One Car Two Drivers? Part Two: Joint Ventures—Cooperation in the Midst of Competition

Japan

This is the second 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.

The American flag adorns the hardhat of an assembly line worker at the NUMMI plant in Fremont, CA., a joint-venture between GM and Toyota that produced cars for both companies. Image Source: NUMMI

Investment in the automotive industry over the past 25 years was not limited to the Japanese firms, and with it came increased cooperation. American automakers invested in Japanese companies, with each of the Big Three entering into a joint venture (JV) with a Japanese counterpart. From 1998 to 2002, General Motors owned a 49% share of Isuzu, up from the 34% it held since the early 1970s, with Ford and Chrysler historically holding large shares of Mazda and Mitsubishi respectively. The American companies used these relationships to import vehicles to supplement their domestic lines, which they rebadged and sold as their own. The Dodge Colt, sold in the US by Chrysler in the 70s and 80s, was actually produced by Mitsubishi.

Joint ventures in which American and Japanese automakers jointly produce vehicles began in 1984 with the establishment of New United Motor Manufacturing Inc. (NUMMI) in Fremont, California by GM and Toyota. While manufacturing vehicles for each company, through NUMMI GM was able to study Toyota’s assembly methods and Toyota studied US labor relations and management. The Ford-Mazda partnership, which goes back to 1979, started a 50-50 JV the following year in Flat Rock, Michigan; making it the only Japanese company to produce vehicles in the heart of America’s automobile country. The two companies cooperated extensively on small cars and pickup trucks, resulting in the joint development of the Ford Explorer, the Detroit automaker’s most successful model. Diamond-Star Motors, a JV between Chrysler and Mitsubishi, built cars for both companies in Normal, Illinois from 1985-1991, before the plant became wholly owned by Mitsubishi.

Nearly a quarter-century on, while cooperation in technology and development continues, many of the JV plants run by US and Japanese partnerships have either closed their doors or become the sole property of a single party due to corporate restructuring. Last spring, Californian autoworkers shed tears as the final Corolla rolled off the assembly line at NUMMI, which Toyota closed after GM pulled out the year before as part of bankruptcy restructuring. Mazda appears poised to do the same at the AutoAlliance plant it shares with Ford in Flat Rock, after announcing earlier last month that it will stop producing the Mazda6 sedan there by next year. While the knowledge gained by both sides in the JV experiments had been valuable, this did not change the fact that vehicles produced at the same plant often had to compete against each other in the market, creating winners and losers within the partnership.

This trend of long-standing JV break-ups does not mark the end of US-Japan automotive partnerships, however. Tesla Motors, the Silicon Valley-based electric car company, recently bought the NUMMI plant and is now working with Toyota to develop the all-electric powertrain for Toyota’s RAV4 EV. Meanwhile, looking to break into emerging auto markets in Asia, Ford and Mazda launched a three-way JV in China with Changan Motors (now split into two separate operations with Changan) and maintain an AutoAlliance plant in Thailand.

Please check back next week for the final installment of our special report where we look at the auto parts sector and the extensive integration of the automotive supply chain between the US and Japan.