This article originally appeared in IMPO's April 2015 print issue.
Nippon Sharyo is a Japanese manufacturer of rail cars that has expanded its reach in the U.S. market in order to accommodate growth, its transition to “Buy America” standards all while working with local agencies to facilitate expansion, job growth and a truly unique cultural work environment.
The company began in 1896 in Japan and has been doing business in the U.S. since 1982 after it received its first contract to supply 44 single-level EMU cars to the Northern Indiana Commuter Transportation District. Since then, the company has produced and delivered over 880 individual cars throughout the U.S. Traditionally, the shells of the railcars were manufactured in Japan, but that has been changing in recent years.
Nippon Sharyo’s facility is nearly impossible to miss upon entering Rochelle’s industrial park. Nippon Sharyo’s Manufacturing Campus is made up of two buildings and dominants its surroundings. But it isn’t only Nippon Sharyo’s appearance that is impressive, the story of the company becoming an American company.
“We are a Japanese company, but our goal is to become 100 percent American and to establish our presences as an American manufacturer here for the American people,” says Akira Koyasu, the President and CEO of Nippon Sharyo U.S.A.
Prior to construction of the Illinois facility Nippon Sharyo had been doing business in the U.S. for over thirty years, however during this time the standards for “Buy America” were not as strict. For past contracts, “Buy America” mandated that 60 percent of all materials and parts be procured in the U.S. and that the final assembly of the rail car vehicles take place on American soil. Which Nippon Sharyo complied with using contractors for final assembly and switching locations depending on the client.
However, the “Buy America” standards changed for certain contracts recently and in order to remain competitive Nippon changed with it. It is now 100 percent American made, so everything from the raw materials, to the building, cutting, bending, forming and fabrication must be done in the U.S. Everything must be bought here as well,” explains Koyasu.
As a result of these standards, Nippon Sharyo chose to become an All-American operation by setting up a one-stop-shop in the U.S. in the community of Rochelle, Illinois.
Choosing Rochelle as the location for their American home base was not an accident. Instead it came as a result of negotiation, collaboration and a close relationship with the local community.
First, from the perspective of Nippon Sharyo the location had to be strategic based on clients. “We were thinking of the Midwest. It is a natural location for us to establish a North American facility,” says Koyasu. “Chicago Metra is one of our biggest customers and has been for many years. So it made sense for us to establish our production facility somewhere near Chicago.”
From here the support of the surrounding community became crucial. “Nippon Sharyo came to Illinois because of our commitment to high-speed rail, strong transportation network and central location — all of which make our state the ideal choice for growing global companies,” explained former Illinois Governor Pat Quinn.
Koyasu explained that when making the transition to the U.S., Nippon Sharyo worked not only with the state government through the Illinois Department of Transportation and the Department of Commerce and Economic Opportunity, but also quite closely with the City of Rochelle. Each providing support and assistance in varying levels of the process. For example the Department of Commerce and Economic Opportunity played a crucial role in helping to find a specific location for the facility as well as provided the necessary support to establish the production facility once its location had been selected.
“We were working very closely,” says Koyasu when asked about the state and local governmental involvement.
The city of Rochelle also played a key role in securing Nippon Sharyo’s presence in their very own industrial park. Erwin Hartmann, the Vice President of Manufacturing, clarified that they helped with their own unique, equally important ways.
“They [City of Rochelle] helped us with more of the infrastructure,” said Hartmann. “They were very helpful with roads we needed to bring in, rails, accessing the necessary power and gas we needed. Those were the things the city helps us out with. Not just financially, but to get it done quickly as well because time was a factor.”
When it was all said and done, Nippon Sharyo received approximately $11 million in incentives to help transition to Illinois. This included $4.7 million from training funds, grants and corporate income tax credits accumulated over ten years. Another $5.5 million came from the Department of Transportation in the form of a rail spur from the BNSF Railway main line to the new facility. Finally, Rochelle also provided around $866,000 in incentives. But these investments were far from risky, as Nippon Sharyo has become an invaluable part of the community and economic infrastructure.
