U.S and Japan Car Industries


It is unfortunate that the U.S. chose to use automobiles as its wedge to open
the alleged "closed" markets of Japan. One Japan-based managing executive of the
Big Three has even admitted that they consider the Japanese automobile market to
be open. Japan is not the island of protectionism in a sea of free trade that
its critic allege. The problem for the U.S. auto-makers is not a lack of market
access, but a lack of effort. The first step required for the U.S. auto makers
to sell competitively in Japan is not to impose of ridiculous tariffs, but to
have Detroit bring up the quality to Japanese standards. All in all, the U.S.\'s
decision to use automobiles as its wedge to open the Japanese market was surely
a dangerous one. In addition, the utilization of unilateral actions by the U.S.
is clearly a violation of international trade law. Not only is this decision a
resemblance of managed trade but a policy which will weaken the leadership
position of the U.S. in the world economy as well.
The U.S. needs to do what the Japanese did when they penetrated the American
market; hard market research and heavy investment. The Japanese spent billions
of dollars studying American taste and manufacturing models that suited them.
The Big Three have generally confined their efforts to sending models that they
have made specifically for Americans. Bill Duncan, the head of the Japan
Automobile Manufacturers Assn. states that "it was the basic principals of
competition that made the Japanese automobile industry strong."
One example which reflects the short-sightedness of the Big Three is the
insufficient number of right-hand models available in Japan. Since cars in Japan
are driven on the left side, all domestic makers produce right-hand drives. It\'s
simple, the inconvenience of a left-hand drive, at tolls, parking lots or when
overtaking another car is too dangerous. Naturally when the Japanese export
their cars to the U.S., in each of the 190 versions sold, they provide American
drivers with a steering wheel where they expect it; on the left side1. On the
other hand U.S. exports have a grand total of 2 models which feature a right-
hand drive. The Big Three sold a measly 22,000 left-hand models in 1994. Jeep
sold 11,000 on their Cherokees alone, just because they remodeled it to a right-
hand model2.
Another area in which Detroit must seek change is in car size. In Japan, the
normal American cars are just too big. 80% of the cars in Japan are under 2000cc
(2L.) Imagine yourself driving on the jammed packed, narrow streets of Tokyo.
The Big Three exports not a single model which falls within these specifications.
In comparison, the successful Europeans have 124 models under 2000cc and listen
to this Detroit, a selection of over 100 models which are right-hand drive3.
This clearly implies that efforts by the Big Three seem to be insufficient
compared to that of Europeans.
An area of the Japanese car industry in which America showed tremendous
dissatisfaction during the negotiation was the exclusive dealerships, or as
Professor Morrison noted in his class, the "keiretsu." It is true, each domestic
manufacturer is closely linked with dealers, but as the New York Times (June 28,
\'95) reports, the dealership issue is largely beside the point: the Big Three
already have twice as many outlets in Japan as all the European auto makers
combined, yet they sell fewer cars. In the past, America succeeded in cracking
the European market with GM and Ford, putting extra care and money over the
decades into establishing dealer networks. This shows in the statistics; as the
two companies occupy 25% of the European market4. This brings us to a question:
Why doesn\'t the U.S. after enjoying such a success in Europe, put in the same
kind of effort into the Japanese market. Maybe U.S. companies should reconsider
just what it takes to succeed. German auto-makers alone, who have commanded over
50% of the import market in Japan, have invested nearly $1 billion in Japan.
"The massive investments helps. Dealers wonder how serious we are" says
Volkswagen Japan manager Minoru Suzuki. Comparatively, American spending is
estimated at $120 million, with Ford eating $100 million of the pie5.
Along with the complaint about the keiretsu, Americans plead that
astronomical land costs makes it hard to set up their own dealerships. However
the same applies to Japanese makers as well. A couple years ago, Mazda, who is
considered a minor player in the Japanese market, established a new dealership
network for its new model. The