Transcript Toyota - 2005

Best in France Project – Toyota Case Study
25th January 2005
TOYOTA Case - HEC MBA Group ES2A
TMMF
page 1
Best in France Project – Toyota Case Study
TMMF
By HEC MBA Sept’04 participants :
- Eric JUILLET de SAINT LAGER
- Saurabh KUMAR
- Steven OPIO
- Kihyeon PAK
With the special participation of :
- Henri MAS, former Valenciennes Sous-Préfet
- Yves LOUZE, current Director of Valenciennes Chamber of Commerce and Industry
- Jean-Luc LEGAREZ, current Vice Director of Valenciennes Métropole Community
- Vincent BOUVIER, current Valenciennes Sous-Préfet
- Christiane HENNEAUX, current Project Assessor at Valenciennes Sous-Préfecture
- Didier LEROY, current Senior Vice President of Toyota Motor Manufacturing France
- Nicolas FAYOL, current External Relation Manager at Toyota Motor Manufacturing France
- Shingo KATO, current Toyota France Secretary-General
- Laurent FISCUS, former Sous-Préfet in Mission fully dedicated to the Toyota project
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Table of Contents
1.
2.
3.
4.
5.
6.
7.
8.
TMMF
Key features on the case ……………….….………..……….…. p. 4
Toyota and the European market ............................................ p. 6
Objectives of the players ……………………...…………………. p. 8
3.1. for Toyota .…………………..……………………..……….……… p. 9
3.2. for France .…………………..……………………..………….…… p.10
Decisional criteria ……………………………………………..….. p.11
4.1 in favor of the French candidacy ………………...……………..… p.12
4.2 not in favor of the French candidacy …..………………………… p.14
4.3 first list and short list decision matrix ……..…………………...… p.16
Actions developed by the players ………………………..…..… p.18
5.1 by France, prior to and during the project ….............................. p.19
5.2 by Toyota ………………………………..…………………..….….. p.21
Key factors of success in this project ………………….....……. p.22
Sustainable development post-project ………………..…..…… p.24
Appendix & exhibits ………………………………………..…….. p.26
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Part 1
TMMF
Key features
on the case
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1. The 5 key ideas of the Toyota Onnaing project

Clear initiative taken by one French region

Strong commitment of Toyota on the long run

Two players both took a huge risk in the project

Fundamentally different cultures understood each other

Human dimension continuously present along the project
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Part 2
TMMF
Toyota and the
European market
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2. Toyota strategic & tactical approach
TMMF

Boost car sales outside Japan (appendix #15)

Europe becomes the most profitable market after the US

Design and produce the cars close to the final market

Small cars is the biggest segment in Western Europe

Opportunity in 1999 with suppression of quota on imported cars
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Part 3
TMMF
Objectives for the
two players
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3.1 Toyota objectives
TMMF

A new and modern plant in Europe located as close as possible
to customers and suppliers (appendix #12)

Develop the leanest auto plant ever with the obsession of cost
reduction and management efficiency (appendix #14)

Operate the plant within 2 years as opposed to usually 3

Achieve an ambitious level of productivity mainly by optimizing
the management of Human Capital

Establish a strong brand image as a local & European producer
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3.2 France objectives
TMMF

Attract investment to generate business for local supply
companies (appendix #0)

Create jobs to fight regional unemployment

Indirectly accelerate the modernization of the French
automotive industry

Promote French technological notoriety abroad

Boost exports to bolster the country’s balance-of-payments
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Part 4
TMMF
Decisional criteria
for Toyota
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4.1 Criteria in favour of the French candidacy
TMMF
4.1.1 Economical factors

Proximity with Western European customers and auto part
suppliers

Location in the Euro zone (money, customs and economy
influence)

Employment reservoir providing both available and skilled
industrial work-force

Modern infrastructure with roads, rail-ways, fluvial network,
airports and maritime harbours (appendix #13)

Country offering a strong potential for the growth of commercial
market share
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4.1 Criteria in favour of the French candidacy
TMMF
4.1.2 Human factors

International prestigious image of France (arts, luxury, culture)

Proximity with Brussels European HQ (makes communication
easier and accelerates decisions)

