Nightly Business Report . Video #2 - Tokyo Auto Show--Japan Auto Industry

Video #2 - Tokyo Auto Show--Japan Auto Industry

Friday, January 06, 2006

BACKGROUND INFORMATION

The 33rd Tokyo Motor Show attracted 1.4 million visitors, making it the most popular auto show in the world. Held at the Nippon Convention Center in Chiba October 22-November 3, the event fell on the 100th anniversary of the introduction of automobiles to Japan. A total of 287 companies, six governments and one association participated in the show, displaying products and concepts that no one could have imagined in 1899. William Duncan, General Director of JAMA (Japan Automobile Manufacturers Association) USA said about the Tokyo Motor show: "What was new was the array of statements by global auto executives indicating a greater commitment to the Japanese market....Most prominent were statements by GM and Ford executives that success in Japan requires more local attention and investment." While calling for local investment is relatively new to the U.S.-Japan auto dialogue, it is not new for the Detroit auto companies. In fact "build where your market is" was the rallying cry of the Big Three (G.M.,Ford, Daimler-Chrysler) during the early

1980's as they urged Japanese companies to switch from imports to U.S. production. The Big Three pointed to their assembly plants in Europe and urged Japanese to build their own in the U.S. while the Big Three at the time aimed to limit Japanese competition in the U.S., it turned out that "build where your market is" proved to be good advice to the Japanese companies, which now build in the U.S. two-thirds of the vehicles they sell here. It was also good for the U. S. economy, which benefited from new production technologies' for U.S. consumers, who benefited from better quality automotive products across the board, and for U.S. workers, who gained jobs.

Sixty-three percent of Americans believe that a car made in America by Americans is an American product regardless of the nationality of the make. Since 1998, Japanese automakers have built a record 2.4 million vehicles in America. They operate 15 manufacturing plants, 37 R&D and design centers and employ more than 300,000 Americans; a $16 billion investment in the U.S. economy.

Mr. Duncan said that Detroit companies are correct in recognizing that building a significant position in a market requires local investment-- either independently or through alliances with established manufacturers. As he put it,"...Localization is an essential part of globalization." The challenge for all auto companies is to take advantage of the economies of global production while meeting the demands of local and state geographical requirements (concerning driving conditions., etc.). This requires a balance of export strategies and local production in major markets. Mr. Duncan feels that "meeting this challenge is not easy, but nevertheless is essential in a world where rapid communication and technological development can lead to sudden changes in consumer demand and the need for quick and effective responses." He adds,"Obviously, circumstances differ between the Japanese entry into the U.S. in the 1980s and foreign entry into Japan today.

While the Japanese companies have a significant presence in the U.S., the Detroit companies have a relatively minor one in Japan today. Accordingly, exporting to Japan will remain an important marketing strategy as these companies aim for success in Japan's vehicle market. Nevertheless, their strategies will also require market commitment and direct investment. The old Big Three slogan, "build where your market is" proved right for the Japanese companies in the U.S. 20 years ago. Today, it may prove right for the Detroit companies in Japan."

Noriyuki Matsushima, director of Equity Research for Nikko Salomon Smith Barney, wrote a lengthy evaluation of what he called the "Era of Great Realignment" in the auto industry. His vision includes much more than investment in any one market. First, he says that there is an oversupply in the industry as a whole. He expects this will cause intensifying competition in the near future. In order to survive, he claims, a firm must meet three important requirements: adequate environmental technology, sophisticated technical expertise, information-related technology. On the high technology front, Japan's auto companies are forging a lead over the rest of the industrialized world in the use of "intelligent Transportation systems" (ITS) to ease traffic congestion and improve safety. The most popular product in a growing line-up of commercially available ITS technologies is the satellite-based on board navigational system, which guides users around even minor roads. Behind the ITS push are five Japanese Government ministries, academia and private companies whose focus is on developing four major ITS systems. Taken together, these technologies will have an annual market value of about $500 billion by the end of 2015.

