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Supply-side Economics

A major takeaway for the automobile industry from the production hurdles caused by the twin disasters of March 2011 and November flooding in Thailand was the importance of varied sourcing capability, either from suppliers’ different geographical centers or even different companies.

JATCO, key producer of Continuously Variable Transmissions (CVTs) for Nissan and other global car makers, is based near Mt. Fuji in Japan, but has seven plants around the country and a growing global production presence.

Majority-owned by Nissan, JATCO supplies about half the world’s CVTs. I spoke with President and CEO Takashi Hata, CVT Chief  Engineer Hirofumi Okahara, and General Manager Tetsuro Watanabe on reflections from 2011 and the outlook ahead.

Outlook for JATCO

Q1. JATCO now produces nearly half the CVTs in the world. What is the next step?

Hata: As you’ve said, JATCO has produced nearly 50% of CVTs in the world. I foresee that the ratio of CVTs will increase along with market and model expansion. CVT production today is almost two-thirds of our total output and there is a tendency to increase the CVT proportion.

Q2. JATCO’s new factory in Thailand is now under construction. Where will JATCO be by 2018?

Production of CVTs at JATCO's facility in Shizuoka

Hata: We set a target to become a company with annual sales of over 1 trillion yen by 2018, compared with the current 500 billion yen. At this moment, JATCO produces 20% of transmissions overseas and 80% in Japan, but the ratio will be fifty-fifty within 3 years.

Nissan is our biggest partner as well as shareholder and along with its new business plan “Power 88”, we can expect business expansion in four years. But, after that, we’ll need to make our own future towards 2018. We would like to develop a new market with our excellent product power.

Q3. How will CVTs develop in the future?

Okahara: There is even more room to improve the efficiency of CVTs. For example, a wider ratio coverage, with a more powerful start and acceleration, while remaining quiet at high speed.

Although we cannot achieve it now, I believe there will be innovations in the future through continuous advanced research and development, so we can adopt our CVTs to a wider range of models.

Q4. CVTs have been focused mainly on fuel efficiency and CO2 reduction. What is required for future CVTs?

Okahara: Car design will change in the future and more cars will be electrified. I feel the necessity to develop CVTs suitable for these electrified vehicles.

CVTs are good at using motor power efficiently, and I feel we need to develop a new product for these electrified vehicles by taking this motor’s characteristic into consideration. In terms of design, hood design would be more attractive when engine room becomes narrower, so we’ll need to make a CVT that’s more compact.

Q5. What are the advantage of CVTs compared to other transmissions?

Okahara: DCTs (Dual Clutch Transmissions) have an advantage in terms of fuel efficiency and are now well known in Europe, as it was introduced to the market about 10 years ago. DCTs also have an advantage in terms of torque compared to MTs (Manual Transmission).  But when we consider that vehicles will be further electrified in the future, I feel that CVTs have more potential and are better suited for this than DCTs. CVTs have an advantage in size because it is possible to make a car with one motor and two clutches, just by taking off the torque converter and mounting clutches.

JATCO's factory floor

In terms of efficiency, DCTs are better than CVTs in some sense, but CVTs have wider ratio coverage than DCTs and its gear selection is seamless. At this moment, CVTs are already competitive with DCTs, so when considering future expansion of electrified vehicles, CVTs have  more advantages than DCTs.

Q6. What future do you envision for JATCO?

Hata: I would like to change the world with our two-pedal transmissions.

If people in emerging markets prioritize “price” for buying cars, most would feel MTs would be the best solution. I understand that MTs are very affordable, but if we can develop a (two-pedal) transmission with driving comfort, without sacrificing fuel efficiency, we can expect it to be accepted in many emerging countries. We would like to develop such kinds of products and we are sure we can do that.


JATCO’s Business Continuity Plan

Q1. Besides the Tohoku disasters, a big earthquake struck eastern Shizuoka prefecture on March 15, 2011, near JATCO factories. What was the damage?

Watanabe: About 600 machines were damaged in the March 15th earthquake. JATCO has been working on several countermeasures, such as anti-seismic reinforcements and anchoring of machines since 2003, and thanks to these activities we managed to escape from terminal damage.

So, I can say that the biggest damage from the magnitude 6.0 earthquake last year was having our machines lean over.

We cannot see terminal damage at our buildings, but inside buildings, we found that the roof of the “clean room” dropped, a special room to prevent contamination.

Q2. How do you prepare for earthquakes here?

Watanabe: Preparing food and water for emergencies are the basis of the BCP (Business Continuity Plan), and we secure food and water for people, who have may difficulty returning home, to survive for 3 days. Other than that, we prepare blankets, sleeping bags, generators and tools for recovery.

JATCO employs over 6000 workers in its facilites in Japan

Q3. JATCO has other factories around Japan. Do you have any systems where factories can support each other in an emergency?

Watanabe: We are now developing a system for factories to support each other in case of disaster.

Through our experience with earthquakes, it’s rather easy to create preventive measures for hardware, such as machines or equipment that can tip or fall down, but the difficult challenge is whether the production line can avoid risks, or whether the suppliers can avoid output risks.

We are now making a strategy and we’re about to execute it. Especially for assembly lines, our backup plan is getting richer as we expand production globally. Also, for CVT2 and CVT7, we are becoming able to produce them in several factories.

Q4. This area is prone to earthquakes. How do you prepare for disasters?

Hata: The damage from the March 11 earthquake wasn’t serious, but due to the earthquake that occurred on March 15, parts of our Fujinomiya and Fuji factories were damaged.

We also need to prepare for other possible big earthquakes, such as Tonankai and Tokai earthquakes. For this, employees’ safety is top priority and we’ve added a “tsunami” factor to our earthquake assumptions. Following that, we reinforced our facilities to prevent buildings and machines from collapsing. Together with Nissan, we do a variety of simulation training of what happens during an earthquake.

More importantly, we are asking our suppliers to do the same kind of simulations, and we’ve already started simulations for our overseas factories in Mexico, China and Thailand, to support Japan when earthquakes hit our Japanese factories.

Dan Sloan



Cars, Management, Production, Suppliers, Technology

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