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Old 2nd June 2007, 04:56   #1
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Question American Vs Japanese automakers - Post Iran crisis

Iran crisis definitely helped Japanese makers to establish themselves in the market, especially in American market, which was & is highly competitive.
The 'Big Three' who were ruling the automotive market so far felt the heat from Japanese manufacturers only after the major oil crisis in 1978. Though 1974 crisis had some effect, i feel the one in 1978 was more severe.

Market for family cars, V-8 engines, RVs, vans, trucks etc dried up instantly and all of a sudden small, fuel efficient cars were more in demand.

This helped Japanese manufacturers (esp Toyota and Honda) establish a firm hold in American market and the Big three started losing their share in their own place.

Japanese claim that - after world war II, since they were left with no resources(of all kinds), they had no other option but to copy the design etc etc from Americans in the beginning and later they had alwayz improved it to perfection(Kanban, Kaizen, JIT etc). with so little resources, they cant afford to enter a direct head-on war with the mighty American automakers. they studied the market well and offered fuel efficient vehicles which was need of the hour whereas GM and Ford were offering the kind of vehicles which were ahead of the time.

Americans claim that - the crisis was never expected in advance and before that Japanese had some seven hundred thousand small cars sitting on the docks. before that Toyota and Honda weren't selling anything (so were the small cars like Omnis, Horizons and colt(built by Mitsu) from American manufacturers). when crisis occured, Ford and Chrysler had nothing to offer and GM was bit lucky as they had planned their X-body cars that time -The Chevy Citation which was a down sized, front wheel drive, Fuel efficient car.
during 1979, in 5 months, small car share rose from 43% to 58% - a swing of 15%.

so, my question is - was that a well planned strategy from Japanese automakers to enter the US market with small cars or did oil crisis and shooting up of gas prices which happened unexpectedly helped Japanese makers capture the US market(after which they capitalized on it and rose to such a height)?

I request BHPians to give their views about this. i may not be entirely right but above statements reflect my thoughts and understanding. Also let me know if there was any other major reason (adding to this/entirely different from this) for the change of market share particularly in US market.
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Old 2nd June 2007, 09:19   #2
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A great book for understanding the auto car industry post World War II is `The Reckoning' by David Halberstam (who has just died). It showed how the bean counters at Ford, GM, and Chrysler (incl. MacNamara at Ford who later led US into theVietnam War) ruined US car industry. Although the Japs were in the US since the late 1950s, their fortunes really turned with the first oil crises of 1973. They had the right product at the right time, and that lesson holds true even now as gas prices in the US cross US$3/gallon. Being FE is not a bad thing, infact even a great thing, since it consumes less of exhaustible fossil fuel resources, and pump out lesser greenhouse gases.
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Old 2nd June 2007, 09:19   #3
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I lived in the US for the past 17 years, I saw the rise of the Japanese sedans like Accord and Camry, let me tell you, they did so by offering sheer value, they embodied the attributes of German and US design and combined in an attractively priced package that was extremely reliable to boot, this is what got them where they are today. If you see the number of Toyota Land Cruisers and Hi Lux with UN and other organizations as well as regular off roaders, tells you the story quite well, its the hallmark of Japanese technology.
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Old 2nd June 2007, 09:46   #4
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This if from the Washington Monthly of 1987 when the Japanese dominance of world auto market was in its first 2 decades:

The travails of the American car makers arenot exactly fresh news. We've been reading about them for 15 years. In fact, the familiarity of its themes and subject makes The Reckoning's success more impressive. In general, Halberstam tells us what we already know. The American industry suffered, he tells us, because it was smug and arrogant, and because the country was complacent about cheap gas, and because the proud men of Detroit underestimated the funny little tongue-tied Japanese. Ford lost its edge because the balance of managerial power swung away from men who knew cars and design and manufacturing and toward men who knew only balance sheets. Detroit and American manufacturing in general suffered because stock market speculators cared only about the next quarter's results, and because unions were greedy, and because managers were greedier still, and because everyone involved viewed the factories as pies to carve up and eat. The Japanese triumphed because they'd been chastened by war, and because their society stressed teamwork and shared sacrifice, and because they cared about building the right car for the market and designing it well. The classic illustration of arrogant inattention to market, incredible but still true, is that even in 1987, American manufacturers ship cars to Japan with their steering wheels on the American, or "wrong," side. How far would the Japanese have gotten in America if they had pushed cars designed for driving in the left lane?).

