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1 Actes du GERPISA n°22

GLOBAL STRATEGY AND GLOBAL SOURCING IN THE WORLD AUTO INDUSTRY AND JAPANESE PRESENCE. WITH SOME CASE STUDY OF MOTORS AND NIPPON

Koichi SHIMOKAWA

With the coming of the “ Mega Competition ” Since 1986, Japanese makers set up local era, the world auto industry is entering the wave of transplants by different ways in Western countries. globalization. Companies are approaching the 21 In early steps of this process, Japanese car century, and they are realizing that global thinking manufacturers tended to transfer their production and management are critical for the survival of the and part procurement systems and their products auto industry. with some local modifications. In 1990s, they were The contents of global strategy of auto industry confronted with higher Yen' appreciation and the consist of global car production and allocation rationalization of their production. During this term strategy, global sourcing strategy, and global their strategy has been changed gradually from product development strategy. Managing local oriented one to more global oriented one. globalization is also one of the key issue from the They tried to build a local production network view point of making strategic decision. On the linked to the international division of labour. The other hand managing globalization is closely local production network tended to produce related with managing localization. Pursuing global international products which can be exported to the strategy, all of the auto companies have to solve world and finally to go to the global network. this problem: how they can co-ordinate and These network global strategies were pursued not connect their global strategy with their strategy of only by car assemblers but also by part suppliers. localization. Japanese part suppliers supported car assembler' The historical tendency of most of the world localization and later their global networking auto enterprises was consolidated organization of because they were also entering globalization. local companies such as U.S. Big 3 and some After 1990, this globalization has been more Europeans. Their local subsidiaries developed their accelerated. differentiated local product by themselves and Within the context of the Japanese auto makers' purchased local parts by their own way. plan for establishing a global network, western auto makers plan to strengthen their global networking global sourcing emerged? With the coming of strategy to greater localize their production and boarderless economy, we can now overview which marketing, and to organize as a world-wide area is most optimal to purchase some parts and network particularly for auto exports. An components by quality, cost, delivery, and aggressive stance toward the development of global engineering capability. We can watch the cost strategy involves producing more goods locally and disparity by each countries using computer purchasing a greater number of parts information data base. Although exchange rate and internationally. US and European auto makers have currency evaluation are still unstable, observing taken the lead in global integration of product these data can show the best response and new development and parts purchases. A few examples choices of exchange rate free purchasing. of such companies would be the new " In considering global sourcing in the auto Concept", which combines global-wide automobile industry, it is quite important to examine the product development with global sourcing. experiences of other industries, with companies In this paper I describe the emerging global such as Wallmart, IBM, GE, Otis, P&W, Boeing, sourcing strategy and the global product and the Semiconductor Industry and development integration strategy with a focus on Micro-Computer Industries. They are still US automakers. I will also compare the US auto- perfecting global sourcing, expanding their world- maker' global strategy with their Japanese wide regional business to new markets. Through counterparts because there are some interesting this expanding world-wide business experience, contrasts on their approaches. I will describe some they can easily find available suppliers in optimum available cases of Japanese assemblers and places. More advanced distribution and information suppliers for their globalization strategy such as logistics are more helpful than ever before. These Mitsubishi and Denso (Nippondenso). Finally I activities are greatly affecting automotive supplier will discuss the significance of the background of companies in global base - and thus, auto global sourcing and the changing situation of assemblers too. global suppliers, the future prospect of the world Among automotive suppliers, there is so car and the Asian car, and the changing product increasing number of global suppliers. After strategy contents in the global base. expanding auto maker' global business and their global purchasing strategy, many suppliers have been choosing their global oriented business and EMERGING GLOBAL SOURCING regional production base network. In generally, STRATEGY they have a more systematized supplier capability to respond to more parts modulation, and they are establishing an outside global network with mutual As I mentioned above recent discussion about complement supply with many strategic alliances. the "world car" are closely related with global We can imagine as these global suppliers as Bosch, sourcing and global product development GM Delphy, Denso, Calsonic, Ford A.C.G., integration under the new dimension of global Johnson Control, , etc. strategy by global