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Japan Auto Talk
 

Japan Auto Talk

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Experience Mazda Zoom Zoom Lifestyle and Culture by Visiting and joining the Official Mazda Community at http://www.MazdaCommunity.org for additional insight into the Zoom Zoom Lifestyle and special ...

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    Japan Auto Talk Japan Auto Talk Presentation Transcript

    • The Japanese Auto Industry A Window on Japan's Economy Michael Smitka Professor of Economics Washington and Lee Alumni College July 20, 2000
    • Japan's Car Market…?! Enjoy the strong yen!
    • Big Sale Now…!
    • Price -- a mere ¥16,800,000
      • Exchange rate: ¥108 per US$ (Wednesday's rate)
      • Price in dollars: $155,555.55
      • And this is after the 10% "strong yen" sale discount!!
    • Luxury Cars aren't Representative
      • Mercedes will sell 50,000 cars in 2000
      • 2.8 million -- regular cars
      • 2.0 million -- minicars
      • 1.0 million -- light trucks
      • 0.3 million -- imports
    • Japanese Auto Firms
      • Toyota Daihatsu
      • Nissan Hino
      • Honda Nissan Diesel
      • Mitsubishi Motors Suzuki
      • Mazda Isuzu
      • Fuji Heavy Industries (Subaru)
      • Defunct: Prince .. Ohta .. Kurogane .. Several others
    • The Domestic Industry's Geography
      • Firm All Cars Regular Minicars
      • Toyota 917,120 917,120
      • Daihatsu 286,555 286,555
      • Nissan 388,548 388,548
      • Honda 375,725 223,506 152,219
      • Mitsubishi 307,949 161,815 146,134
      • Mazda 165,613 142,436 23,177
      • Suzuki 324,059 324,059
      • Fuji (Subaru) 151,100 64,799 86,301
      • Isuzu 35,529 35,529
      • Cars 3.061 mil 2.043 mil 1.018 m
      • Trucks & Buses 0.051 mil
    • Import Brands
      • VW 33,078
      • D/C 28,248
      • BMW 20,110
      • GM 14,217
      • Ford 13,511
      • All less than 1% share in a 3 million car market….
    • Definitions
      • Production inside Japan versus global production
        • Honda is almost as much American as Japanese!
        • Toyota is rapidly internationalizing
    •  
    • Missing from List?!
      • Nissan is owned by Renault
      • Mazda is owned by Ford
      • Isuzu is owned by GM
      • Suzuki, Fuji are partly owned by GM
      • Mitsubishi will be owned by DaimlerChrysler
      • Hino & Daihatsu are now owned by Toyota
      • Nissan Diesel is (?) Volvo
    • Definitions (ii)
      • Production by Japanese firms
        • Mazda, Isuzu and Nissan are all controlled by non-Japanese companies
        • Suzuki, Fuji Heavy Industries (Subaru) and Mitsubishi have foreign firms as major if not dominant shareholders
        • Only Honda and Toyota are "Japanese"
    • Production outside of Japan NAFTA EU
    • Asian expansion
    •  
    • "The" Auto Industry
      • 888,000 Manufacturing (1.3% of labor force)
        • 262,000 assembly
        • 626,000 parts and body
      • 1,280,000 Sales & Repair (2.0% " " ")
      • 957,000 Materials (Steel, rubber, paint…)
      • 1,106,000 Ancillary (Gas Stations, Insurance….)
      • 3,033,000 Transport services (Truck drivers….)
      • 7,260,000 Total -- 11% of Labor Force
      • 13% of mfg shipments, 20% of exports
    • Definitions (iii)
      • Parts versus Assembly
        • Employment is in parts, not assembly
        • Dealerships and repair shops, too
          • Dealerships in Japan are unprofitable!
        • Gas stations, too?
          • Deregulation has overturned the industry!
    • Peak 13.5 mil Now < 10 mil
    • Historical Development
      • Typical LDC Pattern of Industrialization
        • Initial domination by foreign producers
        • Excess entry by &quot;national&quot; firms and extreme inefficiency under subsequent protectionism
      • Industrial consolidation - the Year 2000 theme!
        • Assemblers going or gone
        • Now it's the parts sector's turn
    • Auto sales
      • The Japanese market was for trucks until 1968 -
        • businesses were the predominant customer
        • many vehicles were 3-wheelers!
      • Japan was advanced in the late 1920s and 1930s
        • Ford from 1925, GM from 1927
        • Military halted construction of a new, state-of-the-art integrated Ford plant in 1936
        • Took 45 years to catch up again!
    • Cars Trucks 3-Wheelers Turning points • 1961 cars surpass 3-wheelers • 1968 cars surpass trucks
    • Distinctive Features
      • Competitiveness
        • Success in American market from late 1970s
        • But in the 1990s poor profitability on a global basis, so-so success in the EU
    • Management details for Q&A?!
        • Just-in-time kanban methods of production control
        • Rapid product development cycle
        • Quality control techniques
        • Supplier management / purchasing strategy
