The American and Japanese Auto Industries in Transition
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The American and Japanese Auto Industries in Transition The American and Japanese Auto Industries in Transition Report of the Joint U.S.-Japan Automotive Study edited by Robert E. Cole and Taizo Yakushiji conducted under the general direction of research chairmen Paul W. McCracken and Keichi Oshima Ann Arbor Center for Japanese Studies The University of Michigan Tokyo Technova Inc. 1984 Open access edition funded by the National Endowment for the Humanities/ Andrew W. Mellon Foundation Humanities Open Book Program. Copyright© 1984 Center for Japanese Studies The University of Michigan 108 Lane Hall Ann Arbor, MI 48109 and Technova Inc. 13th Floor, Fukoku Seimei Building 2-2 Uchisaiwai-cho, 2-chome Chiyoda-ku, Tokyo 100 Japan Cover Design by Carrie Di Lorenzo Calligraphy by Shunichi Kato Library of Congress Cataloging in Publication Data Joint U.S.-Japan Automotive Study. The American and Japanese auto industries in transition. Includes bibliographical references. 1. Automobile industry and trade — United States. 2. Automobile industry and trade — Japan. I. Cole, Robert E. II. Yakushiji, Taizo, 1944- . III. Title. HD9710.U52J64 1984 338.476292W52 84-5814 ISBN 0-939512-20-3 Printed in the United States of America ISBN 978-0-939512-28-7 (paper) ISBN 978-0-472-88001-0 (ebook) ISBN 978-0-472-90205-7 (open access) The text of this book is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License: https://creativecommons.org/licenses/by-nc-nd/4.0/ Contents Figures vii Tables ix Foreword xi Preface xiii Policy Board Members xv Research Scholars xvii Policy Board Recommendations xix Executive Summary xxi Chapter 1: Introduction 1 Chapter 2: Postwar Evolution of the Japanese and American Automotive Industries 11 Chapter 3: Internationalization of the Automobile Industry 43 Chapter 4: Macroeconomic Issues and Bilateral Trade Relations 61 Chapter 5: The Automobile Industry and Public Policy 79 Chapter 6: Market Factors Influencing the Automobile Industry 97 Chapter 7: Manufacturing Cost Differences 111 Chapter 8: Product and Process Evolution 131 Chapter 9: Manufacturer-Supplier Relations 151 Chapter 10: Human Resource Development and Labor Relations 173 Chapter 11: Human Resource Development: Management and Technical Personnel 189 Chapter 12: Policy Implications 203 Appendix A: Working Paper Series 221 Appendix B: List of Project Sponsors 223 Figures Figure 1. United States and Japan Domestic Motor-Vehicle Production, 1945-1982 14 Figure 2. U.S. and Japan: Record Years in Motor-Vehicle Production 16 Figure 3. Big Three Share of Domestic Market and the Number of Companies Manufacturing Passenger Cars in the U.S. 18 Figure 4. Production and Export of Japanese Passenger Cars 24 Figure 5. Japanese Patent Applications 34 Figure 6. Motor-Vehicle Exports: Selected Countries 50 Figure 7. The Real Price of Gasoline and Vehicle Type 106 Figure 8. Overview of Typical Passenger-Car Manufacturing Stages 143 Figure 9. Salary-Grade Distributions 200 vn Tables Table 1. Projected Future Reliance on Suppliers 30 Table 2. 1981 World Trade in Passenger Cars 52 Table 3. Impact of Development Bank Loans in the Auto-Parts Industry, 1960-1965 87 Table 4. Automobile Ownership and Per Capita Income 98 Table 5. U.S. Energy Consumption by Sector and by Primary Source, 1978 102 Table 6 Primary Japanese Energy Supply in 1979 104 Table 7 Japanese Energy Demand by Sector in 1979 105 Table 8 Reported Manufacturing Cost Differentials 114 Table 9 Proportional Allocation of Total Productivity/ Wage Cost Difference to Productivity, Wages, and Joint Effect 121 Table 10 Japanese Labor-Content Cost Advantage as a Proportion of U.S. Labor-Content Cost 127 Table 11 Forecast for the Range of Displacement of Gasoline and Diesel Passenger-Car Engines 136 Table 12 Forecast of Offshore Sourcing of Components 137 Table 13 Forecast of Material Usage 139 Table 14 Forecast of Transmission Usage in the U.S. and Japan 141 Table 15 Capacity of U.S. Final-Assembly Plants 145 IX Foreword In the Spring of 1980, the prospects for the U.S. auto industry stood at low ebb, and there were rapidly growing trade frictions between Japan and the United States. At that time, a number of us initiated a set of private discussions that led to the formal establishment of the Joint U.S.-Japan Automotive Study in September 1980. At the time of this writing, conditions have once again changed, and the sighs of collective relief can be heard widely throughout the respective auto industries. That the situation changed so rapidly in such a short time, however, should make us mindful that the future holds little promise of tranquility or ease of predictability. Paul W. McCracken Keichi Oshima Research Chairmen XI Preface This report was prepared for the Policy Board by the U.S. and Japanese research staffs of the Joint U.S.