Texas troubleshooter
From Katrina to the new oil boom, Chris Nielsen has guided Toyota's truck plant through a maze of obstacles
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SAN ANTONIO -- Just when Toyota's long-suffering truck plant here seemed to have emerged from its startup woes, somebody went and started an oil boom.
Granted, oil drilling has nothing to do with selling Toyota Tundras. But as a new wave of exploration starts up within view of his San Antonio pickup factory, Chris Nielsen is keeping a wary eye on the trucks and rigs rolling past his front gate.
The affable 48-year-old Detroiter, who became the first American president of Toyota Motor Manufacturing, Texas, in 2010, finally has the plant humming along nicely after years of tribulations, regrettable decisions and rotten luck.
His concern? The good-paying jobs of the new oil rush will make it harder to woo workers to Toyota. Hiring is already a notch tougher in Texas, where young people "don't really know what manufacturing is all about," he says.
'Not the big dog'
"We're not the big dog here," acknowledges Nielsen, named president as part of Toyota's bid to put more decision-making authority into the hands of American executives. "We're not even in the top 10 of local employers."
Anticipating a future in which the oil patch is expected to hire as many as 68,000 local workers, Nielsen and his team have visited San Antonio high schools and junior high schools to tell kids about working in an auto plant.
Last year, as part of that effort to increase the supply of good young workers needed to keep his plant humming, the team brought eight high schoolers into the plant as paid summer interns. This year the plant will bring in 20 more.
"We have to create that awareness out there," Nielsen says. Since there's little family or community history in the region that informs young people of the benefits of working in auto manufacturing, he says, "We're trying to get out and tell young people what we're offering."
It's just another challenge for Nielsen as he tries to leave one of Toyota's rockiest plant startups in the rearview mirror.
Nielsen, a father of three young boys and a fan of alternative country music, has been groomed for challenges from his first day at Toyota in 1987. He reported for work the Monday after graduating from GMI Engineering & Management Institute, now Kettering University, causing his Detroit family some chagrin.
Initially, Nielsen was one of just two U.S. parts buyers in Toyota's tiny North American purchasing office in suburban Detroit. In the late 1990s, in an effort to better integrate Toyota's increasingly global management, he became the first American national to rotate through assignments in Japan.
When Toyota decided to build trucks in San Antonio to battle the Detroit 3 in the truck-crazy Texas market, Nielsen was tapped for a supporting role. He oversaw the details of putting 21 Tundra suppliers inside the new plant, a move to cut logistics costs.
Finally, in the second half of the past decade, Nielsen was vice president of North American purchasing. That role thrust him into crisis management as the economic collapse in 2008 and '09 threatened to bring down Toyota's supply chain.
The San Antonio plant, meanwhile, went through its own challenges.
Hurricane Katrina hit during its original construction project, driving up the cost of materials and contractor labor and complicating construction logistics. Cost overruns, on top of a fateful decision by Toyota Motor Corp. managers to make the plant bigger than originally planned, inflated its original $800 million price tag to $1.3 billion.
Shortage of skilled workers
Skilled labor and maintenance workers proved harder than expected to find, causing Toyota to advertise for recruits in faraway Midwestern states.
Toyota had become giddy with its own success and assumed big-pickup buyers would leave the Detroit 3 and flock to Toyota. It originally planned to build 150,000 Tundras a year in Texas, on top of an existing Tundra production line in Princeton, Ind. Then, mid-construction, Toyota upped its production goal for San Antonio to 200,000 Tundras a year.
But just as the plant launched in November 2006, the truck market began to decline. The falloff in housing construction in 2007 and '08 crushed sales of large pickups. While still ramping up, San Antonio had to shut down production for three months in 2008, sending team members out to clean municipal parks, paint fences and scrub graffiti off city walls.
Yadi Vega, 31, a final assembly worker who had come to the plant after being laid off by a local shoe company, remembers reassuring her husband that Toyota would be a different kind of employer.
"I told him not to worry," Vega says. "I said, 'I'm sure they're going to get it all worked out.'"
As the plant struggled with the new economic reality of low truck demand, another hammer blow came in early 2010. Consumer complaints about unintended acceleration in Toyota and Lexus vehicles promoted an international recall of epic proportions. As Toyota scrambled to counter bad publicity, congressional hearings and allegations of poor quality, San Antonio briefly halted work again.
