News: Toyota Motors reviews overall ASEAN operations -
28 Oct 2007
TOKYO — Toyota Motor Corp., the world’s second biggest car giant, has hinted the likelihood of its Philippine operations be limited to parts production only in light of its serious difficulty in attaining competitive assembly operation under a liberalized trade regime in ASEAN, which import tariff is going to be phased-out by 2010.
Tokuichi Uranishi, TMC executive vice-president for global planning operations, told Philippine journalists covering the 40th Tokyo Motor Show that while TMC is supporting free trade on a global basis it is also experiencing difficulty in rationalizing uncompetitive operations.
Uranishi is TMC’s point man in connection with trade negotiations.
"Once we invest in manufacturing, we have to maintain that production to create jobs to contribute to society but if automotive import tariff is reduced then local production cannot compete anymore. What will happen to local production?" Uranishi said.
"We are in a kind of a dilemma because the ASEAN governments are reducing tariffs and that means the Philippines can no longer compete," he said.
"It is very difficult to rationalize, we have many shareholders and we have to justify our operations and we cannot justify if we are losing money," Uranishi added.
He noted that the current 5 percent tariff on completely built-up packs imported by the Philippines from an ASEAN country is already very low. Worse, this import tariff will be phased-out by 2010 when the ASEAN Free Trade Agreement is fully implemented.
By that time, TMC, which has huge operations in Thailand, could freely export to the Philippines without tariffs. This means that assembly operations in the Philippines is no longer viable.
Justifying an assembly operation in the Philippines will be made more difficult once the Japan-Philippines Economic Cooperation is implemented as this ushers in another round of tariff reduction, he said. "That is our problem, we need to protect the Philippine operations," he said.
Thus, Uranishi said, TMC has decided to invest over a billion pesos for the transmission facility in its Sta. Rosa plant in Laguna to build the capability of the Philippine operations as a transmission hub for Toyota’s regional operations.
According to Uranishi, the automotive supply chain in the Philippines is very poor compared to other countries in the region.
Uranishi pointed out that 70 percent of its parts and components are sourced from outside and only 30 percent is supplied by Toyota company affiliates.
"That is why we decided to expand our transmission facility and export to other countries so we can become competitive and in that case that is much better than continuing the assembly of vehicles itself," he added.
Source: Bernie Cahiles-Magkilat, Manila Bulletin Online, 28 October 2007