Article from the NYTimes
Toyota Drove to the Bank in a Ford
By MICHELINE MAYNARD
DETROIT
IF the Japanese want to sell cars here, they must build them here, America?s automakers insisted back in the fuel-shocked 70?s.
And build them they did. Detroit?s brake, it turns out, was Japan?s accelerator.
Last week, for the first time, Japanese auto companies said they were now selling more vehicles outside Japan than at home ? the bulk in the United States. What?s more, Japan?s biggest automaker, Toyota, upset Ford for second place in the American market in July and reported a huge rise in profits for the quarter. Many analysts predict that Toyota will overtake first-place General Motors in global sales this year.
It?s quite possible that none of this would have happened, Japanese car company officials say, had American executives, politicians and union officials not put pressure on their companies nearly 30 years ago to build factories in the United States. It certainly wouldn?t have happened so fast.
?You could never do that by simply shipping cars from Japan,? said Dennis Cuneo, a senior vice president at Toyota Motor Manufacturing North America.
Beyond expanding American sales, the plants have given the Japanese companies a window into American life, creating thousands of jobs in grateful communities and blunting the stereotype of the automakers as predators interested only in sending profits back to Japan.
Detroit?s strategy seemed like a good idea at the time. When they began demanding that the Japanese companies build factories here, the four American companies ? G.M., Ford, Chrysler and American Motors (later bought by Chrysler) ? had almost 70 percent of the American market. They employed nearly 800,000 people in factories that carpeted the country.
But two fuel shocks in the 70?s had given Japanese automakers nearly 30 percent of the market, up from less than 20 at the start of the decade, and Detroit was glancing more frequently in the rearview mirror.
Henry Ford II at Ford and Lee A. Iacocca at Chrysler led the calls for the Japanese companies to open factories or face limits on sales. Douglas A. Fraser, the president of the United Automobile Workers at the time, went further. Mr. Fraser, whose union was pushing measures in Congress that would have limited each Japanese company to just 200,000 sales a year, or about a quarter the number of cars and trucks that Toyota was selling then in the United States, flew to Japan to confront the leaders of Toyota, Honda, Nissan and Mitsubishi.
?Invest where your market is,? Mr. Fraser told them, he recalled last week. ?Build cars where your consumers are.?
?I not only advocated it, I yelled at them,? he said with a chuckle.
Ultimately, Japan and the United States agreed to voluntary limits on the imports, essentially forcing the companies to build here. Detroit reasoned that the limits would give it time to recoup lost ground, as the Japanese sorted through the complexities of setting up plants and pipelines of parts to supply them.
Not only did the ground remain lost, so did the unquestioning loyalty of American consumers, as Japanese companies moved in on virtually every market, from family cars to luxury models to minivans.
Despite having three decades to outwit the Japanese, G.M., Ford and Chrysler find themselves in a worse situation. The big S.U.V.?s and pickups that fed profits in the 90?s and helped them briefly halt the Japanese climb are falling out of favor in the face of $3-a-gallon gasoline, and Detroit has failed to develop enough fuel-efficient cars to overcome its gas-guzzling image. The American companies are stuck with heavy labor costs, especially for pensions and health care, which they say make them unable to compete with the Japanese, largely unburdened by union contracts and hefty legacy costs.
Detroit held 52 percent of the market last month, its smallest share ever. The Japanese took nearly 40 percent of the American market, their biggest.
Only now, most of the Japanese sales come from the factories that Detroit insisted they create.
And they are not just places to make cars. American plants have given the Japanese companies a tutorial in dealing with other cultures. Toyota is now building its Camry sedan, America?s best-selling car, in seven countries, including Vietnam and China, using ideas gleaned from Camry?s base in Kentucky.
Rural towns like Georgetown, Ky., and East Liberty, Ohio, mere dots on the map before Toyota and Honda arrived, now boast jobs with $25-an-hour wages that rival those at Detroit factories, helping offset some of the half-million automotive jobs Detroit lost. The factories have lifted the economies of entire states, like Indiana, which recently won a new Honda plant; Tennessee, where Nissan has two factories and will put its American headquarters; and Alabama, with four major car factories in 15 years.
With that has come influence in state capitals as well as in Washington, where the Japanese no longer face the protectionist threats that forced them to invest here. Now states like Indiana line up to offer millions of dollars in incentives to land their plants, while President Bush, who said Detroit needed to build ?relevant? products, has postponed a meeting with Detroit auto leaders three times this year.
?In an odd way,? Mr. Cuneo of Toyota said, ?we owe Mr. Iacocca a favor for continuing to keep the pressure on.?
