Case of Thai Toyota

JBIC‐LPEM workshop
Comparative performance assessment from Management perspectives
Learning the way of capability building from the case of Toyota Motor Thailand
Amano, Tomofumi
Associate Professor
Graduate School of Economics
The University of Tokyo
The case study aims to be used in JBIC‐LPEM workshop. The citation is necessary to be approved by the author
Contents
Ⅰ Japanese manufacturing activities abroad and a brief history of Toyota
Ⅱ Profiles of Toyota Motor Thailand(TMT)
Ⅲ Building the capabilities while being small
Ⅳ Overcoming the economic crisis and further growth
Ｖ Implications
Ⅰ Japanese manufacturing activities abroad and a brief history of Toyota
Japanese firms’ foreign activities
Manufacturing sectors vs Non‐manufacturing sectors
Source: METI
Overview of Japanese firms’ foreign business activities
Inside the manufacturing sectors
Source: METI
Long‐term performance of Japanese automobile firms
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
Data Source: Development Bank of Japan
輸出台数
北米向け
1965
万台
日本の自動車輸出台数
500
450
400
350
300
250
200
150
100
50
0
The rise of productivity at the early stage of growth 1. Early struggle of low productivities and low qualities with hostile labor relationship and financial shortage in the 1950s
2. Toyota laid‐off their employees and announced “Joint labor declaration” in 1962 to promise the labor securities.
3. TPS was developed at the early stage of their growth to overcome such shortages
Establishment of TPS
1959 Motomachi 1974 Shimoyama
1965 Kamigo
1979 Tahara
1966 Takaoka
1970 Tsutsumi
Situations before TPS
Eiji Toyoda and Taiichi Ohno
The philosophy of TPS (Toyota Production System)
Missions
The robust production system to the demand fluctuation and diversity
Sustain the long‐term labor‐relationship and upgrading organization capabilities
Upgrading of productivity and quality Components
Just‐in‐Time: demand pull production
The respect of working standard and application to quality control and Kaizen (Jidoka)
Normalization of processes based on the cycle time (Dohki‐ka and Heijunka)
Skill evaluation, education and training to be multi‐
skilled workers
The importance of NUMMI’s case in the 1980s (USA)
• The first experience of executing TPS outside Japan
• Toyota tried to seek joint venture partner and started partnership with in 1981
• Two heads: GM John Smith and Toyota Eiji Toyoda
– Management is Toyota, Utilizing the GM’s unused factory in California, Corolla with brand, 400,000 cars annually
– There were many opponents inside and outside the firms, however they persuaded the importance of the joint venture
“Full and best supports” from Toyota mother factory
• The Negotiation of labor issues comes first
– Negotiation with UAW (United Auto Workers Union) – Rejecting the traditional “job based wage system”, taking “the uniform wage system” to every factory workers allowing the multi‐
job workers, because of the introduction of TPS.
– Hiring UAW workers
• Full support from mother factory – In 1984, Takaoka plant accepted 250 UAW workers to train the concept and skills of TPS. Workers learned the basics and managers learned how to make the system.
– California government supported the training fee(3million dollars).
– Japanese managers opened parties every Sunday during their stays.
• Building the trust through practices at NUMMI
• In 1985 they succeed in launching the 1st car
Toyota’s another success in Taiwan
台湾自動車市場
T aiwan Au t o m o bil e M ar ke t
70
50
30
国瑞（Toyota）
25
中華（Mitsubish）
20
40
％
15
30
裕隆（Nissan）
福徳（Ford）
10
20
本田（Honda） 馬自達（Mazda)
5
10
20
00
20
01
20
02
20
03
20
04
20
05
19
94
20
00
20
01
20
02
20
03
20
04
20
05
0
0
19
94
万台（10,000units)
60
国産車
(Domestic
Production)
輸入車
（Imports)
台湾自動車市場シ ェア
TW Au t o m o bile M ar ke t Sh ar e
Ⅱ Profiles of Toyota Motor Thailand Toyota Motor Thailand (TMT)
Establishment 1962
Capital 7520 million Baht
Shareholders TMC 86.4%
Local 13.6% (Siam Cement 10%) Employees 13,500
Plants Samrong, Gateway, Ban Pho
Number of Dealers 119 Chairman Pramon S. President Sonoda M.
TMT plants
Samrong plant (1964)
220,000 unit/year
430,000 ㎡ 4,500 emps
IMV 1‐3 Tact time 1.1 min.
Gateway plant (1996)
200,000 unit/year
1,000,000㎡ 4,400 emps
Camry Corolla Vios Wish Yaris
TAW (1988)
55,000 unit/year
40,000 ㎡ 1,100 emps
IMV 3‐4 Tact time 4.0 min.
