CINCINNATI - Creative thinking appears to rule the day as automakers and their suppliers struggle to meet self-imposed goals to source content from minority-owned businesses.
'I challenge you all to think creatively when evaluating commercial opportunities with potential partners,' Teruyuki Minoura, president of Toyota Motor Manufacturing North America Inc., told several hundred guests at the annual Toyota minority purchasing conference here Nov. 15.
Automakers realize that their odds of stumbling onto a previously undiscovered minority seating supplier or piston manufacturer are small. Instead, they are increasingly turning to different approaches - helping to create new minority alliances, outsourcing more factory jobs and putting more emphasis on minority service suppliers.
'No, we're not going to find many minority-owned steel mills,' said Dennis Cuneo, Toyota's senior vice president for corporate affairs at the North American manufacturing headquarters in Erlanger, Ky. 'So we really have to make it happen in other ways.'
Toyota is not alone. General Motors, Ford Motor Co. and DaimlerChrysler, as well as almost every other automotive manufacturer in North America, is searching for content from minority-owned companies.
In 1997, Toyota declared that it would source 5 percent of its total North American Tier 1 business from minority companies by 2002. A year later it extended the challenge to its suppliers. Now Toyota expects its Tier 1 suppliers to have 5 percent minority content by 2002.
This year, Minoura said, Toyota is only at the 3 percent level. That represents about $330 million in Tier 1 purchases. But he vowed to surpass the goal.
The challenge is formidable. Toyota's U.S. purchasing total is climbing at a steep pace. Two years ago, when the company was spending about $7 billion on Tier 1 needs, the current $330 million in purchasing would have put Toyota almost at its 5 percent goal. This year the company will spend about $11 billion. By 2002, the 5 percent target could require Toyota to double its current minority spending.
Is it possible for Toyota to find an additional $300 million to $400 million in annual minority procurements by 2002?
'We have a plan,' Cuneo said. 'It does require some effort, but we'll get there. And by the way, we view 5 percent as a floor, not the ceiling.'
WHEELS IN MOTION
Another big piece of Toyota's plan will come from outsourced assembly work. One of the biggest recent success stories among minority automotive companies has been T&WA Inc. of Louisville, Ky.
The venture was started by Tommie Burns, whose Burns Janitor Service Inc. held the custodial contract for Toyota's Georgetown, Ky., assembly complex. Burns launched a separate venture to assemble wheels and tires into ready-to-install modules for automakers - although Toyota was not the first to embrace the concept. Burns' partner in the wheel venture is former Toyota executive Gary Dodd.
Toyota has awarded Burns the wheel assembly business for its truck plant in Princeton, Ind. In the next year or two, Toyota also will give him the contract for its Georgetown plant.
Such contracts could represent big dollar amounts, as far as an automaker's Tier 1 ledger is concerned. It is not merely an assembly service the auto plant pays for. It is a completed module. Previously, the automaker would have bought wheels from a Tier 1 wheel supplier and tires from a Tier 1 tire maker. Under the new approach, the automaker buys completed wheel modules from an independent minority assembler. That new reality prompted Goodyear Tire & Rubber Inc. to invest in T&WA two years ago, taking a partial interest in the company.
RAISING ALL BOATS
Toyota's other concern is pulling its suppliers up to the 5 percent goal.
Fostering communications between suppliers and potential minority contacts was the main purpose for Toyota's supplier conference in Cincinnati. Many of the automaker's vendors acknowledge they are not at Toyota's desired level. But they say they are working toward the 2002 deadline.
At the event, representatives of dozens of major Tier 1 companies stood at small exhibit booths, hoping to attract the attention of minority-owned companies that might offer additional content.
The search is clearly industrywide. On hand for Toyota were the biggest of the big: Lear Corp., Visteon Corp. and Delphi Automotive Systems Corp., to name a few.
One company, Nastech Inc. of Bennington, Vt., is the U.S. subsidiary of Toyota's longtime Japanese steering supplier, NSK Corp. Jacqueline Roxon, Nastech senior buyer, showed passers-by the forged machine parts and aluminum castings the company would like to source with a U.S. minority supplier.
'It can be difficult where we are in New England to find the manufacturing services we need,' Roxon said. 'It's also difficult to find the minority businesses we need.'
As part of its effort, the Vermont operation helped spawn a new minority company - Floyd Manufacturing Co. of East Berlin, Conn. Floyd went into business in 1988 providing machining services to Nastech, according to Al Floyd, the company's vice president of sales and marketing. Over the past 12 years, as Nastech's Toyota volumes have grown, Floyd also has grown. This year the company will do about $10 million in sales, Floyd said.
'We've never pursued business on the basis that we're a minority-owned company,' Floyd said. 'We're not going to make it that way. The only way anybody can make it in the industry is on the basis of price and quality. We have to sell that.
'I see that these minority procurement programs are working,' he said. 'But they work by helping you get in the door. They get you into the circle to bid. After that, you're on your own. It still comes back to competitive pricing and doing good work.'