In order for a company to survive amid the global realignment of the industry, Matsushima says it will need products that offer better performance at lower prices. The industry has responded to this by cost-cutting through "commonality" for platforms or engines. Likewise systematization is being stressed for automotive parts and in other areas. Mr. Matsushima states: "The equity and business tie-ups taking place now represent efforts to achieve this "quantitative" or "volume effect."

SOURCES:

A second requirement: the shared development of the use of fuel-efficient motor vehicles. These must become widespread in order to reduce CO2 to the emissions reduction standards required by global environmental regulations. Renault and Nissan and Mitsubishi and Fiat are said to be developing alliances for this purpose. These can only be successful if volume manufacturing is achieved. Evidence of how company nationalities and distinctions have blurred with the globalization of Japan's auto industry is offered in "Japan Auto Trends" (JAMA's newsletter) for December 1999: *To get a 10 % market share in Japan, General Motors and Ford conceded that they need to engineer and produce vehicles for the Japanese and Asian markets in Japan. *To that end, GM and its partner, Suzuki, unveiled the YGM-1, which will go to market in 2001 and will be produced somewhere in Asia. *As a part of their capital alliance, Nissan and Renault will develop a common platform my mid-2002 for Nissan's Cube and March models and Renault's Clio. This will lower production costs. *Mitsubishi recently announced that it would form a capital alliance with Volvo to develop and build trucks and buses. *Mazda, meanwhile, said its rising managers might learn a thing or two from corporate America. It plans to send 30 young employees to Ford plants in the U.S. to get a first-hand look at how the Detroit automaker does things. *GM and Toyota want to team again. This time they plan to jointly develop hybrid engine and hydrogen fuel cell technology in a effort to produce clearer-burning cars. *Daimler-Chrysler, which is building its PT Cruiser in Mexico, said it is looking for a second manufacturing base to handle expected high demand for the vehicle. The company plans to introduce the combination sedan/mini van in Japan next year as a "unique" American vehicle. Additionally, The New York Times reported on January 5 that Nissan will start producing vehicles of French Renault in Thailand, the Philippines and Malaysia. The French firm acquired a stake in Nissan after the Japanese auto maker went through financial difficulties in 1999. The globalization of the auto industry is here to stay.

www.theautochannel.com www.japanauto.com (JAMA's web site) www.nttls.co.jp www.motorshow.or.jp http://tradeport.org

LESSON PLAN

GRADE LEVEL/SUBJECT: 10-12/Economics, International Relations, World History, International Bachelaurate Programs(IB), Current Events.

PURPOSE: to present activities to be used at a variety of classroom situations in order to enhance student understanding of Japanese economy and its significance globally.

OBJECTIVES: Students will be able to:

Research the state of the automobile industry in Japan.
Research the state of the automobile industry in the U.S.
Compare and contrast the automobile industry of the U.S. with that of Japan's.
Research the history of automobile industry relationships between the U.S. and Japan.
Predict the future of the automobile industry.

MATERIALS:

Background information provided.
Resources on Japan available at your school's Media Center and the Public Library System in your area.
Background information available through Internet "search engines".

ACTIVITIES: May be assigned as group activities or as individual tasks. They may also be designed as preparation for related presentations either by individuals or groups.

Develop a time-line depicting the history of automobile industry relationships between the U.S. and Japan.
Locate the major automobile manufacturers on a map of the world. Include international subsidiaries.
Create charts and graphs to show the sales of the major auto makers in different regions of the world.
Draw conclusions about the present state of the automobile industry worldwide using the information gathered above.
Predict the state of the global automobile industry in 2025.
Hold a keiretsu meeting to plan a joint investment between a Japanese automaker and its American counterpart.

EVALUATION: Individual assignments should be graded by the teacher using established criteria. Group activities, presentations and projects may be evaluated by teachers and students using the following criteria and scale:

Content 1= Superior (A) Creativity 2= Excellent (B) Clarity 3= Good (C) 4= Fair (D) 5= Poor (F)

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