Purpose - To analyze the challenges and solutions in developing local employees for managing subsidiaries - the implementation of Thainization philosophy at Toyota Motor Thailand (TMT). Design/methodology/approach - In-depth interviews were conducted with Thai and Japanese employees, and Imai Hiroshi, one of the architects of Thainization philosophy. Findings - For successful implementataion of Thainization philosophy in TMT, the management had to demonstrate respect for local employees and build trust between Thai and Japanese employees. Once the employees related to each other on the basis of mutual respect and trust, it was relatively easy to collaborate and find solutions. Practical implications - CEOs of multi-national companies, particularly Asian subsidiaries, can learn how to cope with challenges in developing local employees, building their technical and managerial capabilities. Originality/value - Many international companies are struggling with the important issue of building capabilities of local employees for leveraging their global competitiveness. The successful implementation of Thainization philosophy of TMT offers a major breakthrough in this direction. © Emerald Group Publishing Limited.