Multiskilled labor management of Japanese commercial vehicle makers in the Chinese market

In the fast-growing Chinese heavy commercial vehicle market, it has been claimed that the rule is “manufacturers cannot survive unless they exceed an annual production scale of 10,000 units.” However, Japanese automakers GAC Hino Motors Company (GHMC) and Qingling Motors have been producing a profit in the Chinese market even though their production scale is less than 10,000 units. This has been due to the adaptation of a Japanese production system that can maintain a constant productivity standard even when dealing with small-scale production. However, the success of this Japanese production system has been due to the development of a method of fostering multiskilled workers in accordance with the actual circumstances in China. a) Musashi University Research Center, 1-26-1 Tamaue, Nerima-ku, Tokyo, Japan, outyuukk@yahoo.co.jp b) Faculty of Business Administration, Kanagawa University, 2946 Tsuchiya, Hiratsuka city, Kanagawa, Japan, suh@kanagawa-u.ac.jp A version of this paper was presented at the ABAS Conference 2020 Autumn (Wang & Suh, 2020). © 2021 Zhongqi Wang and Youngkyo Suh. This is an Open Access article distributed under the terms of the Creative Commons Attribution License CC BY 4.0 (Attribution 4.0 International) license. The CC BY 4.0 license permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited. Annals of Business Administrative Science 20 (2021) 1–17 http://doi.org/10.7880/abas.0201201a Received: December 1, 2020; accepted: January 8, 2021 Published in advance on J-STAGE: January 17, 2021


Introduction
In the 21st century, China has demonstrated a particularly high growth rate. Against this background, the construction industry has grown as a result of a real estate boom, which has also led to a significant growth in the construction machinery and commercial vehicle markets. In the Chinese heavy commercial vehicle market, it has been claimed that the rule is "manufacturers cannot survive unless they exceed an annual production scale of 10,000 units." Although the Japanese commercial automakers that have entered the Chinese market have gradually increased their production scales, they have not yet reached a production scale of 10,000 units. However, they have been consistently producing profits in this market.

Chinese Commercial Vehicle Market
In the 20th century, exports of Chinese vehicles were primarily commercial vehicles, but after entering the 21st century, the trend shifted to passenger vehicles (Li, 2010). However, the Chinese heavy truck market is enormous, and has consistently produced more than 800,000 units per year for 11 consecutive years, from 2009 to 2020, and accounts for more than 70% of the global heavy truck market. 1 The profitability of finished-truck businesses is higher than that of the makers of parts business such as engines and transmissions, and many manufacturers entered this market in China around 2009 (Kamiyama, 2009). Both Isuzu and Hino, who are the subject of this study, also entered the Chinese market at around this time.
However, against the backdrop of the thriving Chinese heavy truck market, it has been said that manufacturers will disappear within 10 years unless they produce volumes of tens of thousands of units a year. Table 1 illustrates the production volume between 2010 and 2019 of the manufacturers in the thousands-unit scale as of 2010. As illustrated in Table 1, local Chinese makers that only produced several thousands of units in 2010 have disappeared or are about to disappear in 2019, except for makers who have produced in scales of tens of thousands of units. The reason for this is that it is difficult to automate the production processes involved in producing heavy trucks compared to passenger vehicles, considering that it is labor intensive industry (Suzuki, 2010). Moreover, the wages of Chinese workers are increasing every year, and it has been difficult for commercial automakers to continue making a profit without selling more than 10,000 units a year. Hence, it has been said that automakers who produce less than 10,000 units a year have only two options: either increase production to become one of the "manufacturers in the 10,000s-unit scale" 2 or disappear.
Chinese makers have strived to mass produce on scales of more than 10,000 units and have adopted the Ford production system (single model, single line), while the mixed production system (MPS), which is common in Japanese commercial vehicle production, is not used. This means that most large companies choose to pursue automation via robots, but automation requires significant capital investment and the maintenance of sales stability. This is the reason 2 Here, a "manufacturuers in the 10,000s-unit scale" refers to heavy truck makers that have annual production scales in the tens of thousands of units. The terms "manufacturuers in the thousands-unit scale" and "manufacturers in the hundreds-unit scale" described below, refer to heavy truck makers with an annual production volume of between 1,000 and 10,000 units, and less than 1,000 units, respectively. why it is claimed that makers cannot survive in the Chinese commercial vehicle market without production on the scale of the manufacturers in the 10,000s-unit scale.
However, the profit rate in Table 2 shows that only two makers in the manufacturers in the thousands-unit scale group (the Japanese automakers GHMC and Qingling (Isuzu)) have continued to achieve profits and produce profit margins at a level equivalent to that of the manufacturers in the 10,000s-unit scale. Hino and Isuzu not only exhibit small production scales but have continuously produced profits despite fluctuations in their production volumes (Table 1). Table 3 compares the product specifications of Hino and Isuzu with local mass-producing rival makers in the Chinese market, and shows that the prices of the main models of Isuzu and Hino are mostly equivalent, but exhibit better fuel consumption, acceleration time,  Then how were the two Japanese makers able to survive until now without being affected by the rule that claims that manufacturers in the thousands-unit scale are doomed to fail? This paper looks at the reasons for this and aims to clarify the reasons for the competitiveness of Japanese JV commercial vehicle makers in the Chinese market. Hino stated, "our original plan was to establish a finished-vehicle plant as soon as possible, but the Chinese government did not approve foreign sole funding in the finished-vehicle market, so we 3 The "Jiefanghao" is a four-ton medium truck developed with the technological support of the former Soviet Union, and is well known as an improved version of the Soviet military truck GS150. It has an important meaning in the history of Chinese automobile industry as it was produced by FAW as the first domestically-produced truck. However, due to the Sino-Soviet conflict from the 1960s, the Soviet Union's technological support was cut off, and although they continued to make partial improvements for approximately 20 years, they were unable to make any model changes. Finally in 1978, with Hino's technological support, they were able to make some model changes.

