SURVIVAL in the post-pandemic era for most carmakers will come from strategic alliances with automakers in the world’s biggest car market now–China.
Toyota Motor Corporation and the First Automotive Works (FAW) in China are set to restructure their management systems to attain sustainable growth in that country. As part of the restructuring, another subsidiary, Tianjin FAW Toyota Motor Co., Ltd. (TFTM) will become a FAW-Toyota manufacturing and supervising affiliate and all other body and engine manufacturing affiliates will become wholly-owned subsidiaries of TFTM.
The move is seen by industry pundits as entering survival-and-sustaining mode in an industry that has dropped 74% in some places. Toyota itself posted an 8% sales decrease in Q1 this year but sales in March year over year dropped a massive 35%.
The goal of the restructuring is to better respond to China’s rapidly changing markets especially after the whole automotive industry has been hit big because of the COVID-19 pandemic.
By centralizing management of manufacturing affiliates under TFTM, the entire production system can be optimized; this will result in a more effective use of resources and more efficient operations and this, in turn, is expected to lead to improved competitiveness. The restructuring is also intended to clarify reporting lines, thereby strengthening governance and accelerating decision-making processes at all its affiliates.
“Thanks to the support of the Chinese government, our partner FAW, and our Chinese customers, the FAW-Toyota business will next year celebrate its 20th anniversary. After discussions with FAW, we decided to reorganize our management systems with the goal of achieving lasting growth for FAW-Toyota,” Tatsuro Ueda, Chief Executive Officer of Toyota’s China Region said.
Since the middle of February, Toyota has opened some of its plants across China. The reboot came after the company shut its operations for not because of the pandemic but because of the long Chinese new year holiday which got caught up in the COVID-19 scare. Since it restarted two of its four plants–one in Guangzhou in Guangdong Province and the other in Changchun in Jilin Province, the level of production has been reduced to half of normal levels pending check parts supply conditions.
China is also central to the production of parts for its own, as well as the global market.
As part of this restructuring, FAW Toyota Research & Development Co., Ltd. (FTRD), FAW-Toyota’s research and development company, will also become a wholly-owned subsidiary of TFTM.
There is no change in the ownership of FAW Toyota Motor Sales Co., Ltd., FAW-Toyota’s sales company; in practice, however, its management will report to TFTM, and by unifying its management, it will seek to realize a single streamlined structure from development through production to sales. Going forward, all Toyota enterprises in China will work together to make cars that provide its Chinese customers with happiness. — with reports from Reuters, Toyota Global Inc. Press center