Toyota-PSA plant officially online, gearing up for car-per-minute production

Car manufacturers say that a combination of falling demand, especially in Europe, the ever-weakening US dollar, and rising material costs are cutting into savings. The French cars group PSA Peugeot Citroen, seeking out lower production costs, three years ago teamed up with Toyota of Japan, an industry leader in terms of efficiency. Their newly opened TPCA plant, in Kolin, the Czech Republic, officially went online this week. To find out why this joint-venture producing small cars — which should eventually make 300,000 cars a year — is already making such big headlines, we spoke with Lyle Frink, the Central European correspondent for Automotive News Europe, who was at the starting line.

Line off ceremony, photo: CTK

"Toyota is considered the benchmark of manufacturing efficiency. This factory is an interesting fusion between Toyota and Peugeot; however, Toyota is absolutely in charge of the manufacturing process, and this is a Toyota factory."

"The factory was actually bought and built in Japan, assembled, they [then] verified what the machinery could do, disassembled it, then brought it to the Czech Republic. So, it is a Japanese factory transplanted to the city of Kolin."

RP: Tell me something about the official first day of production — although they've been cranking out some cars already.

"The atmosphere in the morning, about 6:15 in the morning, when hundreds of workers arrived, was a bit subdued, but I think this was due to the very, very cold temperatures. By 11:00, when the ceremony was starting, the atmosphere switched to something like a rock concert, or a sports event, with yes, yes, this is our team, go, go, yes, yes, yes. I think for many of the workers there, this something that they will remember."

Line off ceremony, photo: CTK

RP: Tell me something about the run up to landing this investment. The Czech Republic was competing with Slovakia, Hungary, Poland, presumably. What kind of incentives did the Czech government offer and what will it mean for the economy?

"The run up to this investment was a 'strike out'. The Czech government had lobbied BMW to site its new factory in the same spot. BMW under pretty heavy political pressure went for a site in eastern Germany. The stated reason there was the time and investment needed to bring a workforce up to the necessary levels of German language skills."

"But this strike out meant that the city [of Kolin] and CzechInvest [the government agency charged with attracting foreign investment] had already prepared a very complete plan that was all ready to go. So Toyota-Peugeot, this meant that they were looking at something already done on a high level."

Photo: CTK

"The project — it was called a B.O. car — and that was this joint-venture between Toyota, Peugeot and Citroen and it was billed as a 1.5 billion euro project. However, the factory that is starting up operations cost less than a third of that because this first amount included development costs, which were incurred in France and in Japan. The actual investment in Kolin was about 450 million euros."

RP: They also saved a mint because of the decline of the US dollar versus the euro, from what I've read....

"They saved a mint due to the decline of the [Japanese] Yen, which is heavily influenced by the US dollar. So that led to, as the French director said, 'substantial' savings — I could send that number to you — but actually the saved money will actually save the Czech taxpayers a little bit because it means the facility will get less in investment incentives, just because it's less of a monetary investment. But it didn't change the production capacity going into Kolin."

RP: It's been reported that this is the largest new company in the Czech Republic and that it will actually make a very visible impact on the economy starting this year.

Line off ceremony, photo: CTK

"I believe it is the largest single investment; however, I'm not sure in comparison to Skoda. What's important is not just the 3,000 or so workers that are putting things together in Kolin, but also the 80 percent of the car that is previously manufactured in the Czech Republic; the Czech suppliers sector. And this is, according to the head of TPCA, the main advantage to locating in the Czech Republic."

"Toyota is not only know for its manufacturing excellence, but also for its logistics, which is called 'kanban' [the "pull along" logistics-quality tool developed by Toyota's Taiichi Ohno] and it's interesting because Skoda uses a variation of this, but Toyota is considered the number one in the world for this."

"How this is going to influence Czech suppliers is an interesting question. And that will be known as the TPCA factory puts on its second and third shifts; right now, this is only the beginning. So this is going to be something that the industry is going to be watching."

RP: Now, it hasn't all been 'smooth sailing' — if I can mix metaphors when speaking of this car plant— there is a lack of housing for the workers, there was much written a few months ago that TPCA was actually having trouble finding enough qualified people to move to the region.

"In some ways, it was a mix of Toyota's perception of how many employees or how many potential people they want to interview for the numbers of actual hires; it's also an issue of a local labour force that does not have huge numbers of people wanting to go work; and it also is influenced by the relative wage rates paid by TPCA. So, a mix of Toyota's perception, a mix of the local employment situation, and TPCA wages."

Photo: CTK

RP: So the wages weren't as flush or plum as the Czechs expected?

"A worker at Skoda would lose money if he switched to the same position at TPCA."

RP: We can blame the French, right?

"Actually, you might, because the French were involved with most of the purchasing decisions, so maybe on that. There was also this idea, or fear, that Skoda workers would pick up and leave Skoda to go over to TPCA. You will find a few Skoda workers at TPCA, but very few. I talked to one and he said he was quite the exception."

RP: Getting back to the Czech economy: what impact do you think the TPCA plant will have in marcoeconomic terms?

"I think the balance of trade, due to the additional exports, as it is now, Skoda produces between 7 and 8 percent of all exports. So I would assume that this new factory would be, let's say at the beginning, at about half that level. Then there is the multiplier effect of local suppliers, including existing automotive suppliers, and the new wave of Japanese suppliers that followed TPCA into the region [an estimated 40 Japanese companies have located to the Czech Republic since the investment was first announced three years ago]. This is both for exports and also for direct employment."