Ban Pho plant (2006)
110,000 unit/year
760,000㎡ 1,800 emps
IMV 3
TMT organization chart in 2008
TMT history
Phase Ⅱ
PhaseⅠ
Importing complete cars
CKD assembly(1960‐70s)
Car assembly to local market(1970‐90s)
Dev. of Soluna
Samrong Factory(1964)
Samrong ⅡFactory(1975)
TAW(1988)
IMV and global
Gateway Factory(1996)
BanPho Factory(2006)
TMT Headquarter(1989)
Toyota Thailand Foundation(1992)
Toyota Education & Training Ctr(1996)
AP‐GPC(2005)
Toyota Automotive School(2004)
Ⅲ Building the capabilities while being small
Creating trust with local dealers
• Building strong dealership since 1956.
– Contacting 60 reliable local commission partners
– One strong dealer in one prefecture (territory system)
• One dealer has 5‐10 shops
–
–
–
–
Strong service system (mechanics, pure parts supply network)
TMT supported the education of sales persons and mechanics
Direct communication with dealers (stocks)
Financial backup from Bangkok Bank
Building the production capabilities step‐by‐step
(1)Motorization started in the 1990s in Thailand. Before then, the production lines are mainly CKD basis and labor intensive. (2)Production lines in Samrong plant were designed by engineers from Toyota Motor Sales Corp.
(1)Demand of commercial vehicles has increased since the 1990s. In 1996, TMT established Gateway plant which mainly producing passenger cars, based on Motomachi Factory’s technological supports.
(2)In Gateway plant, the national car project “SOLUNA” started in 1996, based on Japanese Tercel model. Volume by model in Gateway plant
“SOLUNA” the 1st national car in Thailand
Joint labor declaration and relationship with unions
• Building the stable labor relationship
– Learning from Japanese labor relationship and proposing Joint labor declaration in 1993(quality, mass production, productivity)
– 70% of employees are under one union and the union plays an important role in promoting communication between the company and labors.
– TMT continued educating employees to understand the Toyota way by both OJT and Off‐JT When launching new models, Toyota celebrated it with the labor union leaders.(1993)
Localization of management and organizational capability building
• TMT’s localization policy (Thai‐nization)
– TMT educated and promoted local managers in 20 years
President (1)
EVP/SVP (3‐5)
VP (20)
GM/M (500)
– Japanse Thai
• Advisory system(Kuroko‐system)
– Local manager should stand on the lines. Japanese are staffs.
• Localization of “promotion committee”
– Evaluation and promotion of managers are all localized TMT organization chart in 2008
Localized organization at TMT
TMT in the 1990s
Appraisal based on competencies and performance
Current sales organization in TMT
(Ref) Education and training to multi‐skilled workers • Skill formation in Toyota’s factories in Japan
Professional
Knowledge
Level S
（25 year～）
Professional
Knowledge
Level A
（10 year～）
Practical
Skills
Basic
Skills
Practice and maintenance of every process
Practice and maintenance of 80% processes Team leader is from level B
Level B
（5 year～）
Level C
（1 year～）
Practice and maintenance of 60% processes
Practice of 20% process
Basics
Basic skills
Ⅳ Overcoming the Economic Crisis and further growth
Baht crisis in 1997
Production volume decrease to almost 30%.
SOLUNA project is stuck
IMV project to increase the export of complete pick‐up trucks and their parts
Internal capability building of sales and production for domestic market in Thailand
Maintaining labor relationship and social trust
• Maintaining employees through deep cost cutting
– TMT showed strong commitment to uniting with the whole workforce, dealers and suppliers to ride out the crisis
– Making operations more lean and utilizing the excess labor to implement improvement initiatives and additional education of employees and suppliers
• Respects to the King of Thailand
– The king of Thailand asked TMT to stay in Thailand. TMT presented SOLUNA to his Majesty. The motivation of employees rose.
His majesty in SOLUNA IMV (Innovative International Multipurpose Vehicle Projects) initiated by Japanese headquarter
Dispersion of R&D centres to 4 areas
1) Nagoya Technical Centre
2) Toyota Motor Engineering & Manufacturing, North America
3) Toyota Motor Europe, R&D and Manufacturing
4) Toyota Motor Asia Pacific Engineering and Manufacturing (Thailand)
IMV project was initiated by Japanese headquarter as their global strategies to emerging countries in 2002.
• IMV project in Samrong plant in Thailand – IMV project room started in Samrong plant in 2002. Maximum 200 Japanese engineers moved to the factory and initiated the project
– Mother plant is Hino’s Hamura plant. They moved the production lines to Samrong plant and launched their production for exporting their turcks
– 13 task force teams. Obeya‐room method, E‐
kanban, quality gates and other new methods were introduced when launching the lines.
