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Saturday, May 21, 2011

Soda Stream Bennett | world news 2011

Posted on May 19, 2011

http://images.businessweek.com/mz/11/20/600/1120_mz_70toyota.jpg

Two weeks after the earthquake, a Toyota in Sendai. Sales in Japan fell by nearly 70% Kim Kyung-Hoon/Reuters

By Drake Bennett

The village of Ohira is in Miyagi prefecture, 20 miles northwest of Sendai Bay, the stretch of Japan?s coastline closest to the epicenter of the massive Mar. 11 earthquake. In recent years the area has become Toyota (TM) country, and car and car-supply plants dot the region. But in a year that has been hard on Toyota and cruel to Japan, Ohira has done O.K. In the Sendai Shiogama port, the tsunami crushed cars as if they were soda cans, scattered street lamps like lawn clippings, and left huge fishing trawlers beached on the docks among the blown-open shells of warehouses. Ohira itself, however, lies inland. Compared with the devastation along the coast, the damage the village suffered was mild: cracked walls, torqued pavement, a few utility poles listing to one side or the other.

Ohira, in short, was lucky, and not for the first time. The village has managed to escape much of the nation?s economic stagnation, too. Unlike many Japanese towns, Ohira has good jobs to keep its young people from fleeing to Tokyo and Osaka. The population of 5,500 swells by more than 2,000 during the workday as commuters stream in. Oki Electric Industry, which makes servers and ATMs, has a factory in Ohira, as does zipper maker YKK. Corporate taxes account for 80 percent of the village?s revenue.

It?s Toyota that looms the largest, though. The automaker?s Central Motor unit opened a plant here in January where 900 workers make Yaris compact cars. In the neighboring town of Taiwa, a wholly owned subsidiary called Toyota Tohoku makes brakes and suspensions. Taiwa is also home to a factory where Primearth EV Energy, a joint venture between Toyota and Panasonic, makes hybrid-car batteries. This island of job growth was only momentarily unsettled by the earthquake: Central Motors is in the process of transferring 400 more workers here from a plant near Tokyo, and the plant will soon add Corollas to its product line. Toyota Tohoku is going ahead with plans to build an engine factory next to its existing facility to meet the growing demand from the area?s Toyota car plants.

To an extent, Ohira and Miyagi?s dependence on Toyota reflects the nation?s. The world?s biggest carmaker is also Japan?s largest company by sales and its biggest taxpayer. But what sets Toyota apart from other Japanese manufacturing giants, as much as its size and clout and cultural prominence, is its insistence on making things in Japan. Nissan, the next-largest Japanese auto manufacturer, makes just 30 percent of its cars in Japan. Honda, the third of the Big Three, makes only a quarter. By contrast, for Toyota the share was 60 percent in 2010, and half those vehicles were shipped abroad.

The Mar. 11 earthquake underlined one risk of concentrating so much production in a tectonically cursed nation. Even though Toyota?s actual plants suffered little damage from the quake and tsunami, the power shortages and disruptions along Japanese supply chains hurt Toyota more than its Japanese competitors. Toyota?s global output dropped 30 percent in March, while Honda?s fell only 19 percent, and Nissan?s actually increased, as its overseas plants were able to temporarily offset the drop at home.

By itself, an unprecedented natural calamity might not be an argument for Toyota to radically change its global strategy. But the company is also facing a pair of longer-term challenges: a shrinking domestic market and a stubbornly high yen that makes its cars more expensive outside Japan. Industry analysts say Toyota needs to speed up the process of moving overseas to stay competitive at a time when the chaos brought about by the earthquake and tsunami all but ensure it will lose its status as the world?s No. 1 carmaker, for now in any case.

?For Toyota, economically it makes 100 percent sense to move their production in Japan overseas,? says Koji Endo, an auto analyst at Advanced Research Japan. But that ?obviously would pose at least a huge short-term impact in particular communities and a spillover impact on other industries as well,? he adds. ?It?s probably not that big a problem for Honda or Nissan, but it?s going to be a big problem for Toyota.?