Toyota learns from JTEKT merger to reorganise for the Internet of Things

With driverless cars and the Internet of Things (IoT), the pressure is on JTEKT, a key member of the Toyota group, to find ways of using its combined strengths in the future, says Nikkei Business (JPNS $).

JTEKT’s main product lines are machine tools, steering systems and bearings, with revenues of around ¥1.3 trn ($9bn).  It continues to use the Toyoda and Koyo brand names since the merger of the two companies in 2006, as well as the JTEKT brand, which has led to concerns that it is not clear what the company stands for and “we have not produced any synergies despite the merger”, according to one senior executive.

One area that may be fruitful is Steer By Wire (SBW).  JTEKT are also trialling IoT technology in their own production lines in Japan with a view to understanding its capabilities better.  JTEKT’s IoT technology is already being used by two parts manufacturers and JTEKT is planning to go beyond just selling its technology and into consulting, particularly for medium sized enterprises with a few hundred employees.

However JTEKT is prevented from selling its technology that has been used in Toyota’s production lines, as part of the strategy of strengthening the Toyota group in 2009.

When the German government announced Industry 4.0 in 2013, many JTEKT engineers felt “we’re already doing that” as Toyota’s factories were already hooked up to the internet.  This is the kind of know how they would like to sell as part of a consulting offering.

“If we don’t do this, we cannot develop overseas employees, or employees that we do develop, will leave”

Toyota, Volkswagen and General Motors are sometimes referred to as the 10 million club as they each manufacture over 10,000,000 cars a year.  Tetsuo Agata, President of JTEKT, instead refers to a 20 million club, whereby Toyota’s main suppliers supply parts for over 20,000,000 cars a year.

Agata moved from Toyota Motors to Toyoda Automotive and then to JTEKT in 2013 and has been focusing on weaving a matrix system of vertical businesses and horizontal functions.  A global HR system has been introduced.  JTEKT has 44,000 employees, 27,000 of whom are overseas.  The key positions in each operation have been made more defined and transparent and regions have been consolidated.  The next step is to build a global remuneration and evaluation system.  “If we don’t do this, we cannot develop overseas employees or employees that we do develop will leave.”

“I was so shocked how little had been invested in systems development that I nearly fell off my chair”

Agata also looked through each division’s strategies during his first summer holiday and was “frankly, surprised that they were working so well”.  He immediately started a training programme on “PDCA” (Plan, Do, Check, Act).  He also invested in systems and a reform of work processes in the functional divisions.  “I was so shocked how little had been invested in systems development I nearly fell off my chair” he says.

Another horizontal initiative is the “Internet of Everything” – connecting people as well things.  He has brought in external resources to work out how to monetize this “soft business” and thinks it will be ready for launch in about a year. “These horizontal threads are things I have to put in.  It can’t just be a structural solution, it has to be the culture as well”

The Toyota group is embarking on a second restructuring since 2014, reorganising its transmission, seat and brake businesses.   JTEKT has taken 10 years to show synergies since it was formed from the merger and Toyota is using the lessons from this to find hints for how to reform the group for the future.

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