Japan Research and Analysis
through Internet Information

by Yasuharu Dando

The Japanese Automobile Industry Has Broken a Taboo. (Japanese edition:1999/04/15)

Nissan, No. 2 domestic carmaker, is to cooperate with French Renault. It will be the fourth allied group in the world following GM, Ford, and Toyota. However, it should accurately be said, "Nissan is to be affiliated" as Nissan is financed 634 billion yen in total and its subsidiary companies are taken over. Renault sends its staff, such as the chief operating officer (COO) and the vice-president in charge of merchandise planning.

Advantages of Japanese cars have been lost.

How many cars are manufactured and sold in a year? "Demand for Cars in the World" says, "demand for new cars in 1997 is 52.4 million including 35.94 million passenger cars". And, "as for passenger car sales, 8.27 million in the United States, the largest car market in the world, followed by 4.49 million in Japan, in Europe, 3.53 million in Germany, 2.41 million in Italy, 2.17 million in England, and 1.71 million in France".

"The total number of the domestic and overseas (6.34 million) productions by Japanese makers in 1997 is 17.32 million which has reached 32 % of the number of the world automobile production", cited from "World Automobile Manufacture". It is noticeable how large the automotive industry is, and how deep Japanese cars have stepped into the world economy when we look at these figures.

Automobile issues seem to be an interesting theme, even academically regardless of the fields, liberal arts or science. University web pages have a lot of laborious works including various kinds of reports. I would like to develop this story referring to those works.

"Relationships between Japan and the United States in the Automotive Industry" begins with a paragraph as follows. "The production of automotive industry has markedly increased 400 times in the last 40 years. Soon after World War, the industry produced only 30,000 cars in 1950, while it exceeded 10 million in 1980s". At its birth, "the first Japanese car manufacturing companies at a full scale are established by Nissan Automobile in 1933 and by Toyota Automobile in 1937".

"The then Japanese Government enacted 'Automotive manufacturing business law' to foreclose the American Big Three monopolizing the Japanese market because the Government.

needed to develop nationalization of car manufacturing, especially of military automobile manufacturing, for warlike purposes. Toyota and Nissan became the sanctioned companies based on the law."

After the War, Toyota has pointed to "a great boorish company". On the other hand, Nissan had been in the central part as a national company concerned with policy, keeping a close relationship with the Government and the Nihon Kogyo Ginko (the Industrial Bank of Japan). It is Toyota which has established the Japanese style system for mass production of cars, and its "kanban hoshiki (signboard formula)" is well known.

"The formula is that they stopped prospect production of the parts. Instead, a former stage of work each time produces and supplies only a certain amount of the parts that have been consumed by a later stage. At that time, 'kanban', a slip to direct its production, is handed to the former stage, so that the name 'kanban' started to be used".

"It is also called 'non stock formula' as they do not have to prepare the partly completed stock. The feature of the non-stock formula is not to have any stock of parts. It is enabled by the combination of Just in Time (JIT: delivery at accurately directed time) and 'frequent delivery for small amounts'".

Such a kind of highly effective production formula was standardized in every domestic company. They have stored up knowledge with the implementation of quality control (QC) and with the self-control by the QC circles respectively. Later, those devices were called the "lean" production system, which does not have any waste during the production process.

In 1980s, those serviceable, economical, and high quality cars were exported to the United States in bulk corresponding with consumers' tendency to demand small-sized, fuel efficient cars due to the oil crisis. While, the Big Three were manufacturing only large size cars which yield high profits, they did not have any measures though they were cornered into closing down their plants and laying off their employees. At last, they asked their government to implement the import restrictions. Thus, some friction in the automobile trade between Japan and the United States broke out.

Because of the voluntary control on Japanese exports, Japanese cars were sold at a premium. Once Japanese cars were recognized as "low price means low quality", but now they are "high quality cars with high prices". However, the counterattacks and technological catch-up of American carmakers have begun through some devices such as the joint corporation of Toyota and GM. Also it is so rapid.

"Accommodations and Changes of the United States (after 1985)" in "On Trade Issues between Japan and the United States" as mentioned below. "American business firms have begun to be aware of some facts. That is, the strong competitiveness of Japanese carmakers including competitive prices is supported by the unique production system of the Japanese industry. It is not in accordance with the common sense of the American car industry so far."

"Certainly Japanese cars must be judged victorious based only on the quality. However, it is also true that American cars are advantageous when they are judged based only on the price. Japanese makers need time to lead their counterpart in terms of costs. Similarly, American parts makers need time to overcome the quality of Japanese parts. It could be a logical conclusion".

American enterprises thoroughly reformed the production system by introducing the Japanese production formula, while, they struggled with closing down their plants and with the decrease in their working forces. The companies have been automating their plants utilizing the latest technology at the same time.

For example, Ford announced that it achieved a decrease of a total of 5 billion dollars in cost, and a 60 % increase in quality, and that it lowered by 40 % in the break-even point, from 4.2 million to 2.4 million cars. For the goal, they tried several measures, such as closing down 5 plants, laying off 40,000 people, and robotizing, from 1979 through 1986. As a result, Ford succeeded in gaining high profits in the late 1980s.

Similarly, the break-even point of North American business of GM lowered from 5.54 million in 1979 to 4.1 million cars in 1988. Chrysler realized a decline of break-even point from 2.4 million in 1980 to 1.1 million cars in 1988 as well.