-Japan Automotive Study under the general direction of Professors Paul W. McCracken and Keichi Oshima, with research operations organized and coordinated by Robert E. Cole on the U.S. side, in close communication with Taizo Yakushiji on the Japanese side. The range of views within the Policy Board, representing widely varying backgrounds, perspectives, and interests, is great. The report is not what any one member of the Policy Board would have written. Therefore, each member reserves the right to his own views on specific matters. The sponsors listed on a subsequent page have joined the study with the intent to promote understanding and open dialogue on the subject of the U.S. and Japanese automotive industries. The report, while taking sponsors' views into account, does not necessarily reflect their individual or organizational views of issues covered in the report. Finally, individual researchers associated with the project do not themselves necessarily agree with all statements in the report. Notwithstanding, there was a substantial measure of consensus within the Policy Board and among the research scholars as to the nature of the problems and policy options of the auto industry. Therefore, we commend this report, produced by scholars in both countries, to the general public. The Policy Board of the Joint U.S.-Japan Automotive Study xni Policy Board Members Shoichi AKAZAWA Robert S. INGERSOLL President Chairman Japan External Trade The Japan Society Organization Former U.S. Ambassador to Japan David E. COLE Director Motoo KAJI Office for the Study of Professor of Economics Automotive Transportation The University of Tokyo The University of Michigan Julius L. KATZ Robert E. COLE Chairman and Chief Executive U.S. Project Director Officer Joint U.S.-Japan Automotive ACLI International Commodity Study Services, Inc. The University of Michigan James KNISTER Donald F. EPHLIN Vice President Vice President and Director Donnelly Mirrors National General Motors Department Paul W. McCRACKEN United Automobile Workers Edmund Ezra Day Distinguished University Professor of R. Eugene GOODSON Business Administration Group Vice President The University of Michigan Automotive Products Group Hoover Universal, Inc. Keichi OSHIMA Professor Emeritus, Engineering Takashi HOSOMI The University of Tokyo President Overseas Economic Cooperation Fred G. SECREST Fund Consultant Ford Motor Company xv XVI Policy Board Members John SMITH, Jr. Nobuhiko USHIBA Director Advisor Worldwide Product Planning Ministry of Foreign Affairs Group Former Japanese Ambassador to General Motors Corporation the United States Minoru TOYODA Shigenobu YAMAMOTO Chairman Executive Vice Chairman Board of Directors Toyota Motor Corporation Technova Inc. Yoshihisa YOKOYAMA Shoichiro TOYODA Executive Vice President President Nissan Motor Company, Ltd. Toyota Motor Corporation Research Scholars George BITTLINGMAYER Richard P. HERVEY Assistant Professor of Business Management Consultant and Administration President The University of Michigan Sigma Associates John CAMPBELL Masakazu IGUCHI Director Professor of Mechanical Center for Japanese Studies Engineering for Production The University of Michigan The University of Tokyo David E. COLE Motoo KAJI Director Professor of Economics Office for the Study of Automotive The University of Tokyo Transportation The University of Michigan Fumio KODAMA Associate Professor of System Robert E. COLE Engineering Professor of Sociology The Saitama University The University of Michigan Jeffrey LIKER Michael S. FLYNN Assistant Professor of Industrial Associate Research Scientist and Operations Engineering Joint U.S.-Japan Automotive The University of Michigan Study The University of Michigan Paul W. McCRACKEN Edmund Ezra Day Distinguished Mieko HANAEDA University Professor of Project Researcher Business Administration Technova Inc. The University of Michigan Lawrence. T. HARBECK Keichi OSHIMA Associate Research Scientist Professor Emeritus of Engineering Office for the Study of Automotive The University of Tokyo Transportation The University of Michigan xvn XV111 Research Scholars Vladimir PUCIK Adrian TSCHOEGL Assistant Professor of Business Assistant Professor of Business Administration Administration The University of Michigan The University of Michigan Haruo SHIMADA Richard C. WILSON Professor of Economics Professor of Industrial Engineering Keio University The University of Michigan Robert J. THOMAS Taizo YAKUSHIJI Assistant Professor of Sociology Associate Professor of Political The University of Michigan Science The Saitama University Tsutomu YASUI Manager, Overseas Operations Technova Inc. Policy Board Recommendations The Policy Board members of the Joint U.S.-Japan