Toyota could introduce a three-day week across Europe as it reduces output but remains committed to work-sharing rather than cutting jobs.

The Japanese carmaker expects sales in Europe to fall by 30 per cent this year - a far bigger drop than predicted elsewhere - and said that it would substantially reduce output but not close facilities.

It is also running down stock. Thierry Dombreval, chief operating officer of Toyota in Europe, said that he wanted to achieve production cuts through work-sharing.

The extent of the cuts are likely to mean that many employees could work three days a week. In Britain, where Toyota's factory near Derby is on a week's shutdown, staff are facing the reduction of the working week to 4 days.

The factory is in talks with unions on a package of cost-cutting measures, including voluntary job losses, and a decision is expected shortly.

Although Toyota in Britain has faced temporary shutdowns, its fortunes are expected to be boosted later in the year when it begins production of the new Avensis.

Its predictions are gloomier than the forecast by Acea, the European trade body, which has said that the market will shrink by 20 per cent. Toyota also warned that the British market could decline by more than feared.

Miguel Fontesca, director of sales in the UK, said that sales could fall to 1.5million - the lowest level since the 1970s - this year, well below the expectations of the Society of Motor Manufacturers and Traders, which is forecasting 1.72 million. Last year sales were 2.1 million and in 2007 they were 2.4million.

Toyota stepped up calls for incentives in the UK to boost the market. Schemes are already being implemented in European countries, including Germany, where buyers are being offered €2,500 (£2,240) to scrap old cars and buy new ones.

Toyota said that sales had risen by up to 70 per cent since the scheme was introduced in January.

Meanwhile, Toyota Financial Services may have approached the state-backed Japan Bank for International Co-operation (JBIC) for as much as $2billion in emergency loans.

It is believed to be tapping the dollar loan facility, which will be drawn from the foreign reserve pot of the JBIC, only weeks after the group raised a similar sum through bond issuance.

Other big players in the car sector are expected to follow suit shortly and a spokesman for the JBIC said that it was evaluating “multiple” funding requests from corporate Japan.

Local governments throughout the country have introduced a range of protectionist schemes aimed at defending their regional manufacturers.

In Honda's heartland of Tochigi, one town has issued Y50,000 (£360) vouchers for anyone buying a Honda hybrid vehicle. In the town of Kami-Mikawa, all residents will be eligible for a 10 per cent discount on a new Nissan.

In Gunma, any farmer wanting to buy a Subaru truck will enjoy a Y100,000 subsidy and the same goes for anyone in Okayama wanting to buy a Mitsubishi.

Other local governments have taken matters into their own hands. Yamaguchi prefecture has bought 50 Mazdas for its municipal car pool, while other authorities have, between them, bought more than 500 cars from a variety of manufacturers.

LDV buyout

— The proposed LDV management buyout, which is crucial to the van manufacturer’s survival, came a step closer to completion after the group’s staff voted to take a 10 per cent pay cut

— Erik Eberhardson, chairman of GAZ, LDV’s parent company, is leading the buyout team and is thought to be close to reaching an agreement with his backers to finance the deal. Mr Eberhardson also secured the support of LDV’s staff to forgo bonuses

— He hopes to finalise the buyout next week. If the deal goes ahead, LDV will resume production, which ceased on December 12, on April 6

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax