When two heavyweights in the forklift truck market, Mitsubishi Heavy Industries (MHI) and Caterpillar, decided to get together in 1992, the prospect of integration was daunting.
In Europe, what had been largely a Mitsubishi distribution centre in Holland (although some truck assembly work was carried out) was to be transformed into the main manufacturing and parts distribution site for the Japanese-American alliance.
The joint venture married not only two very different cultures, Japanese and American, but brought together mainly Dutch and Swiss nationals in marketing and distribution.
At least there was the advantage of a long-standing relationship between MHI and Caterpillar. Since 1961 they had operated a joint venture in earth-moving equipment. And with 36 overseas subsidiaries, MHI is no stranger to link-ups.
Four years on, the integration process in Europe is nearly over – it will end later this year with the transfer of Caterpillar’s remaining marketing staff from Geneva to Almere, near Amsterdam. Thirty six nationalities now work at the combined group, Mitsubishi Caterpillar Forklift Europe (MCFE).
The Almere site has trebled in size from 8,000m2 to 25,000m2. With an annual turnover of £170m, the new facility has been profitable since 1994. Output has risen from less than 1,000 units before the joint venture to producing more than 10,000 electric and internal combustion trucks annually, serving the European, Middle East and African markets.
A separate parts centre carries three million spare parts and ships about 10,000 items a day to all MCFE dealers and distributors. Such is its efficiency that other leading companies use the centre to warehouse their goods, and the facility reputedly has one of the best overnight availability rates in the sector.
Success took time, dedication, effort and diplomacy. Back in 1992, the first step was to increase truck production capacity. This required more space and skilled workers. `We also wanted to expand our local supplier base at a time when the European industry was pulling in its horns because of uncertain demand,’ says Martin Baumann, MCFE’s marketing general manager.
A new management team, drawn from both partners, was brought in to tackle these issues and get the project running. Its remit was to combine the strong mass production skills and engineering focus of Mitsubishi with the expertise of Caterpillar in distribution and marketing. The US group also had a long-standing capability in the fast-growing electric truck market which fitted well with Mitsubishi’s strength in internal combustion engines.
Geographically there was a good fit between MHI in Asia and Caterpillar’s distribution network, especially dominant in the US and Europe.
`We needed to develop a common and mutual understanding of the goals of the combined company which everyone could subscribe to and buy into,’ says Baumann.
Not everyone could or wanted to adapt to the changes. `These were primarily on the management side,’ he says. `At that level people tend to identify closely with a particular company and can be less willing to change – some simply did not want to move location.’
On the production side, one of the major challenges for management and workers was adapting to a constantly changing environment resulting from the rapid growth. `The skills involved in an environment that never stands still are very special. It takes dedication and tolerance on everyone’s part to meet production targets and quality standards. Management also had to motivate staff under these conditions,’ says Baumann.
Not everything went to plan. In 1994, for example, product delivery schedules increased to 25 weeks on some trucks. `A lot of our competitors were averaging 10-12 weeks at the time,’ says Baumann. Since then, schedules have moved back in line with the rest of the industry.
On a cultural level, one of the main achievements of the joint venture has been to introduce kaizen or continuous improvement techniques. `This process, so closely woven into the fabric of Japanese manufacturing, is now very much a way of life at Almere too,’ he says.
The Japanese were also instrumental in developing local supplier relations. There are now 120 European suppliers certified to the MCFE quality standards. `This needed a lot of purchasing and logistic skills, which the Japanese are renowned for,’ says Baumann. Today more than 90% of components for the electric trucks are sourced from Europe. On internal combustion models, the figure is 60-65%.
Adapting to some Japanese working practices may have come as a shock to European and US staff but working in Europe also provided a few shocks for the Japanese. `In Japan, the relationship between worker and company is much stronger than in Europe,’ says Terukazu Sakakibara, MCFE managing director. `Our remuneration system is based on seniority and length of service. Japanese companies also tend to provide for workers’ medical and social needs. In Europe this is less evident.’
It is also easier to manage a Japanese workforce, says Sakakibara. `It is one people, speaking the same language, with the same expectations. This makes it easier to win acceptance for corporate strategies and goals. At Almere, with its variety of nationalities, this was much harder to achieve.’
The European worker is more likely to question decisions than his Japanese counterpart. `In Japan decisions are arrived at by consensus and then stuck to. In Europe workers want to be more involved in the decision-making process,’ says Sakakibara.
In addition, differing education systems tend to create a more generalist worker in Japan, while Europe seems to spawn specialists, says Takashi Hasegawa, president of MCFE. `European specialists tend to be excellent at what they do but less flexible.’
This led to compromise in certain areas. On the production line, for example, the new management team tried to get workers to switch between functions. This proved inefficient, however, and had to be dropped.
For its part, the US management was largely responsible for the consolidation of the distribution businesses of both partners. Prior to the joint venture, there were two parts distribution centres – one for Mitsubishi at Almere and the other for Caterpillar in Belgium.
As with the manufacturing plant, setting up a combined parts centre was not without difficulties. At one point the supply network broke down completely. Two jumbo plane- loads of parts had to be flown in from the US and Japan to meet customer orders in Europe.
Two different numbering and ordering systems have now been successfully consolidated and a central computer system has been introduced to support distribution operations.
Cultural problems were most pronounced in combining the marketing and distribution operations. `We were trying to bring together two sets of people who had until then been in competition,’ says Baumann. `Mediating between them took time and patience, not to mention the odd late night. We had to develop trust, acceptance and goodwill. This was more difficult in marketing than on production because of the differing geographical locations of each party.’
Baumann says that management has had mixed fortunes in increasing the workforce from about 100 in 1992 to about 450 today. As Almere is a new town, some skills were not readily available. `We brought in training experts from Japan, Europe and the US. Our dealer network also played a vital role in training workers in final assembly and finishing.’
MCFE was fortunate, however, in picking up skilled welders who had come on to the labour market because of job cuts at some local manufacturers.
A total of £22m has been invested at Almere since 1992 but significant efficiencies and economies of scale have come out of the joint venture for both parties.
`Today, 90% of what the combined group sells in Europe is produced at Almere,’ says Baumann. `There have also been significant savings in administration and marketing.’
With competition increasing in the forklift truck market as Korean manufacturers set their sights on Europe, MCFE looks well positioned to increase its market share. Globally this stands at 17%, according to MCFE estimates. In Europe it aims to double market share by the year 2000.
Last May, in what the company says was a planned move, the management brought in to launch the Almere project was replaced. Its task is to build on what the former management achieved and to allow both truck brands to develop in Europe.
`It’s relatively easy to make gains on price with only a limited model range,’ says Baumann. `But in today’s market, success depends on product range, service and support. This is where we feel we have developed an edge in a local base at Almere.’