auto companies. Recently, many auto makers are decreasing Of course some companies cannot use special their number of platforms and reorganized number term "world car" in their global strategy. There are of part suppliers with classified simple tiers. This several choices, however, in approaching the tendency is eminent in U.S. and Europe. In U.S. "world car", such the "localized design car". Even along with the cutting modular of platform types, without a "world car", auto companies should the Big 3 are in process of rapidly reducing their consider the possibility of global sourcing. As auto parts suppliers. GM is aiming for 600, from a peak companies strategy becomes more globalized, their of several thousand. Ford has cut the number of its parts sourcing strategy are evolving. suppliers by more than half, from 2,500 to less than l,000, and says it plans to purchase main components exclusively from only about 180 firms Global sourcing means purchasing parts and in the future. also plans to focus on about components from optimal places which are 150 firms, down from 1,500. characterised by global bases. Why and how has Narrowing the field to only system and module its global strategy under his "Project 2000", has suppliers leads to purchase from suppliers with concentrated his product development organization high capability who can operate on a toward five vehicle centers. It has concentrated global scale. development center for , big size car, mid Reducing the number of suppliers will also size car, and commercial vehicle, to the Dearborn promote the integration and restructuring of sub- head-quarters. Small car development is delegated system makers, promoting a tendency whereby to the UK. As a result Ford is now going to small and middlesize suppliers - who cannot decrease number of platforms from 24 to 16 after transform themselves into global players but have platform integration. And GM is going to cut one original techniques - can join in global networks. third of its 96 platforms. The company wants to Of course not all suppliers can transform develop its car products on the base of 8 themselves into a global supplier. Transforming elementary platforms in the future. Among the mid into a global supplier, for first tier suppliers size and small car segments it is now going to particularly, can be risky because of the necessary integrate its platform with . Chrysler, which huge R&D and overseas investment. In general, car doesn't have overseas development center, wants to assembler still needs their local suppliers. But the decrease its number of platforms from 12 to 7 or 8. auto-maker' behavior will be more global, As a result of advanced three-dimensional decreasing number of suppliers and concentrating computer-aided-design (CAD) techniques, a on available system module suppliers. If so, the variety of car bodies can now be designed using most independent and capable supplier should be one platform. This integration has eliminated global supplier who has organized other local overlap in new car development, allowing for short supplier networks. cuts in costs. As I noted above, Ford is developing a new "world car" strategy, where global product teams use a single platform to design for sale GLOBAL PRODUCT DEVELOPMENT internationally. The plan is revised to increase the INTEGRATION STRATEGY number of models per platform while meeting demand unique to each region. While the Big Three are employing strategies of Along with increased tendency for global international unification and are focusing on sourcing and decreased number of suppliers for development and purchases, Japanese are engaged reorganizing supply chain, the auto maker' product in an active shift of production abroad and have development system is going to integrate globally. increased their purchase of overseas parts. Of course, each car maker product development Generally speaking, Japanese auto-makers have system has special characteristics because of their also tried to eliminate duplication by cutting back product strategy contents. Some companies are on the variety of platforms and expanding local trying to do more centralized and others are development systems abroad through restructuring, looking more localized in respect to their product while simultaneously strengthening their development system. But there are common international purchasing network. tendencies such as platform integration by each car Comparing U.S. with , we see common segment, elimination of dual R&D efforts, the and contrasting features in each strategic approach. reduction of R&D cost, the shortening of Both countries are cutting back or decreasing development lead time, effective and efficient co- number of platforms and commonizing use to the ordination in the R&D activities, and the same platform. Historically Ford and GM's world- strengthening more higher simultaneous product wide product development approach was development engineering with design-in suppliers. completely local. Their North American R&D Currently, the U.S. Big Three have gone a step center and European one work independently each further and are streamlining the types of platforms other. Before the early , the German Opel and they use and cutting their suppliers while reforming Ford, and the British Ford and Vauxhall developed product development processes. The cutback stems different . Now they are concentrating their from an international point of view and, R&D power to unify one organization or to co- consequently, are not concentrated in any specific ordinate completely, eliminating duplicated jobs in region. For example, Ford, which boldly publisized the global