CASEToyota and General Motors

Japan-based Toyota and US-based General Motors [GM] are the worlds two largest
manufacturers. !th!n "ustral!a# Toyotas subs!d!ary Toyota Motor $orporat!on "ustral!a
[TM$"] and GMs subs!d!ary General Motors-%oldens "utomot!&e [GM%"] formed a 'o!nt
&enture. %e comb!ned product!on under a new company Un!ted "ustral!an "utomot!&e (ndustr!es
[U""(]. (t was hoped that th!s &enture w!ll en'oy the same success as the )ew Un!ted Motor
Manufactur!ng (nc &enture between Toyota and GM !n $al!forn!a# but th!s was not to be the case.
The *ederal Go&ernment !n "ustral!a dec!ded to reduce the number of "ustral!an $ar
manufactures from f!&e to three. Therefore a 'o!nt &enture of th!s nature was appropr!ate. (n
read!ness for change# %olden phased out !ts $am!ra model# the Toyota $amrys closest r!&al#
l!+ew!se the $orolla e,u!&alent "stra suppl!ed to %olden by )!ssan "ustral!a# was also remo&ed
from the mar+et.
U""( began produc!ng and supply!ng cars to - percent of the "ustral!an mar+et. Under the deal#
a percentage of %oldens $ommodore was to be re-badged and sold as the Toyota .e/cen. (n
return# %olden would sell the Toyota $amry and $orolla as !ts own "pollo and )o&a.
The e/pected benef!ts of produc!ng cars under U""( all!ance !ncluded0
Meet!ng the &olume product!on schedule1 reduc!ng wasteful dupl!cat!on1 $reat!ng a powerful
sales force1 2ecreas!ng car pr!ces to consumers.
Toyota and %olden had formal!3ed the merger wh!ch had been delayed due to a ta/ problem !t
created !n 2etro!t [the %ead,uarters of GM]# the comple/!t!es !n determ!n!ng each partners
&alue and the de&astat!ng effect of the "ustral!an recess!on on the &eh!cle !ndustry. Together#
these factors led the merger be!ng two and a half years late.
4ual!ty problems w!th pre&!ous $ommodores and f!nanc!al problems !n the Un!ted States caused
GM to recons!der !ts pos!t!on !n "ustral!a. 5umors pers!sted that GM was loo+!ng for a way out
of the "ustral!an car manufactur!ng mar+et and th!s &enture was the solut!on. %owe&er# than+s to
the success of later model $ommodores# %olden became more prof!table than GM e/pected. (n
add!t!on# %oldens subs!d!ary# %olden 6ng!ne $ompany [%6$]# became successful !n produc!ng
78 eng!nes and began e/port!ng. Th!s earned the company e/port cred!ts wh!ch !t used to offset
tar!ffs !mposed on !mported &eh!cles. Under the U""(# the e/port cred!ts had to be shared w!th
Toyota.
The apprec!at!ng 9en aga!nst "ustral!an dollar caused the costs of produc!ng $amry and $orolla
to !ncrease. 7aluable parts manufactured !n Japan# such as the front wheel dr!&e gear
bo/:d!fferent!al un!ts used !n both models dramat!cally !ncreased. Therefore# the %olden s!de of
U""( was reasonably successful# the Toyota s!de was not. The greater outlay for product!on of
Toyota cars !n U""( restr!cted !ts ab!l!ty to reap the benef!ts of econom!es of scale. These
problems were the f!rst s!gns that the all!ance was start!ng to ;crac+. The mar+et!ng operat!ons
of the all!ance were meant to rema!n separate. %owe&er# th!s !ssue also caused a ma'or
d!sagreement. 2ealer networ+s became reluctant to strongly promote cars that were ob&!ous
;clones and were eas!ly !dent!f!ed as &eh!cles sold by another company.
*urther problems were presented for %olden as all new passenger products had to be appro&ed
by U""(. Toyota &!rtually refused to endorse any product wh!ch could be perce!&ed to be !n
d!rect compet!t!on w!th !ts own badged models. !th %olden and Toyota d!sagree!ng on
sourc!ng# asset &alues and other !ssues# !t was e&!dent that the U""( all!ance was com!ng to an
end.
2esp!te re&enues of more than "< - b!ll!on a year# the all!ance ended w!th!n = years e&en after a
thorough process of analys!s# study and negot!at!on spread o&er s!/ months. The two compan!es
released a statement after the d!ssolut!on was announced say!ng0
>GM$ and TM$ emphas!3e that the d!ssolut!on has occurred by mutual agreement and reflects
the chang!ng pos!t!on of the "ustral!an !ndustry w!th!n the Global automot!&e !ndustry. (t was
also stated that the d!ssolut!on of U""( would not affect GM and Toyota &entures !n other
mar+ets.
Sol&e the case systemat!cally us!ng $ase Study Methodology.
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