Toyota Announces New Global Business Plan

The plan was created in response to increased globalization of economies and to the new economic environment resulting from recent rapid valuation of the yen. It focuses upon "Further Localization" and "Increase of Imports", and will accelerate TMC's international business activities toward 1998. Toyota will work towards achieving the "Mid-Term Global Business Plan" announced in March 1994 as well as the plan announced today. The specifics of the plan are as follows:

1. Further Localization

   1. Local production of vehicles
      The proportion of overseas-produced vehicles in worldwide sales (excluding sales in Japan) will increase as production in foreign countries/regions is expanded further. Specifically, the percentage is projected to increase from the 1994 level of 48% to around 60% in 1996, and around 65% in 1998. The shift from vehicle exportation to local production will accelerate and be most evident in North America. In Europe, Asia, and Oceania, the ratio of locally-produced cars will be increased as well, taking in consideration the changes in economic circumstances such as the exchange rate.
   2. Procurement of parts, materials, and equipment
      Local procurement activities of parts, materials, and equipment will be further strengthened in each region through the seeking of capable suppliers and various support activities for current suppliers. Toyota will also engage aggressively in technology transfer, increased investment, and establishing regional parts complementary programs in areas where localization has previously been difficult.
      To further strengthen the relationships with overseas suppliers, a "Toyota Global Optimized Purchase System" will also be introduced at various locations worldwide. (See 2. Increase of imports for further details)
   3. Localization plans on a region-by-region basis
      1. North America
         1. Increase in local production capacity

            Production capacity in North America will be increased to 900,000 units per annum in 1996, and to 1,100,000 units in 1998. Actual production in 1994 was 735,000 units. In order to achieve these increases, the following measures will be taken

            • Increase annual production capacity at Toyota Motor Manufacturing, U.S.A., Inc. (TMM) to 500,000 units in 1998. (1994 production was 285,000 units.)
            • Increase annual production capacity at Toyota Motor Manufacturing Canada, Inc. (TMMC) to 200,000 units in 1998. (1994 production was 86,000 units.)

            In addition, the construction of a new plant is being studied. (Initial production levels targeted are about 100,000 units/year)

         2. Addition of models produced
            The models produced in North America will also be increased. Presently, there are four models: the Corolla, the Camry, the Avalon, and the Tacoma. The addition by 1998 of three to four vehicles, including a new minivan, will be considered.
         3. Further localization and procurement of parts and materials Together with local production, local procurement of components and parts will be increased to accelerate localization.

            (Through the following activities, Toyota will work to continually receive the tariff exemptions set forth by NAFTA)

            • At present, the 2.2- and 3.0-liter engines are produced in North America. The machining operation on the engine blocks, heads, connecting rods, and crankshafts of 3.0-liter engine production will be localized, similar to the 2.2-liter engines.
            • In addition to the engine plant currently under construction in Canada, U.S. production of Corolla engines will be considered. (Localization of assembly to machining operations, combined production targets are to be around 350,000 units/year)
            • In addition to large-size stamped parts, approximately 300 mid- and small-sized stamped parts will be made in North America by 1998. Mid- and small-sized stamping requires particular precision and thus has been difficult to localize.

         4. Increase of exports
            Vehicle exports from North America will also be further increased. Toyota will especially work towards increasing vehicle exports from the U.S. (1994 figure: 63,000 units)
      2. Europe
         1. Increase in local production capacity
            Annual production capacity at Toyota Motor Manufacturing (UK) Ltd. (TMUK) is targeted to increase to 200,000 units in 1998. (1994 production: 85,000 units)
         2. Addition of models produced
            In addition to the Carina E currently produced, TMUK is to start producing a car in the Corolla series from 1998.
         3. Further localization and procurement of parts and materials Together with local production, local procurement of components and parts will be increased to accelerate localization.
            • Engine production capacity will be increased to 170,000 units in 1998. (1994 production: 76,000 units)
            • Also, molds, jigs, mid- and small-sized stamped parts, engine parts, and materials will be procured locally.
            In addition, more industrial cooperation will be promoted, and events such as business meetings with parts makers will be fully utilized to seek out competitive local parts.
         4. Increase of exports
            Exports of TMUK-produced cars, which are presently only exported to other European countries, to regions outside of Europe will start. Exports of engines and engine parts to Japan and other regions will also be increased. Last year, TMUK exported 2,500 engines to Turkey, and over 35,000 units worth of engine block and crankshaft units to Japan.
      3. Asia and Oceania

         1. Increase in local production capacity Local production capacity in Asia and Oceania will be increased to around 600,000 units annually by 1998. (1994 production was 396,000 units.) Specifically

            • Construction of a commercial vehicle plant in Taiwan
              (Scheduled production capacity to be 110,000 units/year combined with the existing passenger vehicle production. 1994 production was 65,000 units.)
            • Philippines plant to be expanded
              (Increase in capacity to around 60,000 units/year in 1998. 1994 production was 30,000 units.)
            • Thailand plant to be expanded
              (Increase in capacity to around 200,000 units/year in 1998. 1994 production was 110,000 units.)

