Toyota-GE case Analysis

The world’s largest car manufacturers Japan-based Toyota and and US-based General Motors [GM] have joined together in Australia to create a joint venture under a new company called United Australian Automotive Industries [UAAI]. This is hoped to see replication of same success as the New United Motor Manufacturing Inc venture between Toyota and GM in California, but this was not to be the case due to various internal and external factors.

The joint venture which involved a lot of process of analysis, study and negotiation spread over six months was not able to stand more than 2 years due to conflict of interests in benefit sharing and failure to forecast changes in the national economies, refusal to follow accepted strategy implementation between the two companies TMC and GMC. PROBLEM IDENTIFICATION

PRIMARY Absence of strategy to tackle impact of international markets and economy fluctuations on the UAAI company’s performance. The venture being a multi national presence, should forecast changes in the economies. The appreciation of Yen against Australian Dollar lead to direct depreciation in Toyota’s profits but not UAAI’s. One partner benefitting and the other not is a matter of serious concern in keeping the joint venture afloat. SECONDARY

Disagreement to the previously accepted terms by Toyota due to unexpected results i.e occurance of loss in exporting valuable parts manufactured in Japan, such as the front wheel drive gear box/differential units due to appreciation of Yen against Aus Dollar. Greater outlay for production of Toyota cars in UAAI restricted its ability to reap the benefits of economies of scale. These problems were the first signs that the alliance was starting to ‘crack. SWOT

STRENGTHS Meeting the volume production schedule Reducing wasteful duplication Creating a powerful sales-force Decrease in car prices to customers WEAKNESS Complexities in determining each partner’s value Susceptible to economic fluctuations Conflicts of partners OPPORTUNITIES Customer base to expand for UAAI New segments can be covered Market expansion in local and global Subsidiary profitability through exports THREATS Economic volatility and recession Changes in Federal Government laws Reluctance of dealer networks over car models CHARACTER ANALYSIS GENERAL MOTORS – HOLDEN’S AUTOMOTIVE [GMHA] GMHA is a subsidiary of GM in Australia. The position of GM in Australia was not good and rumours were that GM is planning to move out of Australia. GMHA has to enter into the joint venture as a solution to gain back the position and to perform better. TOYOTA’S SUBSIDIARY TOYOTA MOTOR CORPORATION AUSTRALIA [TMCA] TMCA is a subsidiary of Toyota in Australia.

UNITED AUSTRALIAN AUTOMOTIVE INDUSTRIES [UAAI] UAAI FORMED as a joint venture of Toyota’s TMCA and GM’s GMHA to replicate success of New United Motor Manufacturing Inc in California.

UAAI began producing and supplying cars to 3 percent of the Australian market. Under the deal, a percentage of Holden’s Commodore was to be re-badged and sold as the Toyota Lexcen. In return, Holden would sell the Toyota Camry and Corolla as its own Apollo and Nova. GENERATION OF ALTERNATIVES

1. Local Manufacturing plant for valued items of Toyota Pros: Minimize impact on price and profits due to currency value. Reduce in price Cons: Quality may differ 2. Willingness to share benefits based on existing situation Pros: Terms of agreement to share benefits based on situation prevents lapse in strategy and provides better results. Cons: May lead to chaos if not communicated about the changes properly. 3. Long-term agreement between the partners Pros: Since the mergers realize profits in long term, the partners should accept to support long-term. Cons: Long-term plans may not be beneficial as it is difficult to forecast many years in advance. SUGGESTIONS Short Term Reduce production of TMCA which use Toyota valued items and increase production of GMHA to achieve economies of scale for UAAI. Long Term Establish local manufacturing plants for Toyota Valued Items which are not realizing profits currently due to economic situation.

LEARNINGS The mergers of global companies involve a lot of parameters to be taken care of. The impact of external variables like economic situations, market trends can work against the performance of companies if marketing strategy is not designed to avoid the impact. Partners should forecast long-term and implement solutions in short-term to realize benefits of long-term business. Marketing strategy should be designed local to the market based on local trends.