For example, Nippon Sharyo’s presence in Rochelle has created a significant amount of jobs for the community. “We have a brand new workforce here,” says Hartmann. “Two and a half years ago we had about twenty people and now we are 600 people.” The company is also benefiting from the location in Rochelle and the newly instated work force because as it offers them a new slate a room for improvement.
“We have been teaching them how to build railcars” explains Hartmann. “Any improvements we make the guys are working on right in the facility right now, looking at how we do things better, smarter, and making templates for those processes. There are a lot of guys out there working on the cars and looking at how to improve.”
The facility in Rochelle is also providing the company with key advantages within the rail car market. By creating a one-stop-shop, as Koyasu and Hartmann call it, Nippon has been able to gain a competitive advantage over other rail car manufacturers. “There are many passenger rail car manufacturers in this country, but as far as we know, we are the first company that has one-stop-shop capability,” comments Koyasu.
The advantages created by having all operations in one location are significant. Koyasu explains them in two parts, “One, of course, is from the point of publicity. We do everything here in Rochelle and the U.S., which is a big sales point. Second, it is also economical. We do everything here so it is easier for us to control the total cost and define schedules.”
But that isn’t all. Hartmann adds, “There is also shipping to think about. Shipping all over the world can get expensive, and there are factors of time and control. But for us we have all the control because things are five hundred feet from us, making it easier.”
Nippon Sharyo’s Company Culture
Nippon Sharyo’s one stop-shop capabilities aren’t the only thing that sets them apart. Their company culture is also singularly unique. As a Japanese company, setting up a home base in the U.S. they have created a company culture and facility that is completely their own, blending aspects of Japanese and American culture to form Nippon Sharyo’s unique culture.
The first immersion of cultures came in the initial stages of company training. As many of the workers did not have significant prior experience with railcars the company sent more than 50 workers to Japan for almost three months to learn the many aspects of the business. “Seeing is believing,” says Koyasu when explaining just why the company chose to send so many workers to Japan.
Japanese workers were also brought to the U.S. to work and to teach the newly hired American workers. “They are called Sensei, which means teacher or instructor in Japanese. They spent a lot of time working with and helping the American workers,” says Koyasu.
The “Sensei” strategy carried on into how work teams were structured as well. In the Nippon Sharyo’s manufacturing department there are different departments and sections with different managers overseeing them who are American workers, but they also always have a technical supervisor that is Japanese. These two leaders then communicate on a daily basis to make decisions on how to best manage their people while incorporating both the Japanese and American perspective.
The process of blending two cultures into an efficient workforce is not without challenges though. By their own admission, there have been unique hurdles. For example, language barriers can create communication breakdowns. Hartmann and Koyasu described the situation using the common colloquial phrase, “maybe,” and “I’ll think about it.”
“To Americans, when you say ‘maybe’ it means maybe, but when a Japanese man says ‘maybe’ to you that probably means no, and that took the American guys a long time to figure out, “ says Hartmann. “When I say I will think about it, Americans take it as a very positive answer, but to a Japanese person this means that it probably won’t be easy to do so probably no,” adds Koyasu.
While these are challenges, the Nippon Sharyo team has been working hard to bridge the gap with amazing results. Through training programs like their Sensei concept and team structures they have created an environment infused with collaboration. They have also hired outside consultants with knowledge of both American and Japanese culture to talk with the workers with great success. “The lights went on for the guys after the class,” exclaims Hartmann.
Through all their efforts it is clear to see that not only did Nippon Sharyo succeed in creating a world-class manufacturing facility in Rochelle that adheres to “Buy America” standards, but they also created a one-of-a-kind community and company culture.
“There is a very unique bond between the Americans and the Japanese,” describes Hartmann. “You know the guys are playing baseball together, they are going golfing together, there are all kinds of things like that these guys are starting to do together, things that really go into forming a relationship, team and a good working environment.”