01 december 2012
Risk analysis of a sustainable production plant for Toyota in France
Toyota and its presence in the European market3
Different renewables to power the plant5
Type of car: hybrid or fully electrical vehicle13
Supply chain risks20
Plant location risks22
French employment risks25
The following risk analysis was done as a result of Toyota’s recent decision to open a production plant in France. This company with Japanese roots is currently trying to change its image to be seen as a more environmental friendly enterprise. After the recent disasters in Fukushima the world is more aware than ever on the dangers of nuclear energy production and the shifting towards more sustainable production methods is inevitable. The amount of companies that use solar energy and wind power as the main sources to juice their operations is rising rapidly. To keep up with this social trend, opening a sustainable production line in France is one of the points on the company’s agenda today. Since it has not been done before by Toyota, there are many risks involved that have to be identified and assessed. This risk analysis will allow the company to come up with a compelling strategic plan to enter this new market and to enforce its position in Europe. The risks will be classified in different categories and will be assessed by importance and likelihood of occurrence. To goal is to minimize the overall risk in order to maximise the profitability of this undertaking in France. -------------------------------------------------
Toyota and its presence in the European market
In late 1996, Toyota began to look at the whole of western Europe for a site for its ultra-modern plant. Belgium, the Czech Republic, France, Germany, Poland and the UK all seemed to be the most promising investment recipient, but the list was quickly left a head-to-head battle between Europe's oldest foreign investment rivals - France and the United Kingdom. At first, the UK seemed the obvious choice. Toyota had its only European car assembly plant at Burnaston, in the UK's Midlands, where a skilled workforce and well-established automotive infrastructure and cluster of related firms are available. However, at the end of January, company president Hiroshi Okuda voiced doubts about investing in the UK because of its hesitation to fully participate in the European monetary system. In 1997, Toyota finally announced plans to build a $660 million car plant in Valenciennes, 60 km from Lille, France.
Valenciennes is a medium-sized city of 350,000 inhabitants in the northeast of France near the Belgium border. The region was severely struck by the steel crisis of the 1970s and the following constriction of the coal mining industry. With an unemployment rate approaching 30% during the 1980s, the region suffered from economic depression. Unemployment decreased steadily with the arrival of Jean-Louis Borloo as mayor in 1989. For thirteen years, he reduced the jobless rate from 22% to 14% thanks to a policy promoting industrial diversification. The installation of the Toyota factory in Onnaing, in the industrial suburbs of Valenciennes, was a very important piece of this regional revitalization process, as it promised the creation of more than 2,000 jobs. Given the economic circumstances of the Valenciennes region, the Japanese plant was more than welcome.
There were some concerns, however, about the company's willingness to remain in the region for the long-term. To attract Toyota, national and local governments, as well as the European Union, gave the firm a total of 51.5 million euros in subsidies and tax incentives. Many feared Toyota might simply...