Green Potential And Readiness Analysis Management Essay



In order to advance the development of local fabrication of parts and constituents in the automotive sector, the Filipino authorities adopted a protectionist policy which was imposed on the sector for three decennaries, from the clip of its origin during the post-war epoch until the eightiess. For over 30 old ages, local content demands were implemented and limitations on the importing of motor vehicles were enforced.

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During the 1990s, at the tallness of trade liberalisation brought by globalisation, the sector opened up and accommodated more participants. Lifting of some limitations was besides implemented, and importing of all types of vehicles was allowed.

With all these developments, the automotive sector today is on its manner to full deregulating. This paved the manner for the entry of several automotive houses, assembly programs and providers likewise, in the state. Currently, transnational endeavors dominate the Filipino automotive industry, with Nipponese houses as the biggest investors.

Since Japan has become one of the largest trading spouses of the Philippines, an economic understanding, called JPEPA ( Japanese-Philippines Economic Partnership Agreement ) , was signed in 2006. One of the commissariats of JPEPA is the riddance of duties for automotive vehicles and automotive parts by 2010.

Table 1 shows a brief background on the development of the Philippine automotive sector.

Table 1: Historical Background of the Automotive Sector[ 1 ]

1950s – 1960s ( post war )

*During the post-war epoch, all motor vehicles were imported.

*The Government adopted an import permutation policy and encouraged local vehicle assembly.

*Importation of CBU ( wholly built-up ) vehicles on a commercial graduated table was banned.

*Almost all constituents were imported as portion of the KD ( powerful ) kit.

1970s – 1980s

*In response to the strain on foreign exchange militias brought approximately by heavy importing, the Progressive Car Manufacturing Program ( PCMP ) was implemented in 1973.

*The plan required assembly programs to increase local content from 10 % in 1973 to 60 % in 1976.

*This led to the outgrowth of local houses fabricating automotive parts and constituents.

*The authorities enacted the Car Development Program, which imposed a minimal local content demand.


*The industry was strengthened because of high capital investing demands for houses runing in the Philippines.

*The authorities initiated trade liberalisation


*On its manner to full deregulating.

*Signing of JPEPA ( Japanese-Philippines Economic Partnership Agreement ) on 9 September 2006.

*Under such understanding, car and automotive parts are capable to gradual duty decrease, and eventual duty riddance will be implemented by 2010 ( Tariff riddance may detain until 2013 and is unfastened for renegotiation[ 2 ]; Partss under the motor vehicle development plan is capable to dialogues and MFN[ 3 ]rate applies. )

*Article 18 of JPEPA provides for the riddance of custom responsibilities for certain merchandises.

*It should be noted that under the ASEAN Free Trade Agreement ( AFTA ) , all duties on the automotive sector shall be eliminated by 2010.

The Sector Today

The Filipino automotive industry is composed of two sections, the motor vehicle assembly section ( assembly programs ) and the car parts and constituents section ( providers ) . A sum of 14 rider auto assembly programs, 21 commercial vehicle assembly programs and 21 bike assembly programs operate in the state.[ 4 ]Harmonizing to the information of CAMPI[ 5 ], the largest assembly programs are Nipponese makers, viz. , Toyota Motor Philippines, Honda Cars Philippines, Mitsubishi Motors Philippines, Isuzu Motor, and Nissan Motor Philippines. Table 2 shows the ownership, sum of investings and figure of individuals employed in these top five assembly programs.

Table 2: Top Automotive Firms





Toyota Motor Philippines

Filipino 60 %

Nipponese 40 %



Honda Cars Philippines, Inc

Nipponese 74.2 %

Filipino 25.8 %



Mitsubishi Motors Phils

Nipponese 100 %



Isuzu Motor

Nipponese 70 %

Filipino 30 %



Nissan Motor Phils.

Filipino 60 %

Chinese 30.8 %

Nipponese 9.2 %



Beginning: Department of Trade and Industry ( as of February 2003 )

The tabular array above shows that the five big Nipponese assembly programs account to around P13.8 Billion in investings and employ more than 5000 workers. Meanwhile, the one-year entire capacity of all assembly programs is illustrated in the tabular array below.

