As the worldwide auto industry enters the 1990s, the Japanese are still in command, still holding with a vise-like grip to the competitive edge over Detroit's auto makers that they first asserted more than a decade ago.
Despite a 10-year, multibillion-dollar effort by the American auto industry to catch up with Japan in terms of reliability and overall quality, the Japanese are still building better cars.
Today, Japanese cars are still not only more trouble-free but also tend to be more stylish and appealing than those offered by the domestic industry.
"Without a doubt, the Japanese won the 1980s," said Chris Cedergren, an automotive analyst with J. D. Power & Associates, a research firm in Agoura Hills, Calif., that publishes studies that are considered, both here and in Detroit, to be the last word on automotive quality. "The Japanese are winning the war."
Even Detroit executives--who usually like to publicize only their own quality gains--quietly admit that they have failed to catch Japan during their decade-long race.
"We keep track of who is first in quality, and it bounces back and forth between Toyota and Honda, mostly," conceded Dan Rivard, Ford's executive director for process and product quality improvement. "They are still a little further ahead of us, and so we have to move faster than we did in the 1980s to catch them."
This winter, Detroit is paying an awful price for its failure to close the quality gap in the 1980s. A free-fall plunge in car sales has forced General Motors, Ford and Chrysler to lay off tens of thousands of workers during the last few months. A staggering 42 of 62 Big Three assembly plants are being shuttered at least temporarily during January.
The Big Three are girding for their worst slump since the recession of the early 1980s--at a time when Japanese plants are continuing to run at full tilt. Chrysler Chairman Lee Iacocca said recently that 1990 could be Detroit's "toughest year in a decade."
To be sure, the Big Three auto makers have dramatically improved the quality of their cars over the last 10 years, a trend that has, at the very least, kept America in the ballgame. Ford's internal surveys, for instance, show that the company posted a 60% quality improvement between 1980 and 1989.
Since 1985, when J. D. Power began its surveys of initial automotive quality--in which it asks people who have recently bought new cars to rate their driving experiences--the number of defects reported by domestic car owners has declined by nearly 40%, including an 8% drop in the last year alone. One domestic car--the Buick LeSabre--was even ranked by Power as the No. 2 trouble-free car sold in America in 1989, trailing only the Nissan Maxima.
Indeed, Detroit has produced its share of winning products over the last decade, cars that were not only well-built but that consumers found compelling as well. Ford's Taurus helped redefine automotive styling, while Chrysler's mini-van single-handedly created a whole new market.
Japanese government and industry officials, who were stunned by the shoddiness of American workmanship in the late 1970s, are now equally impressed by the speed with which the domestic industry has turned its quality around.
Some even say--perhaps in an effort to be diplomatic--that they believe Detroit is starting to catch up.
"My personal opinion is that the quality of American cars has increased, and that the quality gap between the U.S. and Japan has absolutely narrowed," said Hajime Ito, deputy director of the automobile division of Japan's Ministry of International Trade and Industry, the government agency that sets industrial policy for Japan.
"I don't think Japanese cars will ever come to dominate the American market completely, because American cars are getting better and better," Ito said in an interview.
"I've seen dramatic improvements in the Big Three, especially at Ford, which has drastically changed itself," said Shoichiro Irimajiri, Honda's senior managing director in charge of worldwide manufacturing and one of the most respected engineers in Japan.
But many outside analysts believe that the Japanese are, in fact, widening their quality lead once more, after several years in which Detroit did narrow the gap. Although the Japanese government has recently complained to Japan's auto makers that they are letting quality slip in an effort to keep up with the worldwide demand for their products, independent quality surveys show that Japanese cars are actually better than ever.
J. D. Power's surveys--perhaps the only quality measurements used internally by every major auto company in Japan and the United States--have found that while the domestics reduced their defects by 8% in 1989, the Japanese cut theirs by 17% to an all-time low, effectively opening up a wider quality gap over Detroit. In 1988, measured by defects per 100 cars, the Japanese had an 18% quality advantage over the domestic industry; in 1989 the gap was 27%, according to J. D. Power.
"The quality gap is still there, and if anything, it's getting bigger," Cedergren warned. "The domestics are certainly improving, but the Japanese are too. The domestics are now only about where the Japanese were in 1983 or 1984."
In addition, the Japanese are meeting those high quality standards with dozens of brand-new products--sophisticated, technically advanced cars representing breakthroughs in automotive design and engineering. At this winter's auto shows, the latest offerings from Detroit already look dated next to Japanese products like the 1991 Toyota MR2 or the 1991 Mitsubishi 3000GT.
The results of all this have been obvious. Japan's share of the American car market has risen inexorably throughout the decade. Today, one of every four cars sold in America comes from the Japanese--more if the Japanese-built cars hiding behind American nameplates are included. In fact, the Japanese, through myriad joint ventures and other partnerships with American firms, are actually building some of the most stylish and attractive cars sold by the Big Three, including the Ford Probe, Plymouth Laser, Geo Storm and next year's Dodge Stealth.
