November 9, 2005--Jujitsu Toyota Style

Here’s something else I don’t understand. I’m old enough to remember when those first tiny foreign cars began to show up here. Because those Morris Minis, Renaults, and VWs were dwarfed by the gas-guzzlers of that era, they were more laughed at than admired. But slowly and inevitably for The Big Three that laughter and mockery about “Jap” and “Kraut” cars turned into despair as Toyotas and Hondas and VW Beatles eventually took over a disproportionate share of America’s auto sales. Eventually, Ford and GM and Chrysler began to produce smaller cars of their own. But it was too late to catch up, in part because the compact cars they produced were, frankly, inferior.

What I didn’t understand than and do not understand now is why the American manufacturers, who after all dominated the industry worldwide for decades, when American cars like American cigarettes were the envy of the world, why didn’t they anticipate or at least get on top of the trend?

And why today have we again allowed our overseas competitors to get the jump on us when it comes to developing and producing more fuel efficient cars?

A recent NY Times story is instructive (see link below). When Toyota and Honda ramped up their production in the past, they needed to buy and license American technology-—recall how we proudly proclaimed that, yes, because of lower labor costs Japan and Germany can produce cheaper products but only by copying American technology and know-how. And to boot, the goods they maufactured were shoddy.

Well, guess what, as US auto manufacturers scramble to catch up, a decade late, with Toyota and others in the hybrid field, they have to lease or buy technology from Toyota and often must buy parts from Japanese companies!

How did this happen? First, Toyota plowed some of its record $10.5 billion in profits into new fuel-saving technology. Second, they moved “quietly and aggressively” (how Japanese!) to cultivate a network of suppliers for critical hybrid parts. Then, without intentional irony, Toyota bought from GM, a large holding in Fuji Heavy Industries, manufacturers of a smaller and lighter lithium battery that is essential to the future of hybrid cars.

And how are American auto manufactures responding? First, betting that the future belongs more to fuel-cell cars than hybrids. But then, more than anything else, they are whining, crying “Foul!” Ford is claiming that Toyota “is manipulating supply.” (Ford should know a lot about that from their own past history of market control and monopolistic manipulation.)

But other, more neutral parties are saying this is not the case. Kurt Sanger, Macquarie Securities Japan automotive analyst, counterclaims, “Toyota developed it all. Toyota does a lot in-house. Someone is pointing a finger at Bill Ford [Ford’s CEO] saying, ‘Why don’t you make more hybrids?’ So he has to point his finger at someone else.”

Who are you betting on? I can tell you where my two dollars are placed—let’s say, not in Detroit.