Table 3: Annual Total Capacity of Assemblers

No. of Assemblers

Annual Total Capacity

Passenger Car Assembly


221,450 units

Commercial Vehicle Assembly


145,950 units

Motorcycle Assembly


462,100 units

Beginning: Department of Trade and Industry ( as of February 2003 )

On the other manus, the parts and constituents section of the automotive industry is composed of 256 companies.[ 6 ]These companies produce different car parts and constituents that are made of plastic, metals, gum elastic and composite stuffs for both OEM ( original equipment maker ) and replacing markets. Of the 256 companies, 124 are first-tier makers which straight supply the demand of the assembly programs. The other 132 companies, which are largely Filipino-owned, are little and average endeavors. These houses are considered sub-contractor ( functioning as 2nd and 3rd grades ) , which supply the demands of first-tier makers.

The major participants in fabricating automotive parts and constituents are shown in Table 4. These companies are the chief providers of the motor vehicle assembly section ( assembly programs ) .

Table 4: Car Partss Companies that supply OEM and replacing markets



Quality Accreditation

Major Clients

Wiring harness

Yazaki Torres Manufacturing Inc.

QS9000, ISO 14001, ISO 9001, Ford Q1

Ford, Jaguar, Toyota, Mitsubishi, Mazda, Honda, Isuzu, Nissan, Universal Motors Corp.

International Wiring Systems Corp. ( Phils )

ISO 9002, QS 9000,

ISO 14000

Sumitomo Wiring Systems

( Japan, USA, Australia )

Pilipinas Kyohritsu Inc.

ISO 9002, QS 9000

Nissan Motor ( Japan, Phils ) Nissan Diesel, Universal Motors Corp


Asiatic Transmission Corporation

ISO 14000

MMC ( Japan, Thailand, Phils. ) , Proton Malaysia

Honda Parts Manufacturing Corp.

ISO 9000

Honda ( Japan, Indonesia, India, Thailand, UK, USA, Pakistan )

Toyota Auto Partss

ISO 14000

Toyota ( Thailand, Indonesia, Malaysia, Taiwan, Japan, South Africa )

Isuzu Auto Parts Manufacturing Corp

ISO 9001

Isuzu ( Thailand )

Alloy Wheels

Filipino Aluminum Wheels, Inc.

Q 9000, ISO 9001

Mitsubishi, Nissan, Toyota, Universal Motors Corp. , Ford, Isuzu, GM, Hino

Enkei Phils. Inc

Q 9000

Honda, Toyota, Enkei Asia Pacific, Mitsubishi, Isuzu, Ford, Nissan

Kosei Inc. ( Asia Pacific )

Q 9000

Toyota, Honda, Mitsubishi, Japan, Isuzu, Nissan, Ford

Radiator, Leaf Spring, Stamp Parts

Roberts Automotive & A ; Industrial Parts Manufacturing Corp.

ISO 9002

Mitsubishi, Honda, Hino, Columbian, Universal Motors.


Goodyear Phils, Inc.

Q 9000, ISO 14001

Honda, Toyota, Mitsubishi, Isuzu, Nissan, Ford, Universal Motors, Hino, Columbian

Auto Rubber Parts

Othsuka Poly-Tech Phils, Inc.

ISO 9002

Toyota, JIDECO, Honda, Lamcor

Beginning: “ RP Automotive Parts Industry Roadmap: Enhancing Supplier Base for Exports ” ( March 2004 )

As illustrated in Table 4, some of the major clients of parts makers are Nipponese assembly programs. Many of these houses are besides affiliates and subordinates of transnational corporations from Japan.

Overall, the parts and constituents section of the automotive industry manufactures about 330 parts, which is distributed as follows[ 7 ]:

Chart 1: Distribution of Partss and Components Manufactured by the Automotive Sector ( % )

EMBED Excel.Chart.8 s

Factors of Production

The tabular array below summarizes the different factors of production in the automotive sector.[ 8 ]

Table 5: Factors of Production in the Automotive Industry

Automotive Sector

Natural Materials

*80 % of the the natural stuffs used in fabricating automotive parts, such as metal, plastic and gum elastic, are imported


*The automotive industry employs 75,000[ 9 ]direction and rank & A ; file employees for both sections. These workers are extremely skilled and trainable.

Packaging Materials

*Packaging demands are specified in the contract between assembly programs and parts makers.

