NORTH AMERICAN REPORTS
By the Time We Get to Woodstock
ntil July, the biggest Toyota news in Woodstock, Ontario, was the opening of a new dealership in May. But behind the scenes a mega-deal was brewing.
Rumors had been flying for over a year that Toyota Motor Manufacturing would add to its usual menu of plant expansions with at least one new plant in North America. But the seeds for its latest Canadian expansion a 1,300-employee, US$650-million investment in Woodstock, Ont. were germinating long ago.
Then Canada and Ontario decidedly reversed their previous stance and offered up generous incentives that prodded both GM and Ford to announce major plant expansions in the past year, investments valued at $2 billion and $818 million, respectively.
Suddenly Toyota's project was ready to bloom. And its total lack of union personnel allows it to coast past the currently unfolding negotiations with the Canadian Auto Workers on which much of the other expansion activity depends.
Within the Circle of InfluenceJim Wiseman, TMMNA vice president for corporate affairs, visited the site 10 times as co-chair of the site selection team. He says there was never any doubt about where to go.
"We really did not seriously consider other sites," he says of this particular process. "From the get-go, this was Canada's project to lose."
In a 2004 interview with Site Selection, on the heels of Lexus production expansion at the company's plant in nearby Cambridge, Dennis Cuneo, senior vice president, Toyota Motor North America, said, "For our operation in Cambridge, it's been a very positive atmosphere. That's what's led to the expansion. We've had a good working relationship with the provincial and federal governments." While he admitted that those governments were then a bit behind in incentives packages, he said incentives were only one issue in site selection: "We don't think they're the driving issue," he said. "You have to look at your overall operating costs over a period of years."
Using Cambridge to keep those operating costs down has been a part of the plan since Toyota Motor Manufacturing Canada Inc. introduced the concept two and a half years ago.
"When we made our proposal to Japan, we first focused on self-reliance," says Real "Ray" Tanguay, newly appointed executive vice president of Toyota Motor Manufacturing North America (TMMNA) and president of TMMC. The company's Texas plant was built on that concept, but the distance between Texas and the company's other truck-making operations in Indiana presented some challenges. In Ontario, he says, "if we could make the distance between the two fairly close, we could use common management in Cambridge, and share some manpower."
Self-reliance is TMMC's calling card already, as it operates as a business and not a cost center, reporting dividends directly to Japan and monitoring its own cash flow. As such, its headquarters roles include finance, public affairs, IT and logistics.
The greenfield assembly plant in Woodstock Canada's first in 20 years, and 24th overall will manufacture 100,000 RAV 4 sport utility vehicles when it opens in 2008. It will be constructed on a 1,000-acre (400-hectare) site, a parcel two-and-a-half times bigger than the one that's home to the Cambridge facility. Which is one major clue to the automaker's new project planning strategy: creating ample room for supplier operations.
The Cambridge plant the only plant outside Japan that makes vehicles for Lexus also makes Corollas and the Matrix crossover SUV. It's seen annual capacity grow from 50,000 vehicles to 288,000 vehicles in 2004, and its footprint has grown to 3 million sq. ft. (280,000 sq. m.)
Helping along the Woodstock project will be the equivalents of US$44.2 million from the Government of Canada and US$56.3 million from the Government of Ontario. According to a release from the national government, Toyota looked for help with the project following a January 19 meeting in Tokyo between Fujio Cho, president of TMC, Canadian Prime Minister Paul Martin and Canadian Minister of Industry David Emerson.
The radius criterion was 50 km. (31 miles), and Woodstock qualified. Tanguay's team emphasized the synergy that would evolve from having experienced team members and a common management system in place. Finally, duplication could be minimized and assets optimized if such a scheme were followed. By the time visits to the region were paid by such executives as Atsushi Niimi, new senior managing director of TMC; Takeshi Uchiyamada, executive vice president of TMC and even Honorary TMC Chairman Shoichiro Toyoda himself, the feeling was universal.