        • Labor relations patterns distinctive from those of the US. &quot;Lifetime&quot; employment system, annual wage hikes, biannual bonuses
    • US-Japan Topics (I) Japanese success was due to US!
      • Japanese entry rode a small car wave
      • We paid Japan off!!
        • VER - voluntary export restraint - cum - cartel
      • Our subsidies financed
        • Japan's mid-sized cars
        • Japan's overseas plants
      • Absent US policy . . . . no Japan??
    • US-Japan Topics (II) American revitalization was due to Japan
      • Until Japanese entry in the 1980s, the Big Three formed a tight cartel
      • Competition forced a reformation the last 15 years
      • Japanese inroads are almost exactly matched by GM's decline
      • US firms' superior financial controls helped offset poor manufacturing
    • The &quot;Bubble&quot;
      • Japan would rule the world in autos…
      • Exports, domestic market boomed in mid-1980s
      • Low interest rates fed the boom
      • So what do you do? -- add capacity!
        • 1.5 million units in a shrinking market
        • Now 15 mil units capacity, 10 mil units output
        • Toyota alone has 1 mil units excess capacity
    • The &quot;Bubble&quot; Denouement
      • Plaza Accord of September 1985
        • yen appreciated
        • exports fell
      • Domestic asset bubble broke
        • home demand fell
      • Foreign producers recovered
        • skills improved
        • light truck / minivan boom favored them
    • Today’s status
      • Huge excess capacity within Japan
        • 10 years of delay while hoping for recover ( cf . GM)
        • Little restructuring until 2000, and then only at a few assemblers
      • Aging labor force & population
        • costs will rise
        • demand won't
      • Debt, poor profitability
        • can Japanese firms invest abroad profitably??
    • Looking Forward
      • Improved efficiency in Japan??
        • continued exit / restructuring esp. at parts firms
      • Maturation in other markets
        • international expansion will slow, firms will see occasional sales downturns
      • How to manage a global firm?
        • few precedents in Japan
        • US firms don't always do well, either! (in 2000, Ford in EU)
        • Firms with high export shares (Honda, Mazda) remain vulnerable to exchange rate swings
    • Summary & Lessons
      • Many features of Japan reflect its economic transition from a developing country
      • The &quot;bubble&quot; legacy is still present 10 years later
      • Maturation will not proceed smoothly
      • How similar are the US? Korea? China?
    • Addenda
      • GDP growth chart
        • GDP
        • Unemployment
      • Big 3 cartel (oligopoly) era
      • Today's structure -- competition galore!
      • Major parts suppliers
        • Sales size
        • Nationality (by headquarters location)
    • GDP growth Mfg growth U
    • Old Vs New: the Old
      • GM
      • Ford
      • Chrysler
      • AMC
      • (imports < 10% of market)
      • VW (Briefly in Pennsylvania)
      • ======
      • Big 3
      • ( + 1-2 little firms )
    • Old vs. New: the New NAFTA Producers
      • GM Subaru BMW
      • Ford Isuzu VW (Mexico)
      • Toyota Mitsubishi Saturn (GM)
      • Honda Mazda (AutoAlliance) (Hyundai*)
      • Chrysler Suzuki (CAMI) (VW - US*)
      • Nissan Mercedes-Benz (Volvo*)
      • Big 6 plus The Little 9 firms ( plus 13% imports !)
    • Top Suppliers - A Multinational Base (1998 OEM sales; *Subsequent M&A)
      • Delphi $26 bil Dana $7 bil
      • Bosch $18 bil Aisin Seiki $7 bil
      • Visteon $18 bil Valeo $7 bil
      • Denso $12 bil Yazaki $6 bil
      • Lear* $9 bil Magna $6 bil
      • JCI $9 bil Mannesmann $6
      • TRW* $7 bil LucasVarity * $5
      • US German Japanese Other
    • Bibliography
      • David Halberstam, The Reckoning . 1986 .
        • A good read, and a good depiction.
      • Maryann Keller, Rude awakening : the rise, fall, & struggle for recovery of General Motors . 1989.
        • Another good read. See also her Collision: GM, Toyota, Volkswagen and the Race for the 21st Century , 1993.
      • Japan Automobile Manufacturers Association: http:// www. jama .or. jp
        • Includes auto industry overview .pdf file and current statistics
      • Mike Smitka, Competitive Ties . Columbia University Press, 1989.
        • The parts sector in Japan
      • Department of Commerce, Office of Automotive Affairs: http://www. ita .doc. gov /td/auto/
        • US data, links, trade data
      • Keizai Koho Center Japan: An International Comparison (Annual, 1998-2000 available online) www.kkc.or.jp/english/activities/publications/aic2000.pdf
        • Handbook of statistics on social / political / economic facets of Japan. 100 pages of downloadable tables & graphs, most with comparative data for the US and EU.