Appropriate Standards and Certification

*Auto makers require their providers to hold enfranchisements ( ISO9000 & A ; QS9000 ) .

As antecedently discussed, the natural stuffs used in fabricating automotive parts are imported. Around 80 % of the input stuffs such as metal, plastic and gum elastic are supplied by foreign markets.

In footings of labour, the motor vehicle assembly sector employs around 75,000 direction and rank & A ; file employees. Around 44,000 workers are employed by parts makers ; 15,000 are employed by assembly programs ; and around 16,000 are working at the franchises.

Gross saless Performance

The gross revenues of the industry have been volatile for the past old ages. One important event that affected the gross revenues of vehicles was the 1997 Asiatic Financial Crisis. Prior to the crisis, industry gross revenues in the Philippines was steadily increasing. However, after the crisis, industry gross revenues dropped significantly. Table 6 shows the automotive industry gross revenues from 1995 to 2006.

Tabe 6: Automotive Industry Gross saless from 1995 to 2006

As shown in Table 6, industry entire gross revenues reached every bit high as 162,095 units ( in 1996 ) before the fiscal crisis. Preference for commercial vehicle over rider autos was besides evident, with gross revenues making 73,095 units in 1997. However, after the 1997 Asiatic Financial Crisis, industry gross revenues declined to every bit low as 74,414 units for both rider autos and commercial vehicles ( in 1999 ) . Consequently, growing rate in the industry from 1995 to 2006 showed a similar volatile form. The growing rate of the industry gross revenues can be represented by the undermentioned chart:

Chart 2: Industry Gross saless Growth

Beginning: Garde, Maricar Paz. A Policy Brief on the Filipino Automotive Sector

The public presentation of ASEAN states besides posted a similar diminution. Before the Asiatic Financial Crisis in 1997, the automotive sector in Southeast Asia was executing good. However, after the crisis, gross revenues of the ASEAN market significantly dropped. Chart 3 illustrates the tendency of gross revenues in the ASEAN market before and after the fiscal crisis.

Chart 3: Gross saless in the ASEAN market from 1996 to 2007

Beginning: Japan Automobile Manufacturers Association

Export Performance

Export of automotive parts and constituents had posted a modest growing from 1999 to 2003. As shown in Table 7 ( below ) , the 5-year mean growing of exports of automotive parts was 12.55 % .

Table 7: Export Performance of Automotive Parts, 1999 to 2003

Chart 4: Filipino Exports of Automotive Parts ( state )

Japan as a Trading Spouse

It must be noted that one of the major trading spouses of the Philippines, as shown in Table 7, is Japan. In 2003, the per centum portion of Japan in the entire exports of automotive parts was 34.30 % , with a five-year mean growing of 11.27 % . USA came following with around 26 % portion.

In footings of the mean portion of entire exports to Japan, the automotive sector posted a nice portion. Table 8 shows that the automotive sector accounted to 7.73 % mean portion in entire exports to Japan, or an mean volume of US $ 495,223,520 from 2001 to 2005. Of this entire portion, export of metal automotive parts accounted to 7.35 % mean portion in entire exports to Japan or US $ 470,834,950.

Table 8: Performance of Exports in Automotive Industry, 2001-2005[ 10 ]

Automotive Supply Chain

The supply concatenation of the automotive sector is composed chiefly of assembly programs and providers. As stated earlier, providers are classified as first, 2nd or 3rd tier makers. In brief, the automotive supply concatenation follows these phases:

The concatenation starts with the importing of natural stuffs by the 1st, 2nd and 3rd grade makers. ( inbound logistics ) Around 80 % of the natural stuffs are imported, while local content is about 20 % .

These natural stuffs will so be utilized in the production ( operation ) of automotive parts and constituents. The 2nd and 3rd grade makers supply input stuffs to the 1st grade providers.

The 1st grade providers supply the demands for parts and constituents of assembly programs both in the domestic and international markets ( exports ) .

Vehicles are eventually manufactured by the assembly programs, and will so be transported ( outbound logistics ) to the franchises for its debut in the market.

Franchises take charge in the publicity and selling of the vehicle. Some franchises besides provide service to vehicle purchasers.

Chart 4 ( below ) demonstrates how the automotive supply concatenation looks like. The chart besides shows the primary value concatenation activities within the sector.

