History of Toyota. Part 22C (1957-1991): Automobile Exports and APA Special Demand

A large number of Toyota vehicles were exported to Southeast Asia as a result of special demand from the U.S. Army Procurement Agency in Japan (APA). APA special demand refers to the large-volume procurement of Japanese vehicles that began in the second half of 1956 pursuant to the Mutual Defense Assistance Pacts (MDAP) entered into by the United States and a number of Asian countries.1

The APA special demand consisted of replacement of the American-made military vehicles supplied to Japan and Southeast Asian countries with new Japanese-made vehicles. In May 1957, bidding was conducted for the supply of trucks to the Defense Agency, but Toyota Motor Co., Ltd. could not obtain the order. From 1958 to 1962, however, orders for a total of 51,273 3/4-ton four-wheel drive trucks (Model FQ15L and Model 2FQ15L) and 2.5-ton six-wheel drive trucks (Model DW15L and Model 2DW15L) were received (not including orders for 1/4-ton four-wheel drive trucks [jeep-type]).

Toyota Motor Sales Co., Ltd. did not participate in order activities for the APA special demand, and the Toyota Motor Co., Ltd. Sales & Marketing Department was responsible. As this business expanded, Toyota Motor Co., Ltd. established the Special Demand Department in August 1960 and reorganized the department into the Export Department in February 1962. The all-wheel drive vehicles that were ordered under the special demand were produced through the cooperation of multiple Toyota group companies, and this ample organization provided an advantage to receiving the order. In addition, large-volume production was achieved as a result of the special demand, raising operating efficiency and reducing costs.

The bid specifications for the 2.5-ton six-wheel drive trucks initially called for gasoline engines, but they were equipped with diesel engines at the request of the U.S. Army, and immediately after their launch in March 1957, the Model D diesel engine was improved. The engines were evaluated in accordance with the strict U.S. Army inspection standards, and Toyota gained valuable technology experience. The results were employed in the development of the Model 2D diesel engine.

A large number of vehicles were supplied to Southeast Asian countries as a result of the APA special demand, and Toyota vehicles were able to establish a solid reputation. This would later provide substantial support to exports. In addition, the rustproofing, packaging, and packing standards for shipment of service parts were based on experience the U.S. Army gained from shipping weapons and parts during wartime and were extremely rigorous. The experience of meeting these standards was later put to good use when transporting parts for knockdown exports.

Expansion into Latin America

The marketability of the Toyota BJ Land Cruiser four-wheel drive vehicle was highly praised in Latin America. Exports began with 32 complete knockdown production (CKD) vehicles in November 1955.

Loading Toyota Model FJ25 Land Cruisers onto a ship

Later, 52 Land Cruisers were exported in the autumn of 1956 to Venezuela, a country which was enjoying an oil boom. Four-wheel drive vehicles showed their true value for maintaining contact in oilfield regions and on cattle ranches, and prospective purchasers appeared one after another. Land Cruiser exports to Venezuela increased to 795 vehicles in 1957 and rapidly spread throughout Latin America.

The Land Cruiser served as a groundbreaker, but as the market was developed, political and economic instability in some Latin American countries resulted in barriers to exports in some cases.

In Colombia an alliance was established with Panhard, a leading Colombian automobile assembly company, in June 1958 to assemble and produce the Land Cruiser. President Shotaro Kamiya of Toyota Motor Sales Co., Ltd. returned to Japan from Columbia having promised full economic cooperation to the president of Colombia, which in turn supported the alliance. One week later, a coup took place, the president fled to another country, and the business tie-up was dismantled.

Packing CKD parts for shipment to Planta REO de Mexico, S. A.

