PARIS – Toyota Motor Corp. has a policy in Europe to have half of its supply base European, but that strategy makes hard work for the 130 people in the purchasing department in Brussels.

“If it were left to occur naturally, Japanese suppliers would dominate because of the quality,” says Jean-Christophe DeVille, senior purchasing manager for Toyota Motor Europe. “We have to work hard to keep it even.”

In a presentation to an industry audience sponsored by the French magazine L’Usine Nouvelle, DeVille says European suppliers generally are 10 times worse than Japanese suppliers when it comes to quality. Most are nowhere close to Toyota’s quality requirements. For Toyota, a supplier must have a manufacturing defect rate of less than 15 parts per million (PPM) and deliver parts with zero defects per million (DPM).

Buyers work with suppliers to teach them how to approach Toyota and win business. Teaching can work. Half the 400 suppliers to Toyota in Europe are European companies and the rest have Japanese parents. This year, three of four top supplier awards from Toyota Motor Europe went to European companies: Valeo SA for quality; interior shelf and floor supplier Johann Borgers GmbH & Co. KG for project management; and plastic molder Bourbon Fabi U.K. Ltd. for on-time delivery. Japan’s Denso Corp. won the award for cost.

Valeo achieved its award after a precipitous drop in its defect rate.

“Before July 2003, we were terrible,” says Kazuo Kawashima, vice president-quality for Valeo. The defect rate in 2003 was 871 ppm. Then Valeo Chairman Thierry Moran told his executives Valeo had to do everything it takes to become a Toyota supplier, because if it can satisfy Toyota, it can satisfy anyone.

“We needed to change our mindset,” says Kawashima, who was hired to lead the internal culture change. “We adopted San Gen Shugi. San means three, Gen means real, Gira means ideologies.”

Now Valeo executives go to real places (Gen-ba) where something is made. They study real parts (Gen-butsu) and work with reality (Gen-jitsu). “Don’t imagine what is wrong,” he says. “We should not say, ‘I think…’ We need the facts.”

When there is a problem, Kawashima asks executives, “Do you find out yourself or do you sit in your office and send someone to report back to you?”

Valeo has had a total quality program since 1991, which it calls Quick Response Quality Control. But it wasn’t performing well enough on its own. With the new Valeo culture helping, QRQC is applied everywhere, from the personnel department to the supply base.

Valeo’s PPM rate dropped to 450 in 2004, 32 in 2005 and 12 in 2006.

“We are under Toyota’s bar of 15, which is very good,” Kawashima says. “But my goal is single digits.”

From 2003, Valeo’s PPM is 96% better, DPM is 99% better and warranty costs are 77% lower.

“We are not good enough,” Kawashima says. Using the Japanese word for waste, or non-value added cost, he says, “We still have muda.”