base. Ford and GM's global product had the basic motive to evaluate local parts for development strategy is essentially moving from a level up local parts quality and engineering localized to centralized integration approach. capability and to reflect the car design in a Contrasting with GM and Ford, the Japanese corresponding Japanese R&D center. Soon this auto maker' approach has generally been one of step moved to more globalizing product centralized R&D systems changing to a localized development and production system, which clearly one. Their essential R&D power is still keeping differentiate the car developed and produced in centralized system in their home country, but year Japan, introducing more local compatible concept by year their portional local R&D power has been along with local production ratio enhancing. developing with expending local parts purchasing. After the second radical appreciation of the yen, Among Japanese auto makers there are many in 1990s, the globalizing R&D production, and different approaches in their R&D localization. parts procurement network, became more dominant This issue will be more discussed further next as the new strategy to decrease car export with chapter. increasing local production in the continuing restructuring of auto industry in Japan. In North America, Japan's biggest market and production JAPANESE AUTO MAKER' GLOBAL base, , and , enhanced their STRATEGY local contents ratio almost same as U.S. Big Three with local production, and their production capacities also expanded up to 600 thousands or In early 1980s the auto trade friction became 700 thousands. In U.S. their R&D system has more intense and local production was appearing as developed further and their R&D center launched a key of Japanese strategy. In early step local original car models -- medium size car and station production started as a primitive localization wagon which completely differed body design, approach of how the Japanese could simply interia, axle and so on, but still commonized with transfer the Japanese system (such as the Japanese model. In addition to the production system and part purchasing system) to wagon, Toyota Camri wagon, Toyota Abaron, other countries and adapt to the local situation. In Honda Accord, are mainly this stage, local production was an export substitute developed by their U.S. R&D center and produced because they couldn't increase car export. Basic in local plants. Some of them are exported to components such as the engine, transaxle, platform Japanese market, Europe or Latin America and and so on were exported from Japan and assembled other Asian markets. in each transplant. After 1985 G5, the Yen' Localization and global networking were appreciated radically, leading to increased local accelerated by the Yen' more continuous production and part local contents. It became clear appreciation, and on behalf of Japan-U.S. auto that car categories would be available for either negotiation Japanese auto makers decided their export or local production. Basic mass produced global vision; it became more decisive. In this cars were produced for local production and high vision, they proclaimed that they would cut off priced luxury car or sporty roder such as niche their car export and basically they still respond for products became export oriented. This outcome local market with their local produced car. They signalled that the Japanese car makers had started a would also strengthen product development new strategic approach which changed from export localization and local parts procurement. This orientation to local production international global vision showed that Japanese auto makers network orientation. wanted to solve auto trade in balance with U.S. and Strengthening this trend, product development initial big stream of globalization in the business localization by Japanese companies also advanced world. They would try a new challengeable with increasing local contents ratio in their local strategy in which they could organize world-wide plants. They established local R&D center and with optimum location and optimum production in hired local designer and design engineer. This a global network. In this strategy they would center started from body design which could be mutually supply their cars and components - adaptable for local needs, and soon it produced a developed and produced in locations determined by prototype. During this early step, R&D localization the market for both home use and export. After all, "Kijan" which is popular commercial vehicle as Japanese auto-makers want a grand strategic aim in original ASEAN model especially for . which they can respond to the exchange rate The company also announced that it would change in every region. introduce small popular passenger " Soluna " based Under this grand strategy Japanese auto maker' on Tarcel model in this area particularly for R&D systems are going to more globalize with . Honda publicized a new popular small strengthening local R&D center. In general they are passenger car for the ASEAN area called "City" now using a common platform world-wide, but the based on "Civic" model. Nissan also publicized its Honda Accord for example, is developing more AD , produced by almost all ASEAN countries locally. Only a few platforms are like this, but in local production network. case by case it may soon follow. If the trend Japanese car makers are very cautious to become more popular, as I have described before, prevent synonym of cheap car with the special term and essential R&D power is not centralized any "Asian Car". They want these model to evolve as more, how they will