4. Strengthening Global Operations
1986-
(2) Commencement of Production in North America
- 1986
- In 1986, our company established its first full-scale overseas production base in Michigan, USA. As the yen continued to appreciate, we continued to launch new production facilities, aiming for mutual coexistence and prosperity with local communities.
In the 1960s, our company opened new sales offices in Chicago, Los Angeles, and Detroit. Initially focused on supplying replacement parts for exported Japanese cars, we gradually expanded our efforts to include supplying parts to the Big Three automakers in the U.S.
The 1970s saw a significant shift in the export environment. The oil crisis boosted the popularity of fuel-efficient small cars, an area where the Big Three were relatively weak. In response, they increased the outsourcing of parts during new car development, leading to a surge in our exports to the U.S.
By the late 1980s, the yen appreciated rapidly, necessitating measures to mitigate exchange rate risks. Concurrently, Japanese automakers were increasingly considering local production in North America, likely leading to stronger demands for local procurement from our company.
In response, we established “Nippondenso Manufacturing USA” (now DMMI) in Michigan in 1986, with a focus on producing thermal components. This marked our first full-scale overseas production, beyond our previous knockdown assembly experiences in Asia. Success in this endeavor would bolster our confidence in further overseas expansion, while failure would likely push us towards a more cautious approach. Consequently, all involved parties managed the business with meticulous care and a sense of urgency.
- Deep DiveEstablishing Trust Between Labor and Management
- When we first expanded production into the United States, we paid particular attention to two critical issues: preventing the organization of the UAW (United Auto Workers), which had a strong stance against Japanese firms, and implementing DENSO-Style Management and production activities in a country with a completely different national character from Japan.
To address these concerns, establishing trust between labor and management was identified as a top priority, crucial to the survival of the company. We clearly incorporated Japanese management principles such as “Employees are valuable assets,” “Customer-first approach,” and “Contributing to the local community” into our company policies. The management team, particularly the top executives, made considerable efforts to ensure that these principles were communicated in ways that local employees could understand and appreciate.
In Japan, our headquarters was narrowing down candidate products for subsequent local production following thermal components. Additionally, we were exploring whether to proceed alone or via joint ventures, depending on the business context.
In 1988, we established “Nippondenso Tennessee” (now DMTN) as a wholly-owned subsidiary. This facility became our largest overseas base, surpassing the Michigan facility, and served as a multi-business production site for electrical components, meters, and electronic parts. It also featured tooling functions, including the production and improvement of equipment and tools.
In 1989, we launched three additional facilities: “Michigan Automotive Compressor (MACI)” for compressors, “Purodenso” (now TBDN Tennessee) for filters, and “Associated Fuel Pump Systems Corporation (AFCO)” for fuel pumps. These ventures were established as joint ventures to ensure sufficient production volumes for cost competitiveness.
- Deep DiveLearnings from joint ventures
- MACI was a joint venture with Toyota Group's Toyota Industries Corporation, Purodenso with the American filter manufacturer Purolator, and AFCO with Robert Bosch GmbH. Each of these were 50-50 ventures, and aimed to ensure sufficient production volumes to maintain profitability. These joint ventures were launched almost simultaneously in 1989.
However, once the businesses began operations, we faced numerous adjustments with our partners, starting from the definitions of operational terms to approaches towards capital investment and profit distribution. Ultimately, we learned that, regardless of whether our joint venture partners were Japanese, European, or American companies, establishing a neutral and independent management approach that favored neither parent company was crucial for the success of the joint ventures.
At that time, there was considerable wariness towards Japanese companies in U.S. communities, partly due to perceptions of them as economic aggressors. Our company made significant efforts to foster an image of “coexistence and co-prosperity with local communities” and being a “good corporate citizen.” Japanese expatriates, led by the heads of local bases, actively participated in community service activities and volunteered to introduce Japanese culture to integrate into American society better.