A long and winding road: this time of uncertainty for the automotive industry—often described as "the backbone of Japan"—as it navigates the future in an ultra-competitive global marketplace - Automotive Japan - adv

Japan, Inc., Oct, 2003 by Gavin Blair

THE JAPANESE AUTOMOBILE INDUSTRY is one of the powerhouses of the world economy, employing one in 10 of the domestic workforce and earning vast amounts of foreign currency through exports and international operations. The industry was one of the cornerstones of Japan's post-war economic success, with vehicle production rising from just over 30,000 units in 1950 to over 13 million units in 1990, still averaging over 10 million units in recent years. The growth of exports has been even more dramatic, increasing more than 1,000-fold over the same period. Although imports increased around 100-fold to a mid-90s peak of 450,000 (falling back to under 300,000 in the last few years), the difficulties faced by foreign manufacturers trying to crack the Japanese market have brought allegations of official and unofficial protectionism.

Yet the Japanese industry is facing a range of challenges in an increasingly demanding global marketplace alongside a largely stagnant economic situation at home. In addition to growing concerns about the environmental effects of gas-powered internal combustion engines and a swath of mergers and alliances across the sector worldwide, there is the rapid emergence of China as both a huge marketplace and a powerful competitor. During this time of upheaval and uncertainty there are beacons of success, though, such as Nissan's well-documented turnaround and the posting of all-time record profits by the world's No. 1 automaker, Toyota.

To listen to some Japan-bashing economists, analysts and commentators, one might believe that the "economic miracle" is over and that the country teeters on the brink of financial, social and political collapse. While there's no doubt Japan faces some serious structural problems (and no sign of anyone with the political will to tackle them), accounts of the nation's total demise have certainly been exaggerated, and the automotive industry is a case in point. The success of Japanese automakers was seen as a symbol of the all-conquering postwar industrial empire. There was shock and some thinly disguised glee in the West when it first became apparent that these industrial giants who had rewritten the rulebook of assembly-line production with their Just-in-Time systems, super-automated factories, high quality / low cost products, company songs and morning exercises were seemingly stumbling. When it emerged that some of the biggest names in the sector were losing money and closing factories, there was surprise and then a realization that even these apparently impenetrable fortresses of efficiency and profitability were in fact susceptible to the same tribulations as everyone else.

While things are not yet all rosy in the garden, overall the Japanese automotive industry is back in profit, continuing its expansion overseas and even managing a small growth in domestic sales in the year to March 2003. This has been achieved through alliances with foreign partners, cost-cutting, continued innovation with new models, reorganizing dealership networks, profitable overseas production and the continual striving for quality that was one of the foundations of their original success.

The Japan Automobile Manufacturers' Association (JAMA), has chosen the theme "Challenges & Change" for this year's Tokyo Motor Show to reflect the current state of affairs and to express JAMA's stance of "... continuing to take on the challenge of the various issues facing the automotive industry head-on." JAMA concerns itself with all matters relating to the Japanese automotive industry, including safety and environmental issues. Toyokazu Ishida serving as Assistant Director General & Group Leader (Advertising & Development) for the Tokyo Motor Show Department, sets out JAMA's position: "Regarding environmental issues, establishing systems in anticipation of the Recycling Law (slated for Fall 2004), improvement of fuel-efficiency and gas emission capabilities, and development and dissemination of clean energy cars such as those using fuel cells are being planned. Additionally, JAMA is working together with the government and related industries for the improvement of fuel quality and traffic flow. This is part of our contribution to society through advances of technology for environment and safety. Regarding safety, JAMA is striving for improvement of vehicle safety with the utilization of Intelligent Transport Systems (ITS) and Advanced Safety Vehicle (ASV)."

Recent years have seen a major realignment in the worldwide automotive industry, with mergers, takeovers and the big manufacturers entering into various types of alliances with each other. Some regard this as an inevitable move toward a few huge conglomerates in each sector dominating the global marketplace. However this is an oversimplification, and statistics both support and contradict this assertion.

Seventy years ago there were said to be 270 carmakers in existence, whereas today there are seven major groups accounting for the lion's share of worldwide sales. On the other hand in the late 60s the then big three car makers--General Motors, Ford and Chrysler--had around half the worldwide market share between them. Today's big three--GM, Ford and Toyota--control around 36 percent of global production. Whichever way you look at it, though, some of the major players have linked up in ways that would have been hard to predict a decade ago. Groups such as Daimler-Chrysler-Mitsubishi have brought together manufacturers and their respective business cultures from Europe, the US and Japan. After decades of the West flocking to learn how to run industry from the Japanese, the automotive industry has been one of the first to embrace the flow of knowledge in the opposite direction. As well as Nissan's iconoclastic Ghosn, Daimler-Chrysler's Rolf Eckrodt now heads Lip Mitsubishi Motors and another foreign executive, Wilfried Porth, has been appointed to lead Mitsubishi Fuso, the de-merged truck division in which Daimler-Chrysler holds a 43 percent stake. Mazda, who has recently greatly increased profitability, appointed its first Japanese president since June 1996, when Ford sent in Henry Wallace.