In Mexico, a tie-up was formed with the distributor Planta REO de Mexico in August 1960 for CKD production of the Land Cruiser (Model FJ25L), a diesel-engine truck (Model DA95LH-3), and passenger cars (the Crown and Corona). The business was established with local capital, and Toyota Motor Sales Co., Ltd. provided financial support. The management of Planta REO, however, was drawn into a political dispute and the company was seized by the government. Until Toyota's withdrawal in March 1964, total CKD production in Mexico was 3,580 vehicles.

Shortly after Toyota's withdrawal, the Mexican government proposed a plan for domestic production of automobiles. However, automakers that did not have local production plants could not participate in Mexico's domestic production, and as a result, there was no Toyota production in Mexico for an extended period.1

Start of exports to Latin America: Assembly plant leased from Ford Brazil (from Toyota Shimbun No. 52)

Exports to Brazil received approval from the Brazilian government in January 1952, and 100 Model FX large trucks were exported for CKD production for the first time. A portion of a Ford Brazil plant (20 meters × 50 meters) was leased for the assembly operations, and production began in June of that year. In addition, an additional 120 large trucks were exported for CKD production in February 1954 and assembly was conducted in the same manner.

Following the sale of the FX trucks, however, service parts were not supplied, and the reputation of Toyota vehicles steadily worsened.1 The Brazilian government banned the import of automobile parts that could be produced locally as a measure to address the shortage of foreign currency, and measures were taken to procure parts locally. There were problems with both the quality and cost when using parts manufactured in Brazil as service parts for Toyota vehicles.

Furthermore, the Brazilian government adopted a policy for the domestication of the automobile industry in June 1956, and CKD exports from Japan were no longer possible. Toyota Motor Co., Ltd. looked into participating in domestic production on its own in order to secure a position in the future Brazilian market and planned to locally produce the Land Cruiser.

Toyota Motor Co., Ltd. requested approval from the Brazilian government for a 'Domestic Production Plan through the Establishment of Toyota do Brasil' on May 10, 1957. The government gave its approval on June 28, and Toyota do Brasil Industria e Comercio Limitada was established as a wholly-owned subsidiary of Toyota Motor Co., Ltd. on January 23, 1958.

Approval was received from the Japanese government to remit funds in July 1958, and parts including engines to assemble 800 vehicles were exported in October. On December 24, a plant was purchased from the local subsidiary of U.K.-based Rover, which had decided to withdraw from the Brazilian market, and production of the Model FJ25L Land Cruiser began in May 1959. This was different from the earlier spot CKD exports and was Toyota's first full-fledged overseas knockdown production. The initial local production rate (by weight) was 60 percent.

Bandeirante (1962 ? 1973 models) manufactured by Toyota do Brasil

A decision was made to expand local production on February 18, 1961 in order to raise the domestic production rate. In accordance with this policy, Toyota do Brasil was reorganized and its capital increased, and construction of a new plant began. Approximately 190,000 square meters in San Bernardo, located in the outskirts of Sao Paulo, was purchased in April of that year for the new plant, and the San Bernardo Plant was completed on November 12, 1962. The plant had monthly production capacity of 250 units and included a number of processes including machining, heat treatment, stamping, painting, and assembly. Frames were manufactured internally, but body stamping and assembly were outsourced to Brasinka.

Most of the machinery and equipment of the new plant were sent from Toyota Motor Co., Ltd. as in-kind contributions. Among the equipment sent was a 700-ton crank press for forming frames that had been installed in the Automotive Department of Toyoda Automatic Loom Works, Ltd. in 1935. Following refurbishment and enhancements, the press was sent to Brasinka. With the completion of the new plant and domestic production of transmissions, the domestic production rate increased to 80 percent.

To further raise the domestic production rate, diesel engines (Model OM-324, 3.4 liter, swirl combustion chamber type) were purchased from Mercedes-Benz do Brasil, Ltda. Supply of engines began in December 1962 and was used on the Land Cruiser in place of the Model F gasoline engine manufactured by Toyota Motor Co., Ltd. At that time, the vehicle name was changed from the FJ25L Land Cruiser to the TB25L Bandeirante (meaning 'pioneers'). Efforts were made to enhance the lineup, and the TB41L hardtop long was introduced in July 1963, followed by the TB51L pickup in August.