Chart 5: The Filipino Automotive Supply Chain

Issues and Prospects

Even with the stiff local content policy in the yesteryear, a immense part of the sector still remains developing. The impact of the local content plan on the growing and development of the sector was really limited[ 11 ]. Imports still account to 80 % of the natural stuffs, which entails that a mere 20 % are locally produced parts.

Another challenge is that a important majority of the parts makers is classified as little and average endeavors. These endeavors frequently have low engineering degrees and are usually faced with deficiency of capital, low productiveness and deficiency of worker accomplishments. Because of deficiency of resources, these houses are sometimes non able to follow the best industry patterns, doing them unable to efficaciously vie in the market.

In respects to greening, one of the issues is the deficiency of incentive plan for green vehicles. Green vehicles are taxed the same manner as other vehicles, and this revenue enhancement construction does non advance favourable conditions for local demands.

With the being of these several issues and concerns of different industries in the Philippines, including the automotive sector, the confirmation of JPEPA ( Japan-Philippine Economic Partnership Agreement ) provides a promising way for the automotive sector. Harmonizing to the survey of PIDS, JPEPA “ will travel beyond duty decreases or riddances and focal points on cooperation countries such as engineering transportation, preparation, and SME development that will let Filipino makers to go more competitory. ”[ 12 ]It must be emphasized that Japan is the largest trading spouse of the Philippine automotive sector.

Green Potential and Readiness Analysis

Background Conditionss

Sector Profile

In brief, the Filipino automotive sector is dominated by Nipponese transnational companies, viz. , Toyota Motor, Honda Cars, Mitsubishi Motors, Isuzu Motors, and Nissan Motors. The assembly programs and first grade providers ( parts and constituents section ) , which supply the OEM ( original equipment makers ) and replacing markets, are big endeavors while the 2nd grade endeavors are SMEs. The sector is geographically clustered and companies are largely located in the economic zones of NCR and CALABARZON. The planning skyline of endeavors in this industry varies from 1 to 5 old ages.

Figure 1: The Sta. Rosa Ecozone

The assembly programs and first tier providers of the automotive sector have a big figure of workers, and some of these workers are members of labour brotherhoods and workers organisations. Some of the bing labour organisations are: Aiwa Industry Workers ‘ Alliance ( AIWA-Toyota ) ; Nissan Motor Phils. Workers Union ; Isuzu Emp. Union ; and Honda Cars Phils. Rank and File Union.

Coordination and describing mechanisms in the sector

A figure of associations are active in the automotive sector. These associations serve as avenue for treatment on issues refering the sector. Two of the outstanding automotive industry associations are CAMPI and MVPMAP.

The vision of CAMPI, or Chamber of Automotive Manufacturers of the Philippines, Inc. , is to go a “ socially responsible automotive industry association in partnership with the Filipino authorities and other stakeholders in chase of economic growing through the development of a feasible and self-sufficient local automotive industry. ”[ 13 ]

Majority of the assembly programs in the sector are members of CAMPI, and over the old ages, have advocated its mission to be “ an engine of growing through investings and authorities gross coevals, employment creative activity, manpower accomplishments development, engineering transportation, environmental protection and safety publicity under a policy environment responsive to the developmental demands of the industry and society. ”[ 14 ]

MVPMAP, or Motor Vehicles Parts Manufacturers Association of the Philippines, is an organisation composed of 101 parts and constituents fabricating companies. It aims to “ actively advance the involvement of the industry, strengthen the back uping industries that would complement car fabrication in the Philippines, and promote the development of feasible automotive parts and constituents to prolong fabrication activities in the state. ”[ 15 ]

The being of associations signifies the preparedness of the sector to follow common schemes, including environmental plans and guidelines. Even within the sector itself, assembly programs besides play a cardinal function in puting common guidelines and criterions which is imposed on both the upstream and downstream sections of the supply concatenation. As shown in Table 5, assembly programs require their providers to follow with enfranchisements and international criterions. This well developed direction system of industry leaders ( assembly programs ) , who greatly influence supply concatenation activities, ensures that quality rules are adhered.

Best patterns in sector

In order to vie globally, the chief participants in the automotive sector follow certain patterns which give them competitory advantage. In a survey conducted by the Asian Institute of Management[ 16 ], they have outlined the undermentioned industry best patterns:

Benchmarking – In order to measure the public presentation and patterns of the company in comparing to its rivals, benchmarking is normally done. In this manner, new thoughts and methods are developed to react to the demands of the clients.