One thought from me: where is the left/right turn signal indicator on GM/Ford/Skoda and other European cars.
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Old 3rd June 2007, 01:04   #5
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Quote:
It showed how the bean counters at Ford, GM, and Chrysler (incl. MacNamara at Ford who later led US into theVietnam War) ruined US car industry.
ya had read about it. i know that McNamara(main guy behind Falcon) also served as president of Ford and then joined Kennedy. did he leave Ford because of Henry Ford II? If you have any source or link which tells how he ruined US car industry, please let me know.
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I saw the rise of the Japanese sedans like Accord and Camry, let me tell you, they did so by offering sheer value, they embodied the attributes of German and US design and combined in an attractively priced package that was extremely reliable to boot, this is what got them where they are today.
i agree to this. but does that not show - they capitalized on the opportunity and they were only building small cars till then and hence they would have sold them Whenever shift occured? did they really expect the US demand for small cars? let me know if they had any strategy in mind
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The American industry suffered, he tells us, because it was smug and arrogant, and because the country was complacent about cheap gas
very much true. Also they were complacent with what they had and automotive market was not facing much competition then. whatever they manufactured sold till then!!!
But coming to Ford's story, how far Henry Ford influenced the managerial decisions? who is to be blamed for not tracking the need of the customers and very rigid selling only what they made?
By the way, US's antitrust laws were also not favouring their manufacturers even at the time of crisis right?
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Old 3rd June 2007, 01:27   #6
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The American industry suffered, he tells us, because it was smug and arrogant, and because the country was complacent about cheap gas,
very much true. they were very complacent with what they had. adding to that, hardly they had any serious competition from other manufacturers(except for competition between GM and Ford). whatever they manufactured sold then!!!
coming to Ford's story, Henry Ford should be blamed for his managerial style and that he neither listened to anyone in Ford nor to the customers' need? or is it simply the inefficiency and carelessness of the top management?

By the way, US's antitrust laws also never favoured their own manufacturers even at the time of crisis. right?
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Old 4th June 2007, 16:05   #7
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For henry Ford II, Mcnamara, and others; some good books (apart from automotive archives) include:

reckoning by halberstam as mentioned above
Iacocca's book (a bit self serving)
De Lorean `on a clear day you can see general motors ' (also a bit self serving).
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Old 4th June 2007, 16:50   #8
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Quote:
Originally Posted by vasudeva View Post
One thought from me: where is the left/right turn signal indicator on GM/Ford/Skoda and other European cars.
Please correct me if I'm wrong.

All of GM's vehicles in India have the turn signal stalk on the left with the exception of the Tavera, I think.

Same with Ford but I think the Endevour has it on the right side. Must be the same for Skoda.

All versions of the FIAT Uno and the first lot of Sienas came with the turn signal stalk on the left side.

There are a lot of people to whom this appeals (those who have stayed in an LHD country for a long time) but I still consider it arrogance on the part of manufacturers.

Look at the Fiesta - designed for India. With the bonnet release lever on the left side.

Last edited by hrag : 4th June 2007 at 16:57. Reason: grammar
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Old 4th June 2007, 23:06   #9
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Rekha,

Thats a very nice topic.

I wouldnt be surprised if the Japs used their sterotypical forethought into timing this- their post-war American offensive with the Iran-Contra crisis.
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Old 5th June 2007, 12:14   #10
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Quote:
reckoning by halberstam as mentioned above
Iacocca's book (a bit self serving)
De Lorean `on a clear day you can see general motors ' (also a bit self serving).
Thank you. i've read Iacocca's book. in fact he too claimed that Japanese's success(atleast entry into US market) is because of Iran crisis. he had mentioned in his book that Henry Ford got rid of McNamara because he hate strong leaders. he wrote in his autobiography that due to Henry ford, Ford had lost to Japanese because he never agreed for small cars which was need of the hour and also that he never agreed for Japanese engine(or some part) in Ford which Iacocca bought from Honda after his trip to Japan to present Mustang.

Quote:
I wouldnt be surprised if the Japs used their sterotypical forethought into timing this- their post-war American offensive with the Iran-Contra crisis.
may be true. mean to tell that Japanese knew when Iran crisis will occur and hence they can catch the US market?
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Old 5th June 2007, 18:46   #11
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Iacocca sounds like George tenet to me, who blames everyone but himself. It was perhaps not Iacocca but US handouts that saved Chrysler. The US auto industry can blame the following for its failures--Iran crises, Henry Ford, or dumping, non-union labour, etc; but they really survived when they had a oligopoly. Right now, they have very few products that customers want, which is FE, reliable cars.