Good quality of life offered to the Japanese and their families

Capacity to take into account the protection of the environment

France is perceived as a “complicated” country which provides
a challenge to overcome
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4.2 Criteria not in favour of the French candidacy
TMMF
4.2.1 Economical factors

Non competitive labour cost (appendix #1&2)

Non productive 35 hours law (appendix #20)

Expensive fiscal burden (appendix #3&4)

Constraining labour regulation

Restricted subsidies for foreign investment
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4.2 Criteria not in favour of the French candidacy
TMMF
4.2.2 Human factors

Non English speaking country (appendix #16)

Latin culture never experienced before by Toyota

Very complex French administration organization (appendix #7&8)

Bad image of French professionalism abroad

Individualistic relationship to labour values (appendix #5&6)

Poor infrastructure in the French province for foreign expatriates
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4.3 Location decisional matrix
TMMF
4.3.1 First short list of 40 possible sites
Eco. criteria
France
UK
Poland
Turkey
Proximity
++
++
+
+
-
-
Euro zone
++
-
++
++
-
-
Economy
++
++
++
++
+
-
Labour cost
-
-
--
-
+
++
Lab. quality
+
+
+
-
+
+
Infrastructure
++
++
++
+
-
--
Subsidies
+
+
+
+
++
-
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Germany Belgium
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4.3 Location decisional matrix
TMMF
4.3.2 Second short list of 4 possible sites
Mainly
France
France
UK
HR criteria
Nord
Alsace
Lorraine
Derbyshire
Anticipation
++
-
-
-
Trust inspired
+
+
+
++
Local pro-activity
++
+
+
+
Huge challenge
++
++
++
+
HQ proximity
++
++
++
-
Environment
++
++
+
-
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Part 5
TMMF
Actions developed
by the two players
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5.1 Actions developed by France
TMMF
5.1.1 Before the project

Prospect investment projects very early (appendix #9&10)

Adopt basic psychological behaviour during the negotiation

Seek the national optimum before the regional optimum

Build trust to show long term commitment
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5.1 Actions developed by France
TMMF
5.1.2 During the project

Organize the French administrations in team

Appoint a sous-préfet in mission fully dedicated to the project

Set administrative procedures in project management

Adapt the type of communication to Toyota corporate structure

Prove the 35 hours law is no constraint for a new company

Assist the investor in recruiting & training its work-force

Create adequate infrastructures for expatriates
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5.2 Actions developed by Toyota
TMMF

Develop a new format of plant enabling the most cost-effective
management of human capital

Evaluate each options including all human factors & audit them
concretely on the floor

Understand the French regulation and abide by it (appendix #19)

Identify corporate values and share them with local employees

Establish the right management system before recruiting the
right talents accordingly (appendix #17)
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Part 6
TMMF
Key factors
of success
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6. What led the project to a genuine success
TMMF

Each player sought to identify the expectations and constraints
of the other player

French administrations involvement in speeding up usual heavy
procedures (appendix #11)

Respect and compatibility between cultures (appendix #21&22)

Mutual trust in human relationships

Transparency in the working relationships
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Part 7
TMMF
Sustainable
development
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7. Further investments after the 1st project
TMMF

Car manufacturing industry is both labour and capital intensive,
so any capital investment is made for the long run (appendix #18)