co-ordinate home centralized reasonable but also as something new in terms of R&D power and local R&D power will be its quality. In the ASEAN area, as the result of interesting. Of course among Japanese auto technology transfer, local based division of work companies the contents of global product strategy complementation such as to Brand and global R&D network are different each other. Complementation, and the development of Generally speaking, as I have noted, Japanese automotive market synergized - and local auto makers have also tried to eliminate duplication production, international division of work become by cutting back on number of platforms and more dominant than before. expanding local developing systems abroad. One Of course, Japanese car maker' strategies vary difference between U.S. and Japanese auto makers from one auto maker to another. For example, to can be seen in the attitude towards suppliers. what extent should local development be pushed? Japanese makers have established orderly, Should different platforms be adopted by region? hierarchical relations with parts manufacturers over Should companies go the route of" World Car " or the years. As opposed to limiting dealings with just " Regional Car" ? a few parts makers, they encourage suppliers to Basically, for the time being Japanese auto participate in the planning and development of cars makers will promote localization in production, at the design and engineering stages. The goal is to development and purchases independently in each cut back on redundant designs and parts and share main region. In the same time, they are sliding common components between different cars. toward the promotion of mutual supplementation of They are now also moving towards increasing cars and parts between regions from an the number of overseas parts makers with whom international perspective, although the pace has they do business, while evaluating their capacities been slow. and the costs and quality of their products. Though the Japanese will design fewer platforms, the overall number of suppliers should grow GLOBAL STRATEGY OF MITSUBISHI internationally. Special emphasis is being placed MOTORS AND DENSO (NIPPON DENSO) on expanding local development (main body and interior design) and parts procurement for their overseas operations in an effort to meet the diverse As I mentioned above, the Japanese auto needs of the U.S. European and Asian markets. companies are going to move from their Related to the development of global strategy is international localization age to globalization age the highlighted international division of the work in in their way of strategy. In this chapter I will Asia - especially ASEAN, where they have describe Mitsubishi Motors' global strategy and responded to the localization policy with SKD or Denso' global strategy as the case study. Through CKD. Auto market in this area is still expanding, these case studies we can confirm some way of the and some of the Japanese auto makers like Toyota, Japanese auto maker' global strategy and the Honda publicized their new trial of "Asian Car" Japanese global sourcing supplier' global strategy. last year. Toyota already has been producing Mitsubishi Motors'( M.M.C. ) global strategy MMMA produced 21 hundred thousands cars in consist of three parts mainly. One of the major 1995 as the top record but it still improved its parts is North America, second major part is Asia, profitability not yet. Its accumulating red figure is and third one is EU. If we want to understand its $ 80 million in 1995. Its amount of over debt was $ global strategy contents, we should summarize 40 million same year. In 1996 Mitsubishi invested Mitsubishi Motors' historical background and additionally $ 54 million. Using this new invested business contents. money MMMA paid MMMA' total debt. MMMA Historically M.M.C. had higher engineering also cut their R&D cost about 20% e.g. almost $ 20 capability in its engine technology and production million. It is also cutting parts purchasing cost, then technology. Its shortage was in marketing area MMMA's final target is decreasing break-even especially to its domestic market. Therefore, this point down to 1.9 or 1.4 hundred thousands number company has pursued many strategic alliances and of vehicles per year. business group support. Most eminent case were What is the reason which explains why the collaboration with Chrysler and Mitsubishi MMMA's profitability become bad? Main reasons group especially Mitsubishi Shoji (Trading come from huge burden of initial investment and Company)' fully support. This company is now marketing power shortage. MMMA's plant in producing fully covered cars and segments, Illinois is most modernised plant but its total initial from minicar to 3,5 liter passenger car and from investment with higher automation is too much truck to heavy duty truck. The company is high. The plant introduced flexible manufacturing now producing 1,28 million cars and (1996). line but its operating ratio experienced too much It also produced about 9 hundred thousands cars frequent change. Especially introduced new car, and trucks overseas. And it sold 8.2 hundred such as from Mirage to Galant exchanged model thousands cars and trucks in domestic market and and fully model change of Eclips, tended to exported 4.6 hundred thousands cars and trucks. production line trouble and longer time for In general Mitsubishi's most important key issue production line change. After all, FMS line did not in its global strategy is the reconstruction of North operate completely. On the other hand Mitsubishi' American transplant MMMA (Mitsubishi Motor car marketing