Supplying Toyota

SeniorManagingDirector SeniorManagingDirector SeniorManagingDirector SeniorManagingDirector SeniorManagingDirector SeniorManagingDirector

YoichiroIchimaru ShojiIkawa TakahikoIjichi KoichiIna ShinzoKobuki IwaoNihashi

MANUFACTURINGSTRATEGY
Toyotaoperates80plantsin28countriesnotcountingDaihatsuandHino.Ofthese,45areassembly plantsincludingseveralwithadjoiningenginemanufacturingoperations.Plantsrangeinsizeand operationalscalefromToyotasTaharaplantinJapanandGeorgetown,KY,plantintheU.S.,which havecapacitytoproduceupwardsof500,000vehiclesandmakemostmajorbodystampingsand injectionmouldinginhouse,totheautomakersPhilippineandVietnameseplantswheremonthly outputstandsataround1,600units. Withglobalautodemandpossiblyfalling10millionunitsin2009andwiththeU.S.market contractingtoaslowas10million,downnearly40%,Toyotafindsitselfwithtwomillionandupto threemillionunitsofidleproductioncapacity. Shortofshuttingdownseveralplantsorlayingoffthousandsofworkers,bothoptionsunlikelygiven theautomakerslongtermcommitmenttoinsuringjobsecurity,thereislittletheautomakercando intheneartermtoremedythesituation. InJapan,itwillnotrenewatleasthalfof6,000employeescurrentlyononeyearcontractswhen theircontractsexpireonMarch31st,whileinNorthAmericatheautomakerwillcutshiftsandidle plantsforspecialtrainingdaystokeepworkersbusy.However,iflossescontinuetomount indefinitelyattheircurrentpaceofmorethan$1billionpermonth,managementmaybeforcedto consider(asNissaninNorthAmerica)somesortofearlyretirementscheme.Butnothinghasbeen announced. Thatsaid,onceproductionlevelssettle,Toyotaisrelativelywellpositionedtoreorganizeitsglobal manufacturestructureinwhateverconfigurationmanagementdeemsnecessarymoremodelsper line,smallerlots,morevariantspermodel. Datingbacktothestartofthedecade,theautomakerdeployeditsGlobalBodyweldinglineatall majorvehicleplantsaroundtheworld.Intotal,anestimated50flexiblelineshavebeeninstalledat morethan25assemblyplants,enablingsubstantiallylowertoolingcostsandfasterstartuptimes whenlaunchingnewmodels. Moreover,ToyotahashadgreatsuccessinJapanwithsupplyingcomponentstothefinalassembly lineinkitsusually510componentsinaplasticorcardboardbox,madeofflineinastagingarea, thatgostraighttoaworkstation. Apartfromeliminatingmuchofthecluttertraditionallyseenalongsidethefinalassemblyline,the operationtendstoreduceoperatorerror.Italsocreatesastructurewherebysmallerlotscanbe assembledwithminimallossofproductivity.ToyotaintroducedtheprocessatitsTsutsumiplantin 2002.

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Meanwhile,theautomakerhasshortenedthetimeneededtodevelopamodel(upperbodyor skin)toundertenmonthsfromfreezingthedesigntoproduction.

DomesticPlants&Strategy
Toyotabuildsvehiclesat17plantsinJapanincluding13operatedbyaffiliatedassemblerssuchas Daihatsu,Hino,ToyotaAutoBodyCo.andKantoAutoWorksLtd.(seeTables5&6).Thisstructure, alongwiththefactthatnearlyonefourthofproductionworkersareseasonalorononeyear contracts,offerstheautomakerconsiderableflexibilitytoadjusttomarketdownturns. IncludingToyotaMotorKyushuInc.andCentralMotorCo.,bothwhollyownedsubsidiaries, affiliatedassemblersbuildnearlyhalfofToyotaandLexusvehiclesmadeinJapan. Meanwhile,socalledglobalmodelsliketheCamry,CorollaandVitzaredividedbetweenToyota plantsandaffiliateplantswithToyotagenerallyresponsibleformainmodelsandaffiliatesfor derivatives.Examples:theCorollasedanisbuiltatToyotasTakaokaplantwhiletheCorollaFielder andCorollaAxioareproducedrespectivelyattheHigashiFujiplantofKantoAutoWorksandthe SagamiharaplantofCentralMotor. Elsewhere,ToyotaproducesVitzandYarishatchbacksatitsTakaokaplantandtheNagakusaplantof ToyotaIndustrieswhiletheautomakerconsignsproductionoftheVitz/Yarisderivative,theBelta sedan,totheIwateplantofKantoAutoWorks. AndDaihatsuMotorKyushuCo.,asubsidiaryofDaihatsuMotorCo.,assemblestheRushSUVatits No.2NakatsuplantinKyushu.TheRushisaToyotabadgedderivativeoftheDaihatsuBeGo,the mainmodelproducedattheplantwhichopenedayearagoinDecember. Toyotaestimatesthatglobalmodelsaccountforaround30%ofglobalsales.Socalledregional modelsincludingtheTundrapickuptruckinNorthAmerica,AvensissedanandAygohatchbackin Europe,ReizandViossedansinAsia,andEstimaminivaninJapanaccountforthebulkofthe remainder. OutsideJapan,Toyotaoperatesnearly20plantsthatmakeCorollasandCamrysasitstrivesto maintainstableproductionvolumesfortheseglobalmodels. Theobjectiveofthismanufacturingstructureisflexibility,makingitpossiblefortheautomakerto shiftmodelsquicklybetweenplantstodealwithsharpfluctuationsindemandatminimalcost. Toyotaestimatesthatglobalmodelsaccountforaround30%ofworldwidesales.
Table 4: Toyota-Affiliated Assembler Production Plants Central Motors* Sagamihara Daihatsu Motor Ikeda, Kyoto & Shiga** Daihatsu Motor Kyushu Nakatsu Gifu Auto Body Kakamigahara Hino Motors Hamura & Hino** Kanto Auto World Higashi-Fuji & Iwate Toyota Auto Body Fujimatsu, Inabe & Yoshiwara Toyota Motor Kyushu* Miyata Toyota Industries Nagakusa * Central Motor and Toyota Motor Kyushu are a wholly owned subsidiaries of Toyota.

