Section 4. Overseas Business Expands Globally
Item 4. Europe
In Europe, the European Community (EC) Commission instituted an import monitoring system for Japanese passenger cars in 1981. In addition, voluntary restraint measures agreed on by the EC Commission and the Japanese government were imposed in 1986 in response to the rising number of annual exports on a single fiscal year basis.
Consequently, the environment for exports of completely built units (fully manufactured vehicles) was unfavorable, and TMC entered into an agreement in June 1987 with VW of (then) West Germany for consignment production and original equipment manufacturer supply of Hilux small trucks. The origins of the tie-up can be traced back to talks between VW Chairman Carl Hahn and Chairman Toyoda during Chairman Toyoda's visit to West Germany in January 1986. Production began at the Hanover Plant in 1989. Dealers made use of their respective sales networks, and VW launched the joint production Taro. Joint production was terminated in 1997, but the project was significant in terms of the understanding TMC gained of European parts manufacturers and labor conditions.
In 1989, when full-scale production in North America gained a firm footing, TMC decided to start local production in the United Kingdom in response to the voluntary export restraints and the extreme increase in the value of the yen since the mid-1980s. Burnaston, Derbyshire was selected as the plant site, and TMC announced a plan to construct an integrated assembly plant, with a production start in 1992 and an ultimate annual production capacity of 200,000 vehicles. At a press conference held in London in April 1989, President Toyoda said, "Toyota will make its best possible effort to be accepted as a true British company and a European company at the earliest possible date." In July of that same year, TMC decided to build an engine plant in Deeside, Clwyd in Wales. In December, TMUK was established and construction of the two plants began. The first engine came off the line in September 1992, and the first Carina E sedan was completed in December. A festive ceremony was held with Prince Charles in attendance to mark the opening of TMUK in June 1993.
TMUK achieved its 80 percent European local procurement target at the end of 1994 and later added the Corolla to its production lineup, becoming a supply base for various European countries. In September 1994, TOYOTASA (now Toyota Motor Manufacturing Turkey Inc.), a joint venture company in Turkey, also began producing the Corolla.
In tandem with the establishment of TMUK, TMC also bolstered its operations in Europe with an eye toward local production and the launch of the European Union in 1993. Sales and marketing companies and European offices were reorganized in October 1990 and Toyota Motor Europe Manufacturing & Engineering (TMME; now Toyota Motor Europe) was established in Belgium. That same year, land was purchased and a new office building was completed in 1993.
In major European countries, most distributors are directly managed by the manufacturers, and marketing is conducted under the direction of the manufacturers. For TMC, reinforcing the ties between production and sales was an urgent issue, and it established TMME, through which it increased its equity holdings in major distributors or provided them financing. Although there were many difficulties in the negotiations with local capital sources concerning equity participation, thanks to TMC's persistence, it was able to invest in two distributors in the United Kingdom in 1990 and distributors in France and Italy in 1993. By the end of the 1990s, TMC had wholly owned or partially owned subsidiaries in almost all major European countries. Moreover, TMC established distributors in Poland, Hungary, and (then) Czechoslovakia jointly with Nissho Iwai Corporation (now Sojitz Corporation) and Toyota Tsusho in 1990 and 1991 in anticipation of economic development in Central Europe and Eastern Europe following the end of the Cold War.
Voluntary export restraints on Japanese cars destined for Europe continued until 1999. Although TMC established TMUK and began local production of passenger cars, Nissan Motors maintained its position as the top Japanese car manufacturer in Europe. Under the restraint measures, the export volume of each company was fixed, and Nissan Motors had started passenger car production in the United Kingdom in 1986. As a result of various measures, however, including the start of full-scale local production and using TMME to strengthen its sales organization, Toyota was able to capture the top share among Japanese manufacturers in Europe in 1998.