power in North America is not so Manufacturing of America). This plant originally strong because Mitsubishi has too much delayed its was established as the business with establishment of own channel on behalf of old Chrysler in 1985 so called Diamond Stars (DSM). Mitsubishi-Chrysler agreement. Chrysler' This plant started car production in 1988. This marketing channel in late l980s and early 1990s plant at first produced small car Mirage for had also weak point. This marketing weak point Mitsubishi channel and Eclipse for Chrysler reflected to MMMA' plant operation ratio channel. In 1991 Chrysler wanted to sell its stock declining. But after reconstruction strategy started ownership of the plant to Mitsubishi because of its MMMA's profitability in 1997 is going to improve cash flow shortage. Then Mitsubishi bought it and for one year. Even though MMMA is still DSM changed its company name as MMMA with confronting hard time not only by sexual 100% owned by Mitsubishi. harasment trouble but also by marketing in US Still now MMMA is producing and supplying market. 50% Chrysler brand cars by OEM. And MMMA Nevertheless in spite of in spite of its business and Chrysler are still continuing collaboration difficulty in US, on the other hand, Mitsubishi's relationship in parts and components procurement Asian strategy is going on very successfully. In this area. This plant' annual production capacity was 1 area, especially ASEAN area, Mitsubishi's hundred thousands in early stage and now presence has been quite important such as Toyota expanded 2.4 hundred thousands. The plant after the 1970s. On behalf of its agreement with installed 470 in its body and final assembly Chrysler, Mitsubishi lost its business chance in line and, so called total final assembly automation North America until early 1980's, then M.M.C. ratio is 20% as the top class not only in U.S. but strengthened its Asian strategy. Basically, its Asian also in Japan. The plant also introduced FMS line, strategy consists of four parts, Korean, Taiwan, therefore, which can respond for 5 or 6 mixture and ASEAN countries. In Korea M.M.C. cars production. started engine technology transfer to Hyundai Motors in 1975 then Mitsubishi invested 15 % • In Indonesia M.K.M. company and others ownership of this company with Mitsubishi shoji in produce press parts, and assembly engine 1982. In this time M.M.C. assisted car and body of Mitsubishi's vehicle, manufacturing technical know-how to Hyundai. Some model of the Mitsubishi such as Granger • In PAMCOR and ATC which is one of the luxury model was directly company produce parts, and assemble body transferred to the Hyundai by giving technical and transmission. licence base. In this alliance it was given to • In Thailand MSC company assembles available licence fee to Mitsubishi for a while. engine, body and vehicle. Soon or later, Hyundai developed is car by itself Among these plants in ASEAN countries with lessen help by Mitsubishi. Mitsubishi complementary supplies parts and Comparing with Korea, Mitsubishi's fully components each other on the base of B.B.C. support for China Motor Company (C.M.C.) is a (Brand to Brand Complementation) schema. After very successful business in Taiwan. In early stage 1996 the AICO (ASEAN Industry Corporation Mitsubishi assisted C.M.C by and small Organization) agreement being started, Mitsubishi R.V. But year by year C.M.C' business situation is going to change from B.B.C. base to AICO base. has been promoted and Mitsubishi transferred its AICO schema includes supplier based division of passenger car technology. After all C.M.C. total labour network in which supply parts and market share became number one in Taiwan components complementary in ASEAN area. From Market as 15%. But Taiwan auto market were now, therefore, Mitsubishi's ASEAN strategy may opened to western auto makers and competitive become more comprehensive including global situation became very tough. After all, Mitsubishi suppliers. and C.M.C. have a plan to invest main land China. This year Mitsubishi introduced new Asian car. This project, however, is established not yet This car is a van typed family wagon with 1.5 liter although Mitsubishi is still keeping its technical engine, and produced in Taiwan, Thailand and licence agreement with several Chinese companies. Philippines on the base of complementary But in the near future some possibility in C.M.C. components supply. In this project Mitsubishi will new investment for Fukan with collaborating with use AICO schema with enhancing local contents Malaysian Proton still exists. C.M.C. has already ratio; pursuing this way Mitsubishi will educate entered Mitsubishi's ASEAN division of labour strongly its local vendors with world-wide special network. In ASEAN area Mitsubishi's strategy has quality guarantee by Mitsubishi. been very aggressive because its North American Soon or later Mitsubishi's total production of strategy was enlimited by Mitsubishi-Chrysler this area will become 6 hundred thousands collaboration agreement until 1982. In this region including . Mitsubishi developed its CKD production bases in Mitsubishi third important production base is each ASEAN countries and established its parts Holland NED Car company in Europe. This plant and components division of labour network. From is the joint venture business with Volvo. Many 1970 on Mitsubishi followed in each ASEAN people are much interested in the encounter of countries auto industry its local promotion policy, Volvo production system and Mitsubishi collaborating with local government and capital; it production system. Nevertheless, NED Car's main founded many local joint venture