‘81 Warning Came True, Toyota President Says
As Japan begins the seventh year of its restraints on exports of passenger cars, Shoichiro Toyoda, president of Toyota Motor Corp., says that his 1981 warning that curbs on competition from Japan could become an “opiate” for the U.S. auto industry has come true.
Speaking at a Yomiuri International Economic Symposium, Toyoda recalled that he had warned that the export curbs would not solve America’s problems. Rather, he recalled predicting, the curbs “would become an opiate, leading (American) management to rely indolently upon politics, spoiling a spirit of challenge and leading to a neglect of progress and managerial efforts while foisting upon consumers a great imposition.”
He added, “Unfortunately, in fact, this trend has appeared, in part.”
Toyoda cited a Brookings Institution study that calculated that American consumers, in 1984 and 1985 alone, were forced to pay an extra $27 billion because of higher car prices and the use of automobiles with inefficient fuel consumption.
Today, because of the steep appreciation of the yen, he said, the advantage that the Japanese automobile industry had over American car makers because of lower manufacturing costs no longer exists. Yet, Japan’s share of the U.S. passenger car market has not decreased significantly. Last year, it was 20.8%, compared to 21.8% in 1981, he pointed out.
The big change brought about by the export restraints, he said, has come in the profits of the Big Three U.S. auto makers, which last year totaled $7.6 billion. Put together, all of Japan’s auto makers registered $2.6 billion in profits last year, only about a third of the American industry’s profits, he said.
“Insofar as the auto industry alone is concerned, the rationale for continued export restraints has become very shallow,” Toyoda said.
The auto maker pronounced himself resigned to what he called the “political reasons” that induced the Japanese government to order yet another year of restraints, beginning Wednesday, fixing the level at 2.3 million cars for the 12 months through next March 31.
Nonetheless, he reiterated his belief that “competition and cooperation”--the latter through direct overseas investment, joint ventures, technology transfers and joint research and development--ought to be the rule for the global auto industry.
In Japan, he said, competition had provided the main spur for the development of an industry that increased exports to more than 6 million vehicles last year from 1.2 million in 1970, while more than doubling production to 12.2 million in the same period.
Citing what he called “the extraordinary competition” among Japan’s 11 auto firms, more than in any other country, he declared that “competition is the driving power of growth.”
Competition led Japanese auto makers, he said, to improve quality, lower prices and create attractive products while meeting the world’s stiffest auto emission standards.
“As a result, Japanese makers, at least in the field of small cars as they are used in Japan, have been able to manufacture cars with the highest reliability (and) quality, cleanest emissions and the most efficient fuel consumption in the world,” he said.
Toyoda made no direct reference to U.S.-Japan trade friction, which has reached a new crisis partly as a result of a $58.6-billion overall U.S. trade deficit with Japan last year, more than half of it in automobile trade. And he declined to answer a question about President Reagan’s decision to impose 100% penalty tariffs on Japanese electronics goods in retaliation against Japan’s alleged violations of a bilateral semiconductor agreement.
Instead, he cited General Motors’ joint venture company with Toyota in Fremont, Calif., which was set up in 1984, as one example of an American auto firm bucking the trend toward protectionism and “trying to recover international competitiveness (by) learning what should be learned from Japan.”
He said the joint venture took over a factory that, under GM, “was the worst in efficiency and the worst in labor-management relations of any GM plant.” Employing essentially the same workers, he said, Toyota’s management had instilled a team spirit in both labor and management and had raised “labor morale.”
An absenteeism ratio that averaged 20% when GM ran the plant has been slashed to 3%, he said. Productivity also has been raised to the point where “it is evaluated as the best at any GM factory,” he added.
Toyota, for its part, was learning how to carry out management in the United States.
The GM-Toyota experience, he said, “has become a good stimulus for the revitalization of the American auto industry” and the same trend is being repeated as a result of investments of Japanese auto makers in Europe and Asia, as well.
“In the history of the world auto industry, the Japanese auto industry is making a historic contribution,” he said. “The same can be said for other outstanding industries in Japan.
“The efforts of our country’s industries are giving a fresh stimulus to the industries of the world and are contributing to vitalizing industry through the process of mutual learning,” Toyoda said.
He also dismissed an opinion now being expressed by some Japanese economists that Japanese auto firms are building “excessive production capacity” in the United States. He said that view ignores “the effect of competition.”
Japanese plants capable of manufacturing more than 2 million cars will be in operation in the United States and Canada by 1990 but Toyoda said he expects the extra competition from the new plants to add to total demand in the North American market without cutting into exports from Japan.
“With competition as the stimulant, new products will be developed to meet what consumers are really seeking. With efforts to reduce costs and improve quality (by all manufacturers), I believe a good result will emerge for both the American industry and American consumers” when the additional Japanese car production facilities go into operation, he said.
