APPENDIX 6
Memorandum submitted by Toyota Motor Europe
1. SUMMARY
1.1 Toyota's initial decision to set up
a manufacturing base in the UK in 1989 was influenced by many
factors, including a large domestic car market, a long tradition
of vehicle manufacture, a good regional parts and components supply
industry, good communication links with the rest of Europe, a
skilled workforce and a positive business and economic climate.
1.2 Toyota is increasingly concerned that
the status of the UK as an attractive place to invest is being
undermined by the current economic and legislative climate.
1.3 Toyota's UK manufacturing operation
is being substantially and negatively affected by the strength
of sterling in relation the weakness of the Euro. Toyota seeks
a solution to the current exchange rate problem so that we can
operate fairly and profitably within the European market.
1.4 Lean, highly productive manufacturers
such as Toyota are the very companies which would be penalised
by the proposed Climate Change Levy. Based on 1999 production
figures, up to £6 would be added to the cost of each car
built at Toyota's Burnaston plant as a direct result of the levy.
1.5 Toyota sees no clear economic and environmental
rationale for the introduction of workplace parking levies. It
is doubtful whether the charges will have any impact on the behaviour
of car users and their decision on how to travel to work.
1.6 Costs introduced by The End of Life
Vehicle Directive, due to pass into UK law by 2001 should be shared
by all relevant players, and a common fund should be created to
which owners of the vehicles, as well as the producers, should
contribute. A common ELV collection network should be established,
given that the ELV Directive states that vehicle manufacturers
and importers should not take sole responsibility for achievement
of the recycling targets set out in the Directive.
1.7 There is a shortage of suitably trained
engineers within the UK. The skill base shortage is particularly
acute in design and research engineering fields. Toyota has experienced
critical shortages in recruiting suitably qualified staff for
vacancies in our Information Systems Department.
2. INTRODUCTION
2.1 Established in 1937, Toyota Motor Corporation
is the world's third largest automobile manufacturer. As of the
end of 1999, Toyota operated 55 plants in 25 countries, and employed
over 184,000 people on a consolidated basis world-wide.
2.2 Toyota Motor Manufacturing UK Ltd, was
established in 1989, and car production started in 1992. It comprises
two facilities:
(i) Burnaston—car plant producing Avensis
and Corollas. Burnaston produced 121,000 Avensis and 58,000 Corollas
in 1999, and currently employs 2736 people.
(ii) Deeside—Engine plant producing
stoichiometric engines (from 2001, Deeside will also produce engines
for the Toyota Yaris, which will be produced in Toyota's new plant
in Valenciennes, France). Deeside produced 105,000 engines during
1999, and currently employs 322 people.
2.3 Toyota has been firmly committed to
local (European) sourcing of components since the beginning of
its manufacturing operations in the UK. Over 80 per cent of components
are sourced from across Europe as a whole, with half of that coming
from UK suppliers. We have contributed significantly towards the
increased competitiveness of UK suppliers through our close working
relationships and our active involvement in schemes such as the
SMMT Industry Forum.
2.4 Approximately 80 per cent of Toyota's
UK car and engine production is exported. In 1999, Toyota's total
contribution to the UK Balance of Payments amounted to approximately
£420 million.
2.5 Toyota vehicles are distributed in the
UK by Toyota (GB) PLC, currently based in Redhill, Surrey. Employing
486 people (including technical personnel), Toyota (GB) PLC is
also responsible for product marketing, fleet sales, customer
services and financial services. There are 225 Toyota dealers
in the UK, 12 of which are satellite branches. Toyota's market
share in the UK at end of 1999 was 3.8 per cent. Our 1999 sales
figure of 91,336 represents an increase of 1 per cent on 1998
levels.
2.6 Toyota Motor Europe, Manufacturing and
Engineering, London is a branch of Toyota's European operational
headquarters based in Brussels. It employs four people and deals
mainly with Corporate Affairs.
2.7 One of Toyota's fundamental aims is
to be a good corporate citizen wherever it established itself
in the world. Toyota is committed to supporting initiatives in
the local communities around its two manufacturing operation in
Burnaston and Deeside as well as Redhill, Toyota GB's headquarters.