companies in; product depends on Mitsubishi small car, then each country to produce SKD and CKD, assembly Mitsubishi production system becomes dominant. plants, main components, engine, transmission and Its car production capacities are one hundred die-casting parts, and so on. thousand and some of them are exported to Japan. Mitsubishi's ASEAN business contents are : In general, Mitsubishi has developed its product • In Malaysian Proton company M.M.C. is by centralized R&D center in Okazaki. It has the jointly producing press parts, die-casting, design center in U.S. and Europe. Both engine assembly, and body and final organizations supported Okazaki center. And assembly. Okazaki center is everytime watching and bench marking local parts Q.C.D.E level from the point of view of global sourcing. educated for Denso's quality guarantee Denso (Nippon Denso) system, just-in-time production technology, Denso is a typical Japanese major global and simultaneous engineering, e.g. design- sourcing supplier with high engineering capability and production technology. Now its world-wide in capability. sales volume ranking in global suppliers became • Although its tight relationship with Toyota, second place. this company decided its business strategy This company started from on 1949 on by by himself especially its international separating Toyota' auto electrical parts division. In strategy. In early stage the company was early time the company produced radiator, , starter, spakplug and so on. It supplied only subordinate subcontractor for Toyota mainly Toyota in early stage. Now its percentage but year by year it expanded its business to of supply to Toyota becomes less than 60%. It is other Japanese auto companies such as now supplying almost all of the Japanese auto Honda, Mitsubishi, Matsuda etc. Of course makers except Nissan. Its supply chain network is it has been keeping its responsibility as the almost fully covered with foreign major auto O.E.M. supplier. manufacturers such as U.S. Big Three. This company now earned net sales $ 13.81 • Denso has been pursuing R & D billion by consolidated base and $ 11.94 by non engineering oriented company. It consolidated base. Its net income is $ 483 million established many technological licences in and $ 929 million each other. Its overseas net sales the world. It developed its R & D capability and net income, therefore, are $ 1,87 billion and $ in which covered many fields of parts and 154 million. This means Denso's overseas business earned 13 % total net sales and contributed almost components elementary technology. Its one third of total net income. This company early stage of engineering priority was already organized global business network. It has machine manufacturing area such as 29 overseas plants for 16 countries such as U.S., radiator, meter, filter and fuel pomp. Then it , , Argentina, U.S., Spain, Italy, developed more systematic product like air Australia, Thailand, Indonesia, Korea, Malaysia, conditioner. Finally, it tried more high tech India, Taiwan, China, and Philippines. Denso also has 13 sales and administration subsidiaries. These oriented engineering fields especially overseas plants and sales organizations are electrical and electronic parts such as E.F.I., administrated by three regional head-quarters sensor, and semi conductor. Its main stream companies, such as Denso International America, of R&D development suited exactly with Denso International Europe and Denso car electronics technology. International Singapore. The company hired 56,300 total number of employees, including 15,500 • Denso has highly talented production foreign employees. Denso main products now technology. Its production technology too contain car air conditions and heaters (33.9% for much contributed its refining process of total net sales), electrical automotive and practitionizing for its introduced technical electronic control products (28.4%), fuel licence from western companies, such as management systems (16.6 %), radiators (5.8 %), meters 4.4%), filters (3.2) and other products (7,7). Robert Bosch, Bendix, Texas Instrument. In Why did this only local parts supplier in Toyota 1960s and 1970s it introduced many group become world-wide global supplier? The technical licences but soon later Denso main reasons in summary are following: modified them and given these practical • Denso has been long time in partnership licences to its licensers. Denso got Deming with Toyota and this relationship prize in 1961 four years earlier than Toyota. guaranteed their long term trusteeship with They introduced advancing quality, cost, delivery, and in 1974. After all its production technology engineering capability. Toyota was highly become excellent level. And using its • When after 1980s Japanese car maker's new production technology Denso developed its transplants emerged, Denso invested more machine engineering capability especially huge money for its transplants. After its robots and factory automation system. new trial for transfer technology and Denso' main factory such as Takatana and production system, these overseas plants Koda plants are fully installed Denso' self became more profitable and nowadays they made robots and F.M.S. This machine and established R&D center in each region. automation system is fully supported by Denso' internationalization as the global talented activities with T.P.M. supplier was ahead and advanced more than activities by shop floor level. Toyota because Toyota' strategic decision of • Denso has been strengthened in strategic internationalization started from 1983 after alliances with many western major its decision for