Officials of Toyota Motor Corp. involved in its China project were elated at the end of the New Year’s holidays in 1994.
“We’ve finally come this far,” one of them said. “We’ll be able to catch up with Volkswagen.”
Their dream of producing Toyota’s luxury car, the Crown sedan, in Shanghai appeared on the verge of coming true.
There had been progress in negotiations with officials of the Chinese State Council’s then Aerospace Industry Ministry, a process necessary for the start of local production of cars in a joint venture with a Chinese corporation.
Toyota officials were relieved because the company had got the nod from the head of the Aerospace Industry Ministry, which exercised control over China’s space and military industries.
Pressed by Toyota, the ministry hurried to work out the final phase of the negotiations.
The minister called on then President Jiang Zemin in Chungnanhai, the residential area in downtown Beijing for top leaders, to give him an outline on the joint venture project.
However, Jiang was reportedly curt, telling the minister he should follow a new automobile policy soon to be announced.
The new policy imposed on foreign automakers making inroads into China a condition to manufacture a minimum of 150,000 cars a year.
The Chinese government at the time set out the policy to raise the people’s living standard by rooting out poverty and placing emphasis on employment.
Beijing wanted an auto industry with a wide base of lower end output so more jobs would be created.
Jiang, who in the 1950s was chief of a factory operated by major automaker China FAW Group Corp., used China’s car manufacturing sector as a lever for achieving the overall policy, which helped him establish a power base in a hurry after becoming the Communist Party leader in 1993.
A Chinese car manufacturer under the umbrella of the Aerospace Industry Ministry with which Toyota was planning the joint venture, had capacity to produce only 8,000 cars a year. It was impossible for Toyota to meet the 150,000 target no matter how hard it was prepared to bolster production.
Toyota tried to get its foot in the door by highlighting its high quality and customer service. However, the ministry was not in a position to oppose the new policy backed by the party chairman.
Toyota decided to call it quits, telling the minister it could not get government approval even if it continued the negotiations with the ministry for 100 years.
Kenichi Asano, 60, who worked to set the stage for the negotiations as chief of Toyota’s China division at the time, said, “Shanghai taxis would have been mostly Crowns now if we had taken action six months before the Chinese government put together the new policy.”
Yet Toyota was keen to have its cars in Shanghai, the fastest-growing city in China.
It proposed itself as a partner for Shanghai Automotive Industry Corp.’s second joint venture, following a venture with Volkswagen. General Motors and Ford Motor Co. of the United States were also showing interest in entering the Shanghai market around that time.
Toyota viewed Vice Premier Zhu Rongji, a former mayor of Shanghai, as a key person and tried to contact him.
Shortly after the negotiations with the Aerospace Industry Ministry came to a deadlock, a Chinese delegation led by Zhu visited Osaka, a sister city of Shanghai.
Toyota President Tatsuro Toyoda called on Zhu at an Osaka hotel and invited him to the automaker’s headquarters.
Toyoda told Zhu that Toyota hoped to produce the Camry in Shanghai. Zhu nodded.
However, Shanghai Automotive Industry’s favorite was GM, the world’s biggest vehicle manufacturer, which eventually got the contract.
What was important to China at the time was not the quality of the car but the scale of production to provide jobs for its people.
Asano was told by an executive of Shanghai Automotive Industry in the early stages of venture talks that “Toyota is an aperitif and GM is the main dish.”
Toyota was merely a tool, providing leverage for the Shanghai automaker in its negotiations with GM.
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