TOKYO (May 24, 2002)—Toyota Motor Corp. is negotiating with Yokohama Rubber Co. Ltd. and Toyo Tire & Rubber Co. Ltd. to make tires for it using a new manufacturing process the car maker has funded.
Toyota does not intend to make tires itself, nor will the company seek to have Toyota brand tires made for it, according to Toyota President Fujio Cho, in informal comments to reporters attending a company reception recently.
Toyota has funded development for the past two years of the new process that originally came from Fuji Seiko Co., a maker of tire materials. Mr. Cho indicated the new technology involves building the tire in its final, inflated shape by assembling it around a core, before sending it to the curing process. In the traditional method, tires are built flat.
Toyota has pursued the tire making technology as a way to cut costs and improve supply-chain management, Mr. Cho said.
Either Toyo Tire or Yokohama Rubber will produce the new tires under license for use on Toyota vehicles.
According to reports in the Nihon Keizai Shimbun business newspaper, the new tire-making technology cuts costs by 20 percent while using only one-fifth the factory floorspace of conventional manufacturing methods. Toyota spokesmen refused to comment on the reported savings.
Mr. Cho said the ultimate 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 then are mounted on rims and sequenced prior to going to the assembly line.
Toward that goal, Toyota has considered having its new-style tires supplied from a purpose-built tire plant located next to the vehicle-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 confirmed that his company and Fuji Seiko, Toyota and Toyo have worked jointly on the new tire, with Toyoda Machine Works Ltd. responsible for providing the equipment for the new manufacturing method. He refused to elaborate.
Analysts said they thought Toyota's purpose was to gain first-hand knowledge of tire-making costs—thereby reducing the bargaining power of giants like Bridgestone Corp. in pricing negotiations—rather than to aggressively enter the tire industry.
Either way, they indicated, it is unlikely that Toyota would expand its tire plans to include operations outside of Japan.
“They're not serious about making money by making tires,” said Noriaki Hirakata, auto analyst at Morgan Stanley Japan Ltd.
“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,” he added.
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 especially 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 like Toyo, which carries far less brand recognition among consumers than big makers like Bridgestone, Michelin or Goodyear.
“For premium-brand vehicles, the brand of a tire is an important issue,” Mr. Hirakata said. “But that is not true for mass-production models.”