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** The Hino plant makes Hino-brand medium- and heavy-duty trucks. The Shiga plant makes only Daihatsu-brand cars and trucks including the Move, Tanto, Sonica, Mira Gino and Latte.

Table 5: Models Produced By Toyota-Affiliated Assemblers Central Motors (Sagamihara) Corolla Axio, Raum and Scion xB Daihatsu Motor (Ikeda) bB & Passo; Subaru Justy; Daihatsu Boon, Coo, Copen, Delta, Esse, Move, Sonica & Terios Kid Daihatsu Motor (Kyoto) Porte, Probox, Sienta & Succeed Daihatsu Motor Kyushu (Nakatsu) Rush; Daihatsu Atrai wagon, Hijet Cargo, Hijet truck, Be-Go & Mira Gifu Auto Body Hiace, special-purpose vehicles Hino (Hamura) Hilux Surf (for Japan market), 4-Runner (for U.S. market), Dyna, Toyoace, Townace, Liteace, FJ Cruiser Kanto Auto Works (Iwate) Auris, Belta, Blade, Scion xB & Corolla Rumion Kanto Auto Works (Higashi-Fuji) Century, Corolla, Corolla Fielder, Crown, Crown Comfort, Isis & SC430 Toyota Auto Body (Fujimatsu) Estima, Estima Hybrid, Ipsum, Noah, Prius & Voxy Toyota Auto Body (Inabe) Alphard, Alphard Hybrid, Hiace, Regius Ace & Vellfire Toyota Auto Body (Yoshiwara) Land Cruiser 70 (pickup & hardtop), Land Cruiser 200, Liteace, LX570 & Coaster Toyota Industries (Nagakusa) Vitz, Yaris, RAV4 & Mark X Zio Toyota Motor Kyushu (Miyata) Harrier & RX350, Harrier Hybrid & RX400h, Kluger & Highlander, Kluger Hybrid & Highlander Hybrid, IS250, IS350, ES350

OverseasPlants&Strategy:
Toyotasstrategy,likeJapaneserivalsHondaandNissan,istobuildcarsinthemarketswhereitsells them.Thisstrategywasbornintheearly1980sfollowingpressurefromtheUStoreduceexports. Thenwhentheyensurgedinthemid1980sandagaininthemid1990s,theautomakerbegan investingheavilyinamanufacturingbaseinNorthAmericaandEuropetoreducethebottomline riskfromforexfluctuations. KeysupplierslikeDenso,AisinSeikiandKoyoSeiko(nowJTEKT)followedinshortorder. Atpresent,Toyotahas14vehicleplantsinNorthAmericaandEurope(notcountingHinoplants) alongwithsevendedicatedpowertrainplants.Since1984,whenToyotaenteredintoajointventure withGeneralMotorsinFremont,CA,ithasinvestednearly$30billioninNorthAmericanand Europeanproduction(seeTables7&8).Ithascapacitytobuildthreemillionvehicles,approximately 30%ofitsglobaltotal. Inresponsetothecurrentbusinessdownturn,managementhasdelayedthestartupofits$1.3 billionplantinBlueSprings,MS,tobuildthePrius.Theplantwasscheduledtobeginoperationin 2010.Nonewstartupdatehasbeenset. Ironically,criticsoftheautomakersrapidbuildupsincethestartofthedecadeseeapossiblesilver lininginthecurrentslowdown.TheyfeelthatToyotahadgrowntoobigtomanageeffectively, especiallystretchingitsqualityassurancesystemsandgivingcompetitorsanopeningtocatchand passtheautomakerinthequalityarea.

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