The plant next had to address a glaring issue: It didn't need 200,000 units of capacity for the Tundra.
To fill the plant, Toyota first discontinued Tundra output in Indiana. Then it moved its mid-sized Tacoma pickup onto the Tundra line from the soon-to-close New United Motor Manufacturing Inc. in Fremont, Calif.
$100 million retrofit
Automakers don't build two sizes of pickups on the same line because of the production complexities of differing passenger cabs, bed lengths, powertrains and other issues.
Last year, the San Antonio team spent $100 million to reconfigure its line to build mid-sized Tacomas and full-sized Tundras together. Between the two models, this year the plant is running at full capacity for the first time, Nielsen says.
On-site suppliers are operating at full speed, too.
"We are attached at the hip with Toyota," says Max Navarro, CEO of sequencing supplier Vutex Inc., a U.S.-Japanese joint venture that operates in the San Antonio complex. "What happens to them happens to us, good or bad."
Of the San Antonio site's total 5,800 workers, Vutex employs 830, starting at $9.95 an hour. Toyota employs 2,800 workers, with on-site suppliers accounting for the rest. When Toyota sent workers out to clean parks in 2008, Navarro did the same. Toyota continued to pay employees during the downtime. So did Navarro.
Thanks to the addition of the Tacoma and combined U.S. sales for the Tundra and Tacoma of nearly 200,000 last year, suppliers are faring better. Navarro remarks, "I'm just two years away from paying off my bank loan for this operation."
But 2011's earthquake and tsunami in Japan brought San Antonio back to a creep. Parts shortages had the plant operating on half shifts from April to September last year.
Working through holidays
At the time, Nielsen reasoned -- correctly -- that the plant would be running overtime by year end. He asked employees to take time off during the summer instead of the traditional vacation week at Christmas.
To make sure employees knew that everyone was sharing the sacrifice, on the first day of the Christmas workweek, Nielsen and the other San Antonio managers assembled early by the front entrance to shake hands with team members as they arrived and thank them for coming in.
"We want the word to be out on the street in San Antonio that this a good place to work," Nielsen says. "I think we're making a good name for ourselves here, which will be important to us going forward."
The oil boom will be the test. Competing for skilled technicians and reliable workers could get a notch tougher.
The great Eagle Ford Shale formation stretches 400 miles beneath southern Texas, starting right where the Tundra plant sits. Long ignored because its reserves of oil and gas were too difficult to access, Eagle Ford suddenly has come alive thanks to hydraulic fracturing, or "fracking," a process that uses a high-pressure mix of water, sand and chemicals to unlock oil and gas from rock.
Working oil equipment is now visible from the Toyota plant. Companies are moving in with rigs and trucks and running want ads seeking to hire hundreds of workers at good wages.
For example, Energy giant Halliburton is setting up a San Antonio office with plans to hire 1,500 oilfield services workers at an average salary of $70,000 a year. Toyota's assembly workers start off making half that.
Nielsen can almost hear the question coming: Was the idea of operating an auto plant in San Antonio a mistake?
He laughs off the suggestion.
"There's that old adage that bad luck comes in threes," he says. "Well, we feel like we've exhausted our three. We've got the plant producing at the right volume now. Things are going well."
Toyota's truck sales still trail those of domestic brands. Toyota sold 82,908 Tundras in the United States last year, considerably behind the full-sized Ford F series, with 584,917 units, and Chevrolet Silverado, with 415,130.
But J.D. Power and Associates recently named the Tundra the most dependable pickup in the full-sized segment for the seventh consecutive time, Nielsen points out. And Toyota has increased its share of the Texas full-sized pickup market to 6.5 percent, from less than 4 percent, the company says.
A modest success -- but a success.
"There's still a lot more growth opportunity for us ahead in trucks," Nielsen says. "Plants always have the dream to grow, and we still have that dream."
Location: San Antonio
Age: 48
Education: Graduate of GMI Engineering & Management Institute (now Kettering University), Flint, Mich., 1987
Hometown: Detroit
First job at Toyota: Parts buyer, 1987
Previous jobs: Vice president for North American parts and material purchasing, Toyota Motor Engineering & Manufacturing North America Inc., Erlanger, Ky.; chief production manager for Tundra pickup and Sequoia SUV, responsible for manufacturing preparation
You can reach Lindsay Chappell at lchappell@crain.com.