2.8 On a national level, Toyota, in partnership
with the Royal Society for the Prevention of Accidents (RoSPA),
sponsors a child safety education product aimed at reducing the
number of accidents that kill or injure children. To date, "S'cool
to be Safe" has been a very successful campaign. In the first
year alone, the campaign reached 6,000 children and demand for
performances outstripped availability.
2.9 Toyota's commitment to good corporate
citizenship extends to its determination from the very beginning
of its manufacturing operations, to ensure the absolute minimum
impact of its manufacturing process on the local environment.
For example:
(i) Toyota Manufacturing UK gained full ISO
14001 accreditation for its outstanding environmental management
in 1997
(ii) Toyota's Burnaston facility was the
first Toyota plant to adopt water-based paint technology.
(iii) 350,000 trees and shrubs have been
planted at Toyota's Burnaston site to minimise the plant's visual
impact on the surrounding area.
2.10 Toyota will continue to pursue a policy
of responsible corporate community involvement in order to contribute
to the society in which it operates.
3. VEHICLE MANUFACTURING
IN THE
UK
3.1 Currency Exchange Rate Impact
3.1.1 Toyota's UK manufacturing operation
is being substantially and negatively affected by the strength
of sterling in relation the weakness of the Euro. This is not
the normal cyclical nature of economies. We face an extended period
of economic imbalance that shows little or no signs of abating.
3.1.2 One unstable element—inflation—has
been substituted with another—the fluctuation in the relationship
between currencies and currently the strength of sterling/weakness
of the Euro. The effect has been considerable. Toyota cars made
in the UK have over 80 per cent "local content" (sourced
from within the EC), but some high tech components are imported
from Japan. The Yen has strengthened against Sterling and the
Euro, so we are hit twice, as parts are more expensive to import
from Japan.
3.1.3 A series of measures taken to mitigate
the impact on profitability means that year on year Toyota has
become more productive. Toyota must, however, explore other avenues
to reduce costs even further—and taken to a logical conclusion,
that must affect our current way of operating in the UK.
3.2 Supply Chain implications
3.2.1 About £875 million is currently
spent annually with our suppliers. Approximately 50 per cent of
that amount is spent with our UK-based suppliers. Because of the
exchange rate problems that we face, UK suppliers are placed in
direct competition with potential suppliers overseas; their competitiveness
is significantly compromised; and they are commercially disadvantaged.
3.2.2 We have not embarked on a "buy-euro-mainland
parts only" campaign. We are, however, taking opportunities
where possible to re-examine parts supply and costs, and can obtain
parts of the same quality and quantity at reduced costs from mainland
Europe when a particular component is re-specified or re-engineered.
This sound business decision based on operating conditions and
commercial logic is an approach that we are also asking our suppliers
to adopt in their procurement activities with second and third
tier suppliers. The almost inevitable outcome is that over a period
of time, the proportion of our suppliers based on the UK will
shrink.
3.2.3 Toyota seeks a solution to the current
exchange rate problem so that we can operate fairly and profitably
within the European market. The benefits of a single currency
are clear from a business viewpoint—transparency, reduced
fluctuations, stability on which to make investment decisions
and reduced currency transaction costs. But any linkage to the
Euro would have to be set at an appropriate rate.
3.2.4 For Toyota's manufacturing operations
in the UK to grow and expand, further investment from Toyota Motor
Corporation is necessary. Such decisions will be taken years in
advance. Under current conditions, however, investment decisions
being taken now mean that additional investment in the UK is unlikely.
3.3 Climate Change Levy/Workplace Charging
3.3.1 In addition to the impact of the current
currency exchange rate situation, the Climate Change Levy has
the potential to serve as a constraint on manufacturing in the
UK which will have a significant effect on competitiveness. Lean,
highly productive manufacturers, such as Toyota, are being encouraged
to become even more so by the Government, but are the very companies
penalised by the Climate Change Levy. There is also no current
recognition in the planned implementation of the Levy of the efforts
involved in instigating internationally recognised environmental
management systems (Toyota Manufacturing UK has ISO 14001 certification).
Up to £6 would be added to the cost of each car built at
Toyota in the UK—based on 1999 production figures—as
a direct result of the proposed Climate Change Levy (>£1
million p.a.)