Reach of full plant capacity

Increase of production capacity

Continuous process improvements

Vertical integration of strategic components

Increase the network of suppliers around the plant

Launch of new product lines … ?
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Part 8
TMMF
Appendix
& exhibits
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#0 – Annual French foreign investments
TMMF
Direct foreign investment abroad in M€
Direct foreign investment in France in M€
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#1 – Hourly labour cost across Europe in 2004
TMMF
Hourly labour cost in Euro
UE average labour cost
30
25
20
15
10
5
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n
Sw
e
ne
ma
rk
Da
an
y
Ge
rm
an
ce
Fr
mb
ou
rg
Lu
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UK
tria
Au
s
d
lla
n
Ho
d
nla
n
Fi
an
d
I rl
Sp
ain
e
Gr
ee
c
Po
rt u
ga
l
0
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#2 – Social charges across Europe in 2004
TMMF
Social charges in % of total labour cost
UE average social charges
30%
25%
20%
15%
10%
5%
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n
Sw
e
an
ce
Fr
e
Gr
ee
c
Sp
ain
tria
Au
s
an
y
Ge
rm
Fi
nla
n
d
d
lla
n
Ho
ga
l
Po
rt u
UK
mb
ou
rg
an
d
I rl
Lu
xe
Da
ne
ma
rk
0%
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#3 – Total fiscal weight across Europe in 1998
TMMF
Fiscal pressure in % of gross profit
Average fiscal pressure in EU
60%
50%
40%
30%
20%
10%
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Fi
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Fr
mb
ou
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Lu
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tria
Au
s
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lla
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Ho
e
Gr
ee
c
an
y
Ge
rm
UK
ga
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Po
rt u
Sp
ain
I rl
an
d
0%
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#4 – Value added tax across Europe in 1998
TMMF
VAT in % of retail price
Average Vat in EU
30%
25%
20%
15%
10%
5%
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n
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Da
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nla
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Fr
tria
Au
s
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Gr
ee
c
UK
d
lla
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Ho
ga
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Po
rt u
Sp
ain
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y
Ge
rm
Lu
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mb
ou
rg
0%
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#5 – Unionization rate across Europe in 1995
TMMF
Unionization rate in % of workers
Average unionization rate in EU
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
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ou
rg
Lu
xe
an
ce
Fr
Sp
ain
e
Gr
ee
c
d
lla
n
Ho
an
y
Ge
rm
Po
rt u
ga
l
UK
tria
Au
s
an
d
I rl
d
nla
n
Fi
ne
ma
rk
Da
Sw
e
de
n
0%
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#6 – French unionization rate
TMMF
Evolution of the French unionization rate in % of the active population
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#7 – French administration structure
levels …
National
Regional
Departmental
District
Agglomeration
Municipality
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French
state
Public
establishment
Territorial
corporation
1 president of rep. state organizations league of mayors
2 parliaments (national research, and of council
1 government
social council…)
presidents
regional préfet
22 regional
frequent
+ ministries
council
representation
representatives
presidents
departmental prefet
95 general
unusual
+ ministries
council
representation
representatives
presidents
TMMF
Consular
organization
Public
company
chamber of
commerce, indus.
and professions
regional chamber
of commerce, ind.
and professions
departmental
chamber of ind.
commerce & prof.
EDF, SNCF,
La Poste,
France Telecom
operational
representation
district
sous-prefet
inter-municipal
unions and
communities
36,000 mayors
with each one
municipal council
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#8 – French administration involved with Toyota
levels …
National
Regional
Departmental
District
Agglomeration
Municipality
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French
state
Public
establishment
Territorial
corporation
1 president of rep. state organizations league of mayors
2 parliaments (national research, and of council
1 government
social council…)
presidents
regional préfet
22 regional
frequent
+ ministries
council
representation
representatives
presidents
departmental prefet
95 general
unusual
+ ministries
council
representation
representatives
presidents
TMMF
Consular
organization
Public
company
chamber of
commerce, indus.
and professions
regional chamber
of commerce, ind.
and professions
departmental
chamber of ind.
commerce & prof.
EDF, SNCF,
La Poste,
France Telecom
operational
representation
district
sous-prefet
inter-municipal
unions and
communities
36,000 mayors
with each one
municipal council
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#9 – Plant construction schedule
TMMF
early prospecting by Chamber of Commerce and Industry
1st meeting with Toyota at Valenciennes
2nd meeting with Toyota at the Paris Motor Show
Toyota launch an official European tender for their project
beginning of the site selection process
 approach
public announcement of the selected site
site officially handed out
 study
plant construction
labour training
 selection
machinery implementation
pre-production
 preparation
launch in production
 construction & training
1996
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1997
1998
1999
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2001
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#10 – Plant production schedule
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#11 – Zoom on the “preparation” phase 
TMMF
In only 9 months instead of usually 2 years France had to :

gain 82 votes in the Community of Municipalities to agree on the project

acquire 250 hectares of terrain with uncertain legal dispossession
procedures

conduct urbanization and environmental authorization procedures

pilot clearing works (archaeological search, OTAN pipeline deviation,
2nd world war blockhaus destruction …)