Collectively, the Japanese now sell more cars in America than does Ford, and they are rapidly catching up with industry leader General Motors. In California, where the Japanese control nearly 40% of the market, the battle may already be over.
"It scares the hell out of me to drive around Los Angeles," one GM marketing executive conceded.
A new study by the University of Michigan predicts that conditions will only get worse for Detroit: It forecasts that the U.S.-Japan trade deficit in automobiles will grow by 36% by 1993.
Fortunately for Detroit, however, top American auto executives are no longer kidding themselves about quality, as they did for so long in the 1970s and early 1980s. Increasingly, they are willing to admit their mistakes and to acknowledge they still have more work to do.
"Our problem, in General Motors and throughout the industry, is the wide variation in quality from one car to another that we have," said J. T. Battenberg, vice president and group executive of General Motors' Buick-Oldsmobile-Cadillac Group, and thus the man in charge of all large car manufacturing at GM.
"The Japanese are more consistent and have smaller variations," Battenberg added. "Our task is to get all of our cars at the same high quality levels."
But despite a sense of urgency that now permeates Detroit, most outside observers still do not believe that the Big Three have the proper understanding of what it will take to match the Japanese on quality.
"The quality gap is not only still there . . . but the people inside the Big Three still really don't understand the problem," said automotive analyst Thomas O'Grady, who previously worked for both General Motors in Detroit and for a Japanese trading company in Tokyo. "The answers are right there in front of them, and they won't listen."
The main problem, say Japanese executives and industry analysts like O'Grady, is that the Japanese are in the process of redefining their understanding of quality--just when Detroit is still struggling to catch up under the old rules.
While Detroit is still frantically driving to reduce the number of measurable defects on its cars, the Japanese have moved on to work on less tangible forms of quality. As a result, they are opening a new, more subtle quality gap of which Big Three executives are still only dimly aware.
The Japanese have come to view quality in a much more comprehensive sense than have the Americans. Their new definition encompasses not just quality as the industrial science of building cars that do not fall apart, but also quality as the art of providing the customer with a better overall driving experience.
The Japanese have two very distinct phrases to describe their two ways of thinking about quality. The first is a more traditional form of quality they call atarimae hinshitsu --"taken-for-granted quality." That means building reliable cars that don't break down, that aren't plagued by squeaks and rattles.
The second is a newer and more complex form of quality they call miryoku teki hinshitsu -- "compelling" or "bewitching" quality. That means building cars that people hunger for, that they can't live without--cars like the Mazda Miata, the Nissan 300 ZX, the Lexus LS400, and the Acura Legend.
"There has been a shift in the standards of quality in Japan," said Katsuyoshi Yamada, general manager of quality control at Toyota.
"At first, we measured quality in terms of workmanship," Yamada added. "Now, the concept of quality is changing to take in standards of appearance, things like how the interior looks and feels; we are now trying to build that kind of quality into our cars at an early stage, during the design process."
Already, the Japanese are trying to sell this idea of "compelling," or intangible, quality to American consumers. In Nissan's controversial television ads for its new Infiniti luxury car line--ads that show scenes of nature rather than cars--the company tries to explain this very Japanese concept: "You know, it's not just a car, it's an expression of the culture, an aesthetic that is connected somehow to nature," the narrator intones in one Infiniti ad.
In practice, what it boils down to is this: The Japanese are showing American drivers that building quality cars for the 1990s means constantly pushing the technological edge. It means taking a risk on experimental styling, while also adding the kinds of new equipment that excite drivers. It means adding every imaginable gadget to appeal to young Americans who have become accustomed to a high-tech experience in every aspect of their lives, from the consumer electronics they play with at home to the personal computers they work with at the office.
But analysts complain that in Detroit, auto executives still don't understand that the Japanese are teaching consumers to demand more than just simple reliability and durability from their cars. "The Americans are still reaching for statistical measures of quality--counting defects--and they aren't looking at new concepts of quality like the Japanese are," O'Grady said.
The American companies are, in fact, still scrimping on the little extras in their cars that the Japanese consider so important to providing a quality experience. Detroit still refuses to put new features--like anti-lock brakes, multivalve engines and four-wheel drive--on less-expensive models for fear of depressing profit margins.
Thanks to a financial community that does not demand high profits each quarter, the Japanese auto makers don't feel those same financial pressures to cut corners on their products. Japanese "management can take a longer view, looking at profitability over longer terms, rather than over the short term," observed Mazda President Norimasa Furata.
That financial freedom enables the Japanese "to give you a better total package," in their cars, noted Maryann Keller, a widely respected auto analyst and author of a new book on GM's recent woes. "They give you a car that, when you sit in it, you say, 'There is more here than I thought.' "
But the Japanese have more than just a financial edge; ironically, they also seem to have a better understanding of American consumers than the American auto companies do.
"The Japanese are better in tune with what the younger car buyer wants," Power's Cedergren added. "I think the domestics, after all this time, are still out of touch with what a whole generation of car buyers--and I mean anyone under 45--wants in a product."
Remarkably, the Japanese have kept their competitive lead throughout an era of unprecedented turbulence for their industry, during which they have lost their once-formidable labor-cost advantage over Detroit.