            In addition to the above, the following will be considered

            • Expansion of the Indonesia plant
              (Increase in capacity to around 150,000 units/year in 1998. 1994 production was 80,000 units.)
            • Continued investigation of possibilities of passenger car production in China. Furthermore, the Toyota Technical Center, China, opened this spring, will support localization of auto parts, motor vehicle production, and product development.

         2. Addition of models produced
            Toyota will begin development and local production of a passenger car specifically for Thailand, Indonesia, and the Philippines.

         3. Further localization and procurement of parts and materials Toyota will aim to contribute to the development of each local auto parts industry. Among ASEAN countries, major components and parts will be aggressively localized, and the complementary auto parts scheme will be further strengthened. Specifically

            • Start of power steering production (target production capacity in 1996: 130,000 units/year) and production of lower ball joints (target production capacity in 1997: 100,000 units/year) in Malaysia
            • Increase engine production capacity in 1996 to 100,000 units/year in Indonesia (1994 production: 70,000 units)
            • Start production of constant velocity universal joints in the Philippines (target production capacity in 1997:110,000 units)
            • Increase engine block production capacity in Thailand to 350,000 units in 1998 (1994 production: 53,000 units)

         4. Increase of exports
            Toyota will seek to expand exports of auto parts in the ASEAN complementary auto parts scheme to countries in other regions. Exports from Australia will expand from current destinations in Asia and Oceania to include Middle Eastern countries from 1996.

2. Increase of imports

   1. Vehicles
      1. Increase imports of foreign makers' passenger cars Toyota will increase sales of VW/AUDI cars sold through the DUO dealerships, and will start the import and sales of the GM-built Toyota Cavalier from early 1996.
         • Toyota will strengthen its sales structure in order to sell 28,000 VW/AUDI cars in 1996 (1994 sales: 19,000 cars).
         • Toyota will utilize the 1,084 "Toyota" dealerships nationwide and work towards selling 20,000 Toyota Cavaliers in 1996.
      2. Increase imports of Toyotas produced in the U.S.
         In addition to increasing sales of the Scepter line already introduced in Japan, the Avalon was introduced this May. Target sales in 1996 for these cars are set at 25,000 units.
   2. Originally equipped parts
      Toyota has made vigorous efforts to increase its procurement from the suppliers around the world with an open, fair policy based on quality, price, delivery, and technology, and has made great progress in developing its relationships with overseas suppliers.
      Toyota will work to increase opportunities for business by seeking out new suppliers and technology, as well as to help raise competitiveness of our current suppliers. Furthermore, Toyota will work to increase clarity, improve accessibility, and assure objectivity and fairness in the procurement process.

      In doing so, the company will compile a "guidebook," clearly explaining Toyota's procurement system and its philosophy, and establish a "Toyota Global Optimized Purchase System." The details are as follows

      1. Overseas Supplier Guidebook
         An "Overseas Supplier Guidebook" will be published, outlining Toyota's purchasing policy, its procurement system, evaluation criteria, and ways to access the company.
      2. Establishment of the "Toyota Global Optimized Purchase System"

         This system enables Toyota to select the most competitive suppliers and to help them raise their competitiveness to world-class levels. It consists of the following

         1. Search program for new suppliers and technology Toyota will further promote the following; organizing exhibitions for new products of overseas suppliers at local Toyota entities, searching for competitive parts which are currently being used in other makers' vehicles, organizing design competitions for parts among qualified suppliers, and making the full use of business meetings.
         2. Support programs for current suppliers
            A program in which the supplier and Toyota discuss and agree on mid- to long-term improvement targets, and work continuously toward achieving them, thereby enhancing competitiveness and expanding business opportunities.
         3. Global Cost-Comparison System
            As a backup system to 1) and 2), Toyota will keep a database which will enable all Toyota entities around the world to make a comparative analysis of the cost competitiveness of parts around the world.

   3. Aftermarket parts
      Through the following means, Toyota will make efforts to increase imports of foreign aftermarket parts.
      • Study the establishment of a new company for procuring and marketing foreign and domestic general replacement parts and accessories during 1996.
      • Strengthen support for the parts wholesalers to increase sales of imported parts.
   4. Activities to promote understanding

      The Japanese auto distribution market is open, and its system is run based on fair competition. Toyota supports this distribution system. It has also repeatedly declared that the decision to handle foreign automobiles and auto parts remains in the hands of the auto dealers and parts wholesalers, and has acted accordingly. To further enhance understanding among those in the automobile industry and governmental bodies, however, Toyota will take the following measures

      • Send out a letter to the dealers, stating once again that the handling of foreign makers' vehicles are not subject to prior consultation with Toyota, and that they are free to handle them.
      • Send out a letter to the parts wholesalers, stating that they are free to handle foreign makers' parts and accessories.
      • In response to the concerns among foreign makers that they will face problems in gaining access to Toyota dealers, Toyota will consider establishing an internal "grievance body" to handle questions and concerns on handling foreign makers' cars.