Section 3. Local Production Starts in North America
Item 1. Negotiations with Ford
As the shift to compact cars accelerated following the second oil crisis in 1979, American automakers found themselves in a predicament, and economic tensions between Japan and the United States intensified.
At this time, Toyota Motor Corporation (TMC) was pressed to make a crucial decision concerning local production in the United States. Honda Motor Company announced in January 1980 that it would produce passenger cars in the U.S. state of Ohio, where it already had a motorcycle plant, and, in April, Nissan Motor Co., Ltd. adopted a plan to build a small truck plant in the state of Tennessee.
TMC was receiving offers of inducements to build a plant from numerous states, and in April 1980 it hired three Japanese and American research companies and began investigations for establishing operations in the United States. The results of the research ranged from suggesting that TMC should aggressively move to set up local production to warning that TMC should watch its steps very carefully. Determining whether such a venture would be profitable or not depended on what assumptions were used, and there was no definite conclusion provided that indicated local production would be beneficial.
As the investigations proceeded, TMC began to form a concrete plan for starting local production. The plan was based on joint production of passenger cars with Ford Motor Company (Ford). In May 1980, Toyota Motor Co., Ltd. President Eiji Toyoda sent a personal letter proposing joint production to Ford President Donald Petersen. President Toyoda had determined that industrial cooperation between Japan and the United States through the joint development and production of a compact car would support the restoration of the American automobile industry, which had fallen on hard times. One of the reasons Ford was selected as Toyota's candidate partner was because Toyota had learned much from Ford in the past.
President Petersen visited Japan in June 1980 and met with senior managers at the Toyota Motor Co., Ltd. head office to start full-fledged negotiations. Toyota proposed that a new model under development to be sold as the Camry be manufactured at a Ford Plant and sold through both companies' sales channels. However, this model would be in competition with a new compact car that Ford was developing, so this proposal was discarded. Toyota next proposed a passenger car somewhat smaller than the Camry, but Ford determined that this model too would compete against a vehicle that it planned to develop, and the negotiations came to an impasse.
Later, Ford developed an interest in the marketability of the Toyota Townace van, and agreement was tentatively reached in March 1981 on joint production of a passenger van based on the Townace. However, when Ford conducted a product clinic to solicit customer opinions of the vehicle, the assessments were not entirely positive, with some saying that the vehicle was too small to be a successor vehicle to Ford's Econoline van series, so this proposal too came to nothing.
Ultimately, the inability to reach agreement on the vehicle was the decisive cause of the negotiations breaking down. The companies confirmed the conclusion of the negotiations in July 1981.