– The first truck was introduced in 2004
– The tact time is shortened from 1.7 sec to 1.0 sec in 2006.
• Gateway plant – Established in 1996, Factory of passenger cars (Vitz, Corolla, Camry, Wish and Yaris), Sales(Domestic 110 thousand and export 76 thousand cars) , Increase export.
– One production line treats 5 different model with about 1 minute
cycle time and the highest qualities in Asia.
– The leader of production line with best practices in Asia‐Pacific
– The continuous Kaizen and the improvement of workers’ skills
IMV part supplies from Thailand to the other countries
OEM parts of 13,200 containers per year are exported to 13 countries
• Human resource development at AP‐GPC
– Overcoming the limitation of mother plant system
• The number of Japanese engineering staffs are limited
• GPC started in Toyota Motomachi plant in Nagoya in 2003 and soon expanded to Asia, North America and EU.
Global Production Center (GPC) within the Motomachi Plant
– AP‐GPS started in 2005 near Samrong plant
• 700 workers are trained basic skills in 2 months
• Educating trainer’s trainer
• Spreading their best practices to other countries
Learning the basic skills with visual methods
Strengthening the total value creation in Thailand
Technical & Production Support
Toyota Motor Asia Pacific Engineering & Manufacturing(2006)
Auto Manufacturing and Sales
Toyota Motor Thailand(1962)
Auto Manufacturing and Sales
Toyota Auto Works(1988)
Internal Parts Manufacturers
Toyota Auto Body(1978) , Siam Toyota Manufacturing(1987)
Truck Manufacturing and Sales
Hino Motor Manufacturing(1964)
Dealers
Toyota 120 Lexus 3
Lease and Insurance
Logistics
Toyota Leasing1993), AICI
Toyota Transport(1993)
AutoPart s Suppliers
Denso , Aisin・・・・
Dealer network in Thailand
Development of dealer support system
• Standardization of Operation Procedure(SOP)
– Times of dealer visits, Contents of communication, Whom to talk, How to train them, Sales achievement, part supplies, financial supports and human skill supports etc.
– The systems are standardized and improved by staffs every months. They are also used for the education of staffs.
• Parts Centre at Ban Pho plant
– JIT supply of service parts to dealers
• Training centre for service mechanics of dealers
– TETC (Toyota Education & Training Centre) in 1996
– After‐service has been recognized as an important cash source even in the economic slowdown like Baht crisis.
• Localization of service engineers and the creation of their own management system
– Areal marketing, Demand‐Supply matching, National demand forecast, CR(customer retention) system, CS survey etc.
• Communication through the dealer club
Service capabilities at TMT dealers
Financial Services of Toyota Leasing Thailand
• Use of carrying charge in purchasing a car: 70‐80% in Thailand
• Toyota Leasing Thailand – Established in 1993
– Shareholders: Bangkok Bank 10.0%, TABT 0.83%, TMT 0.26%. Japanese Banks 10%.
• Case of carrying charge
High level of integration among the departments of manufacturing, sales, R&D, and human resource with highly localized organizations
• Regional technical and production centre in Thailand
– TMAP (Toyota Motor Asia Pacific, Thailand) in 2006, supporting production and part supplies in Asia pacific region
– TMAP Thailand will support the region with TMAP Singapore and Toyota Technical Centre Asia Pacific(TTCAP) in Thailand
• The Importance of social contribution activities in Thailand
– Toyota Thailand Foundation was established in 1992
– Currently 400 million baht fund
– Supporting public activities including education, life support and healthcare.
Not only localization, but also socialization
CEO Eiji Toyota visited King several times
Launching of new cars in 1970s
Birthday present to Loyal family
Establishment of nurse school in 1995
The effects of automotive industry on SMEs in Thailand
There are large clusters of mechanics and parts importers around Bangkok (Siancon)
Many car users repair gasoline engines to LNG usable engines
Sources and Photos are from T.Rachott and Shintaku(2008)
Ⅳ Implications from business history
Some implications from the case study
• The importance of foreign firms operations and the role of their technology transfers and localization policies in national level of economic development
• Market attractiveness + export manufacturing advantage
• The importance of “bottom‐up” style education and training (Training to the “middle class”) within and outside the MNEs.
• Long‐term and stable labor relationship for the commitment to the accumulation of technological skills • Good and reliable relationship of foreign firms with local government and overall society
• Creating qualitative capabilities not like only volume building is very important to Japanese firms (Ref) Toyota’s next challenge in Russia (St. Petersburg)