Finding still another way to cut costs and improve supply-chain management, Toyota is entering the tire business with a manufacturing process it has co-developed.
Speaking informally to reporters at a reception here, Toyota President Fujio Cho confirmed reports that the automaker has co-developed a tire-making technology with Fuji Seiko and that either Toyo Tire & Rubber or Yokohama Rubber will produce the tires under license for use on Toyota vehicles.
Although the tires are 'terrific,' Cho said, they won't be produced by Toyota or carry the Toyota brand.
Without going into details, Cho said the technology involves building the tire in its final, fully inflated shape by assembling it around a core, before sending it through the curing process. In the traditional method, tires are built flat.
According to reports in the Nihon Keizai Shimbun business newspaper, the tire-making technology cuts costs by 20 percent while using only one-fifth of the factory floor space of conventional manufacturing methods. Toyota spokesmen refused to comment on the reported savings.
Cho said the objective is to have tires arrive at the final assembly line on a just-in-time basis, in sequence, directly from the manufacturer. 'That's the ideal,' he said.
Tires now arrive at the assembly plant in large batches and are mounted on rims and put in sequence before going to the assembly line.
Toward that goal, Toyota has considered having its new-style tires supplied from a tire plant next to the assembly plant. But for now, it is expected that Toyo or Yokohama will build a tire-making line using the new manufacturing approach within one of its existing plants.
A spokesman for Yokohama Rubber confirmed that his company and Fuji Seiko, Toyota and Toyo Tire have worked jointly on the new tire, with Toyoda Machine Works responsible for providing the equipment for the manufacturing method. He refused to elaborate.
Analysts said they thought Toyota's purpose was to gain firsthand knowledge of tire-making costs - thereby reducing the bargaining power of giants such as Bridgestone in pricing negotiations - rather than to enter the tire industry aggressively.
Either way, they indicated, it is unlikely Toyota would expand its tire plans to include operations outside Japan.
'They're not serious about making money by making tires,' said Noriaki Hirakata, auto analyst at Morgan Stanley Japan.
Studying the costs
'They want to know [tire-making's] cost structure to reduce their purchasing cost. Up until now, tires are a 'black box' for Toyota. If Michelin says, 'This is the lowest I can charge,' Toyota has no reply.'
This is the same philosophy that led Toyota to set up an electronics-parts plant in the late 1980s. Although the plant is not competitive against the larger, integrated electronics makers, it gives Toyota critical insight into the cost structure of electronics parts.
Takaki Nakanishi, auto analyst for Merrill Lynch Japan, said Toyota wanted to strengthen its hand in price negotiations with Bridgestone in the Japanese market.
'In tires, there is no second maker, Bridgestone is so big,' he said. 'The bargaining power is so unbalanced because Bridgestone is so powerful. Toyota's goal is simply to regain their bargaining power in the domestic market.'
Analysts also downplayed Toyota's risk in committing itself to a maker such as Toyo, which carries far less brand recognition among consumers than big tiremakers such as Bridgestone, Michelin and Goodyear.
Said Hirakata: 'For premium-brand vehicles, the brand of a tire is an important issue. But that is not true for mass-production models.'