Toyota in France

As the third largest manufacturer of automobiles, Toyota Motor Corporation decided in 1997 to invest over $600 million in a car plant in France as its second major commitment to Europe. The following discussion will focus on three main aspects: the foreign investment environment in France, the effects of Toyota's investment on the company and the country, and its reasons for choosing France.

Foreign Direct Investment (FDI) in France

The Socialist French Government has been holding a radical view toward foreign direct investment as they believed that only by building their own enterprise can profits made be retained in France. However in the 1980s, the Government has shifted to a pragmatic nationalistic attitude. France realized that the benefits of job creation, technology transfer and increased export brought about by FDI outweigh the costs to local businesses. Hence the Government reduced obstacles to FDI and used various subsidies, financial aids or tax waivers to attract foreign firms like Toyota.
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Benefits of Toyota's investment to France

France was having a high unemployment rate at that time, and in the city of Valencienne, where the plant was planned to be built, the unemployment rate was as high as 20%. Toyota's investment would not only create 4,000 new jobs in France, but also help balancing the current account by increasing France's export through exporting Toyota's automobiles to other European countries. Knowing that Toyota would build a plant in Europe anyway, French Government wanted to capture FDI away from other potential host countries and take this advantage as a signal ...

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