3.3.2 We see no clear economic and environmental
rationale for the introduction of workplace parking levies. The
policy taxes parking space rather than addressing the environmental
impact of congestion through road use. It is doubtful whether
the charges will have any impact on the behaviour of car users
and their decision on how to travel to work, and if levied at
an annual rate, the incentive not to use the car is gone once
the levy is paid.
3.4 End of Life Vehicles
3.4.1 The cost of the ELV treatment should
be shared by all relevant players and a common fund should be
created to which owners of the vehicles, as well as the producers,
should contribute. Money from the fund should be transferred to
the last owner of the vehicle (to pay for the ELV dismantling
treatment) in exchange for the "certificate of destruction".
3.4.2 A common ELV collection network should
be established. Despite vigorous lobbying to date by ACORD (Automotive
Consortium on Recycling and Disposal), the UK Government still
believes that vehicle manufacturers/importers should have the
responsibility for achievement of the recycling targets set out
in the ELV Directive. This is despite the fact that the ELV Directive
currently states that these targets should be "attained by
economic operators", defined in the Directive as producers,
distributors, collectors, motor vehicle insurance companies, dismantlers,
shredders, recoverers, recyclers and other treatment operators
of end-of-life vehicles. Indeed, there is also a case to be made
for Government to play an important and value-added part in this
process too.
3.5 Skills Base
3.5.1 Toyota Manufacturing UK has adopted
a policy of training in house since the beginning of its operations.
It has not, therefore, as yet, felt the full impact of a shortage
of Engineering skilled manpower. There is no doubt that a shortage
of suitably trained engineers exists within the UK, and this has
been documented from several sources (CBI, DTI, etc). We understand
that the skill base shortage is particularly acute in design and
research engineering fields.
3.5.2 As a company we have designed, in
association with a local college, an in-house engineering course
leading to NVQ level 3 and ONC engineering qualifications. This
has enabled us to train members from production lines to become
multi-skilled maintenance craftsmen on site.
3.5.3 As a company, Toyota Manufacturing
UK has experienced critical shortages in recruiting suitably qualified
staff for vacancies in our Information Systems Department. We
are particularly short of programmer/analysts and systems programmers
and several recruitment campaigns have been unsuccessful in attracting
trained, experienced and qualified staff for these positions.
We have adopted a longer-term solution recruiting I.T. trained
graduates and training them on-the-job. This is something we have
had to do across all our hiring at Toyota Manufacturing UK. For
the present time though, some critical shortages exit and can
only be overcome by supplementing our current Department headcount
with short-term contract staff.
3.5.4 Toyota Manufacturing UK is dedicated
to training and developing the whole of its workforce—from
team members to Engineers to Maintenance and Management. This
is a crucial and fundamental element of the Toyota working culture.
We have received recognition for this approach—typified
by the awards of "Investor in People" and two National
Training Awards. Our philosophy is geared to invest heavily in
training our people. An example of this is the construction of
a purpose-built training centre on site, which incorporates engineering
and technology learning centres.
4. CONCLUSION
4.1 Current uncertainty over exchange rates
needs to be addressed if the decline in vehicle manufacturing
is to be arrested.
4.2 Further threats to vehicle manufacturing
in the UK will be tempered if the company's concerns on the Climate
Change Levy, Workplace Parking and End of Life Vehicles are addressed.
4.3 Toyota's investment in the UK was a
long-term strategic investment decision, based on attractive factors
such as a highly skilled workforce. Future investment decisions
will reappraise economic and legislative conditions in the UK,
and the still remaining benefits of manufacturing in the UK could
be offset by threats to Toyota's profitability due to the strength
of sterling, legislative constraints such as the Climate Change
Levy and the general deterioration in the manufacturing base.
4.4 We therefore call on the committee to
note our concerns, which we believe are widely shared by other
motor manufacturers in the UK.
4.5 Toyota is looking forward to welcoming
a delegation from the Trade and Industry Select committee to the
Burnaston manufacturing plant in Derbyshire, which will present
the opportunity to brief committee members further on Toyota's
key concerns.
4.6 Toyota is grateful for the opportunity
to present written evidence to the Trade and Industry Committee,
and welcomes the Committee's decision to conduct an inquiry into
Vehicle Manufacturing in the UK
11 July 2000
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