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Talking Points AJBS Auto Forum

Talking Points AJBS Auto Forum. Michael Smitka, Professor of Economics Williams School of Commerce Washington and Lee University Lexington, VA 24450 ------------- Association of Japanese Business Studies Conference Friday, June 6, 2003 Concordia University Montreal, Quebec.

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Talking Points AJBS Auto Forum

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  1. Talking PointsAJBS Auto Forum Michael Smitka, Professor of Economics Williams School of Commerce Washington and Lee University Lexington, VA 24450 ------------- Association of Japanese Business Studies Conference Friday, June 6, 2003 Concordia University Montreal, Quebec

  2. Definition of industry • By location: “japan” or “ownership” ? • Is Nissan “Japanese”? • Is Honda “Japanese”? • Neither clear • By sector ? • Assembly: but at most 15% of costs • Design & engineering • Suppliers • Distribution

  3. Analytics • Final market: monopolistic competition • Implication: at best “normal” profits • Evidence: product proliferation, low profits • Analytic premise #1: organizational change • Can old dogs learn new tricks, or entry / exit? • Premise #2: is the firm an appropriate unit? • National industry? NAFTA vs Japan profits

  4. Assembly focus in academics • Not center of costs: suppliers • Overrated: worst in quality today is better than best when JDPower surveys began • Not strategic key: design & product positioning • Neither addresses issues of technology • Electronics in car, now alternate propulsion systems • Marketing neglected • Absent dealerships, GM would have failed • Poorest in quality, product, cost but survived

  5. Suppliers • Subject to strategy of parents • Both Toyota & GM had written policy: never be 1st to market - both now selective innovators • Qualitatively, no PACE (Automotive “Supplier of the Year”) finalists from Japanese supplier network • Qualitatively, suppliers I’ve visited in Japan are only now awakening from a passive mindset, about 10 years after transition in NAFTA

  6. Design: What’s Known and (mainly) What Isn’t • Speed-to-market: Japanese strength • Fujimoto research • Help with auto market • But still lagged in light trucks • Link from marketing to design not studied • Contrast of independent dealers vs captive dealers not studied

  7. Domestic Japan • Adjustment: my story of post-1991 shifts • Started with grant proposal in 1999, why no change despite 30% excess capacity? • Unfortunately Nissan takeover announced between writing and evaluation of proposal • CY 2000 version: direction but not results • CY 2002 version: direction and results • Next version: adequate results?

  8. Will “Japan” survive? • Not sure what to conclude • Only 2 independent assemblers remain: • Honda, Toyota - and former more US than Japan sales! • NAFTA still young: I know two retirees from Honda, but one was the 4th hire in HMMC. • Cf. GM pension crisis • MMC, Mazda, FHI, Suzuki, Isuzu • GM okay - FHI, Suzuki, remains of Isuzu • DCX can’t manage mass market maker MMC • Ford not yet recovered from chaos: fights between EU, NAFTA, with Mazda to date a loser

  9. Nissan • They make money, and maybe BMW • Not clear anyone else does: on a ROA basis Toyota is not very profitable

  10. The Future • Industry consolidation? - will it work? • China? • Every manufacturer I visited in Japan July 2002 and December 2002 wanted to discuss • New technology? • Car electronics (adaptive safety devices) • Fuel cell electric vehicles & hybrids • Demographics & LF issues in both US and Japan • Common source, firm-level issues vary with health care and retirement systems

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