1. Why do you think Toyota waited so long to move much of its manufacturing for European sales to Europe? It was January 2002, and Toyota Motor Europe Manufacturing (TMEM) had a problem. More specifically, Mr. Toyoda Shuhei, the new President of TMEM, had a problem. He was on his way to Toyota Motor Company's (Japan) corporate offices outside Tokyo to explain the con- tinuing losses of European manufacturing and sales operations. The CEO of Toyota Motor Company, Mr. Hiroshi Okuda, was expecting a proposal from Mr. Shuhei to reduce and eventually eliminate these losses. The situa- tion was intense given that TMEM was the only major Toyota subsidiary losing money. Toyota and Auto Manufacturing Toyota Motor Company was the number one automobile manufacturer in Japan, the third largest manufacturer in the world by unit sales (5.5 million units or one auto every six seconds), but number eight in sales in continental Europe. The global automobile manufacturing industry, like many industries, had been experiencing continued consolidation in recent years as margins were squeezed,

economies of scale and scope pursued, and global sales slowed.