pilot servicing works (road, rail, water supply, electricity & gas network
upgrading)

carry out 8 public surveys related to the territory development planning

perform various administrative tasks to obtain residence permits and
working authorizations
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#12 – Toyota locations across Europe
TMMF
European HQ
Engine plant
300km
Final assembly
Research & D
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#13 – Importance of local infrastructures
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#14 – Compact plant layout
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#15 – Toyota market shares evolution
1994
1997
1999
TMMF
2004
Toyota market
share in the US
10%
11%
Toyota market
share in Japan
40%
45%
Toyota market
share in Europe
3%
5%
Toyota volume
sold in Europe
800,000
Production sold
in the US
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1,200,000
End of import
sales quotas
Trade regulation
across Europe
Production sold
in Japan
2010*
90%
50%
40%
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#16 – Communication theory in non-native language
Two people of the
same tongue speaking
their language

100%
One different
interlocutor listening to
a native speaker

100%
Two people speaking
in a third non-native
language

50%
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TMMF
100%

50%

50%

= 100%
= 50%
= 25%
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#17 – Toyota philosophy, management & recruitment
TMMF
Toyota Philosophy
Toyota Recruitment Strategy
TOYOTA WAY
1st = define the right values (management system)
2 values = Respect and
Continuous improvement
TMMF management team had to guess in
1997 that Proximity Communication and
Continuous Improvement would be two suitable pillars
TOYOTA PRODUC. SYST.
2nd = recruit the right talents and personalities
Indicates the right
management priorities
From 40,000 applications Toyota identified through psychological
testing and confirming interview 3,300 employees with suitable
profiles (according to 10 dimensions representing the 2 pillars)
TECHNICAL SOLUTIONS
3rd = define the short term goals to be achieved
Indicates the best
possible solutions
day-to-day shop floor management and
management by yearly objective
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#18 – Sustainable development
TMMF
Production launch – 1st shift
600 M€ and +1,500 people
Production increase – 2nd shift
+1,500 people
New engine assembly line
100 M€ and +300 people
Production increase – 3rd shift
+500 people
New logistic platform
80 M€ and +140 people
New spare-part Toyota supplier
60 M€ and +120 people
Press-tool capacity increase
20 M€ and +30 people
2001
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2002
2003
2004
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2005
…
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#19 – Typical French agreement protocol
TMMF
Items specified in the agreement protocol of this project :

amount of the total capital investment

quantity of positions created

targeted date of launch

final sale price of the serviced terrain

ending date for all related clearing & servicing works

delay for the final delivery of all urbanization, environmental and working
authorizations

average amount of all types of capital investment subsidy

assistance for labour recruitment and training
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#20 – Average yearly activity per person
TMMF
Nb of hours worked per year / person
Portugal
Irland
Luxembourg
Greece
Finland
Germany
France
1 400
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1 450
1 500
1 550
1 600
1 650
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1 700
1 750
1 800
1 850
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#21 – Cultural final quote on the project
TMMF
Extracts of the inauguration speech of Mr Hiroaki WATANABE, President of TMMF,
on the 6th of January 2001 :
« Before accepting to undertake this project, I had many prejudices about France
and the French. But since I moved here I’ve been realising that the French and the
Japanese are obviously different, but that they have also many things in common,
among which a very strong culture. Let’s consider gastronomy : the delicacy for
taste and aesthetics are a real passion for the French and the Japanese, because
they express a strong cultural identity. (…) Similarly the Japanese and the French
are capable to adapt and work together while remaining loyal to their culture. This
is how our employees are now getting progressively used to our corporate culture
while TMMF is taking progressively place in the Nord-Pas-de-Calais landscape.
And I remain convinced that soon the direction of TMMF could be transferred to a
French »
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#22 – Monochronic & polychronic cultures
TMMF
Monochronic People (American)
Polychronic People (French)
 Do one thing at a time
 Do many things at once
 Concentrate on the job
 Manage interruptions well
 Take time commitments
 Objectives can be possibly achieved
 Low-context + need information
 High-context + already have information
 Committed to the job
 Committed to people and relationships
 Abide by the plans
 Chang plans often and easily
 Great respect for private property
 Borrow and lend easily
 Used to short-term relationships
 Build lifetime relationships
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