After enduring weeks of tribulations that included a protracted grilling by the US Congress over safety issues in his company’s vehicles, Toyota’s President, Akio Toyoda will later this month land in Nairobi to put last touches to a project billed as the company’s biggest investment of the decade.
The highlight of Toyota’s massive venture will be Sh114 billion investment in 1400 kilometer-long oil export pipeline stretching from Juba, Southern Sudan to the Coastal town of Lamu. Although the company says it is yet to commence negotiations with the concerned governments, its optimism is spelled out in an elaborate project plan Financial Journal has obtained. It plans to operate on a Build Own and Transfer (BOT) model. Under the arrangement the venture will not require the Kenyan and Southern Sudanese governments to put in any monies initially, but Toyota will build and operate it for 20 years, as it recoups its investment and thereafter transfer its ownership to the two governments.
Last week, chief executive of Toyota Tsusho Corporation (TTC), Takashi Hattori was in the county to hasten proceedings, as Toyota gears up to establish its regional headquarters in Nairobi. TTC is the trading and investment arm of the Toyota Group.The company has reportedly identified a suitable site along Mombasa Road to host the regional headquarters, which will be responsible for new projects and investments in East Africa.
“We will begin by setting up a new logistics hub, that will serve the greater Eastern Africa region, with possibility of expanding the company’s current local assembly of vehicles to take advantage of the recently launched East African Customs Union,” says Hattori.
Toyota is divided into six major business divisions that include metals, machinery and electronics, automotive, energy and chemicals. It also has divisions that deal with produce, foodstuff and other materials.Already, TTC has appointed Mr Eiichi Kaneko as General Manager and representative at the Nairobi office. The headquarters will be independent from Toyota East Africa.
The move makes good sense under Toyota’s expansionist policy. It will guarantee a number of synergies, which, as Hattori, points out, is euphemism for cost-cutting. It will also enhance the company’s distribution network across the region.
“This is good news to the regional market, because we will make spare parts readily available. Contrary to past situations when customers were forced to sometimes wait up to six months for spare parts to be delivered, the parts will now be readily available,” says Kaneko.
Japanese Crown Prince Naruhito is expected in the country later this week, on his maiden trip to the continent to cement the new found relationship between Kenya and Japan.Toyota’s huge catalogue of planned investments also includes participation in geothermal power generation and field development. It says it will also consider setting up a motor cycle assembly plant locally, to take advantage of the booming motor cycle business being fanned by the explosion of boda boda (motor cycle) taxi operators.
Supplying automotive spare parts locally will cut both the costs and inconveniences of transporting them over long distances, and cushion customers as well as the company against foreign currency fluctuations.
Although it could be good news to local customers, second-hand car part dealers and the middlemen who do business with them could find the going difficult, once the planned logistics hub takes off, as their products can’t compete fairly with evenly priced new automotive parts. It could be too soon to put numbers, but Toyota believes the consequence will be a huge increase in the consumption of its products, and increased job opportunities for locals.
“We will utilise local labour as much as possible. That is what we do in all the places we operate,” says Kaneko.
To a large extent, Toyota’s move follows Prime Minister Raila Odinga’s invitation to the world’s biggest automotive company to invest in Kenya, due to its strategic location as the regional business hub and a resource pool of skilled labour force.
Just as important were strategic considerations, such as East Africa’s Customs Union rule, which zero-rates duties for products made within the region and the country’s central location in the region and as a foothold for making Toyota’s products more competitive.The company’s executives puts customer perception of the company high on the list of items they hope will improve, once it sets shop here.
“What the public thinks of us is very important to us,” says Hattori.
The reputation of Toyota has been severely blistered by a string of problems across a range of vehicles.
The main issues have been faulty accelerator pedals, getting stuck in floor mats, and a problem with braking systems on its hybrid models.In remarks he read to the US Congressional Committee, Toyota’s President, Toyoda admitted that the firm’s expansion “may have been too quick”.
The grandson of the company’s founder, Toyoda was quoted by BBC as saying he took a personal responsibility for improving the quality of Toyota cars.
“All Toyota vehicles bear my name. For me, when the cars are damaged, it is as though I am as well. I, more than anyone, wish for Toyota’s cars to be safe, and for our customers to feel safe when they use our vehicles.” He added: “We pursued growth over the speed at which we were able to develop our people and our organisation and we should be sincerely mindful of that.”
The company’s other plans in the non- automotive sector include participating in the country’s green power programme, especially in geo-thermal power generation and field development, as well as in solar photovoltaic power generation.
The company says the new regional headquarters will be established by September. Hattori says his visit, which involved holding a number of meetings with concerned government officials, went well.
“So far, things are going well. We like the spirit,” he told Financial Journal.
Written By:Kenneth Kamwa
Published on: 9/3/10