Toyota carefully coordinates US investment and China deals - GulfToday

Toyota carefully coordinates US investment and China deals


Akio Toyoda speaks during an International Auto Show in Detroit, Michigan, US. Reuters

Toyota Motor Corp last month announced two deals in China that were small in size but large in strategic planning. The automaker said it would establish a green-tech research institute with Tsinghua University and provide state-owned BAIC Group’s Foton unit with fuel-cell technology for buses. But before it could feel comfortable unveiling those plans, Toyota put in months of work to pledge fresh investment — in the United States.

The technology transfers represent gestures of goodwill to Beijing by the Japanese automaker, which wants to “step on the accelerator in China” as CEO Akio Toyoda told an internal management group, according to minutes of meetings on March 19 and April 23 viewed by Reuters.

Announcing US investment first was a strategy Toyoda felt the company needed to pursue to avoid US President Donald Trump’s wrath, the minutes showed - providing a rare window into how it has sought to tread carefully as the United States and China battle for investment, jobs and influence in the global economy.

“For Toyota to operate globally, we need to strike a fine balance between China and the United States,” the March 19 minutes quoted Toyoda as saying. “It’s imperative to avoid making enemies.”

The Japanese automaker is making what one unnamed senior executive described as a “significant move to steer its focus to China” - a market where it is far behind industry leaders Volkswagen AG and General Motors Co.

Toyota declined to comment on its internal meetings.

Its pivot to China — one that many other global automakers are also making - has been made easier by a thaw in ties between China and Japan but complicated by Trump’s trade policies.

That includes the trade war between Washington and Beijing as well as threats from Trump to impose tariffs of up to 25 per cent on imported cars made by foreign automakers. On Friday, Trump declared that some imported vehicles and parts pose a national security threat, although he delayed a decision for as long as six months on whether to impose tariffs.

In response, Toyota issued one of its strongest messages on potential tariffs to date, calling the designation “a major set-back for American consumers, workers and the auto industry” and saying it sent the message “our investments are not welcomed.”

Toyota has been at pains to show its commitment to the United States, and in the March 19 minutes Toyoda explained a fresh investment of $749 million in US manufacturing capacity and jobs as “an essential” step before it could speed up efforts to expand in China.

Announcing the new investment on March 14, Toyota stressed the sum helped bump up a five-year investment pledge made in 2017 to almost $13 billion from $10 billion. The day following the announcement, Toyoda also spoke before the Economic Club of Washington, declaring: “I love America”.

“I just don’t understand why we are called a national security threat and it pains my heart,” Toyoda said in answer to a question after his speech. “One thing I would promise, no matter what direction the discussion takes us is that Toyota will not leave America.”

Though many other automakers, including US automakers, have announced investments in the United States since Trump came to power in 2017, the near $13 billion pledged by Toyota is the biggest amount by far.

Toyota would have pressed ahead with fresh US investment even without its China plans, but there was much internal planning around how the announcements should be timed, company sources with knowledge of the matter said. The sources, who were not authorised to speak to media, declined to be identified.

In a further sign of Toyota’s careful approach to relations with Washington, board member Ikuro Sugawara was dispatched in April to meet with US Ambassador William Hagerty at the US embassy in Tokyo to give him the heads up that the two China deals would be announced.

“I didn’t think we needed to do that but the Ambassador commended our effort more than I had expected,” the April 23 minutes quoted Sugawara, a former vice minister for trade, as saying.

The US embassy in Tokyo declined to comment on the specifics of the meeting, saying only it was in regular contact with Toyota and many other Japanese firms about their plans to continue investing in the United States.

For many automakers, the US auto market is a key profit centre that generates industry-wide sales of about 17 million vehicles annually. But China has rapidly grown in importance - with 28 million vehicles sold in 2018 - and is drawing new investment from global automakers eager to keep up with its heavy promotion of electric cars.


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