Regular Supply Chain Matters readers will recall that lately I have penned a number of rants regarding my frustration with the strategic direction of the current U.S. automotive industry. My latest came in a posting in early January which noted the ongoing precarious financial state of many suppliers within the industry, but more importantly, survival of the industry is not assured from a purely top-down approach. The long-term competitiveness of the industry, in my view, stems from a more holistic investment in the overall innovation, health and global competitiveness of the entire U.S. automotive value-chain, from the lowest tier to the OEM.
Last week, the Wall Street Journal and others in the blogsphere noted an announcement that, for me, provided yet more disheartening evidence for the lack of value-chain sensitivity and strategy being applied on a timely basis within the U.S.. Toyota Tsusho Corp., a key supplier and 21.8% owned by Toyota Motor Corp., moved to secure a long-term source of lithium in Argentina, billed as one of the first global natural-resource plays of the electric-car age. The investment, valued at $100-$120 million, is being inexpensively financed through a government of Japan state-owned public agency, Japan Oils, Gas and Metals National Corporation.
For those who may not be aware, high quality lithium is a core raw material in the production of rechargeable batteries. Quality supplies of this very light metal are limited to certain global areas of the world, specifically Bolivia, which is noted as having over one-half of the world reserves, followed by Chile, Argentina, China and Australia. Global automotive manufacturers must all tap into a finite number or raw material suppliers of high quality lithium originating from these regions.
This latest investment by Toyota, through its supplier, is characterized as providing a more reliable supply of lithium, rather than being reliant on a few producers who could tighten the overall flow of supplies over the coming years. The investment time horizon is characterized as a window of ten years, a window where the demand for hybrid and electric autos and other vehicles could substantially grow. It assures that Toyota and the remainder of Japanese car makers and battery producers have a long-term reliable and consistent supply of high quality lithium.
This was for me the best demonstration of strategically positioning a value-chain for long term competitiveness, and it’s not the first or last time a Japan or Asian-based industry will initiate such strategic or tactical moves. In the WSJ article, the chairmen of Toyota’s supplier Orocobre notes that his company has considered investment proposals from other Chinese companies, as well as other companies in the lithium supply chain.
The open question however is when will we read of such proactive strategic actions emanating from the U.S. automotive industry? Perhaps I’ve overlooked something in all of those press releases from the big-three U.S. OEM’s?