FEATURE

Offering products which meet the needs of customers in specific regions is important to Toyota. Even in markets where conditions are very rough, the company has durable models that will perform reliably. (Photo by Bob Seary/The Project Group)

Valuable lessons learnt from developing the Tundra (red pick-up) and the Sequoia SUV (box) which share the same platform were used for the IMV project.

When it comes to making automobiles, no one does it better that Toyota where cost-efficiency and quality are concerned. With almost seven decades of experience, the company has learnt countless lessons in how to produce automobiles at a lower cost than others and not only that, to do so with quality levels that are very high.

Now Toyota is embarking on a project which has the same significance to the company as the creation of the Lexus luxury brand in the late 1980s and the hybrid project of the 1990s. Where the Lexus project was primarily for the US market and the hybrid project was about technological advancement for the 21st century, the IMV Project is an industrial project that spans the globe.

‘IMV’ stands for ‘Innovative International Multi-purpose Vehicles’ and demonstrates the enormous resources and capabilities of the company and its determination to stay a global leader. The impetus for the project was undoubtedly due to the intense competition in the automobile market which is forcing manufacturers to lower production costs as much as possible. Toyota already has some of the lowest costs in the industry and yet it aims to shave off another US$10 billion over the next five years (this fiscal year, it managed to cut costs by US$1.7 billion). To cut costs so radically has meant that the whole cost base has to change and this has required an over-haul in the way things have been done for decades.

A solution to cutting costs would have been to make less in Japan – where labour and materials costs are high - and localize more. However, Toyota has always been obsessed with quality and delivery times – two of the key elements in its vaunted Toyota Production System (TPS) – and it has been hard to replicate the high quality completely outside Japan. Though they do have assembly operations in many countries, a great deal of work is still centralized in Japan and many crucial components and systems are still made there.

Over the years, Toyota has successfully introduced TPS outside Japan and results show that the factories in the US, especially, have been producing vehicles which are of very high quality. Now the time has come for Toyota to trust more of its overseas facilities to produce Toyota vehicles with the superlative quality as customers have come to expect – and at a lower cost. The IMV Project thus represents a bold new approach that draws fully on the resources and potential of Toyota’s global production and supply bases.

With the huge US market able to support (and also require) product development and manufacturing activities on its own, the focus of the IMV Project is mostly on markets where economies are developing or still growing – which covers many countries in Asia, Eastern Europe, Africa, Oceania, South America and even the Middle East. These are markets where Toyota has been established for many years but where the prices of its products have escalated; if not addressed, the company could lose share to the aggressive Koreans which are playing the ‘price game’ – the same one that the Japanese themselves used when they embarked on their conquest of the world markets.

An amazing aspect about the IMV Project, which was initiated in 1999, is that it involves five different models with three bodystyles (pick-up, MPV and SUV) and four main production facilities on three continents. It is a massive undertaking which few other carmakers could have carried out. Yoshio Shirai, Managing Officer at TMC and a key figure in the project would tell you that ‘challenging’ is an under-statement to describe what the project has been for Toyota.

"On a historical and geographical scale, it is an unprecedented vehicle project for Toyota," he said during a media event in Australia last month to introduce the project and its models.

The first challenge was that original prototypes of the models planned did not exist in Japan. In fact, for the main model, the new Hilux, production and sale in Japan had even ceased (due to lack of demand by Japanese buyers). Previously, models developed in Japan would be adapted for overseas sales and the process was less complicated. The design could be copied for local production in other countries, where necessary, and parts needed – if not locally sourced in those countries – would be made by a trusted Toyota supplier in Japan and shipped out.

In some ways, this approach has worked well in the early years but as customer demands are diverse inn different markets, being closer to the market in as many aspects as possible is more effective in providing products that are right for customers needs and expectations. Thus, for the IMV Project, tasks that had been traditionally handled in Japan would be transferred to the facilities overseas with activities in Toyota City mainly related to administrative and coordination aspects and of course, engineering activities.

More significantly, and crucial to lowering costs, is to have as much as possible of the components made outside Japan in countries with lower labour costs. This includes the production of such major components as diesel engines (Thailand), petrol engines (Indonesia) and manual transmissions (the Philippines and India). Ultimately, Toyota wants to procure nearly 100% of IMV components from sources outside Japan.

Yet the strict requirements of TPS – the real ‘secret weapon’ of Toyota – could not be compromised. TPS has an optimized procurement system that is the result of decades of refinement. “With the IMV Project, the challenge was to effectively coordinate optimized global procurement with TPS. Regardless of the country in which Toyota vehicles are produced, we deal with suppliers from around the world, and have implemented an optimized global procurement system to ensure that we obtain the highest quality parts at a reasonable price,” explained Mr Shirai.

"For the IMV project, we had to deal with over 600 companies worldwide that will supply thousands of parts with different lead times, different production locations, and even different distribution methods. Even with our global network, coordinating the production schedules of all these parts to ensure "Just in Time" delivery at four IMV production centres was a major challenge. Any changes made would have global implications. However, by working closely with related companies and suppliers around the world, we were able to create a carefully calculated system to successfully handle this complex task," he said.

For a factory, anytime there is a lengthy stoppage, losses can run into millions very quickly. So the IMV team had to also create a back-up system with an alternate source for parts in the event of the primary source having problems. They considered not just the availability of finished parts, but also the availability of raw materials from which the parts are made, so that no matter what happens in the world, the factories can receive back-up supplies within two weeks. This has probably been tested in recent times as the supply of steel has been in question in some countries.