They put forward the development of new merchandise, such as Ford Taurus and GM Saturn, supported by those fundamental vital forces.

The Japanese production system has opened the Pandora's box.

Basically, North American market easily yields profits because it accepts some hundreds of thousands of cars to one commodity type. On the contrary, the Japanese market in which sometimes only around 10,000 cars are accepted in one commodity type can hardly produce high profits due to the large developmental costs.

A reason for Honda's activity, a smaller maker than Nissan, is a bombardment of successful commodities. It is impossible for Nissan to be like Honda, because it seems to keep an assortment of cars that somehow resemble successful commodities made by other makers.

At one time Renault was nationalized due to the slump in business. Even now the French Government is a chief stockholder. Still, the company succeeded in recovering, and is able to invest a huge sum of 643 billion yen in Nissan. "Japanese Production System in the Future" introduces the penetration of the Japanese production system into various countries of the world. Of course, it includes France, as mentioned below.

"They introduced JIT system and TQC to increase its productivity. In addition to the automated production technology, and the reorganization of the office, the introduction of 'kanban system' and 'versatile worker system' was implemented. Then, enterprises that carried out those reformations have made great strides in their business results."

"Introduction of QC circle activities has led to various outcomes. First, there was a large decrease in wastage by misuse of tools and parts. Costs for abandoned parts decreased from 180 to 85 francs. Second, the appointed dates of delivery have been pushed up. Third, time for change in line of action has been

shortened as well. The shortened time for the auto assembly production line is indispensable to a successful JIT system. A French automobile plant shortened the time for line of action for pressing from 8 hours to a couple of hours, and for other matters from 2 hours to 15 minutes."

"The lean production formula" has come into wide use all over the world, though it was thought to be under Japanese patent. I, however, was skeptical based on two reasons, since it became popular. First, labor is a human culture and has a close relationship with the condition of the society. It is questionable that someone can entirely change a labor culture of a country.

"Japanization of European Automotive Industries from the 1980s through the 1990s" tells people's reaction to its introduction in Europe. "Europeans do not agree with the Japanese system, because they have their own values. They have a common world view, which is 'individual labor itself has a certain value', while the Japanese system denies it."

According to a book review, "an Experience of Volvo-an Alternative to Lean Formula", Swedish Volvo has devised a system differing from the production system using conveyer belts. I felt relieved in a sense as that is just like Volvo. The first ranking person on the Volvo studies says, “the lean production formula is not the last destination for automobile production systems”.

Another skepticism of mine is what is actually happening. Total quality control in a company as a whole (TQC) has been greatly successful, but it is possible for anyone if s/he continues to take an accurate measurement of statistical data after all.

Thoroughness is not only a Japanese-exclusive possession. Rather, Americans are at an advantage in terms of consistent work. For example, a gap in the accuracy level in the space development between American NASA and Japanese NASDA is not mere one letter of the alphabet. It is a gap between an adult and a child. My fear, if Japan can solely rely on the lean production formula, has come true.

Productivity of development, of sales, and of indirect departments becomes a new issue when each production system does not differ so much from another. For instance, Japan is still beneath Italy in the superb industrial design, and many people think that productivity of white-collar workers in Japan is considerably low. "A Viewpoint on Productivity of White-collar Workers" reports on very hard working American white-collar workers as follows.

"In a company split into independence from AT & T", "it is struggling the sharp reductions in the costs staking its survival, as the competition in communication industry is dreadful. The most effective method to lower the costs in the short term is to cut its working forces." "The number of the workers has become half during the last 10 years."

"The work load is increasing fairly well compared with before. We can handle an equal or more load of work with half the previous working force, because the technology in computer and communication has developed. Managers themselves input data into computers, so that, clerical assistants are not needed. The development of communication technology also made it possible to access to the host computer of the company from any location."

"The work load for each manager has drastically increased. Now, they have to draw up all the documents by themselves. They are also inseparable from a computer even at home orduring their business trips. It is said that their substantial working hours per week are over 60 hours."

The widespread lean production formula has broken a taboo like opening the Pandora's box, which leads us to an endless competition. We who stepped into the situation by ourselves have handicaps whose seriousness is similar to the one of the white-collar worker problem. Low productivity of the Japanese bureaucracy and politicians is indisputable now as the good times with growing economy and with the easy life style to deal with only routine duties has gone. This is a kind of strategic issue, which is different from deregulation. Even the buying power changes when people cannot actually feel enough wealth of the face value with their given salary.

Environmental Issues, and the Age of Asian Motorcars

The automobile industry is to focus on electric cars from this time on. Now, every maker in and out of Japan is studying it. The amount of investment for fuel cells must inevitably influence the company's survival. Benz assumes to load them into compact cars from the beginning. The United States obviously tries to wrestle with electric cars as a national project.

The environmental issues related to automobiles have considerable effects on us, particularly because we live in the eastern tip of Asia. Air pollution in Asia connects directly with the acid rain on our land. Asian motorization is beginning on a full scale from now on. Should we allow massive investment of cars, which are made with the conventional way of thinking? Improvement of the Asian environment polluted with smog is inseparable from the strategy of Japanese carmakers.

(special thanks to translation by j-watch)

Related work!!---"Large amount judgment of invention countervalue projects Japanese corporate society."
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(under printing by "electronic journal of contemporary japanese studies" May 2004)

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