Regarding GM/Ford/Skoda, the stalk lever is on the left side on Corsa/Optra. I have also heard that perhaps some of the earlier Astra/Corsa (could it also be their new cars) were perhaps seconds imported and sold here.
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Old 5th June 2007, 19:25   #12
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Blaming high oil prices is a lame excuse for not making investments in producing FE cars. Apart from selling a higher proportion of clunkers, US carmakers also sell cars that are generally less FE than the Japanese cars in their class. Oil prices and petrol prices are likely to be firm over the next 1-2 years with both IMF, IEA, Oil & Gas Journal predicting slowdown in oil demand, but no easing of the demand-supply. Plus geo tensions can cause a spike anytime.

Already as can be seen, because of their higher FE and more advanced and acceptable (in terms of learning curve) hybrids, Japs have gained the most from their high FE. But they also gained in periods of low oil prices. Over the period 1995-2006, NADA and Automotive News data show a consistent unbroken increase in market share for only 1 of the US big Six-that is Toyota. Others have gained in some but lost in some years, but even in 2002-04 when oil prices were low, the Detroit 3 lost US market shares in 2002,2003, 2004.
What of the future. Rising oil prices are impacting American's lifestyles, leading many car owners to adjust travel plans, tighten their budget, and lean toward purchasing small, fuel-efficient vehicles. In fact, most consumer surveys reveal that most drivers have accepted the new reality of US$3/gallon, and expect it to go to even US$4.

In the past five years, gasoline prices have jumped 250% according to data from the US Department of Energy. Considering that Americans drive on an average 13000 miles or 20000 kms per annum, and with an average FE of 22 mpg (both US Transport Stats), their driving behaviour results in an average annual bill of US$1800, as compared with around US$700-800 in 2002. In the short-term, consumers have little flexibility. But over the next few years as in the past, consumers will trade in their older cars for ones with greater FE, which should further benefit Japs. Further, as per a recent survey by Consumer Reports, 55% of those who may replace their vehicle are considering a small car, more than 2.5 times the share of those looking at a family sedan or small SUV. This desire for a small car is common across the board, regardless of gender, age, income, or region. In contrast, large SUVs are on the shopping list for only 1%.

Although gas/electric hybrid vehicles now make up only about 1% of the US market, 50 percent of the respondents said they would consider a hybrid for their next purchase. Better fuel economy (98 percent) dominated their list of "very important" factors, followed by good reliability (82 percent) and owner-satisfaction ratings (74 percent), and the societal benefits of reduced U.S. oil consumption (70 percent) and minimized environmental impact (64 percent). Tax incentives were rated very important by 46 percent, suggesting their availability may have a measured impact in hybrid sales in the future. Those who are not considering a hybrid cited the vehicles' higher purchase prices (16 percent) and concern about service and maintenance costs (15 percent) and reliability (15 percent) as the most important factors.
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Old 5th June 2007, 21:59   #13
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Quote:
Originally Posted by Rekha View Post
may be true. mean to tell that Japanese knew when Iran crisis will occur and hence they can catch the US market?
If they did, I'm sure it wouldnt be from their country's intelligence services - its feasible however that they could have had a very good read of the American market leading upto an oil crash
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Old 8th June 2007, 02:12   #14
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@ Vasudeva, Thank you for the detailed information and i too agree with you about Iacocca(came to know from his autobiography)

@theMAG, they had done their homework well...

PS: i thought it was Japanese(Toyota) who invented JIT concept. but i remember Iacocca telling that they had used the concept long back(even before Jap entered the US market). any links which gives the origin?
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Old 8th June 2007, 14:22   #15
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Of course JIT in some form or the other has been there as long as mankind has lived on this earth. To buy fruits when we need to eat instead of storing is also JIT. But Toyota is universally acknowledged (at least by manufacturing and management experts) as the company that perfected modern JIT to manufacturing and process. As you would know, JIT is now one of the founding principle of lean manufacturing (not just auto manfg.).

For that matter, outsourcing is also an ancient concept (for example, hiring domestic help and royal servants is outsourcing, but doing one's own work is not). But modern services outsourcing/offshoring as meant today implies doling out work that can be done by others over the communications network.
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