Car Parts’ Quality at Issue : Japanese Say They Want to Buy, but U.S. Goods Fall Short
Before a squad of Toyota engineers descended on the Danville, Ill., plant where Flex-n-gate Co. produces truck bumpers last year, the company’s future with Japan’s largest auto maker was uncertain.
One of a small number of U.S. auto parts suppliers to have established a relationship with a Japanese auto maker, Flex-n-gate had been supplying Toyota with bumpers for its pickup trucks since 1987. But Toyota wasn’t satisfied.
“We wanted to upgrade the level of quality,” recalls Andrew Lampers, national manager of procurement and supplier development at Toyota Motor Sales USA.
Several months and a few key structural changes later, Toyota says, its crack engineers left the Flex-n-gate plant with its product lead-time 90% improved, its inventory down 96% and its productivity up 33%. Flex-n-gate’s quality went up, Toyota’s orders for Flex-n-gate bumpers went up, and the two have maintained a model supplier-manufacturer relationship ever since.
Toyota tells that story at a series of “seminars” it has been conducting around the country to explain to Americans why it isn’t buying more American-made auto parts--the latest beef against Japanese auto makers.
Despite their massive investments in U.S. assembly plants during the 1980s--a response to political pressure on the Japanese to employ more Americans--the Japanese auto makers’ method of operations have failed to halt the growing imbalance in automotive trade between the two countries.
A Commerce Department-sponsored study this summer said the Japanese put so many Japanese-built components into the cars assembled here that the $10-billion auto-parts trade deficit, one-fourth of the trade gap between the two nations, is projected to double by 1994. Legislators have urged the Bush Administration to investigate the trade practices of Japanese auto makers operating in the United States, and bills have been rushed before Congress to remedy the imbalance as the U.S. auto lobby mounts a campaign on behalf of “traditional” U.S. parts makers.
“We hope their intentions (to buy more U.S. components) are pure and good-hearted,” says Sean McAlinden, an economist at the University of Michigan’s Office for the Study of Automotive Transportation, which did the study for the Commerce Department. “But their record to date is miserable.”
That sort of criticism has stirred fears in Japan of an American consumer backlash, and several Japanese auto makers have begun an image campaign to tell their side of the story. The Flex-n-gate tale reflects Toyota’s view that U.S. auto suppliers have to be shown how to do things properly to meet the Japanese company’s high standards. The message is part of a mounting effort by Japanese auto makers to counter what Toyota calls “mistaken assumptions, misunderstandings and outright falsehoods” about the way they do business with American suppliers.
“The current trade imbalance for cars and automotive parts between the U.S. and Japan is the result of fair competition,” Toyota purchasing executive Koichiro Noguchi said at a recent industry conference in Traverse City, Mich. “Putting the U.S. on the path to protectionism in the long term would serve only to blunt the industries and economies of both countries.”
At the heart of the debate is the so-called keiretsu system. Critics charge that the interlocking relationship between Japanese manufacturers and their suppliers has kept American suppliers out of Japan and is now being used to discriminate against them in their own home market.
The University of Michigan study found that Honda, the first auto maker to come to the United States and the one with the largest U.S. supplier base, sourced less than 20% of the parts for its Ohio-built cars from traditional American suppliers.
More than 300 Japanese suppliers followed the auto makers across the Pacific as they stepped up production in the United States. Although the number of Japanese cars produced in the United States surged from 509,000 in 1986 to more than 1.3 million last year, critics say there has been no corresponding increase in business for U.S. parts suppliers. Indeed, because the cars produced in Japanese-owned plants in the United States are taking sales from the Big Three U.S. auto makers, the traditional U.S. parts suppliers--whose shipments totaled more than $100 billion and employment topped 600,000 in 1990--are losing business.
Walt Barkowiak, whose Detroit-based FitzSimons Manufacturing Co. supplies fuel fillertubes to the Big Three, says his business has dropped 31% the last eight years, directly mirroring Japanese penetration of the U.S. market.
“If you’re not in business with a transplant company, you’re in trouble, and it’s not easy to break into the club, “ Barkowiak said, echoing the sentiment of the hundreds of U.S. parts makers whose business has followed the same pattern.
But in a string of recent speeches and news conferences, and slick brochures chock full of charts and graphs, Japanese manufacturers insist that they are doing all they can to find American suppliers.
Their efforts include opening technical centers in the United States to introduce American suppliers to their design process and quality standards, holding twice-a-year meetings with potential U.S. suppliers and submitting regular reviews to the U.S. Department of Commerce that detail their progress in establishing relationships with U.S. suppliers.
The Japanese say such efforts have paid off: The Japanese Automobile Makers Assn. says Japanese auto makers purchased $9.1 billion in U.S. parts and materials last year, an increase of 27% over 1989 and a 500% increase over 1985.
In the face of mounting tensions, several Japanese auto makers pledged increases in spending on U.S. parts for fiscal-year 1992, although they did not specify how much of the purchases would be from Japanese-owned firms with plants in the United States.
Toyota said last month that it will spend $1.2 billion on U.S. parts in the next year, nearly double the level of two years ago. Nissan said it will increase its purchase of U.S.-made parts in 1992 to $2.3 billion, up 80% from 1991, and Mazda said it plans to increase U.S. parts imports to $312 million in 1992, a 22% increase over 1991 levels.
Toyota’s Noguchi said some of the blame for the plight of American suppliers lies with the Big Three. “Detroit’s response (to the recession) was to request drastic price reductions. We cannot ignore the fact that these actions contributed to the drastic drop in business for domestic parts suppliers,” Noguchi said at the same industry conference where Ford Chairman Harold Poling announced that by 1995 his company would have cut its supplier base by one-third.
Advocates of stricter trade regulations insist that it’s up to Japanese manufacturers to replace those jobs, and many believe that they won’t follow through on their promises to expand their U.S. supplier base unless legislation compels them to.
“Once GM and Ford and Chrysler start to sell more cars, the political pressure will be off,” said the University of Michigan’s McAlinden. “It’ll be fat times for everybody, and (Japanese manufacturers) will be able to ratchet up imported parts from Japan without too much political cost.”
But Japanese auto makers say they will carry out their intentions not because of politics, but because they make good business sense.
“We will source more from U.S. companies, but it has nothing to do with any political pressure,” Ryuhei Narita, president of Nissan Research and Development, said in Traverse City last month. “It’s a business decision. It’s the natural flow of things to become a global company.”
United States--Japan Trade Deficit
Motor vehicles have accounted for close to half of the U.S.--Japan trade deficit in recent years. But while the vehicle deficit has been slowly declining since 1987, the deficit in auto parts has increased.
