Japanese carmakers moving suppliers and production sites together

Because of the massive supply disruptions caused by the March 11 earthquake in Japan, carmakers are now rushing to move their suppliers and production sites closer to each other. Nissan Motor Kyushu Co., a spin-off from Nissan Motor Co., will now be the production site for Nissan Motor Co.’s Note compact. Despite the strong yen, in August this year Nissan expanded the operations of Nissan Motor Kyushu as a way of further strengthening its goal to create an Asian economic block for car making. The spin-off company is located in Kanagawa Prefecture, which is 1,000 km away from the key cities of Tokyo, Shanghai and Dalian, and is also close to South Korea, the home of many parts makers. Nissan Motor Kyushu has been procuring parts from other countries like China where the company’s procurement teams working in local subsidiaries look for the most promising parts makers who can send their products to Japan. Because of the strong yen, imported parts are relatively cheaper than those made in Japan even if shipping and other incremental costs are included. Nissan has already standardized parts with Renault Samsung Motors and buys other parts from the suppliers of Renault. Concern has been raised over Nissan’s moves but its President, Carlos Ghosn, said that the situation in Japan has forced them to buy parts abroad; otherwise, they would not be able to manufacture anything in Japan.

Toyota aims for strong domestic manufacturing base

Among those who have raised concerns over the situation is the President of Toyota Motor Corp., Akio Toyoda, who said, “Some praise Toyota for working hard to maintain production in Japan, while others are concerned about us doing so amid such a tough business environment. We are in a delicate situation.” Like Nissan, Toyota wants to create a regional manufacturing bloc but the automaker is determined to remain fully Japan-based. It is stepping up efforts to build a low-cost production system in the Tohoku region where labor expenses are cheaper. Towards the end of this year, Toyota will start production on the new Acqua hybrid which will be more fuel efficient but cheaper than the Prius. Toyoda is also accelerating efforts to stay globally competitive by having a strong domestic manufacturing base through the increased concentration of key production functions. Towards this end, it will merge with Kanto Auto Works and Central Motor Co. around July next year. The move will allow them to place the right employees in the right jobs. The group will also make engines locally to cut costs. “Bringing the personnel, production technology and R&D functions closer together forms the very base of a manufacturer’s competitiveness,” said Masahisa Fujita, president of the Research Institute of Economy, Trade and Industry. (October 12, 2011)