Foreign Auto Makers Cut Use of Japanese Parts
Burdened by skyrocketing costs as a result of the rapid rise in the value of the yen, Japanese-built auto parts are starting to lose out in the international marketplace, auto industry officials say, to components produced in Europe, the Third World--and the United States.
A dramatic example of how the yen’s appreciation has made Japanese parts less competitive has come in Malaysia, which plans to export its first subcompact passenger car, the Proton, to the United States next spring.
On Tuesday, the president of Global Motors, the U.S. distributor for the Proton, said here that the Malaysians are in the process of increasing their imports of American-built components to replace Japanese-produced parts that have become too expensive as a result of the yen’s steep rise in value.
As a result, William Pryor, Global’s president, said in a press briefing here Tuesday, the Malaysians will be importing about 150 parts from the United States, as well as others from South Korea, Taiwan and Europe, to reduce Proton’s heavy dependence on Japanese components.
The Japanese-designed Proton is now being assembled in Malaysia from parts kits shipped from Japan’s Mitsubishi Motors. Mitsubishi even holds a small stake in the Malaysian joint venture, which produces the Proton. Pryor said that 45% of the Proton’s content has been coming from Japan; as a result, its production costs have gone up as the yen’s value has increased.
But to keep the Proton’s sticker price in the $5,000 range when it is introduced next year, the Malaysians and Global Motors have already identified ways to reduce their use of Japanese parts by 30%, Pryor said.
“I believe this kind of shuffling of sourcing patterns is going on all over the Third World, and in the board rooms of Detroit, with people looking for non-Japanese parts,” said Pryor.
Hyundai, the South Korean auto maker which has stormed the American market with its successful Excel subcompact, is also planning to reduce its reliance on Japan. Although the Excel is based on a Mitsubishi design, Hyundai is planning to drop Mitsubishi as its automatic transmission supplier, and will move transmission production from Japan to Korea, Hyundai spokesman Ted Kade said Tuesday. Hyundai, which already imports a number of Excel parts from the United States, including tires, windshield glass and spark plugs, is also looking for more American suppliers, he added.
But even the American manufacturing operations of the Japanese auto makers are starting to look for non-Japanese parts to reduce their vulnerability to the volatility of the yen-dollar exchange rate.
Honda recently announced plans to increase the U.S. content in its Ohio-built passenger cars from 50% to 66% by 1990. Diamond-Star Motors, the Illinois joint venture between Chrysler and Mitsubishi, originally planned to import 60% of its parts from Japan, but the shift in the yen’s value has forced it to plan on buying 55% of its components from the U.S. and Canada, spokeswoman Robin Skiles said Tuesday.
