JUDY WOODRUFF: For weeks now, attention has been focused on the troubles of Detroit’s big three, but this week it became clear the financial crisis is also hitting foreign automakers hard.
Toyota’s decline in sales of nearly 22 percent was its biggest drop in eight years. The automaker previously had been closing in on G.M. to overtake it as the world’s largest car manufacturer this year.
Other Japanese automakers, including Nissan, announced similar losses.
And though Honda, the country’s second-biggest carmaker, did not give sales figures, it did say worldwide production went down 10 percent.
The news came just days after Toyota forecast an operating loss of $1.6 billion, for the first time since 1938, 70 years ago. Japan’s stock market took a hit on the dismal news, and Toyota’s shares fell 4 percent.
The decline in auto sales is having an impact on exports across Asia. Thailand and Taiwan saw their exports drop by roughly 20 percent in November, and China saw the largest dip in exports in seven years.
Joining me now to discuss these developments are Micheline Maynard, a senior business correspondent for the New York Times, who has long covered the auto business. She’s the author of “The End of Detroit: How the Big Three Lost Their Grip on the American Car Market.”
And Clyde Prestowitz, president of the Economic Strategy Institute, he’s the author of “Three Billion New Capitalists: The Great Shift of Wealth and Power to the East.”
Thank you both for being with us.
American woes spread to Japan
JUDY WOODRUFF: And, Mickey Maynard, I'm going to start with you. So much of the focus has been on Detroit. Is it a surprise that the Japanese carmakers were also facing a downturn?
MICHELINE MAYNARD, The New York Times: I think it's a surprise that how hard this downturn has hit them. For Toyota, the problems that they've been running into are just as bad in their context as what General Motors, Ford and Chrysler have experienced over the last few months.
JUDY WOODRUFF: So they just didn't see the warning signs?
MICHELINE MAYNARD: No, I was in Tokyo in February in interviewing the chief executive officer of Toyota. And we were talking about the American housing crisis and some of the other economic problems. And I said, do you think this will affect you? And he said, "No." He said, "In Japan, we would say they are sneezing." Well, unfortunately, we weren't sneezing. We've got pneumonia, and it's spread to Japan, as well.
JUDY WOODRUFF: So how much of what's behind this is the downturn in the U.S.? Is that the whole story?
MICHELINE MAYNARD: It's a lot of the story, because the United States is now the biggest market for Toyota, for Honda, for Nissan, and that's developed over the last few years, as they've built plants in the United States and hired their American workers.
But they are also affected by the global market, because these companies have expanded in places like Europe, and China, and South Asia, so they're no longer insulated from what goes on in the global car market.
JUDY WOODRUFF: And what about their own decisions, in terms of expansion? How much of a factor was that?
MICHELINE MAYNARD: Well, that's one of the biggest factors facing Toyota here. Toyota is a very conservative company. And so their decision to build so many factories in North America -- they have a big pickup truck plant down in Texas, they have a plant in Mississippi that has yet to open, and just a brand-new plant in Canada, as well -- those were decisions that were controversial inside Toyota and now seem to have been the wrong decision, given what's going on in the car market.
JUDY WOODRUFF: And now that they are hit with this, how are they dealing with it?
MICHELINE MAYNARD: Well, one thing about Toyota is, whenever they see a threat of a crisis, they really jump on it. So one of the things that they have done is they've put the brakes on the plant in Mississippi. They basically said, "We're not going to open it. We'll finish the building, and it will just sit there empty until the market improves."
They've also consolidated some of their production. They were building pickup trucks in two places, in Indiana and Texas, and they have now consolidated that production down in Texas. And in addition to that, there's cost-cutting all across the board at the company.
The picture across Asia
JUDY WOODRUFF: All right, Clyde Prestowitz, I'm going to bring you into this. Let's widen this out to the bigger picture. What does it look like across Asia? And talk country by country.
CLYDE PRESTOWITZ, Economic Strategy Institute: We're in the middle or the beginning, I think, of a huge tectonic plate shift of the global economy. Not only are Toyota's exports down and Toyota's business down. All of Asia is in a panic, and rightly so, because the story of Toyota is repeated in Korea, in China, across the board.
And what really is happening, Judy, is that for the past 50 years, half-century, essentially, we've had a global economy for which the model essentially has been Asia makes and America takes. And what really has happened is that America has stopped taking.
And I think what we really have to say is, America has reached kind of the -- the American consumer is tapped out and can't take anymore. And I think that what Mickey mentioned about Toyota being surprised is shared broadly across Asia.
I was in Hong Kong at a CEO summit a couple of weeks ago. And the sentiment there was one of total shock and surprise, because I think the assumption in Asia and much of the world has been that the American consumer will always be there.
