Toyota thinks long-term about capital expenditures. Not every expenditure has to have a specific payback and some may be pilots that are expected to have a long-term payoff. For example, there were a lot of expenditures in the case of the first Prius for battery technology in a joint venture and for integrated circuits that did not have an immediate payback, but were investments in a core competence for the future. Building a new plant, like the plant in Mississippi in the U.S. is also a long-term investment. A new plant is considered a “child” and only has one simple product, sometimes on one shift, and is expected to take 2-3 years to develop. Eventually it will get additional vehicles and run at a full two shifts plus overtime and become profitable.
In general the philosophy for new technologies is simple, slim, and flexible. Automation is not considered the solution to all problems. That philosophy is illustrated in the new plant in high-cost Japan. The plant was designed for the lowest possible capital expenditure so it will have a low fixed overhead cost. Labor is less expensive in Northern Japan. They have worked to optimize processes to have as little labor as possible through lean methods. Low capital investment and use of labor provides a great deal of flexibility. It is also a great model for building capacity in the future in developing countries.