Toyota Drove to the Bank in a Ford
By MICHELINE MAYNARD
DETROIT
IF the Japanese want to sell cars here, they must build them here, America?s automakers insisted back in the fuel-shocked 70?s.
And build them they did. Detroit?s brake, it turns out, was Japan?s accelerator.
Last week, for the first time, Japanese auto companies said they were now selling more vehicles outside Japan than at home ? the bulk in the United States. What?s more, Japan?s biggest automaker, Toyota, upset Ford for second place in the American market in July and reported a huge rise in profits for the quarter. Many analysts predict that Toyota will overtake first-place General Motors in global sales this year.
It?s quite possible that none of this would have happened, Japanese car company officials say, had American executives, politicians and union officials not put pressure on their companies nearly 30 years ago to build factories in the United States. It certainly wouldn?t have happened so fast.
?You could never do that by simply shipping cars from Japan,? said Dennis Cuneo, a senior vice president at Toyota Motor Manufacturing North America.
Beyond expanding American sales, the plants have given the Japanese companies a window into American life, creating thousands of jobs in grateful communities and blunting the stereotype of the automakers as predators interested only in sending profits back to Japan.
Detroit?s strategy seemed like a good idea at the time. When they began demanding that the Japanese companies build factories here, the four American companies ? G.M., Ford, Chrysler and American Motors (later bought by Chrysler) ? had almost 70 percent of the American market. They employed nearly 800,000 people in factories that carpeted the country.
But two fuel shocks in the 70?s had given Japanese automakers nearly 30 percent of the market, up from less than 20 at the start of the decade, and Detroit was glancing more frequently in the rearview mirror.
Henry Ford II at Ford and Lee A. Iacocca at Chrysler led the calls for the Japanese companies to open factories or face limits on sales. Douglas A. Fraser, the president of the United Automobile Workers at the time, went further. Mr. Fraser, whose union was pushing measures in Congress that would have limited each Japanese company to just 200,000 sales a year, or about a quarter the number of cars and trucks that Toyota was selling then in the United States, flew to Japan to confront the leaders of Toyota, Honda, Nissan and Mitsubishi.
?Invest where your market is,? Mr. Fraser told them, he recalled last week. ?Build cars where your consumers are.?
?I not only advocated it, I yelled at them,? he said with a chuckle.
Ultimately, Japan and the United States agreed to voluntary limits on the imports, essentially forcing the companies to build here. Detroit reasoned that the limits would give it time to recoup lost ground, as the Japanese sorted through the complexities of setting up plants and pipelines of parts to supply them.
Not only did the ground remain lost, so did the unquestioning loyalty of American consumers, as Japanese companies moved in on virtually every market, from family cars to luxury models to minivans.
Despite having three decades to outwit the Japanese, G.M., Ford and Chrysler find themselves in a worse situation. The big S.U.V.?s and pickups that fed profits in the 90?s and helped them briefly halt the Japanese climb are falling out of favor in the face of $3-a-gallon gasoline, and Detroit has failed to develop enough fuel-efficient cars to overcome its gas-guzzling image. The American companies are stuck with heavy labor costs, especially for pensions and health care, which they say make them unable to compete with the Japanese, largely unburdened by union contracts and hefty legacy costs.
Detroit held 52 percent of the market last month, its smallest share ever. The Japanese took nearly 40 percent of the American market, their biggest.
Only now, most of the Japanese sales come from the factories that Detroit insisted they create.
And they are not just places to make cars. American plants have given the Japanese companies a tutorial in dealing with other cultures. Toyota is now building its Camry sedan, America?s best-selling car, in seven countries, including Vietnam and China, using ideas gleaned from Camry?s base in Kentucky.
Rural towns like Georgetown, Ky., and East Liberty, Ohio, mere dots on the map before Toyota and Honda arrived, now boast jobs with $25-an-hour wages that rival those at Detroit factories, helping offset some of the half-million automotive jobs Detroit lost. The factories have lifted the economies of entire states, like Indiana, which recently won a new Honda plant; Tennessee, where Nissan has two factories and will put its American headquarters; and Alabama, with four major car factories in 15 years.
With that has come influence in state capitals as well as in Washington, where the Japanese no longer face the protectionist threats that forced them to invest here. Now states like Indiana line up to offer millions of dollars in incentives to land their plants, while President Bush, who said Detroit needed to build ?relevant? products, has postponed a meeting with Detroit auto leaders three times this year.
?In an odd way,? Mr. Cuneo of Toyota said, ?we owe Mr. Iacocca a favor for continuing to keep the pressure on.?
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