Japan Said to Feel Pressure to Limit Auto Plant Growth
In an unusually aggressive display of its power over Japan’s auto industry, the Japanese government is pressuring the nation’s auto companies to refrain from expanding their manufacturing operations in Japan for fear of further damaging trade relations with the United States.
Japanese auto industry officials say the Ministry of International Trade and Industry, the government agency largely responsible for Japanese industrial policy, is working hard to stop some of the nation’s biggest auto makers from building new assembly plants in Japan.
Even though Japanese auto executives say they want to expand only in order to satisfy the soaring demand for new cars in Japan’s booming domestic market--and have no plans to use the additional car-making capacity to increase exports--Japanese government officials apparently believe that the expansion will put pressure on at least some Japanese companies to ship more cars overseas.
The government is trying to reduce the industry’s reliance on exports and to encourage more balanced trade patterns in the auto sector--which is still the largest single contributor to America’s trade deficit with Japan.
While Japanese passenger car exports to the United States are limited to 2.3 million a year under quotas imposed by the Japanese government, the Japanese have been shipping fewer than that in recent years because they have shifted much of their auto production to the United States.
Yet the Japanese government still apparently believes that any increase in direct exports would cause a furor in America. Hagime Ito, deputy director of MITI’s automobile division, noted in a recent interview that he thinks it would be “politically risky” for Japan to drop its restrictions on exports to the United States.
Government officials have not publicly announced their anti-growth campaign, and few auto industry executives are willing to openly discuss it.
But the government’s new policy so far seems to have had its biggest impact on Mazda, Japan’s fourth-largest auto maker. So, not surprisingly, Mazda officials have been more vocal in their complaints than executives at the other Japanese companies.
The Hiroshima-based auto maker is upset about the government’s efforts because Mazda has just begun a long-range strategic program to dramatically expand its presence in the Japanese home market.
Mazda has just passed Honda to become the third-best-selling car line in Japan. Now, the stunning growth of the overall Japanese market--sales have skyrocketed to 7.2 million cars and trucks in 1989, up from just 6 million two years ago--has enticed Mazda to set some ambitious targets for the 1990s. The company’s goal is to nearly double its Japanese sales, from roughly 480,000 in 1989 to 800,000 by 1992.
To meet that target, Mazda has decided to expand production at its modern assembly complex at Hofu in southwestern Japan.
The government tried to persuade Mazda to cancel its Hofu expansion. But Mazda responded by agreeing instead to suspend operations at one of its older assembly lines in Hiroshima at the same time it completes its expansion at Hofu in 1992. However, Mazda has no plans to lay off any workers in Hiroshima, because the company is already struggling with a labor shortage.
“MITI is advising the auto makers not to expand facilities, so we have decided to expand in Hofu and close down in Hiroshima,” Mazda spokesman Atsuo Katada said. “Basically, we will suspend some of the old facilities in order to expand our new facilities,” he added.
Ironically, the government’s fears of additional domestic manufacturing come at a time when many of the largest Japanese auto makers are also planning to dramatically expand their operations in the United States and Europe. Nissan, Toyota, Honda and Mazda have all announced plans to increase the number of U.S.-made cars and auto parts they send back to Japan from their American factories in the early 1990s.
Most notably, Nissan has altered its long-range strategic plans to rely more heavily on U.S.-built cars and trucks to meet its sales targets in the American market.
Nissan has been depending on Japanese imports for roughly two-thirds of its sales in the United States, with the remainder coming from its big assembly complex in Smyrna, Tenn., where Nissan produces light trucks and subcompact cars. But the company has announced plans to expand its Smyrna factory to turn it into the largest single auto plant in the United States. With the extra U.S. car production capacity, Nissan expects that, by the mid-1990s, two out of every three vehicles it sells in America will be built in the United States, according to Kiyofumi Morimoto, a Nissan managing director.
“We are now moving from a two-to-one ratio in favor of imports compared to cars from Smyrna, to a one-to-one ratio between imports and Smyrna,” Morimoto said. “We hope in the future it will be two-to-one in favor of Smyrna.”
