The trend among automakers to outsource more vehicle content has never stirred much interest among the Japanese transplants.
But that may be changing.
Japan's three biggest automakers say they may outsource more parts and even entire modules for future U.S.-built vehicles.
Officials at the North American units of Toyota Motor Corp., Nissan Motor Co. Ltd. and Honda Motor Co. Ltd. are studying proposals to turn over more vehicle content to local suppliers.
Toyota may begin next year when it starts building a new full-sized sport-utility in Princeton, Ind. Honda has said it plans to use local suppliers to a greater degree on a sport-utility scheduled to be built in Lincoln, Ala., in 2001. And Nissan is conducting feasibility studies on whether to outsource entire cockpits, doors, headliner interiors and vehicle front-ends.
Such considerations are facts of life for other automakers. The industry has buzzed over outsourcing for most of this decade. In an effort to shed factory inefficiencies, automakers in Europe and North America have handed parts production over to suppliers and empowered suppliers to design and take charge of entire pieces of vehicles.
DaimlerChrysler builds trucks in Brazil on a 'rolling chassis' supplied by Dana Corp. The module contains more than 200 parts from 66 subsuppliers and represents nearly a third of the truck's cost.
BMW Manufacturing Corp. in Spartanburg County, S.C., assembles cars and sport wagons whose steel bodies are delivered pre-made by a subsidiary of Magna International Inc. The Mercedes-Benz U.S. International Inc. plant in Vance, Ala., obtains ready-to-install cockpits from Delphi Automotive Systems Corp. to go into its M-class sport-utilities.
The trend has been a beacon of promise for key global suppliers. Many parts makers believe big money will be made performing assembly jobs traditionally handled by the automakers themselves.
But until now, Japan's automakers have not been sold on the idea.
'We're a conservative company,' explains Norm Bafunno, general manager of manufacturing for Toyota Motor Manufacturing, Indiana Inc. in Princeton, Ind. 'But we're thinking about it.'
Bafunno's plant is evidence of the transplants' hesitation to outsource. Princeton is the newest auto factory in North America; it started production last December. Yet the full-sized Tundra pickup built there is sourced much the same as Toyota's other vehicles.
But phase two of the Princeton plant may be different. Princeton will begin tooling up for the new sport-utility this year, and sourcing decisions are still being made. But Bafunno says Toyota is considering more outside suppliers for the vehicle.
'Our engineers in North America and Japan are all looking at make-vs.-buy proposals right now,' Bafunno says. 'We've seen a little outsourcing already, but we're holding serious discussions now about outsourcing parts we've never outsourced before.'
One possible area for outsourcing: Plastics. Like other Japanese transplants, the Princeton plant runs a plastics injection-molding department that supplies instrument panels, bumper fascias and trim pieces for its trucks
Similarly, a plastics department at Nissan Motor Manufacturing Corp. U.S.A. in Smyrna, Tenn., turns out bumpers, trim and even the Altima's plastic fuel tank.
'We originally looked into sourcing the tank from an outside supplier but found we could make it cheaper and better in-house,' says Emil Hassan, senior vice president of Nissan North America Inc. in Smyrna, who oversees purchasing.
Now, Hassan says Nissan is looking at outside suppliers in a different way. Outsourcing a module such as the cockpit would mean major changes for Nissan's supply base. Currently, Nissan itself is the gathering point for the dozens of subcomponents that go into the cockpit.
But Hassan cautions that the module studies are far from resolved. 'Whether we end up doing them all is pretty doubtful,' he says.
The shift is equally remarkable for Honda. The company's Honda of America Manufacturing Inc. unit has been a classic example of efficient vertical integration. In addition to building cars and complete engines and transmissions, Honda has in-house production of brakes, crankshafts, pistons, plastic components and aluminum wheels.
The company has not said what parts of the upcoming sport-utility it may turn over to suppliers. But one change could be to outsource the truck's body stampings.
There are three main reasons why the Japanese transplants have not handed over more components to suppliers.
1. Efficiency: Many Japanese-owned plants in the United States are already among the industry's most efficient. Some of the plants employ staffs of people who teach quality and efficiency concepts to local suppliers.
'They're less motivated because they're already superproductive,' says Richard Hervey, president of Sigma Associates, a management consulting firm in Southfield, Mich. 'Unless they can get something done better or cheaper outside, there's less incentive for them to outsource.'
2. Culture: Handing over major sections of a vehicle to an outside company would be out of character for a Japanese automaker, says Jeffrey Liker, director of the University of Michigan's Japanese Technology Management Program.
'Toyota is watching the American and European carmakers experiment with modules before making a decision on it,' Liker says.
3. Trust: Outsourcing more content is a relationship issue for Japanese automakers. Only in recent years have the transplants begun sourcing engine parts, electronics and chassis parts in big numbers from North American suppliers. Additional levels of sourcing will take more time.
'There's a question in our mind about suppliers' ability to maintain quality,' Toyota's Bafunno says. 'When that level of trust is there, we'll see more and more sourcing.'
On the other hand, asserts Liker, Toyota also has the capacity to move aggressively when it decides to. 'Right now, the Big 3 and the Europeans probably have more to gain from outsourcing modules from suppliers.' Liker says. 'But in a year or two, if it looks like they're making big gains from doing it, you could see Toyota taking some big steps and catching up quickly.'