Local parts makers hit Toyota, Mitsubishi for ignoring small firms

TOYOTA MOTORS Philippines Corp. (TMP) and Mitsubishi Motors Philippines Corp. (MMPC) have ignored Filipinoowned parts makers “in favor of the Japanese companies” based here for the localization requirement under the government’s auto industry resurgence program, the Philippine Parts Makers Association, Inc. (PPMA) said on Monday.

“What happened to the objective of boosting the local production and supply of SMEs (small and mediumsized enterprises)? It seems that the local car assemblers have totally ignored the local SME supply chain and have just focused on their own Japanese-affiliated suppliers,” the PPMA statement read, which was signed by PPMA President Ferdinand I. Raquelsantos.

The Comprehensive Automobile Resurgence Strategy (CARS) program is an initiative established under the Aquino administration that would incentivize three car makers to locally produce three car models with a production volume of at least 200,000 units for up to six years, or an average of 33,333 vehicles per year. MMPC and TMP are the two companies registered under the program.

Since being awarded as participants of the CARS program, the companies have announced late last year a handful of initial partnerships with local suppliers in preparation for the start of their volume production.

Mitsubishi would begin volume production in April this year while Toyota would do so in August 2018.

“Noteworthy is the fact that, none of these local suppliers are registered under the SME category. Mostly are Japanese locally established companies, with the rest having TLA (technical licensing agreement) with local Filipino large companies,” the statement read.

PPMA said they asked the car makers for a timeline for the phase-in of local parts makers in the supply chain.

In the case of Mitsubishi, PPMA said that they were told of a scheduled “Wave 1 to 3 phase-in” next year. However, “no plan for local development of SME suppliers is apparent or forthcoming.”

PPMA said that they asked Japanese suppliers visiting Mitsubishi in March last year to enter into joint venture agreements or TLAs with local parts makers, especially those considered SMEs.

Instead, PPMA said that the suppliers only worked with either “Japanese comrades” in the local industry or large Filipino companies.

On the other hand, PPMA noted that Toyota said it would take four years for the development, and depending on whether or not it would be approved, SME firms would enter the supply chain “in the middle of production life which will be sometime by the end of 2021.”

While the local parts makers group recognized the employment gains under the CARS program due to in-house production among others, they noted that there is a “noticeable downsizing” in SME operations which the group fears is “tantamount, if not near, to closure.”

“Our large companies-members are preparing and looking forward in making true forecast of increase in production of about 55%. They will definitely be benefitted from this CARS Program while the SMEs will continuously strive for their existence,” PPMA said.

Trade Undersecretary Ceferino S. Rodolfo has previously said that the government cannot require the car makers to pick SMEs for the CARS program, noting that the companies should have the space to choose which local parts makers they would like to partner with.

Toyota and Mitsubishi officials were not available for comment as of press time.

However, in separate interview in November, they said that the matter is still under discussion.

Froilan G. Dytianquin, MMPC first vice-president for marketing, said late last year that Mitsubishi is still studying whether or not SME firms could be picked as Tier 1 suppliers, but noted that SMEs could later come in as Tier 2 and 3 suppliers.

Tiers point to the level of commercial distance between the supplier and the manufacturer. Tier 1 firms are direct suppliers to a company, while succeeding tiers indicate an indirect relationship that could stretch further along the supply chain.

On the other hand, TMP First VicePresident Rommel R. Gutierrez said in a chance interview in November that this is still subject to an ongoing discussion that is in the process of filtering the list for those that are qualified under the CARS program. —