Simple math can be graphic as well as educational.

Each year, Toyota Motor Corp. ships about 56,000 40-ft. (12-m) containers, filled with “Made in Japan” systems and components, to 67 assembly plants around the world.

Even more surprising: Denso Corp., Toyota’s main supplier, transports 12,000 40-ft. containers from Japan annually to more than 90 plants it operates in 26 countries.

Looking at the larger picture, the Japanese government estimates exports of automotive components to vehicle assemblers around the globe, both Japanese transplants and foreign makers, grew to $25.6 billion last year, almost one-third of them to the U.S.

Although there are no exact numbers, the total actually is much larger, because official statistics count tires, chemical additives and a long list of electronic devices usually shipped to Tier 2, Tier 3 and Tier 4 suppliers in different trade categories.

Even so, the volume of exports vividly illustrates how Japanese suppliers have changed their ways to keep in tune with the times – and, more importantly, their best customers.

Japanese auto makers say they strive for maximum local content in all major overseas markets, yet, for one reason or another, local sourcing is not always possible or practical. Nissan Motor Co. Ltd. imports almost all automatic transmissions installed in its two U.S. plants.

Toyota still imports nearly half of transmissions and one-fifth of engines needed each year in its U.S. and Canadian plants, and nearly 1 million transmissions are shipped to Europe each year from Aisin AW Co. Ltd., an Aisin Seiki Co. Ltd. subsidiary.

Exports are only one edge of the solid support Japanese auto makers enjoy from their parts makers, so critical to the auto industry’s success. As these auto makers shifted production offshore, their suppliers followed suit, often in lockstep, to offer invaluable support. But it was never one size fits all or, more specifically, one strategy.

For example, Japan’s leading tire makers, Bridgestone Corp. and Sumitomo Rubber Industries Ltd., moved abroad ahead of their automotive partners, while transmission makers Aisin AW and JATCO Corp. are just now establishing beachheads beyond Japan, nearly 50 years after the first Japanese assembly plant was set up in Brazil.

Unfortunately, no one knows for sure how many Japanese material and component plants are operating overseas. However, more than 1,000 are producing in the U.S. and Canada, alone, 2.5 times the total in 1990.

The Japan Automobile Parts Industry Assn. reports nearly 100 suppliers have more than 350 plants in Thailand, Malaysia, Indonesia and the Philippines. Alas, JAPIA statistics, like others, are incomplete and generally do not delve below Tier 1 companies.

Uncertain statistics aside, changing with the times in the topsy-turvy automotive world of today remains as critical as it was in the immediate years post-World War II when the Japanese government spearheaded development of a domestic automotive industry as a critical key to the nation’s economic recovery and future.

As the infant truck and car producers, led by Toyota and Nissan, grew from tiny, carefully protected companies focused on the domestic market to global powerhouses, their suppliers, often grudgingly, were forced to keep step. Today they range in size from giant Tier 1 companies such as Denso and Aisin Seiki to small, local suppliers of plastic fasteners, rubber bushings and untold numbers of small metal parts.

Hard numbers of precisely how many suppliers are doing exactly what are unavailable. The count is made all the more difficult because leading auto makers make so many components in-house and sometimes supply them to affiliates and even competitors.

Toyota, for example, supplies engines and transmissions to all seven affiliated assemblers in Japan, while affiliate Daihatsu Motor Co. Ltd. supplies engines in return. Until recently, Honda Motor Co. Ltd. was supplying V-6 engines to General Motors Corp. for its Saturn Vue cross/utility vehicle (a new Vue now hitting the market does away with the Honda engine).

If only companies that provide the 3,000 main assembly parts in a vehicle are included, total suppliers easily exceed 10,000. Adding those supplying nuts, bolts and fasteners would increase the count tenfold or even twenty-fold, although the final total is unknown.

The industry, in a state of flux for more than 50 years, still is in transition, becoming steadily stronger and more competitive. It is underpinned by three relatively new legs – exports, overseas production, mergers and acquisitions – all backed by the old faithful group (keiretsu) leaders.

Most critical to the survival and success of a major Japanese supplier today, as in the past, is close affiliation with a strong group, such as that headed by Toyota. Like their counterparts in North America and Europe, Japanese auto makers choose their suppliers on the basis of which offers the best quality at the lowest price with the most reliable delivery.

But the Japanese have tended to operate differently from their counterparts overseas, particularly the U.S. Big Three. The relationship with group leaders is generally more cooperative and less adversarial, with more emphasis on long-term relationships and less on meeting rigid cost targets.

Cooperation tends to begin with input at the start of the development process all the way through to Job One.

In Japan, there are more than 200 core suppliers in the Toyota keiretsu and nearly 200 in the Nissan supplier family. Overseas, the total exceeds 1,000 for each company.