NUMMI which is joint components manufacturers. The company venture business in Fremont California. got important components' basic elementary • Denso has well organized its excellent technology by giving licence agreement suppliers. The company has given highly from Bosch, T. I., GM, GE etc. as I educated engineering capability. Starting mentioned above. But the company returned from quality guarantee system by each its modified technical licence and new supplier, the company strengthened its licenses to its alliances as its licenser. And leadership for the supplier with high Denso established many joint venture productivity. Then it induced just in time business with its world partners including delivery system by adapting Toyota their licensers. For example the company production system. Even if small, its established Bosch-Denso's venture business suppliers enhanced their technical capability in Tennessee and Valeo-Denso's joint to respond multiple various production with venture-business in Spain in late 1980s. small lot. Its suppliers also accumulated • Denso did its commitment for many Kaizen activities and these enhanced internationalization at a very early stage. technical capability supported Denso' Especially after late 1960s, Mr. Tanabe, flexible production system. who became vice chairman later, joined Considering Denso' globalization strategy, we with Denso from Mitsuibussan (general can see two cases of Denso transplant new way of production system in Battlecreek Plant in trading company), Denso' strategy became Michigan, and European Denso' strategy. more internationalized. The company Denso' Battlecreek plant is producing radiator, established overseas subsidiaries very early. heater at first, then come cleaning units, condenser, For instance, Denso established Nippon evaporator. Among these production items there Denso in 1971, Nippon Denso were two types products in which suited for mass production and non suited for it with small lot Thailand and Australia in 1972, and also production. Then, the plant was deeply concerning Nippon Denso Europe in 1978. Those for control of delivery system and tight linkage subsidiaries were export sales office and with its vends. reason office of its licensers. But soon or About its delivery system, for example, in later the company invested small heater assembly lines were separated five lines manufacturing plants which produced spark with 26 docks in the stockyard, and supply orderly to suit delivery lots and frequency with keeping the plug and air conditioner etc. for after market racks. And disposable used for CKD in each country. components and in-house manufacturing products, then inhouse production schedule and its results What is the reason why Denso' priority in could make sure by each process. This system Europe is based on U.K.? Main reason came from tended to be usable for contrasting schedule with U.K. government' eager support for Japanese real performance and stock control. investment for U.K. especially in manufacturing This plant has expanded local contents ratio field. The other reason came from Japanese auto from 45% to 70% with much trouble to local maker's investment concentrated for U.K. In U.K. vendors. The local venders disliked small lot Denso' plant designed as the midscale plant with production order, using special new materials. Its not so big and small. It is very interesting story that quality and delivery tended to be good for their Denso invested medium sized plants to keep with testing process but if the process moved to mass available profitability and is establishing its production their response was getting worse. The presence to penetrate for the weak point of local vendor' top people could be understandable European parts makers with strategic alliance. its necessity of Kaizen but it tended to be impossible to penetrate its way of thinking by itself. CONCLUSION: FUTURE PROSPECT OF Beyond these trouble this plant now expanded "WORLD CAR" OR "ASIAN CAR", its business area and sales volume with stable GLOBAL SOURCING AND CHANGING profitability. After all in l988 Denso established its GLOBAL PRODUCT STRATEGY new plant in Tennessee to produce starter, alternator and meter etc. In 1989 Denso opened The tendency of global networking for local new joint venture plant with Bosch in Tennessee to production is spreading not only among Japanese produce fuel pomp. car makers but among GM, Ford and European In North America Denso's strategy is very makers such as VW, BMW and Mercedes Benz. aggressive to expand its big manufacturing plants Among these makers the most attractive plan is network. On the other hand, its European strategy Ford' ambitious "World Car strategy" and "Global is more cautious and contrastive. In Europe it had Sourcing strategy". long time alliance with Bosch as the relative In 1994, as I mentioned above, Ford publicized relationship between licenser and licensee. In its Ford 2000 project as its 21st Century' grand making strategy for Europe Denso considered strategy with new world car strategy. In this project welcoming entrance by its partner and competitor. Ford exhibited its grand design targets as follow: • Advancing effectiveness by global Evading direct competition with local parts makers in Europe, not only with Bosch, Denso integration of Auto R&D, Design and chose its advanced products fields in which used its Production. R&D and production technology with high quality • Reorganization and vitalization of and management capability. This way could bureaucratic organization. contribute to European parts supply industry. • Active entrance for new developing market Therefore, Denso