Making More with Less – Through waste decrease, automotive companies are able to hold a leaner operation. The propensity of the supply concatenation finally consequences in the addition of profitableness for both the company and the clients. Two illustrations of plans that promote leaner operations are the six-sigma methodological analysis and 5S.

Early Engagement of Key Suppliers – In the design procedure, assembly programs already involve their providers in order to guarantee the manufacturability of the merchandise.

Authorization of Employees – In constructing the roadmap of the company, inputs and suggestions of the common employees are elicited by the direction. In this manner, employees will experience that they are portion of the decision-making procedure of the company.

In add-on to the above-named best patterns, and in relation to the green enterprise, assembly programs besides require their first grade providers to hold certain environmental enfranchisements like ISO 14001. This implies that publicity of environmental protagonism is manifested across the sector. Several companies in the sector have already been recognized for their rejuvenation enterprises and protagonism.

Figure 2: The Toyota Production System[ 17 ]

In order to hold a thin endeavor, Toyota adopted the Toyota Production System ( TPS ) . The TPS has become the operational design for many companies that aim to hold a thin endeavor.

Contextual Factors

Green context

In an interview with a cardinal source in the automotive sector, he acknowledged that the sector is one of the chief subscribers to climate alteration. For this ground, the sector has a high degree of consciousness sing clime impacts. Greening has become one of the major schemes of assembly programs to remain in concern. In bend, providers are led ( forced ) by the assembly programs to travel green.

The technological makeup of the sector, which requires big energy ingestion, is besides suited toward green acceptance ( energy-efficient engineerings ) . Regulatory model, both local and international, besides heighten its reactivity to hold a more environmental attack in fabricating its merchandises.

Impacts so far on the sector

Primary value concatenation activities, particularly “ operations ” , are affected by clime alteration. Even prior to the physical calamity ( direct impact ) brought by clime alteration which affected the productiveness of the sector ( Typhoon Ondoy ) , publicity of energy-efficient, cost-saving activities have been a common pattern in the sector.

Retraining and upskilling of employees have besides been conducted to fit employees for greener engineerings and procedures, therefore, bettering their productiveness through efficiency.

A smattering of “ green occupations ” have besides been created as a consequence of heightened consciousness sing clime alteration ( at least for big endeavors ) . “ Environment officers ” are hired/trained to guarantee that environmental guidelines are followed.

Drivers act uponing the sector response

Greener activities generate more nest eggs to companies. Customers besides prefer companies with environmental protagonism. Greening has been an built-in portion in the concern schemes of companies.

The automotive sector is besides one of the chief subscribers ( causes ) to climate alteration. Advocacy for the environment is one manner of demoing corporate societal duty.

Table 9: Some of the Environmental Initiatives of Major Assemblers[ 18 ]


Some Environmental Enterprises


Green Buying Program, Green Dealership Program, Waste Management, Eco Plant


Environmental Technology, Green Factories, Waste Management,


Drive @ Earth plans including Biofuel compatible vehicles


Environmental and Social Report


Nissan Green Program 2010 ( 3R Campaign ) , Nissan Powertrain Roadmap

Furthermore, one of the chief grounds why the automotive sector is clustered in CALABARZON is the copiousness of H2O in the country. Salvaging the watershed is of import for the sustainability of the concern.[ 19 ]

On the portion of the providers, force per unit areas to follow green procedures compelled them to follow environmental criterions set by the assembly programs. Attachment to such criterions makes them more competitory in the market.

Readiness of the sector to react

Compared to other sectors, the automotive sector has been in the head of green enterprises. The economic significance of greening the sector, plus the high degree of consciousness across the supply concatenation, prompts leaders of the sector to hold an environmental protagonism. Environmental guidelines and policies from such leaders besides lead providers in following greener attacks.

Jointly, the preparedness of the sector to react to climate alteration is really evident. For big endeavors, financess are allocated for green schemes. However, for smaller endeavors ( 2nd and 3rd tier providers ) , the cost of holding greener engineerings is a barrier.[ 20 ]

Perceptual Dimension

Sector purposes to move and openness to external support

Since the consciousness sing clime impacts is high, greening purposes and actions are really clear in the automotive sector. Trainings may be conducted in both the first and second-tier providers. As pointed out by one of the cardinal sources, assembly programs already have good developed environmental schemes that have been embedded in the overall concern scheme.