Note, too, that large suppliers depend in turn on their own groups. Denso, for example, purchases parts and materials from 900 companies in Japan, alone.

Groups or families of suppliers are not unique to Japan. Every large auto maker in the world has a core group of suppliers. That said, there is no standard pattern.

For instance, since the arrival of Carlos Ghosn and his Renault SA “fix-it” team in 1999, Nissan’s relationship with its supplier group has evolved much more along Western lines and is more tightly focused on cost. Unlike Toyota, Nissan has a tendency to “squeeze” its suppliers, says Koji Endo, an auto analyst at Credit Suisse Securities (Japan).

“When Toyota’s management sets cost targets,” he says, “it generally shares the benefits realized, giving suppliers an incentive for meeting targets.” By implication, Nissan does not.

Yet, Nissan has taken the lead in bringing suppliers into its plants. Calsonic Kansei Corp., for example, makes front-end and cockpit modules in Nissan plants in both Japan and North America.

Toyota’s keiretsu is the strongest, with many group members posting record sales and profits in recent years. These not only reflect the explosive growth of Toyota but also the demands from their leader to constantly improve quality and raise productivity.

At the start of this decade, main suppliers were called upon to cut costs or increase value 30%, resulting in record and near-record profits over the past three years. Then, in 2005, they were asked to cooperate again when the auto maker launched a new cost-cutting initiative called “Value Innovation.”

Although financial objectives are basically the same – 30% savings over three years – how to achieve them is substantially different this time. Toyota is bringing key suppliers into the development process much earlier, empowering them more than ever before to design new systems that integrate functions and systems.

Nor is Japan’s supply side neat and tidy.

Honda and Mitsubishi Motors Corp. never have had strong keiretsu, while Nissan is in the process of transforming its group. Toyota, Nissan and Honda, unlike their counterparts in Detroit, traditionally have produced most body stampings in-house and, in recent years, have brought plastic moldings for dashboard assemblies and bumpers in-house as well.

The reasoning? In addition to keeping logistics costs under control, it’s easier to assure quality by avoiding the extra handling needed even when trucking in parts from nearby supplier shops.

In another new trend, Toyota suppliers have begun making components for Nissan and vice-versa, while Nissan’s new U.S.-built hybrid Altima uses key components from Toyota – unthinkable 20 years ago.

Whatever the fit, tight or loose, the secrets of success for Japanese suppliers are no secret but simply basic virtues such as hearty research and development; adaptability and innovation; and constant improvement and cost reduction – with quality always paramount.

The quality levels achieved by many Toyota suppliers is 10 parts per million or less, currently the industry standard for excellence. And, for some components, the level is an astonishing 1 ppm or less.

Moreover, the leveling off of demand in Japan and massive shift of vehicle production overseas in recent years has led to a more consolidated supplier industry, while mergers and acquisitions, some forced, have reduced the number of major suppliers. Among examples:

  • ¼In January 2006, Toyota orchestrated the creation of a new mega-supplier, KTEKT Corp., by bringing together Koyo Seiko and Toyoda Machine Works to tap more effectively into growing global demand for electronic driveline and electronic power steering systems (EPS). The new company, which holds the dominant EPS share in both the European and Japanese markets, expects demand to approach 30 million units in 2008, up from an estimated 18 million in 2005. “By combining our capabilities, we hope to develop such new systems as intelligent finite steering,” JTEKT Executive Vice President Toshikatsu Taniguchi says. The company is projecting global sales of ¥1.4 trillion ($11.9 billion) in fiscal 2008.
  • "Fifteen months earlier, in October 2004, Toyota created another new mega-supplier by joining the seating unit of Araco Corp. with seat and trim supplier TakaNichi Co. Ltd. and interior fabric and door trim maker Toyota Boshoku Corp. The trio, with more than 15 overseas manufacturing plants, was such an inspired union that Toyota Motor raised its stake in the new Toyota Boshoku to 41.6%. By the end of this decade, management foresees global sales approaching ¥1 trillion ($8.4 billion) and a profit-to-sales margin of 5%, up from 3.8% in 2006.
  • ‰Advics Co. Ltd., a joint venture formed in 2001 by Aisin Seiki, Sumitomo Electric Industries Ltd. and Denso, is primarily an engineering company that develops and markets braking systems and chassis components. The three partners produce and assemble product and sales total ¥330 billion ($29 billion) in fiscal 2005 – even more is projected for fiscal 2006, with Toyota Advics’ main customer.
  • “For the time being, we are a ‘cost center’ and contribute to (the bottom lines of) Aisin Seiki, Sumitomo and Denso,” explains Advics President Haruhiko Saito, adding that “annually, we invest 6% to 7% of sales in research.”
  • The JV is changing. Aisin has announced plans to buy Sumitomo’s shares. And eventually, analysts believe Advics will acquire its own production capability, as did Aisin AW, an earlier Aisin Seiki JV that began operations in 1969 as Aisin-Warner Inc.
  • ÐGet-togethers often beget more get-togethers. After Renault took a controlling equity position in Nissan, Calsonic Corp. (formerly Nihon Radiator Co. Ltd.) and Kansei Corp. (formerly Kanto Seiki Co. Ltd.) merged in April 2000 into Calsonic Kansei Corp., a Nissan-affiliated supplier of heating, ventilation and air conditioning systems and front-end and center modules, which in fiscal 2005 reported sales of ¥715.5 billion ($6 billion), up 3% from a year earlier.
  • ¤In 2002, Unisia JECS Corp. (a 1993 merger of Japan Electronic Control System Co. Ltd. and Atsugi Motor Parts Co. Ltd.) merged with Hitachi Ltd. to form Hitachi Unisia Automotive Ltd. Two years later, Hitachi turned the company into a wholly-owned subsidiary that became part of a newly formed Automotive Systems Group, one of six operating divisions, with annual sales estimated by analysts at ¥1 trillion ($8.2 billion)

