TBY talks to Orhan Özer, President and CEO of Toyota Turkey, on the strength of local production in Toyota’s global network.
TBY What has Toyota’s strategy been since the global economic crisis in Turkey?
ORHAN ÖZER Toyota is export-orientated in Turkey. In 2006 we reached a production capacity of 270,000 units, and 95% of that production was for export. This made Toyota Turkey’s top exporter for that year, with a total export value of $2.5 billion. The recent global economic crisis affected the entire industry, yet the recovery has been fast, and the current climate is even better than before the crisis; 2010 was a glittering year for the automotive sector in Turkey. All manufacturers made significant improvements in terms of production and export. This reflects the lack of crisis conditions in Turkey. Currently, Toyota in Turkey is focusing on Europe as the firm lost an important market share there during the crisis. Toyota’s total global number of sales before the crisis was 8.9 million, and now it is around 8.5 million, with this 400,000 difference stemming from the drop in business seen in Europe. So, aside from Europe, the crisis recovery is complete, and that is why we are focusing on European exports at the moment. We are also focusing on strengthening our foundations. Certainly, Toyota Turkey is a quite strong and institutionalized company. Crisis means opportunity for us and it’s a chance to develop our basics such as quality, productivity, and safety. I am more confident that Toyota Turkey will recover very soon.
Why has Turkey’s production base recovered so quickly following the crisis?
Turkey has a young population, and it is a big market. Education levels are strong in Turkey, and this puts us in a good position. Toyota Turkey is no doubt the leader of all European Toyota plants, and in my own opinion we are in another league. We are also competing to be among the best branches of Toyota globally. This condition exists for other automotive manufacturers in Turkey also. Renault Turkey is the star within its group, and the same applies to Ford and Fiat. Renault has made significant investments in Turkey, and this is partly due to the ease with which qualified, experienced, and ambitious workers can be found. These factors have meant that greater efficiencies can be achieved here, and the differences are stark.
What significance does Toyota attach to Turkey’s human resource potential globally?
The strengths of the Turkish workforce are very well known to Toyota global. There are around 100 Turkish engineers working in Brussels at the European headquarters. I was the first Turk to go there in 2002, and I worked there for six years as Vice-President. Now there are Turkish workers at all levels there. This is very much appreciated by the head office in Japan, and I have heard that those engineers are considered to be as good as Japanese engineers.
What was behind the decision to manufacture the new Corolla here in Turkey?
We will produce 95,000 vehicles of this model in 2011. Our total capacity is closer to 170,000. In reality, with very negligible investment we can bring this capacity up to over 200,000. The background of this decision was to bring volume to this company. With the existing models we will approach our capacity in terms of production. Later, at the end of the lifetime of the current models, we will try to convince the decision makers in Japan to bring in one more big volume model. If we obtain such a model, we will exceed 200,000. The decision to bring Corolla production here was simply to utilize the production capabilities of this company and to increase volumes.
A couple of years ago ALJ Group partnered with Toyota. What has been the impact of that?
ALJ Group is a distributor in several regions, including North Africa and the Middle East. There are also some dealerships in Europe. In 2009 the group purchased 65% of Toyota’s distributor company for $80 million. After this purchase, there was a pickup in terms of motivation. It became very positive for the Turkish market, and sales increased to 40,000 in Turkey over a year—the first time such figures had been seen. We support ALJ in all kinds of activities. If there is a need for a special kind of product in the Turkish market then we cooperate in every way that we can. ALJ utilizes unique priorities and has a fantastic perception of the market. With ALJ, because it is a big global Toyota partner, its priority is the Toyota brand. We also share deep mutual respect with the group’s management, and this helps facilitate a fruitful business relationship.
You have discussed what makes Toyota unique as a corporation. What can you tell us about the Toyota production system and its advantages?
One of Toyota’s biggest advantages is its production system. The company has 300,000 employees worldwide, and most of them are involved in production. Management is also very influential, but the real power of the company lies in its production. Our production system is very lean. There is no excess, and yet there is nothing missing in terms of the devices and components required for production. In the Toyota production system, such an understanding of the lean attitude is key to its efficiency. Intelligent automation is also important. This means that total quality must be attained in every component of a car. Each employee has the ability to bring production to a halt if he or she has concerns. We can check the number of times the line has been stopped, and how many minutes were lost in getting things operational again. However, we never discourage employees from halting the line. There are also automatic quality controls should a mistake be made. We operate on a just-in-time basis right across the board from production to delivery. We have eight shipments a day from our suppliers, and whenever equipment is required that exact quantity is supplied immediately. This improves overall efficiency. In this facility, we have around 2,800 employees on average. There are also around 200-300 contractors dealing with cleaning and so forth. Around peak production time there are around 4,200 employees. During off-peak production times, our production is reduced by half, yet our head count does not drop as significantly. This is because of fixed elements and the respect principle we have. We will not let people go unnecessarily unless the company is approaching bankruptcy.
What is your outlook for the Turkish automotive industry, for Toyota, and for the economy in general?
I am very optimistic about the Turkish economy. So far, my biggest criticism was due to the exchange rate conditions. This has reduced competitiveness in the export market. At the beginning of 2011, however, policy change was implemented. This reform was vital due to the balance of payments and the current account deficit. This is the weakest aspect of the economy, and the issue has been recognized by the government and the Central Bank of Turkey. We are pleased to see measures being taken to combat it. I therefore expect Turkey to grow well over the coming years. The Turkish desire to be successful is very high, whether it be within larger corporations or through entrepreneurship. So far, in the automotive industry, the large companies have almost reached saturation in terms of capacity. There are some business improvements and enlargement activities, and Fiat is very active in this area. We will also increase our production as we have excess capacity. The further potential is in new investments. We expect to see newcomers such as Peugeot and other European brands. Some Chinese brands may also appear in Turkey. Investing in Turkey is the right decision due to the many reasons I have mentioned. Turkey is an excellent center of automotive production. There is a strong supplier base, and we have an 80% localization rate.
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