In Georgetown, Toyota became global

A delicate balance in Kentucky: Keep Japanese concept intact, but adapt to a new culture

Toyota's decision to build an assembly plant in Georgetown, Ky., was only partly about the U.S. auto market. The decision was also about Toyota itself.

Georgetown was Toyota Motor Corp.'s effort to prove to itself that it could be a global automaker and that its very particular way of building cars could be replicated outside Japan.

But to become a global corporation, Toyota had to learn how to become a local employer.

Shoichiro Toyoda, the family member who was president of the parent company in the 1980s, championed the idea of manufacturing in the United States as a critical step in Toyota's global evolution.

Toyoda, who held a doctorate in engineering, knew that American input was needed to make Toyota products more appealing to American consumers. He also understood that embracing input from outside Japan was necessary.

Today, as construction crews work on what will be Toyota's ninth North American auto plant in Tupelo, Miss., the enormity of the decision to build the Georgetown factory has become somewhat lost.

But in 1985, Toyota leaders in Japan fretted about the Kentucky idea. They worried about overreaching in their quest for growth. They wondered about the wisdom of a remote, rural Midwestern factory location, with even more remote suppliers sprawled out over thousands of square miles.

They also remained anxious about the image of the American worker.

A year earlier, Toyota had opened New United Motor Manufacturing Inc. in Fremont, Calif. That 50-50 joint venture with General Motors, located safely on the West Coast in a major urban area, gave Toyota a taste of foreign operations. But the automaker needed to know whether it could really fly solo.

The challenge was large. Toyota executives in Japan feared their company would not be accepted in the American heartland, recalled Fujio Cho, who presided over the launch of Georgetown as CEO of Toyota's operations there. It was American car country with low Toyota sales.

"The Midwest was a blank area for us," Cho, now 70 and chairman of the Japanese parent company, said through an interpreter.

Executives in Japan weren't the only ones who were nervous about a Kentucky factory.

"Our dealers were extremely worried about the quality of the products we could produce in Kentucky," Cho said. "If the Camrys produced in Kentucky turned out to be inferior in quality, then customers would start asking for Camrys built in Japan. Dealers said that would seriously affect their business."

WOULD WORKERS DELIVER?

Easing those fears would largely come down to whether American workers were up to the job. Could Toyota hire residents of a farm community and truly train them — not merely train them to operate advanced automaking equipment but to think about their jobs in a way that would mesh with Toyota's philosophy of automaking?

"What have I gotten myself into?" Cheryl Jones remembers asking her family in Georgetown in a phone call from Japan in 1987.

At 24, Jones had become one of the first local residents hired to work at the still-incomplete car factory. The two-lane country road that had long connected her to her grandmother's house was being widened into a broad highway for Toyota. The small horse farm where her fiance grew up had been bulldozed to make way for an engine line.

To train Jones, Toyota sent her off with hundreds of other early hires to Japan to work in its assembly plants there, side by side with Japanese assembly workers, struggling to communicate with Japanese team leaders.

Jones spent weeks in Japan, learning Toyota Production System concepts of andon (stopping the assembly line), kaizen (continual improvement) and kanban (lean inventory control).

"When I walked into the plant in Japan for the first time, it was the first time I had ever been in a manufacturing plant of any kind," she says. "Even here in Kentucky. It was pretty bewildering."

FROM CHECKOUT LINE TO ASSEMBLY LINE

The recent college graduate had been a cashier at the Kroger grocery store in Georgetown since she was a teenager. The major employer in the area, IBM, was closing operations as Toyota began to hire.

Jones' manager at the grocery store scoffed at her application to Toyota. "They're not going to hire you," she remembers being told. "You don't know anything about building cars."

Jones, now 44, is vice president of manufacturing at Toyota Motor Manufacturing Kentucky in Georgetown.

Her stories are freely laced with Japanese Toyota vocabulary. Jidoka. Heijunka. Poka-yoke. Besides helping manage a plant that builds 500,000 vehicles a year, Jones' duties include managing Georgetown's emerging role as a "mother plant."

Georgetown team members and managers supported the launch of the first Toyota plant in Mexico, in Tijuana, in 2004. They oversaw the launch of Toyota's Camry production last year in Subaru of Indiana Automotive Inc. in Lafayette, Ind. Jones' current task is to support the 2010 launch of the $1.4 billion Tupelo, Miss., plant.

Her former manager from Kroger now reports to her at Toyota.

Jones' initial experiences in Japan reveal what a cultural shift American manufacturing brought to Toyota. Japanese personnel were unaccustomed to seeing a woman in an industrial setting. Every morning, her stint on the Japanese assembly line would draw an audience of corporate onlookers to see with their own eyes whether this woman from an American farm town could actually build a car. The visitors would watch as she sweated and toiled, and all the while she remained aware of their eyes on her, determined not to fail.

