Seminar 7

Ou Toyota in France

Background
French government took the view that direct investment by foreign multinational
enterprises would damages the French economy. Government officials argued that the
economic power enjoyed by foreign multinationals gave them the ability to dominate any
markets they entered, at the expense of locally grown enterprises.

France’s policy toward inward foreign direct investment began to change in the early
1980s. The change in policy reflected the growing realization that inward investment
could have substantial benefits for the French economy. This free market philosophy
encouraged inward investment a priority. France was one of the few countries that saw
FDI inflows increase in 2001. Among the foreign companies that made major
investments in France over this time period were Toyota, IBM, Motorola, and Federal
Express Corp.

One noteworthy inward investment of $656.8million by Toyota on a car plant in France,

with a production of 150.000 vehicles per year.
By 2001, estimated 2000 jobs created among suppliers.
There are a number of factors motivated Toyota’s choices of France as the location for the
plant. They are:
 To increase market share in France
 Indigenous automobile industry, adequate supply of trained labour & expertise,
along with a network of experienced subcontractors.
 Government offers considerable subsidies such as tax breaks, financial aid.
 French’s priority of establishing a presence not only within Europe’s single market,
but also within the euro single currency zone.

Qn 1) How would you characterize the shift in French attitudes and policies toward
FDI? What do you think has driven this change in attitudes and policies?

In this shift, it encourages inward foreign direct investment. It reduced the bureaucratic
obstacles to foreign investment and created amore coherent mechanism for luring inward
investment. The shift toward a more liberal attitude.

The growing realization of French that inward investment could have substantial benefits
for the French economy, including the creation of jobs, the transfer of valuable
technology, and the increase of exports that would bolster France’s balance-of-payments
positions. It is also accelerated under Mitterrand’s successor, Gaullist Jacques Chirac
(France’s president), who encourages inward investment a priority.

Done by: Karin

Joyce
Shandy
Xiaolian