Case of GHMC
had to take a strategic detour by first establishing an independent engine plant and then establishing a finished-vehicle company" (source: interview with GHMC, 2017). They were finally able to launch their finished-vehicle business in this way, but due to a problem with GAC, they were not able to officially start mass production until 2008. This mass production was of the N700 model, which is sold in Japan as the Profia. Despite it only being initially sold in Guangdong, they were able to maintain a production volume of 1000-1500 units auxiliary system, and they have been able to maintain a price that is two-thirds of that in Japan.
In China, GHMC has implemented two factories in which only assembly is conducted at their Chonghua factory, with engine production being performed at their Shanghai engine factory. Their Shanghai engine factory produces diesel engines for three types of heavy trucks. It provides engines to both GHMC and other local Chinese truck makers. The Chonghua factory has two heavy truck production lines onsite and has an annual production capacity of 20,000 units, but it currently only produces approximately 5000 units annually. Due to the thorough training of a multiskilled workforce, which we will touch on later, they have been able to maintain the same level of shop-floor flexibility as that found in their headquarters (Hamura Factory).

Case of Qingling
Qingling Qingling's production base in Chongqing has an annual capacity of 100,000 units across all of their products. This includes the capacity to produce 8000 units of heavy trucks, but their current annual production of heavy trucks has hovered approximately 3000 units.
To begin with, Isuzu's capital ratio in Qingling was not high (it was initially 6%, and is currently 20.3%), and the remainder is comprised of Chongqing Motor (50%) and other entities including the government of Chongqing City (29.7%). Therefore, Isuzu was limited to implementing in-factory initiatives (Fujiwara, 1997), and has been focusing on building the capacity of the production teams of Qingling (with a special focus on having multiskilled workers). As a result, Qingling's heavy truck production sites have more shop-floor flexibility than its Chinese rivals. The Chongqing factory is the only assembly factory that incorporates a MPS for heavy and medium trucks among Isuzu's global factories (including their headquarters).