The Japanese company itself began to change from that moment.

"I tell people I'm famous for bringing women's restrooms to Toyota," Jones says. "There were no women in the factories then. So when we came over, they had to construct women's restrooms for the first time."

NOT EVERYONE CHEERED

But the project was not universally welcomed in Kentucky, says Jim Wiseman, now vice president for external affairs at Toyota Motor Engineering & Manufacturing North America in Erlanger, Ky.

Wiseman, 55, was president of the Kentucky Chamber of Commerce when Toyota arrived in the mid-'80s. He recalls murmurs of discontent around the state.

Some politicians criticized the state's $147 million incentives package to Toyota. Longtime landowners were convinced that an auto plant would destroy the local horse industry. County residents worried about the possibility of higher local taxes for the infrastructure to support Toyota and about a general degradation of the pastoral landscape.

Already, a massage parlor had opened on the outskirts of town, purporting to offer "Japanese massages." Some residents viewed the establishment as a harbinger of what was sure to be Georgetown's cultural undoing.

Legally, the entire project had to be approved by the Georgetown City Council before it could move forward. Wiseman says that on the night of its discussion, 800 residents crowded into the council building to witness the controversy.

By contrast, three years later, when Toyota decided to double the size of the original project, that issue also had to be voted on by the Georgetown council. That evening's vote drew a public audience of only one person.

BUILDING A SUPPLY CHAIN

Another major hurdle would be establishing an American supply base for Georgetown. At NUMMI in California, Toyota relied on a mix of U.S. suppliers that already were working with GM, imported parts shipped from Japan and a small number of local parts sourced specifically to supply the new Toyota-GM vehicle line.

Georgetown, 2,400 miles east of the San Francisco Bay, required a full-blown North American supply chain.

Hundreds of Japanese parts manufacturing plants opened in North America in the 1980s and 1990s, many of them through joint ventures with U.S. companies. Cho said Toyota never asked its traditional Japanese suppliers — let alone instructed them — to open North American parts factories. He says many of Toyota's traditional suppliers were eager to enter North America.

But from the beginning, Cho said, Toyota intended to work with local suppliers, whoever they happened to be.

That was no easy task. Many U.S. companies were not up to the quality standards Toyota expected. And few were able, or even willing, to operate under Toyota's unique factory production system in 1987.

NEW DIALOGUE

Cho said he and his managers were surprised to learn of two other fundamental differences between Japanese and American supply chains.

In Japan, parts makers delivered to their customer's door. In America, Toyota learned, the automaker takes responsibility for picking up the supplier's parts. Toyota had to retain a fleet of trucks to operate "milk runs" among the suppliers, which were stretched out over states from the Great Lakes to Tennessee.

More vexing to Cho, there seemed to be little helpful conversation between automakers and suppliers in the United States. Toyota was accustomed to sharing ideas for improvements. It relied on suppliers to suggest product innovations and cost-saving methods.

"Here in Japan, we have a Toyota supplier association," Cho said. "I thought it would be a good idea to set up a similar association in the United States.

"American executives were concerned that this could have some antitrust implications. I thought, 'OK, we're not going to be able to come up with such an association.' But after looking into it legally, we determined that so long as no business information was exchanged, and the gathering was only for the advancement of friendship or mutual study, it should be doable."

The group was limited to Kentucky at first, and Toyota dubbed it the Bluegrass Automobile Manufacturers Association, or BAMA.

"Initially, we thought American suppliers might not like forming such a group," said Cho. "But once we started BAMA, American executives quite liked it. By the time I left Kentucky, it had far expanded beyond the Kentucky borders, with suppliers in other states becoming members of BAMA."

LOCAL INPUT

Toyota itself learned from the plant. After Georgetown came plants in France, the United Kingdom, China, Mexico and elsewhere. Cho learned that local management — rather than executives dispatched from the home office — can guide Toyota through unfamiliar waters.

"We had some difficulties," Cho said about Kentucky. Some, he admitted, he barely understood.

In the years after Cho returned to Japan, Toyota named Gary Convis to run Georgetown. Convis, who had worked at Ford Motor Co. and GM before learning the Toyota way as NUMMI's senior manufacturing executive, retired recently as chairman of Toyota Motor Manufacturing Kentucky.

"Mr. Cho was a tremendous leader, as were all the Japanese executives who came through Georgetown," says Convis, 65. "I don't think we fully appreciated that while we were busy getting started. We just assumed it was normal.

"But we began to understand after a number of years that we had benefited from some inspired leadership in those early years. It makes you realize how important this all was to Toyota."

You can reach Lindsay Chappell at lchappell@crain.com.