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Spreading out for a little elbow room

Posted in Posts, and Syllabus Schedule

Out of everything we have learned in this class, what has had the greatest impact on me personally is the realization of the importance of being globally diverse. From various national economies taking downward turns, to devastating tsunamis, I have learned that if you aren’t spread out, you are taking a major risk.

In an increasingly interdependent world it is important to not only seek profit globally, but to spread risk globally. Metelsa is an excellent example, expanding to Russia and Vietnam. A slow down in the North American industry would hurt, but not totally devastate the company like a company with “all of its eggs in one basket.”

Toyota is employing this strategy with the production of its Yaris small car. On a small vehicle like the Yaris margins are tiny, if existent at all. As such, continuing to produce the car in Japan where a strengthening Yen is cutting into profits no longer became economically viable. As a result Yaris production will be shifting to France. This is a great example of a firm seeing that its current production mix/strategy is risky and adapting.

One Comment

  1. I would like to know where Toyota sells the most Yaris. It’s OK but not great in the US, so maybe sales in Europe are strong. I would not however think that it’s cheaper to produce in Europe, particularly France. Instead Toyota’s plant in France may be tailored to smaller models, so that limits what can be made there. With Europe in the doldrums, capacity utilization is low — so this may be partly a strategy to lessen losses in Europe.

    Other manufacturers (including US ones) are also shifting production to Thailand, where wages are lower. Within NAFTA, smaller cars tend to be made in Mexico (though that’s also a function of trade deals that facilitate exports to South America and other markets, where smaller cars are central).

    I’ve not followed Europe closely. Automotive News has a European edition (available through Leyburn?) and of course it would be natural to check French publications if you have language skills. I can handle German, though only with scraping rust off (e.g., pulling out a dictionary)…

    May 18, 2013

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