One Car, Two Drivers? Competition, Cooperation, and the Impact of the Japanese Auto Industry in America


This is the first in a three-part Japan Matters for America special report on the impact of Japan’s automakers and their interactions with the American auto industry. Part one examines Japanese cars made in America, part two examines joint ventures between US and Japanese automakers, and part three examines the integration of the auto part supply chain.

Japanese automakers currently operate in 17 states across the country. Image Source: JAMA, "Building in America" (Click to expand)

In the wake of the 3/11 Tohoku earthquake, tsunami, and nuclear disasters, Japan received aid from, among others, a seemingly unlikely source: Detroit’s “Big Three” automakers. Chrysler donated $100,000 with the promise to match employee contributions up to an additional $100,000, while General Motors contributed a total of $750,000 through the GM foundation and dispatched a task-force to Japan to visit and support parts suppliers in the affected region. Meanwhile, workers of AutoAlliance International, the jointly-owned Ford-Mazda plant in Flat Rock, MI, raised $7,000 in one day toward Japan’s relief efforts, despite layoffs the week before. These gestures from the heavyweights of the American auto industry reveal a dramatically different environment from nearly 30 years ago when anti-Japan sentiment in the Motor City reached a fever-pitch, culminating in the brutal murder of Vincent Chin, a Chinese-American mistaken for Japanese by an enraged, laid-off autoworker.

The auto industry is significant to both the US and Japan. The Japan Automobile Manufacturers Association (JAMA) reports that a little over 8% of Japan’s workforce is either directly or indirectly employed by the auto industry, which produces 17% of the economy’s manufacturing shipments. In the US, the industry contributes 5% of GDP and 16% of all durable goods manufactures, according to the Department of Commerce International Trade Administration. In 2010 the total employed in the US by automobile parts and assembly jobs was over 674,000. This role of the industry as a large-scale employer has prompted patriotic calls to support the domestic industry in the face of Japanese imports for decades.

The competition remains significant, with Japanese automakers currently capturing nearly a third of US auto sales in an industry that was, until a generation ago, dominated by the Big Three. However, what this means for America has changed dramatically in that time. Japanese investment in the US, and increased cooperation between domestic and Japanese manufacturers, has resulted in a progressively more globalised and interconnected industry. With the line between a foreign and domestic vehicle becoming increasingly blurred, the mantra of “Buy American” has taken on new complexities.

Transplants: Japanese Cars, Made in America

Honda, established the first Japanese "transplant" in Marysville, Ohio, in 1982. The Accord was the plant's first vehicle and it remains its core product. Image Source: Honda/Wieck

Perhaps the most notable change has been the number of vehicles from Japanese automakers produced in the US. Faced with export quotas in the early 1980s, and the rising costs of manufacturing in Japan due to a rising yen, Japanese companies began investing in assembly plants in the US. Honda established the first “transplant” in Ohio in 1982 and by 2009 Japanese transplants operated in 14 states with combined investment totals nearing $33.3 billion. Initially firms were drawn to states through substantial state and local incentives and, in order to develop unique relationships with the host governments, chose states in which competitors were not operating. After Honda located in Ohio, Nissan set up in Tennessee, Toyota in Kentucky, Mitsubishi in Illinois, Subaru/Isuzu in Indiana, and Mazda in Michigan. Since then operations have spread from the Midwest to the South and West, creating an “automobile ally” from Michigan to Alabama along the I-65/I-75 corridors.

According to a report from JAMA, the number of vehicles built in the US by Japanese automakers first exceeded the number imported from Japan in 1992, a trend that has continued since. In 2009, 66% of Japanese-brand vehicles sold in the US were produced domestically. While output was reduced that year due to the worldwide economic crisis, 1.9 million vehicles were built at Japanese transplants. Of these, 171,000 were exported, accounting for 17.2% of the total new vehicle exports from the US.

JAMA estimates that Japanese automakers generated 401,019 American jobs in 2009: 50,927 in manufacturing, 3,838 in Research and Development and Design Centers, and the rest through Japanese-brand dealer and distributer networks. While developing an important manufacturing sector in their host states, a report by the Congressional Research Service concludes that due to the higher efficiency of the Japanese plants and locations further afield from the Great Lakes automotive hubs of Michigan, Indiana, and Ohio, these new jobs did not fully replace those downsized from the Big Three. Yet, as a result, the auto industry has spread to a greater portion of the country.

Please check back next week for the second part of our Special Report where we look at the role of US-Japan joint ventures.