On balance, mergers such as these have been win-win, especially when orchestrated by group leaders such as Toyota and Nissan.

Advances in such areas as hybrid-electric vehicles, electronic controls and telematics are creating new suppliers, such as Panasonic EV Energy Co. Ltd. This is a JV between Toyota, Matsushita Battery Industries Co. Ltd. and Matsushita Electric Industries Co. Ltd. to make nickel-metal-hydride batteries for hybrid cars.

Other newcomers include Xanavi Informatics Corp., a Nissan JV with Hitachi Ltd. in telematics, and NEC Tokin Corp., a new JV between Nissan and NEC Corp. to develop and market lithium-ion batteries for future hybrid cars and plug-in electric vehicles.

Foreign suppliers have entered the Japanese market, too, pooh-poohing the myth that it can’t be done. Following the example and, in some cases, lead of DaimlerChrysler AG, Renault and Ford Motor Co., they have purchased ailing Japanese companies and bought their way in.

Notables include Robert Bosch GmbH with Zexel Corp.; GKN plc with Tochigi Fuji Sangyo K.K.; Goodyear Tire & Rubber Co. with Sumitomo Rubber Industries Ltd.; Johnson Controls Inc. with Ikeda Busan Co. Ltd.; Kolbenschmidt Pierburg AG with Microtechno Corp.; Valeo SA with Ichikoh Industries Ltd. and Zexel; and Visteon Corp. with Naldec Corp.

Home base still is vitally important, even though new Japanese vehicle registrations last year totaled only 5.25 million. This was well beneath the peak of 7.7 million in 1990, but only 10% below the annual average during the go-go 1980s and 1990s.

In fact, domestic production actually rose 6.3% to 11.5 million units last year, with the export of 6 million cars, trucks and buses (7.45 million including used vehicles) to countries from one end of the world to the other. Last year’s output was 5% above the averages for the 1980s and 1990s.

The fact that almost no major Japanese supplier is losing money does not mean they are without problems. At the top of their list is the rising cost of raw materials. And they have other difficulties, as well, including an acute labor shortage and rising wages in many areas around the country, forcing some companies to rehire retired employees.

Seeking greener pastures outside Japan, the trend for Japanese suppliers today is to follow their group leaders, in particular Toyota, and build more production facilities offshore.

“We must build a global production base,” says Taka Taniguchi, president of Aisin AW, which has only two plants outside Japan and is aiming for 20% of the global market for transmissions in 2010. “This is a big problem, not only because it involves a major financial commitment but also because it will put added strain on our manpower resources.”

“We are still too Japan-centered,” adds Denso President Koichi Fukaya, even though his company has been investing nearly $2 billion annually on overseas facilities.

Yet no one pretends expansion abroad is easily done or an automatic addition to bottom lines.

“Not all of our overseas units are profitable,” admits Takashi Matsuura, president of Toyota Gosei Co., Toyota’s main supplier of synthetic rubber and plastic components with 40 overseas plants. “Thus, one of our 2010 goals is to put them all into the black. We also want to cut development time in half and move closer to zero defects in manufacturing.”

Whether the hectic pace of Japan’s automotive expansion globally can be maintained is impossible to say. Global Insight, a Boston-based consultancy, predicts Japanese auto makers will boost worldwide production to 25 million units in 2010, up from 21.4 million in 2005, with 57% of the increase overseas.

Questions have been raised periodically over the past 20 years about the danger of Japan’s automotive industry “hollowing out,” at least on the supplier side. This is considered unlikely as long as vehicle producers remain strong and their suppliers continue metamorphosing.