Build quality has always been of paramount concern to Toyota, which is why it has been cautious in starting production outside Japan. Decades of making vehicles with superior build quality have made Toyota vehicles the benchmark for the industry and the company will not risk losing this coveted position by hastily setting up manufacturing operations that cannot deliver the same sort of renowned quality.

In fact, a directive from Akio Toyoda, Senior Managing Director of TMC, declared: “No matter where IMV vehicles are assembled or sold, Toyota customers must be able to enjoy the highest "Made by Toyota" quality.”

"This was another big challenge for us - achieving and maintaining true Toyota quality at all IMV production facilities. We had to ensure that a consistently high standard of "Made by Toyota" quality can be achieved at each plant," Mr Shirai emphasized.

"To overcome the many challenges involved, we had to make big changes in our production, parts procurement, and supply systems. It was not easy but we also found that this project reinforced teamwork among local production bases. And in doing this, it has become a touchstone against which all future projects of our company can be measured," said Mr Shirai proudly.

The IMV project starts off with 5 models that have three bodystyles but share a common platform with the exception of the rear suspension which will be either leafsprings or coil springs, depending on the usage.	New Hilux is the main model in the IMV project and not surprisingly, it will be produced in very large volumes in Thailand which is the 2nd largest pick-up market in the world. (Photo by Bob Seary/The Project Group)

The right global package

In order to produce vehicles to appeal to a broad segment of customers in eastern and western hemispheres, the right global package was needed. This has always been a challenge for manufacturers because of the diverse needs and conditions in different countries. Customers in the US market prefer big engines and body sizes larger than those acceptable elsewhere whereas in Asean, more compact dimensions are needed and engines cannot be too big as fuel is expensive (besides annual roadtax being high too).

In order to meet the requirements of the countries (around 90 at this time) that the IMV project will serve, a thorough study was conducted. Feedback established that the requirement was for a vehicle which could perform multiple roles – a Multipurpose vehicle (MPV), in other words. To most people, MPV is taken to be a one-box people-carrier but in the case of the IMV Project, it also encompasses a pick-up and SUV.

To develop three different models is expensive if each one utilizes a different platform (chassis, suspension, engine, etc) and having commonality among the models was very important for economies of scale, so a common platform called the Toyota Optimised Performance (TOP) platform was developed for the purpose.

As none of the IMV models is a passenger car, the platform chosen was a chassis frame type (on which the bodyshell is bolted) which is better for heavy loads and tougher than the monocoque construction used by passenger cars. Though the chassis frame approach has inherent drawbacks in the areas of comfort and handling, a great deal of effort went into fine-tuning the suspension to achieve an optimum balance. Once the engineers were able to get this balance, they found that they could then improve upon ride and handling. Where heavy loads would be more likely, as in the case of the new Hilux, a leafspring rear suspension is used but in the case of the SUV and MPV, which requires good ride comfort, coil springs are used instead.

Lessons learnt in developing such products for the US market came in handy and the man given the task was Kaoru Hosokawa, who was Chief Engineer for the Sequoia SUV and the Tundra pick-up. These two Toyota models are sold only in North America and had the same platform so Mr Hosokawa (who also headed the Avanza program) brought valuable lessons learnt to the IMV project.

Engines are the heart of a vehicle and for the IMV models, three engines – two turbodiesels and one petrol – will be offered initially. They come from well-proven engine families and have been fine-tuned for the different roles of each IMV model. Extensive testing was carried out on the diesel engines, in particular, to ensure that they would be suitable for the fuel quality in the different countries. The latest technology is incorporated such as common rail direct injection for the diesels and Toyota’s Variable Valve Timing – intelligent (VVT-i) for the petrol engine, ensuring that performance levels as well as fuel efficiency are high.

IMV production will be in four main centres on three continents. Production has already started in Thailand and Indonesia and will start this year in South Africa and Argentina.

Two turbodiesel engines and one petrol engine are initially available for IMV models. They will be produced only outside Japan, along with the majority of components.

500,000 units a year

Production volumes are a key factor in achieving economies of scale and by 2006, 500,000 units should be the combined annual output from IMV factories in four countries. Considering that Toyota sold 7.52 million vehicles in over 140 countries last year, half a million units is certainly not a modest projection. And it should be noted that the first units only began rolling out in August 2004, so from zero to half a million units in 27 months is pretty impressive.

The biggest IMV output will be in Thailand where 280,000 units will be produced annually, half of them for export (including units that are sent in CKD packs to Malaysia for local assembly). Not surprisingly, with Thailand being the second largest pick-up market in the world, the Toyota factory there is assigned the new Hilux pick-up (three variants) and also the mid-sized SUV called ‘Fortuner’ which has the profile of a first-generation Harrier.

Toyota’s Indonesian production plant, which has been making the Kijang since 1975, was the obvious choice for the IMV people-carrier called the Innova. This plant will produce 80,000 Innovas a year for domestic demand (which will be very high as its predecessor, the Kijang, has been No. 1 for years) as well as for export to other Asian markets and the Middle East.

This year, Toyota factories in South Africa and Argentina will also begin IMV production at a rate of 60,000 units a year each and serve their own markets as well as Europe and some markets on their respective continents.

The two other IMV models, the Innova MPV and Fortuner SUV, will appear in Malaysia later this year.