Multiskilled labor and commercial vehicle production
It is difficult to standardize automobile production without meeting a constant level of production because it requires handling variations in client orders by making adjustments to take time and overtime hours. Furthermore, in the case of heavy trucks, the production line itself is simple and characterized by its dependency on onsite operators and its nondependency on equipment. This means that for makers that cannot ensure sufficient production scale, the fostering of multiskilled workers is the key to ensuring productivity and production quality. The American mass production system utilizes single-purpose workers and dedicated equipment to heighten productivity; however, the Japanese system utilizes generic equipment and multiskilled workers to promote highmix low-volume production (Fujimoto, 2003). This is derived from the historical background of the production system of Japanese companies and is best embodied by the Toyota production system (Ohno, 1978).
Although Japanese manufacturers in the Chinese commercial vehicle market have also focused on multiskilled workers to meet the challenge of low-volume production, the social climate of personnel evaluation based on performance-based criteria has hindered their ability to systematically and intentionally cultivate multiskilled workers in their usual way (Wang, 2014). Although the Japanese production system can be a source of competitive advantage in overseas markets, in many cases it cannot be directly transferred asis to local environments (Abo, 2007).

Multiskilled worker training system of Isuzu and Hino
As such, the Japanese makers Isuzu and Hino have heavily focused on cultivating multiskilled workers; however, they lack onsite workers in China (leading to skyrocketing labor costs) and have had to procure human resources through staffing companies, which has increased the ratio of temporary shop-floor staff in the 2010s to approximately 50% in some factories. Therefore, to better align themselves with the circumstances of the Chinese labor market,

15：10-16：10
For example, the engine of a heavy truck is one of its most important parts in terms of its overall performance. Its structure is complicated (just the number of oil pans and bolts alone for heavy trucks is more than twice that of general passenger vehicles), which requires advanced and accurate performance from the operators. In this regard, Hino has been leading Isuzu to some degree.
Conversely, Isuzu has been leading Hino in regard the docking process of chassis and cabs, all of which have an impact on the production efficiency of heavy trucks. This requires having operators on both sides of the line, and a hoist operator and line operators communicate with each other to maintain the integrity of dimensions, with failure to do so meaning that they would need to redo the steps.
Although their know-how is supposed to be confidential, they seem to have passed each other detailed knowledge through WuxiTongzhong. Despite their small scale in the Chinese commercial vehicle market, they have been able to maintain high productivity due to their successful training of multiskilled workers.

Chinese rival makers and labor agency
Rival Chinese makers also utilize labor agencies. However, unlike the two Japanese companies, they merely utilize the labor force of the labor agencies to absorb fluctuations in the market demand and do not seek multiskilled workers. This is because many Chinese companies desire profits through mass production quickly, in a short time frame, without challenging themselves. In other words, their goal is to mass produce and make profits in the shortest possible time with the lowest possible amount of investment. These companies sometimes file bankruptcy if they cannot become one of the manufacturers in the 10,000s-unit scale within five years, but they do not consider ways of increasing their profit rate as a thousand makers.
Furthermore, with the exception of certain heavy truck makers (former nationally owned companies), they lack experience in utilizing multiskilled workers, are unable to implement low-scale production through them, and have no other option but to mass produce products to maintain profitability. However, even in these cases, they are forced to simplify the construction process and hire large volumes of onsite workers because of their inability to build an onsite multiskilled worker system, which thereby generates excessive labor costs.

Conclusion
The players in the Chinese commercial vehicle market have long competed in terms of production scale. However, the Japanese commercial automakers GHMC and Qingling have continued to be profitable despite producing smaller volumes than the Chinese market standard. This is because their Chinese production bases exhibit the same level of productivity capability as their Japanese bases, which makes up for the weaknesses of small-scale production. This is all supported in the background by the cultivation of multiskilled workers through specialized labor agencies. It can be said that this is a product of the strategic alliance between Japanese manufacturers in overseas markets. Heller (2002) has elucidated the structure of reaping mutual benefit through mutual learning in strategic alliances. However, this study focuses on different cases, wherein rival companies in a foreign market provide knowledge to common suppliers to gain mutual benefit.
Furthermore, in emerging market studies of major Japanese passenger automakers such as Honda and Toyota, it has been assumed that they have achieved a constant level of sales in each emerging market. However, this study has focused on two companies and verified that, despite producing low volume, they have been able to demonstrate their Japanese competitiveness in China, which is