Toyota’s Objectives in Global Automotive Industry

The automobile industry is America’s largest manufacturing industry with total auto industry and related employment numbering 13.3 million, a new Center for Automotive Research study shows. The majority of those jobs are in supplier and related industries. About 6.6 million jobs are connected to automotive manufacturing and new vehicle sales. This generates more than $240 billion in annual private sector compensation. (Automakers Drive U.S. Economy on Many Different Levels, New Study Show, 2003)

The following is the findings of the study “Contribution of The Automotive Industry to the U.S. Economy”:

*The auto industry is responsible for more than 100,000 jobs in each of several industries, including dealerships, fabricated metals, auto parts, auto repair and maintenance, road construction, tire dealerships, fueling stations, and car washes.

*The auto industry is responsible for more than 50,000 jobs in each of several other related industries, including plastics and rubber, trucking, computers and electronics, petroleum and machinery and equipment.

*The auto industry is responsible for more than 25,000 jobs in each of several more related industries, including advertising, textiles, aluminum and recycling.

*The auto industry also provides thousands more jobs each in the rail industry, the steel industry, the painting and coating industry, the glass industry, the copper and brass industry and the iron industry.

*The automobile industry provides among the highest levels of wages and benefits in the private sector, averaging $69,500 in 2001.

*The auto industry boasts a value added of $292,000 per worker, 143 percent higher than the overall value-added ratio for U.S. manufacturing ($120,000).

*The automobile industry invests more in research and development than any other industry — $18.4 billion in 2000.

*The automobile industry directly employs 1.3 million Americans in all 50 states.

*2.2 million U.S. workers are employed indirectly by auto industry suppliers and other industry-related companies.

*Expenditures of auto industry employees create an additional 3.5 million jobs nationwide.

Toyota aims to be a major economic contributor and first-tier automobile manufacturers. As an example of the series of economic contributions, Toyota has invested over $10 billion in the U.S., and its dealers have spent nearly $9 billion more. Nationwide, Toyota directly employs 28,000 Americans and another 95,000 more work for Toyota dealerships. That’s a total of 123,000 American jobs, and it is more than Microsoft, Oracle and Coca-Cola in combined.

Following Toyota’s principal of “thinking globally but acting locally,” the company has eight U.S. manufacturing facilities and a ninth under construction. About two-thirds of the cars and trucks Toyota sells in the U.S. are now built in America. With 1.6 million in sales last year and a 10 percent market share so far this year, Toyota is the third best-selling automobile brand in the U.S., behind Ford and Chevrolet.

While there are some positive signs boosting a fragile economy, the automobile sector has not been immune. Toyota will continue to see shakeups and reorganizations within the automobile industry as costs are brought in line with the deflationary economic environment.

ACCELERATING GLOBALIZATION

*Plan for Globalization

To ensure the timely delivery of vehicles that cater to customer needs in diverse regions around the world, Toyota is simultaneously advancing the globalization and localization of its operations. In the current competitive market, Toyota is taking the initiative by devoting itself to developing a highly appealing product lineup.

Toyota is leveraging its full lineup to advance the penetration of its vehicles in markets worldwide and to establish a solid operating platform that is regionally balanced. To create a stable operational base, Toyota is actively building international production systems while increasing the localization of all its activities, including vehicle development, procurement, production, and marketing.

Toyota aims to produce vehicles that perfectly meet customers’ various demands and deliver these vehicles in the right amount and time by focusing on the following objectives – highest quality, lowest production cost, and lowest time from production line to delivery. By using the world famous Toyota Production System, Toyota is able to accomplish the objectives successfully. The Toyota Production System starts with minimizing production costs by removing waste, unevenness, and overburden.

The system applies the concept of Just-In-Time (JIT) production with the principles to produce only what is needed, and when it is needed. JIT minimizes in-process inventory, employs least-time production, and removes the burden of extra inventory cost. (Reference: Toyota Motor Thailand)

Further, the Toyota Way is playing an important role in unifying the efforts to promote globalization and develop human resources. The Toyota Way is a comprehensive summary of its unique management and manufacturing philosophy since the company’s founding in 1937.

*Raising Production Capacity Worldwide

Toyota, like other manufacturers, recognized that high volume production runs would reduce unit costs and exports at the same time as generating duty rebates in certain countries. This would enable them to rationalize the number of locally produced vehicle models and augment them with a wide range of imported products which would make Toyota’s offerings more tantalizing. (Payne, 2002)

While increasing production capacity around the world, Toyota is taking measures to construct a global production system. As of July 2002, Toyota had built a total of 10 million vehicles in North America. In addition to boosting output at its four existing automobile assembly plants in the region, plans call for the construction of a new factory, Toyota Motor Manufacturing Texas, which will begin annual production of 150,000 Tundra pickup trucks from 2006.

Toyota will also begin producing its small pickup truck the Tacoma in Mexico from 2005. As a result, Toyota will have ramped up production capacity in North America from its current level of 1.48 million vehicles to 1.65 million by 2006.

In Europe, Toyota intends to raise the combined production capacity in France, the United Kingdom, and Turkey from its present 500,000 units to 610,000 units. Beginning 2005, its joint venture company established in the Czech Republic with PSA Peugeot Citroen is scheduled to roll out 300,000 compact cars a year, of which 100,000 will be Toyota-brand vehicles.

In Indonesia, Toyota reorganized its local joint venture into separate manufacturing and distribution entities. Toyota acquired a 95% stake in the manufacturing entity to enhance its operations as a global production, supply, and export center for vehicles and engines.

In China, by strengthening its alliance with China FAW Group Corporation (FAW) Toyota will begin the joint production of mid-to-high-end passenger cars, compact cars, and mid-to-high-end SUVs. Toyota intends to capture 10% of the Chinese market by around 2010.

*Expanding Employee Training

To ensure that the global operations develop unhindered, Toyota is expanding its employee training programs. The Toyota Institute, based at the head office, is responsible in cultivating the executives and middle managers essential for the operation of a global company.

Toyota also took steps to integrate the training and technical skills of its employees at production sites worldwide by establishing the Overseas Support Center within its Motomachi plant in July 2003. In July 2002, the Global Knowledge Center was established within the University of Toyota, the educational facility of Toyota

Motor Sales, U.S.A., Inc., to promote the Toyota Way in sales and marketing. At the center, individuals from distributors worldwide are working together to study the world’s best marketing practices and to help develop cooperative relationships among distributors.

Toyota is also implementing regional training programs, primarily in Europe, Asia, and Africa.