Cost quandary hits Japan's advanced factories

High-tech supplier Jatco goes low tech for overseas expansion

The automated line in Jatco's Yagi, Japan, plant has fewer workers in sight.

UPDATED: 4/14/14 9:25 pm ET - adds correction

Editor's note: An earlier version of this story, which also appeared on Page 70 of the April 14 print edition, incorrectly described Jatco's transmission operations in China. Jatco expanded production of the CVT8 transmission at an existing plant.

NANTAN, Japan -- It's a cruel paradox for Japan's manufacturers.

Auto suppliers here have some of the world's most automated factories. But because they also serve as global mother plants for low-tech operations overseas, they sometimes have to dumb down lines, making output more costly and labor intense. That allows the companies to test and prove processes before implementing them abroad.

Such is the quandary facing Jatco at its Yagi plant in Nantan city, northwest of Kyoto, which makes the continuously variable transmission that goes in such vehicles as the Nissan Altima sedan.

At Yagi, casings flow seamlessly down one machining line that is fully automated, with hardly a worker in sight. Yet just across the aisle, workers scurry among machines on a labor-intense line making torque converter housings.

The worker-rich line is cheaper to install. But in high-wage Japan, keeping it staffed and operating is costly.

Financially, "in Japan, it's bad. In Mexico, it's better," the plant's general manager, Kenji Matsumoto, says. Yet Jatco tolerates, even builds in, the inefficiencies because Yagi is a global pilot plant for factories in such low-wage markets as Mexico and China.

"You see workers manually transporting things by hand. But this line is newer than others," Matsumoto said. "Globally, we are a mother plant, so even if it's higher cost here, we try these new ways and then copy and install it in other countries."

Few Japanese manufacturers plan substantial, if any, expansion at home, but the production technologies they use still stem from here.

"How to teach and coach [the plants] is a very important task for us," Matsumoto told Automotive News. "The idea of what we need in order to expand outside [Japan] is changing."

Jatco's CVT8 made at Yagi is a key product for the company and its No. 1 customer, Nissan Motor Corp. It is mounted on mid-sized and large vehicles, including the Altima, the Nissan X-Trail and the New York version of the Nissan NV200 taxi.

To meet surging demand, Jatco expanded capacity for CVT8 production in China last year and is opening a second plant in Mexico this summer.

Jatco expects most, if not all, growth to come in low-cost emerging markets. In 2012, Japan accounted for 75 percent of the company's global output, Jatco says. But it wants Japan to account for just 30 percent in 2019.

Jatco has rolled out other adaptations to emerging markets.

At Yagi, Jatco created a pilot line for CVT8 production to test how the new line should operate in Mexico. Now, that line has been moved to Mexico, where workers and engineers are preparing to start production. Japanese engineers from Yagi were dispatched to help.

Jatco will need a new overseas CVT8 plant before April 2019 to meet its expansion plans, Matsumoto said. Yagi will be the mother plant to that one, too.

Its location has not been announced, but Matsumoto said the additional plant likely will target customers focused on Europe.

Using the mother plant concept as the basis for overseas expansion requires close communication not only among front offices in Japan and locations abroad, but also factory floors.

"If you have a problem in the processing area, you have to first inform China and Mexico, faster than me," said Matsumoto, who worked four years at Jatco's Mexico plant. "It's more important to call the other countries because they copied our lines."

Meanwhile, production engineers are experimenting with small-batch manufacturing techniques for use in Japan.

The idea is to channel Japan's production expertise into flexible lines that can adjust to sudden changes in demand.

The new approach also may mesh with Yagi's role as a labor-intensive mother plant. That is because the small-batch lines are usually more efficient with lots of workers, who can adapt more quickly than a fixed automated line to changing demand.

Says Matsumoto: "We have been especially interested in lower-volume techniques."

You can reach Hans Greimel at -- Follow Hans on Twitter: @hansgreimel

ATTENTION COMMENTERS: Automotive News has monitored a significant increase in the number of personal attacks and abusive comments on our site. We encourage our readers to voice their opinions and argue their points. We expect disagreement. We do not expect our readers to turn on each other. We will be aggressively deleting all comments that personally attack another poster, or an article author, even if the comment is otherwise a well-argued observation. If we see repeated behavior, we will ban the commenter. Please help us maintain a civil level of discourse.

Email Newsletters
  • General newsletters
  • (Weekdays)
  • (Mondays)
  • (As needed)
  • Video newscasts
  • (Weekdays)
  • (Weekdays)
  • (Saturdays)
  • Special interest newsletters
  • (Thursdays)
  • (Tuesdays)
  • (Monthly)
  • (Monthly)
  • (Wednesdays)
  • (Bimonthly)
  • Special reports
  • (As needed)
  • (As needed)
  • Communication preferences
  • You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.