Action taken by the sector in response to the drivers.

Several internal steps have been employed by the industry in response to climate alteration drivers. This includes: the use of nonleaded, SOC-free stuffs ; production of greener vehicles and vehicle parts and constituents ; decrease of clime exposure through environmental activities like re-afforestation ; and increase energy efficiency in the production.

Engagement in greening enterprises within the community is besides really apparent amongst industry leaders. Engagement in activities designed to advance environmental protection is a common pattern among these big houses.

Sector Interviews

Jose Maria Aligada, First Vice President, Toyota Motor Philippines Corp.

On Ideas on the GBA Undertaking:

Toyota appreciates support coordination for the local supply side. It is helpful that the environment is prepared to assist the provider. If rejuvenation is initiated in some companies, other houses will be compelled to follow. In order for them to vie, they must follow with the criterions. Our precedence will be our first-tier providers, and they will hold to look into their ain grades.

On Green Drivers of Toyota:

The merchandises of Toyota ( adversely ) affect the environment. In bend, we have to return something to the environment. It is our manner of demoing corporate societal duty. Having a greener scheme is besides really of import if you are to vie globally in the automotive industry. Greening is a necessary portion of remaining in concern, since it improves efficiency and productiveness to our operations. Customer penchant for greener merchandises is besides high.

On Challenges in Traveling Green

Although there are planetary demands to travel green, the Filipino revenue enhancement construction does non advance a favourable status for local demands. The authorities must supply revenue enhancement inducements to companies that produce green merchandises. While there is a immense potency for the Philippines, the Filipino market is besides non mature plenty, even if you have an environmental policy. The market in the state is price-driven. However, as the population matures, the market will finally take environmentally-driven companies.

Angel Martinez, Sanoh Fulton.

On Ideas on the GBA Undertaking:

Sanoh Fulton is a maker of brake and fuel parts. One of the services our company provides is the transition of vehicle engines from fuel-powered to LPG, which makes the vehicle greener. We are besides one of the providers of Toyota, and Toyota has been really acute toward green production. Sanoh Fulton will profit from the GBA undertaking and we are supportive of it since it will assist us in our rejuvenation attempts.

Mark Marcelo, Cost and Environment Section, TMPC

On Greening Enterprises of Toyota

Toyota has been in the head of the industry in footings of greening enterprises. TMPC has a really strong environmental policy, protagonism and patterns. Some of the enterprises of the company are: the decrease of volatile organic compounds ( VOCs ) , production of SOC-free ( substance of concern ) vehicles, sustainable mobility, sustainable works enterprises like acquiring ISO enfranchisement, operation of our ain waste H2O works, H2O recycling, waste segregation, sludge decrease and green trader protagonism. Toyota besides adheres to our “ Kaizen ” value, which aims to seek the best environmental engineering and patterns in our works operations.

On Climate Change Impacts

When typhoon Ondoy and Pepeng hit the state, our operations were straight affected because many of our workers were unable to describe to work due to the inundations. The productiveness of the company was adversely affected. Another consequence of clime alteration, furthered by the high consciousness of the industry, is the creative activity of some green occupations like the environment officer station.

Danny Penaflor, TMPC

On Reforestation and Salvaging the Watershed

Toyota besides has its ain plan for the community. We have already started our re-afforestation attempts in the bald land environing the Toyota works. Presently, around 14 hectares of land have already been reforested. We have besides constructed a bamboo frame coop designed to pin down the refuse that flow to Laguna Bay. In this manner, we are able to salvage the H2O supply in the country. Salvaging the watershed is a necessary portion of remaining in concern. The chief ground why automotive houses chose to set up workss in Sta. Rosa is the copiousness of H2O. Water is really of import in vehicle fabrication.

Ronald Gaspar, The TMP Foundation

On the TMP Foundation.

Toyota, through the TMP foundation, besides actively participates in several environmental activities like the International Coastal Clean-up Day, Earth Day Celebration and some activities in the Environment month. These show that Toyota has a strong protagonism for environmental protection.


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