Toyota's New Factory Shows Loyalty to Home Market
SENDAI, Japan—Toyota Motor Corp. formally opened its first group assembly plant in Japan in 18 years, highlighting the commitment Toyota has to manufacturing in Japan despite macroeconomic pressures that would seem to make the strategy impractical.
The latest addition to Toyota's production base, which will export Yaris subcompact cars to the U.S. and Middle East, comes as the yen's rise to near-record levels against the dollar and weak domestic demand has brought into question Japanese carmakers' ability to compete in overseas markets with cars made in Japan.
While Toyota officials have indicated it is difficult for them to export smaller cars from Japan profitably at current exchange rates, a parade of senior company and local government officials at the opening ceremony Wednesday said the new facility was primed to compete globally.
"We believe Japanese-based manufacturing still has plenty of competitiveness when it comes to exporting," Atsushi Niimi, an executive vice president at Toyota, said at a news conference after the opening event. However, he acknowledged that Japan would seek to meet increased demand abroad with localized production, where possible.
Toyota said the new plant features a number of cost-, space- and labor-saving innovations to boost productivity and competitiveness. Using a term for making things the Japanese way, Mr. Niimi added "mono-zukuri isn't just about assembling things, it's about the materials, plans and designs that go into the process."
The factory, located in a rural hamlet outside the northern Japanese city of Sendai, will produce 120,000 vehicles a year, including two versions of the Corolla model for sale in Japan. Run by Toyota affiliate Central Motor Co., it replaces an older factory located on the outskirts of Tokyo.
The last time Toyota opened a plant in Japan was when group company Kanto Auto Works Ltd. began production at a plant in Iwate Prefecture in 1993.
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Auxiliary equipment makes the work easier at a Central Motor Co. plant in Miyagi Prefecture. (Koji Nishimura)
Toyota Motor Corp. faces some hard choices.
Corporate executives have pledged to maintain a work force capable of producing 3.2 million vehicles annually in Japan.
But advances made in manufacturing efficiency to compete on a global scale mean fewer workers will be needed.
The difficult position Toyota finds itself in was demonstrated Wednesday when the company invited journalists to tour its latest plant in Miyagi Prefecture.
The plant is operated by Central Motor Co., a Toyota subsidiary. Operations began in January after the Central Motor plant in Sagamihara, Kanagawa Prefecture, was moved to Miyagi. The plant will produce the compact Yaris sedan for export as well as the Corolla Axio for the domestic market. The Yaris is sold in Japan as the Belta. The plant can manufacture 120,000 vehicles annually.
The major feature of the plant is an assembly line in which car bodies are positioned sideways. This allows workers to install engine and suspension parts at the same time. The assembly line is 35 percent shorter than the one in which car bodies were positioned lengthwise. This has resulted in manufacturing efficiency.
The Miyagi plant is considered a model for all other Toyota plants. However, the company did not allow photos or illustrations to be made of the unique assembly line.
Toyota plans to incorporate the latest manufacturing technology in its plants in Changchun, China, and Brazil.
Executive Vice President Atsushi Niimi said at a news conference that other domestic plants would also incorporate the new technology.
"We want to look for opportunities when upgrading outdated plants in Japan," Niimi said.
At a ceremony at the Miyagi plant, Toyota Chairman Fujio Cho stressed the importance of maintaining the company's domestic manufacturing base.
"Although some people say the stronger yen makes automobile exports unprofitable, we believe it is our duty to look after Japan's manufacturing prowess," Cho said.
The sharp rise in the yen since last autumn is worsening the profitability of exports. Toyota alone is expecting to post an operating loss in the current fiscal year of about 420 billion yen ($5 billion).
Given these conditions, improving the international competitiveness of domestic manufacturing plants is an urgent task.
The various members of the Toyota group have competed in developing the latest manufacturing technology and the Miyagi plant is the result of a concentration of such efforts.
The plant investment amount was reduced by 40 percent and manufacturing costs per vehicle were cut by about 5 percent.
With the effects of cost reductions in other plants, Niimi said, "We will make every effort to record an operating profit on a monthly basis by the end of the next fiscal year."
However, there are concerns about whether the company can keep its pledge of protecting jobs in Japan. As manufacturing efficiency improves, the number of workers needed would be reduced if the same number of vehicles was manufactured.
Toyota alone has about 70,000 workers. Any cut in jobs will affect the local communities where those workers live.
It is uncertain if Toyota will be able to maintain its work force by increasing exports through an improvement in price competitiveness as well as increasing production of high value-added vehicles, such as hybrids.
(This article was written by Go Tsutsumino and Tomohiro Yamamoto.)