Production of the Bandeirante increased steadily from 624 units in 1962 to 1,510 units in 1963, to 2,242 units in 1964, and the 5,000th Bandeirante came off the production line in August 1965.

Domestic production of differential carriers began in February 1968, and a 100 percent domestic production rate was achieved. The Bandeirante was redesigned in September 1969 and the body style was changed from that of the Model FJ25 Land Cruiser to the Model FJ40 Land Cruiser. As a result, the new Model OJ40 Bandeirante was created. In conjunction with the redesign, production of the body was shifted to within the company.

The 1997 model Bandeirante manufactured by Toyota do Brasil

In 1971, Toyota Motor Co., Ltd. Senior Managing Officer Taiichi Ono visited Toyota do Brasil, which was experiencing poor performance, to give instruction on the Toyota Production System. Senior Managing Officer Ono experienced the conditions of Toyota do Brasil firsthand and his advice led to Toyota Motor Co., Ltd. sending a survey team to the company in November 1972 to increase the internal production rates and the company's investigation into producing passenger cars. The team investigated expansion of the existing plant, acquisition of a new plant site, and other measures and prepared production capacity expansion plans for Toyota do Brasil.

Based on this plan, a casting shop equipped with a low-frequency induction furnace was introduced in May 1974 and a stamping shop was expanded in October, followed by the completion of a forging shop with a 1,600-ton forging press in April 1975. The machining shop was also expanded, and internal production of parts such as driving gears and shafts, which had been outsourced, was increased. These investments were made with support from Toyota Motor Co., Ltd. In addition, the Model OM-324 diesel engine manufactured by Mercedes-Benz do Brasil, Ltda. was replaced by the Model OM-314 (3.8 liter, direct injection) in January 1973, increasing output and improving marketability.

Following implementation of the production capacity expansion plan, Toyota do Brasil's performance turned sharply upwards in 1975. Production volume exceeded 1,000 units in 1976, and surpassed 4,000 units by 1979. The company was also able to completely eliminate its accumulated losses in 1980.

Starting in 1981, automobile sales volumes in Brazil fell to the 500,000 to 700,000 unit range, but Toyota do Brasil made active investments including refurbishing its obsolete machining equipment and stamping equipment in 1984 and expanding its painting, heat treatment, and machining processes from 1986 to 1988. During this time, cumulative production reached the 50,000 unit mark in September 1987, and facilities were enhanced with the aim of introducing two-shift production on the Bandeirante manufacturing line.

Efforts to enhance the marketability of the Bandeirante continued, such as making some changes including switching from round to square headlights in November 1989 followed by adoption of the Model OM-364 engine (4.0 liter, direct injection) with higher torque in March 1990. Two-shift production was introduced at the San Bernardo Plant in August of that year, and production volume in 1991 reached 6,754 units, setting a new record high.

In 1991, 1.55 million square meters of land in Intaiatuba, Sao Paulo, located about 100 kilometers to the northwest of Sao Paulo City, was acquired for future expansion. The Indaiatuba Plant began operations in August 1998, producing the Corolla.

Later, the Bandeirante switched in April 1994 from the OM-364 diesel engine manufactured by Mercedes-Benz do Brasil, Ltda. to the 14B diesel engine (3.7-liter, direct injection) manufactured by Daihatsu Motor Co., Ltd. in order to comply with the 1996 emissions regulations. Even with this change, however, the Bandeirante was unable to comply with the 2000 emissions regulations. As a result, production of the Bandeirante ended in November 2001, closing the curtains on a 42-year history. Cumulative production reached 100,000 units in November 1999.

Source: Toyota Motor Corporation 

For more on theory and case studies on: http://expertresearchers.blogspot.com