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Xerox University Microfilms 300 North Zeeb Road Ann Arbor, Michigan 48106 74- 21,688 CHANG, Chan Sup, 1933- THE JAPANESE MOTOR VEHICLE INDUSTRY: A STUDY OF THE HISTORY OF THE JAPANESE MOTOR VEHICLE INDUSTRY AND THE IMPACT OF THE JAPANESE MOTOR VEHICLES ON THE U.S. MARKET. The American University, Ph.D., 1974 Business Administration University Microfilms, A XEROX Company, Ann Arbor, Michigan THE JAPANESE MOTOR VEHICLE INDUS THY: A STUDY OF THE HISTORY OF THE JAPANESE MOTOR VEHICLE INDUSTRY AND THE IMPACT OF TEE JAPANESE MOTOR VEHICLES OH THE U .S. MARKET ty Chan Sup Chang Submitted to the Faculty of the School of Business Administration of the American University in Partial Fulfillment of the Requirements for the Degree o f Doctor of Philosophy i n Business Administration D is s e r ta tio n A dvisory Commit1;e h im njhima# o f th e D o q to ral Comm ittee: Chairman jChairm (197U) The American University Washington, D.C. aas W ism-is imivEisiTY liebaby ABSTRACT The objective of this dissertation is to identify the reasons behind the success of the Japanese motor vehicle industry and the impact of Japanese motor vehicles on the U.S. market. The growth of the Japanese motor vehicle industry is a very impressive one. The w riter tries to find the reasons which can explain such accomplish­ ment. He identifies three major reasons: l) the positive and consistent policy of the Japanese government for the motor vehicle industry, 2) the aggressive entrepreneurship of motor vehicle manufacturing companies in Japan, and 3) the encouraging role of the Americans, both in supplying technology and in providing procurements as an accessible market. The Japanese government has given higher priority m its policies to the motor vehicle industry in most times for the national defense until the end of World War II, and for economic progress for the post-war period. Although there were days of ambiguity in the government policies for the motor vehicle industry, the policy to stimulate the growth of the motor vehicle industry has been consistently implemented. The entrepreneurs in the motor vehicle industry have also contributed to the develop­ ment of the industry through the profit motive along with the pride of their contribution to the growth of their nation. However, the w riter has also identified some unique events in Japan which had a great impact on the develop­ ment of the industry. They were political, military, and natural events; such as, l) the Kanto Earthquake of 1923, 2) World War II, and 3) the Korean War. Except for the unfavorable impact of the final stage of World War II, most of these events had a favorable impact on the development of the Japanese motor vehicle industry. The Japanese had an opportunity of access to the assembly plants of GM and Ford after the Kanto Earthquake. They also founded a strong base for the motor vehicle industry during those years of militarism for their national defense. The Korean War gave a springboard to the Japanese through which the industry could accomplish a remarkable development in the future. As a third major reason for Japanese accomplishment, the writer believes that the United States has played a great role in the development of the Japanese motor vehicle industry in two aspects: l) American technology transfer to the Japanese motor vehicle industry, under both commercial contracts and American m ilitary procurements and 2) American permissiveness toward Japanese motor vehicles in the U.S. market. The Japanese motor vehicle industry utilized American technology from the beginning by modeling after American motor vehicles. After General Motors and Ford established assembly plants, Japanese learned American technology. When Toyota built its factory, it modeled it after the Detroit system, and Graham-Paige provided a "turnkey plant" to Nissan. When Japan was under the control of the United States after World War II, American technology transfer was actively implemented to the Japanese mainly through the "Roll-up Operation Commercial transfers have continued since that time. This technology transfer made a sound foundation for the development of the Japanese motor vehicle industry. Americans have been very permissive toward Japanese motor vehicles exported to the American market in the sense that, under American trade policy no restrictions were imposed upon them, while American passenger cars were restricted in the Japanese market. The second part of the dissertation concentrates on the impact of Japanese motor vehicles on the U.S. market. The w riter adopted a comparative approach because it is almost impossible to predict the permanent position of Japanese motor vehicles in the U.S. market. He tries to assess the impact by- comparing market penetration of the Volkswagen and Japanese motor vehicles. He proved that Japanese motor vehicles were as important as the Volkswagen in the U.S. market. The w riter also discusses the impact of Japanese motor vehicles on the U.S. market by reviewing the possibility of establishing assembly plants of Japanese motor vehicles in the United States. Although it is very hard to predict such a possibility because it is based on both economic and non­ economic (cultural) factors, he has forecasted this event in the future. ACKNOWLEDGMENT The w riter is deeply indebted to Prof. Howe Martyn, Director of the International Business Program and Chairman of the Dissertation Committee, for his guidance, understanding, and encouragement during those years when the w riter studied at the American University. The writer is also indebted to Drs. Daniel L. Spencer and Kirk L. Bums for their advice and encourage­ ment. In particular, Dr. Daniel Spencer has been heavily involved in encouraging the w riter from the beginning of this dissertation until it was f in is h e d . The w riter wishes to express his sincere thanks to Dr. Herbert Glazer for his excellent advice at the initial stage of this dissertation, and to Mr. Joseph Caulfield for his final editing of the dissertation into readable English. Dr. George Allen, Chairman of the Doctoral Committee of the School of Business Administration, The American University, has been most helpful in assisting with administrative processes. v TABLE OP CONTENTS PAGE INTRODUCTION 1 PART I . A REVIEW OP THE HISTORY OP THE JAPANESE MOTOR VEHICLE INDUSTRY CHAPTER I . BACKGROUND AND BEGINNINGS 8 A Niief History of World Motor Vehicles Japanese Economic Development, 1868-1971 Origins of the Japanese Motor Vehicle Industry General Motors and Pord Assembly in Japan I I . THE PERIOD OP JAPANESE MILITARISM 32 Restriction on Foreign Manufacturers by Japanese Militarists Grovth of Toyota, Nissan, and Other Motor Tehicle Manufacturers The Japanese Motor Vehicle Industry During Vo rid War II I I I . THE TOST-WAR RECOVERY AND U .S . INFLUENCE 53 The American Occupation of Japan The Korean War and the Japanese Motor tehicle Industry Government Policies and Regulations on the Japanese Motor Vehicle Industry IV. THE DEVELOPMENT OP THE INDUSTRY, 1 9 5 5 - 1 9 7 1 .......................................76 Physical Expansion of Motor Vehicle Manufacturing Companies Efficiency of Motor Vehicle Manufacturing Companies Merger Movement of the Japanese Motor Vehicle In d u stry vi CHAPTER PAGE V. THE MOTOR VEHICLE PARTS INDUSTRY........................................................ 93 Characteristics of the Japanese Motor Vehicle Parts Industry The Government Policy on the Motor Vehicle Parts In d u s try R & D in the Motor Vehicle Parts Industry PART I I . THE U .S.

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