Japanese Automotive giant go to EU Suppliers
Toyota Motor Corp. launched a new Corolla in Japan this year marked a change for the company, they went to a German car parts maker for cutting-edge crash prevention system, rather than their traditional close knit Japanese supplier network (source: WSJ Oct 28th 2015)
The decision to go outside its traditional network highlights a growing concern within Japan’s auto industry: Parts suppliers, once considered the foundation of the country’s auto export prowess, are losing their edge, especially in next-generation software technologies for safety and autonomous driving.
According to Toyota President Akio Toyoda; “Competition in the global automotive industry is becoming fiercer. This is the time when Toyota must change its formation.”
Reported in the Wall Street Journal 28th October “Japan’s parts makers are up against suppliers such as Continental and Robert Bosch GmbH, which have become one-stop shops for everything from engine software to automatic braking systems. Their gl The German auto-parts suppliers have made inroads with auto makers by developing complete systems that combine a range of technologies, rather than just individual components. They have expanded product lines through acquisitions, such as ZF Friedrichshafen AG’s $11.7 billion purchase of U.S. supplier TRW Automotive, which bolstered the firm’s braking and safety systems offerings.
The Japanese are lagging behind rivals in the innovation race in part due to their de facto control by the big auto makers, a system the Japanese call keiretsu. This tight relationship enables close communications between car manufacturers and their suppliers, allowing them to fine-tune development of precisely engineered parts, but the insular nature of the groups may have stifled breakthroughs.
“Toyota’s shift is indicative of changes going on in Japan,” with ramifications that extend beyond the auto industry, said Ulrike Schaede, professor of Japanese business at the University of California, San Diego. “The globalization of Japan’s auto parts industry and competitive jockeying mean uncertainty and unpredictability” in a society that values stability, she said.
Toyota, the world’s best-selling auto maker, is the last of Japan’s Big Three to fully maintain a keiretsu. Mr. Toyoda wants to maintain the system, but aims to turn the company’s parts providers into powerful global players, in the model of Bosch. He is keeping the group largely intact while trying to make its development of parts more efficient, aiming to allocate more resources to cutting-edge technologies. Global presence and greater economies of scale mean they can offer the newest technologies at lower prices.”
To read more in this article in the WSJ