The driving force behind EU shift

Toyota is proving to be a model citizen of the UK and Europe since it arrived as a manufacturer nine years ago.

The new Corolla goes into production next month at Burnaston, Derbyshire, prior to a sales launch across Europe early next year. The company is also expanding output at the Deeside engine plant, and not just for Corolla and Avensis models made at Burnaston.

It will supply units to Toyota car plants in France and Turkey next year and, starting in 2003, machined engine components to the group’s factories in Brazil, Venezuela and South Africa. Toyota will make manual transmissions in Poland next year. More recently, the company signed a small car joint venture for central Europe with Peugeot-Citroën.

Individually, none of these moves seems particularly significant. Collectively, they will turn Toyota into a fully integrated European vehicle maker that happens to have its headquarters in Japan.

Right direction?

Alan Jones, managing director of Toyota’s manufacturing units in the UK, says the plan is for Burnaston to reach an annual output of 220,000 in 2003 and for Deeside to top out at between 300,000 and 400,000 engines a year. By way of comparison, Burnaston last year made 171,400 cars and Deeside 132,500 engines.

While Toyota is moving in the right direction – part of its pursuit of a 5% share of the European market – there is one drawback. It has invested £1.6bn in the UK since its arrival, but is enjoying scant financial rewards for its efforts. It is a similar story for the UK manufacturing enterprises of Nissan and Honda.

The cause is, in large measure, a strong pound/euro exchange rate. (It is not the only reason: Japanese carmakers were very slow in getting diesels to Europe, a market with an insatiable demand for them.)

Toyota, Nissan and Honda have collectively invested £4.5bn in their UK facilities and are here to stay. But they decided they can do so only by switching more of their component sourcing to eurozone suppliers.

Remodelling UK industry

It is all part of a fundamental reshaping of the motor industry in the UK. As traditional carmakers and suppliers fade in significance, Japanese marques are expanding and more components are being sucked in from the rest of Europe.

At Toyota, the changes will at least mean more jobs – 250 at Burnaston and 200 at Deeside. Even so, the group’s eventual UK manufacturing payroll of 2,250 people is well below the level of companies that make fewer cars and engines. It is another facet of the sector’s reshaping.

For Jones, the clever part of Burnaston will be its ability to react to market demand. ‘We want to make sure our investment is flexible, and Toyota Manufacturing UK epitomises the best flexibility you can have,’ he says.

The factory will use an improved version of the company’s widely copied production system involving more precise sub-assembly manufacturing and less clamping at the body framing stage.

The flexibility that Jones talks about means Burnaston will be capable of making three- and five-door Corollas, each with a choice of three types of transmission and six engines. Together with saloons and estate cars made in Turkey, Toyota reckons it will be able to cover 84% of the European C-segment with locally made Corollas.

That’s a major shift in only a decade.