specialized for the product field such as evaporator and radiator in U.K. and air like China, India, Latin America and conditioner in Spain. Another special ASEAN countries. Strengthening characteristics of Denso's European strategy is that established market share. they thought never brought over-capacity after its • Global advancing R&D cost cutting and European investment because there were many quality improvement by suppliers auto makers and parts makers. Its European integration. investment started by M&A or the joint venture business with European companies. Two plants in • For this global strategy, Ford has integrate U.K. were purchased by Denso for local plants. its R&D center globally, and introduced 5 Denso' plant in Spain started as the joint venture Vehicle Centers. The development center with Valeo then Denso purchased Valeo' for large, mid size, luxury and commercial ownership by its asking. vehicle is concentrated at the Dearborn Headquarters; small car are also centralized (Dagenham in the U.K.), and the purchasing systems, as well as the quick utilization development of power-train is in Köln, of accumulated information through networking, have helped in this regard. It is true that . This integration of R&D international logistics of parts and components organization will cut the number of human mutual supply became less risky rather than before hour of product development, which was when information technology advanced not so duplicated by regional based development much. Ford's "world car" strategy will become separately. With this strategy Ford will more changeable in its contents, as shown by Ford globally unify the basic platforms and 2000 catch-phrase "Think Globally, Act Locally, with Agility". This strategy, however, different components of its cars, which will be from GM "world car" before, may have somehow produced and sold in Europe, North possibility towards future success. If this ambitious America, Asia and Latin America. By strategy can realize, it will have a big impact pursuing this strategy, the "World car", toward world automotive society. which needs to be developed and produced Not only with Ford 2000, but also in the world automobile industry major auto makers - world-widely, can be truly realized. Ford whether or not using the name "world car" - already publicized its midsize car Mondeo are moving towards world-wide car production Mystique series as its "world car". Now and supply networking based on global product Ford' international product strategy will development and platform commonization, proceed, focusing on the "world car" with connecting with their home country with overseas eminent markets, and production bases. The platform commonization. Of course this internationalization of development and purchases "world car" strategy is closely relating with can also serve as a buffer to lessen the impact of parts international optimum procurement exchange-rate fluctuations through the flexible strategy by global sourcing. It is natural that networking of supplying parts between regions. the integration of world-wide suppliers German auto makers, whose labour costs are quite under project 2000 is also closely related high, as well as the Big Three, have displayed great interest in these types of international with global sourcing. purchases, among others. Different regions offer A "world car" developed and produced with a different advantages for the purchase of auto global strategy and allocated locally with a global parts, such as lower distribution costs. In a network of suppliers by global sourcing is Ford's globalized network, goods will be purchase based global strategic plan for the 21st century. People on cost comparisons of the optimum product in a said this "world car " project is very risky because prime location. Even GM is moving toward global GM's "world car" concept 1980 was unsuccessful. networking strategy almost similar to Ford strategic It is true that among the other auto makers except behavior in its core elements. Japanese auto makers Ford there is question whether or not the local who have begun to get on the right truck for their compatibility responding to regional customer local production, and European auto makers, who needs can be attained with "world car" product are challenging the global strategy, are following differentiation. It is not impossible, though, to these behavior or taking a more independent integrate product development under a global approach. As the automobile industry becomes strategy, and to differentiate car body design using internationalized, it is necessary to built a global three dimension CAD/CAM with speedy network for developing and supplying cars, as well information exchange. As opposed to a decade ago, as the purchase of parts, while avoiding exchange it has became much easier to have a world-wide risk as much as possible. With a decrease in the choice and integration of suppliers and their number of suppliers internationally, the question network now that we have better information of how they should merge and how localization technology. A world-wide distribution system, will balance with globalization is the main closely integrated with the information revolution challenge facing the auto industry. have aided in the globalization of development and purchases. Databases for the development parts Not only globalization strategies by Ford and GM but also by Japanese auto makers and global sourcing suppliers such as Mitsubishi and Denso are also interesting story with step by step approach with localization. 13 Actes du GERPISA n°22

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