JIN-335 -- Japan's Front-Running Auto Industry

T H E J @ P A N I N C N E W S L E T T E R
Commentary on the Week's Business, Technology and Cultural News

Issue No. 335
Wednesday August 31, 2005 TOKYO

+++ VIEWPOINT: Japan's Front-Running Auto Industry
1. Accounting for half of the growth in the industry
2. Evolution not revolution

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+++ VIEWPOINT: Japan's Front-Running Auto Industry
1. Accounting for half of the growth in the industry

In early spring, amidst all the bad news emanating from Detroit,
Koichi Amamiya, for 16 years the president of American Honda
Motor Co., Inc, asked, "Why are the Big Three ailing, in spite of
America's being the home of automobile?" He answered his own
question: "They lack earnestness."

What did Amamiya mean? Rewind to the 2003 Detroit Motor Show.
G. Richard Wagoner, then CEO of General Motors, boasted the
company would be marketing hybrid-electric vehicles from the
year-end and would sell a million of them in 2007. But the years
passed without a single full-scale hybrid-electric vehicle rolling
off a GM assembly line. Meanwhile Japanese automakers steadily
gained a foothold in the hybrid-electric vehicle market.

The global automobile market is now undergoing a seismic change.
On top of the stagnation in Detroit there was the sudden resignation
of DaimlerChrysler CEO Jurgen Schrempp at the end of July.
Schrempp, who with the purchase of Chrysler had caused a global
restructuring of the industry, was pushed to the wall by
DaimlerChrysler's eroding performance.

Meanwhile it's been smooth sailing for Japanese automakers.
Toyota's greatest care at the moment is a lack of inventory. In Asia
and the US people regard a wait of several months for a popular
Toyota model as par for the course. Honda and Nissan continue to chalk
up healthy results. In the last three years global annual auto output
grew by more than 5 million units, with Japanese manufacturers
accounting for approximately half of the growth.

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2. Evolution not revolution

Amamiya's earnestness can be interpreted as continuity. Take, for
example, 'Nissan's renaissance.' Carlos Ghosn came along and created
a revolution that changed Nissan from top to bottom. At least that's the
story everyone believes. The truth is somewhat different.

Ghosn took a scalpel to inefficient keiretsu transactions between
affiliated enterprises, but he didn't break with the past. There were many
areas of the company where great weight was placed on continuity. One
example is Nissan's 3.5-L V6 engine. The only engine that has won a
"Wards Ten Best Engines" award every year since the prize's inception
in 1995, the 3.5-L V6 was first used in 1994 models. It underwent
continual incremental improvements, attaining a level of
performance that helped bolster Nissan's midsize car strategy,
its Achilles' heel. The VQ is but one example of continuity before
and after the arrival of Ghosn. Introduction of the
make-to-order production system, dubbed the Nissan Production
System, is still in progress. In the production site and in
engineering laboratories there is not revolution but rather evolution.

Takahiro Fujimoto, a Tokyo University professor and the author of "The
Evolution of a Manufacturing System at Toyota," espouses the 'varsity
team' strategy. Its essence is summarized by a saying of Miyamoto
Musashi (1584? - 1645), the famous swordsman, in his "Book of Five
Rings": "Practice for a thousand days is discipline. Practice for ten
thousand days is refinement." This refers to the single-minded
step-by-step accumulation of improvements to increase one's
capabilities. This will provide an bigger edge than a large
buy-out or splendid brand strategy, and will slowly and steadily
increase a company's market share.

The strengths of the Japanese automotive industry should lead to their
products commanding a still greater global presence.

--Burritt Sabin

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Written and edited by Burritt Sabin (editors2@japaninc.com)

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