TOKYO -- After a hiatus of about three years, Toyota Motor has decided to resume large-scale investments, starting with the opening of new plants in China and Mexico in 2018 and 2019.
The Japanese carmaker will pack the factories with advanced technologies that reflect its push to bring its focus back to maximizing production efficiency.
Toyota's overseas expansion drive was significantly hampered by the global financial crisis triggered by the Lehman Brothers collapse in 2008. But the company has been building up its strength and is keen to lay the foundation for stable long-term growth by building plants better capable of bringing profits.
"Simple and slim"
Hirofumi Muta, Toyota's senior managing officer in charge of production, said the new facilities will be "simple and slim," turning out cars faster using fewer processes.
What will particularly set the new factories apart from conventional plants will be their production line structure.
Conventional auto plants use hanger-like overhead conveyance devices to move the cars along as parts are incorporated into them. But the new Toyota plants will eliminate such devices, with the cars instead being assembled as they move on floor conveyors.
This format will make it easier to lengthen and shorten the lines. So if demand declines, for example, Toyota will be able quickly shrink the line.
At conventional plants, conveyors are fixed into place inside holes dug into the floor. But the new factories will simply place the conveyors onto the floor without securing them into holes, making it easier to change the layout.
Should Toyota decide to change the model of car being produced at a new plant, it will be able to rearrange the conveyor layout over a weekend instead of a month, Muta said.
Flexibility will be a big theme of the facilities. The Mexico plant, for example, will have an annual capacity of 200,000 vehicles. But Toyota will be able to adjust output easily depending on demand.
"It can also become a plant that produces between 100,000 and 150,000 vehicles a year," said a senior Toyota official.
Conventional plants cannot be profitable if they turn out only a small number of cars. But Toyota's planned factories in China and Mexico will be designed to be able to operate in the black at both large and small output volumes. The key will be their streamlined designs and processes.
For example, even the space used for painting the cars will be reduced. Typical Toyota plants use a space 13 meters high and 6 meters wide for painting. At the new plants, however, those dimensions will be trimmed to 6.5 meters high and 4.5 meters wide. That move alone cuts related investment costs by 40%.
Also, instead of using four robots for painting, the new plants will use two highly efficient models without any loss in productivity.
Because the new plants will not use overhead conveyance devices or require holes in the floor, the pillar designs can be simplified, allowing for a smaller footprint. The more compact design will translate into 40% lower construction costs compared with comparable plants built in 2008.
It is the prospect of these cost reductions that convinced Toyota to once again embark on big investments.
Bracing for the future
The production reforms represent a new way forward, but they also symbolize a return to Toyota's core principle of eliminating waste by maximizing efficiency.
Auto markets in developed countries have largely stopped growing. For a company like Toyota, which is not particularly strong in emerging markets, that means it will be necessary to prepare for a possible decline in demand.
The new plants in Mexico and China may mark a significant first step in ensuring the carmaker's growth.