Going it alone in North America: the Kentucky plant (1985)

Verify in a joint venture, then bet alone

The heart of this decision was a two-stage structure: verify in a joint venture, then bet alone. Having confirmed at NUMMI that its production system would function even in North America’s labour environment, Toyota built a wholly owned plant in Kentucky. The trigger was the external pressure of voluntary export restraints to the United States, but what set Toyota apart was that it did not let the investment remain a passive move to skirt regulation; it set itself the heavier task of raising inexperienced hands from scratch and turning out quality equal to what it made in Japan. Its caution — calling the choice of plant site “one of the most difficult things in our history” — speaks to the weight of a solo investment with no way out.

A solo advance, unlike a joint venture, leaves no refuge from failure. Even so, Toyota — having taken the steps to gauge the risk — grew Kentucky into the core of its North American business and shifted its structure from export-led to local-production-led. How to turn outside pressure into one’s own competitiveness — the choice of Kentucky became the prototype for the global local production that followed. The question of how to answer the pressures of regulation and localization persists, in altered form, in a production strategy still shaken today by electrification and geopolitics.