Thanks to the rise in the value of the yen relative to the dollar and a worsening labor shortage in Japan, assembly-line workers in Japan actually command higher wages than their counterparts in Detroit; the average Toyota assembly-line worker makes the equivalent of more than $49,000, compared to just $40,000 at Ford. The Japanese have adjusted by mounting a massive, nationwide campaign to drastically upgrade the automation in their factories.
But by far the biggest challenge for the Japanese over the last 10 years has been the shift of much of their car production to the United States in a bid to ease trade frictions between the two countries. By the early 1990s, in fact, Japanese-managed plants--including joint ventures producing cars for both Japanese and American auto companies--will be building 2 million cars and trucks a year in eight assembly plants in the United States, making Japan's U.S. operations roughly the same size as those of Chrysler.
As a result, import quotas, first slapped on Japanese cars in 1981, have proved to be only a minor inconvenience.
Indeed, most embarrassing for auto executives in Detroit has been that they have had to watch as the Japanese have rapidly set up shop in the Midwest with plants that can approach the best quality levels of Japan--while employing the same kind of American workers that Big Three management once blamed for the poor workmanship in American cars.
"We screamed at them to come over here and build cars where they sold them, and now they are doing it--and they are still beating us," one Ford official said with a sigh.
Why are Japanese cars still better?
There are no simple answers, but most industry experts point to a handful of key differences between the way cars are designed, engineered and built by Tokyo and Detroit.
First, the Japanese can design and develop a new car much faster than American companies can. It often takes two years longer in Detroit to develop a new model than it does in Japan--virtually assuring that Japanese cars will always seem newer, fresher and just plain better. Although the Big Three have recognized the problem and are struggling to shorten their development schedules, they have yet to match the Japanese timetables.
In addition, the Japanese do a better job of planning ahead for problems, placing a much greater emphasis on what they call "designing-in" quality. When their engineers are designing new models, they spend a great deal of time making sure that the cars will be easy to build on the assembly line, taking a big load off their workers and their factories.
The Japanese have also developed far more sophisticated relationships with their parts suppliers, who often perform critical research and development work for the major auto makers. By bringing their parts suppliers into their development process, the Japanese are consistently able to offer newer and better technology for much less money than Detroit can.
They have also perfected the complex art of building many different models on the same assembly line--something Detroit has never quite mastered. In Japan, it is quite common for six different cars to be built on the same line. That allows the Japanese to offer a wider array of new models without going to the huge expense of building new plants.
But what may be most important is the Japanese attention to detail, which borders on the obsessive.
That willingness by both managers and line workers to focus on even the smallest problems until they are solved springs from a genuine sense of team spirit, which continues to elude Detroit's auto makers even after years of rhetoric about it.
The difference is that Japanese assembly-line workers are made to feel like members of a team, not through words but deeds. The pay gap between executives and the people on the shop floor is much smaller in Japan than in the United States.
The chief executive of a major Japanese auto company earns only about 10 times as much as the youngest line worker; top executives in Detroit, by contrast, usually make at least 50 times as much as their workers, and sometimes as much as 500 times.
Along with their fixation on detail comes a sense in Japan that quality isn't stationary. Instead, the function of quality control in Japan is kaizen-- the search for constant improvement.
So, what is perhaps most frightening for Detroit today is that the Japanese are, more than ever, a moving target.
"We are never satisfied," said Kaname Kasai, general manager of Honda's massive assembly plant in Sayama, Japan. "We are moving now so that in the next couple of years we can open the quality gap even wider over America."
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THE QUALITY TOP 20
The 1989 list of models making J. D. Power & Associates' top 20 for initial quality is markedly different from 1988's list. Twelve models that made the list in 1988 failed to make the grade in 1989. An asterisk denotes a tie between models for that rank. An N/A in the 1988 column means that the model did not exist that year.
'89 Rank '88 Rank Model '89 Problems Per 100 Autos 1 6 Nissan Maxima 83 2* 44 Buick LeSabre 89 2* 9 Toyota Corolla 89 4 16 Ford Crown Victoria 91 5 14 Mercedes-Benz S-Class 93 6 62 Mercury Tracer 94 7 1 Toyota Cressida 96 8* 30 Subaru Sedan 98 8* N/A Subaru 3-Door Coupe 98 10* 58 Buick Riviera 100 10* 5 Mercedes-Benz 190 E/D 100 12 N/A Dodge Spirit 101 13* 3 Mazda 929 103 13* 12 Honda Prelude 103 15 37 Mazda 323 104 16 35 Acura Legend 105 17 32 Mercedes-Benz 300-Series 106 18* 62 Honda Accord 107 18* 10 Porsche 911 107 18* 36 Toyota Supra 107
'89 Rank '88 Problems Per 100 Autos 1 106 2* 147 2* 109 4 118 5 116 6 158 7 80 8* 128 8* N/A 10* 158 10* 104 12 N/A 13* 100 13* 110 15 138 16 142 17 130 18* 168 18* 110 18* 148
Source: J.D. Power & Associates 1989, 1988 Initial Quality Survey