"This location allows us to capitalize on our outstanding operation 40 kilometers [25 miles] away in Cambridge," said Niimi at the project announcement. "Its proximity to suppliers on both sides of the border will benefit both countries and it will mean new opportunities for those suppliers. Jobs will be created across North America."
The new willingness of the Ontario and federal governments to play the incentives game played a part as well.
"We certainly noticed what they gave other automakers," says Wiseman. "In the past, they were not willing, but now they're quite willing. What Canada is offering these days makes them more competitive."
Parts and PeopleParallels abound between TMMNA's Ontario presence and its Kentucky manufacturing complex in Georgetown, beginning with the fact that they were launched at the same time in 1988. Tanguay says the full production activity was one thing to examine in the site selection, as the Cambridge plant only has about half the production capacity of the Kentucky operation, and therefore the potential to expand.
Concrete criteria in the Ontario search included power availability, water systems and dual rail, which the new site will see from CN and Canadian Pacific. And with so many parts coming up the I-75/Hwy 401 corridor from Michigan, Ohio, Kentucky and Tennessee, logistics flow was key. The first round of cuts produced five sites, which were then narrowed to three. The logistics component was a key final criterion in Woodstock's favor, as the chosen site is directly adjacent to 401. Wiseman says the milk-run and cross-dock process Toyota currently uses with its suppliers for Cambridge will now just add another "really quick" stop, made all the quicker by the 401 location, where an exit comes off directly adjacent to the site. As for bottlenecking, Ontario already had plans in the works to widen that stretch to three lanes each way.
Asked if border congestion issues were a challenge for Toyota, Tanguay says the delays are not significant at the present time. He praises the cooperation on both sides of the border, new highway solutions in the works in Windsor and the trade flow goals of a newly minted automotive group that has now formed among Mexican, U.S. and Canadian constituents as part of the NAFTA countries' security and prosperity partnership.
Access to the right pool of people was important too, says Tanguay. Within the same 31-mile (50-km.) distance that governed the site choice, the Woodstock area offers more than 650,000 people, which grows to more than 1 million within just under an hour's drive. Even though CAMI is expanding nearby along with a number of other growing manufacturers, Tanguay says sufficient labor availability was never a concern for an employer of choice like Toyota.
"We have people who have moved all the way from the East Coast to get a job," he says. "When people know they can get a job at Toyota, they will move."
Wiseman adds that temporary personnel movement within Toyota has been a common occurrence lately, as the company maximizes its in-house expertise amid a plethora of North American new plant and expansion projects. Proximity like Woodstock's, he says, makes that process less burdensome.
Right with the CommunityIn addition to the usual criteria. Tanguay says the senior Toyota executives were most interested in how this facility would blend with the community, and has nothing but praise for officials from Woodstock and Oxford County, who not only facilitated the purchase of the land but never broke their confidentiality agreement, even in the face of heavy rumors looking for confirmation.
Helping the assembly project along has been some creative assembly of land. First, the parcel, which is currently part of Blandford Blenheim Township, will be amalgamated into the City of Woodstock by this fall. But First Summit, owner of the 100-acre (40-hectare) Blandford Square Mall, didn't like the offer it got and has threatened to sue if Oxford County "expropriates." Tanguay does not expect the dispute to be a long-term concern, and at this writing, negotiations continue between the landowner and the county.
Wiseman for one was impressed with the truly welcoming and forthcoming spirit he found in the area, and the hard work by local and provincial officials on a project that was "not so easy." While many states will already have a mega-site assembled and own the options outright, in this case more than 25 landowners were involved.
"The province did an excellent job of pulling it together," he says, as did the families themselves. "Some of those farms were in families for generations," he adds, "but they recognized it was a good thing for the community."
©2005 Conway Data, Inc. All rights reserved. SiteNet data is from many sources and not warranted to be accurate or current.