And although we've had huge imbalances, with the U.S. running enormous $800 billion trade deficits and Asia accumulating almost $4 trillion of surpluses over the past several years, and people warned that this was not sustainable, nobody kind of believed it.
But now it has come. And it's not sustainable. And we're seeing a huge shift.
JUDY WOODRUFF: You used the word "panic" a minute ago.
CLYDE PRESTOWITZ: Yes.
JUDY WOODRUFF: You meant to use that dramatic term?
CLYDE PRESTOWITZ: I meant to use "panic," yes, yes.
JUDY WOODRUFF: And so what do you see as the underlying causes? I mean, we heard -- you're both saying they didn't expect it, but beyond that and beyond -- I mean, is it all about America has stopped consuming? Is that the whole story?
CLYDE PRESTOWITZ: It essentially is about -- it's two things. It's America has stopped consuming. And it's also that Asia has overemphasized for a long time exports.
Really, for ever since the 1960s, or even before that, Japan after the Second World War adopted the so-called export-led growth strategy, in which they achieved rapid economic growth by focusing on exports. And it worked.
And it worked so well that people like Lee Kuan Yew in Singapore said, "Hey, look east. Don't look at the Americans. Look at the Japanese. Let's do what they're doing." And so he had the Asian tigers, Korea, Taiwan, Singapore, Hong Kong, who in one way or another imitated Japan, and it worked for them.
And then we had the last tiger, China. And it has really worked for China until now.
So you had a situation in which Asia was focused on exporting, saving, investing, and the U.S. focus was on consumption. The driver of the U.S. economy was consume, consume, consume. And all of our incentives in the U.S. were aimed at consuming.
My kids get three or four credit cards mailed to them in the mail every week. They have no -- many of them -- some of them have no income, but they still get the credit cards. It doesn't happen in other places.
How resilient is Japan?
JUDY WOODRUFF: Mickey Maynard, given all this, how are the Japanese carmakers dealing with this? How resilient are they in the middle of this?
MICHELINE MAYNARD: Well, we really don't know, Judy. One of the interesting things about this particular downturn is that you've never seen Japanese car companies sales go down 10 percent, 15 percent, 20 percent in a year.
In the 1990s, Toyota's sales kind of stalled out at one point, when the yen became very strong against the dollar, but over the last 10 or so years, they've had 10 percent, 12 percent a year growth.
So this year, Toyota's down I believe about 17 percent, Honda's down about 10 percent. Now, that's not as much as the Detroit companies. They're down in the 20 percent or more range.
But this will be a real test for Toyota, for Honda, for Nissan, and the others to show that they can be resilient.
JUDY WOODRUFF: Well, you mentioned they're slowing down some of these new plants. What about laying people off? I mean, we are -- are they dealing with this in some of the same ways American automakers are?
MICHELINE MAYNARD: Well, they're certainly not employing people to build cars, but what they've been doing is offering sort of their version of the jobs bank, where workers get paid to come to work, but they've been taking classes on the Toyota production system, which is something that can take experts years to learn.
They've been going through the assembly line and showing their supervisors places that they would suggest improvements. They've been working on the grounds around the plant.
And it's all kind of reminiscent of what General Motors did at its Saturn plant back in the '90s. When they would have a slowdown in sales, they would have workers go out and paint the fences. And somebody once joked to me that the Saturn plant had the whitest fences of any place in Tennessee.
But this kind of fits in with the philosophy at the Japanese companies of lifetime employment for their permanent workers. Now, they lay off temporary workers all the time.
But they promise Japanese workers that they would have employment for the rest of their lives and that they would stick with them through up cycles and down cycles. And that so far is playing out at their plants in the United States.
Production will move to America
JUDY WOODRUFF: So, Clyde Prestowitz, if the old model isn't working anymore, they make, U.S. consumes, how do you see this playing itself out? I mean, what is going to change?
CLYDE PRESTOWITZ: I think there's going to be a huge rebalancing in which more of what Americans consume is going to be produced in North America. And at the same time, Asia is going to have to find a way to allow and to enable its own consumers to begin consuming so that Asia can achieve growth through the growth of its domestic economy.
We're in a crisis right now. And it's painful, and it's going to get more painful. But the good news is that, at least for the United States, we're going to have a manufacturing renaissance.
Jobs in production are going to come back to the U.S. because the only way for the U.S. to achieve sustainable, long-term growth is for the U.S. to produce more here, export more, relatively, while Asia imports more relatively. So I see this as the beginning of a long-needed shift in the base of the U.S. economy.
JUDY WOODRUFF: It's good to find one silver lining in all this.
CLYDE PRESTOWITZ: Yes.
JUDY WOODRUFF: Clyde Prestowitz, Micheline Maynard, thank you both.
MICHELINE MAYNARD: Thank you, Judy.