This is the final installment 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 third way that Japan’s automotive industry is closely interconnected with that of the US is through relationships between producers and parts suppliers. When assembly transplants were first established in the American heartland, they imported parts from their traditional suppliers back in Japan. Over time, in order to have “just-in-time” access to components at their US plants, Japanese automakers urged the Japanese parts manufacturers to invest in America and open factories nearby. Increasingly, however, in order to reduce costs through the purchase of domestically produced parts, and to uphold pledges to boost the “North American content” of their products, Japanese manufacturers have utilized more and more components from US suppliers. Driven by the Japanese transplants, the US is Japan’s largest market for auto parts, importing $13.8 billion in 2009; however, the Japan Automobile Manufacturers Association reports the same operations purchased $38.3 billion in parts from US companies.
American automakers, too, have begun to a greater extent to globally source vehicle components. The results have been a less clear definition of what constitutes an “American-made” vehicle and an internationally integrated industry where shocks in one country can cause ripples in another. This year, for the third year in a row, it was not a Big Three product but the Toyota Camry that topped the annual American Made Index from Cars.com. The survey takes into consideration the percentage of domestic parts (vehicles must have over 75% North American parts content to be eligible), where it is assembled, and its popularity and availability to American consumers (the greater the volume, the more Americans employed to produce them). As a result, the Japanese automaker’s vehicle was deemed “more American” than the Ford F-150 it initially dethroned, which contained only 60% domestic parts in 2011.
The level of integration between the US and Japan’s auto industry was seen in the wake of Japan’s March 11, 2011 complex disaster and subsequent blackouts. As many component factories were damaged by the earthquake and tsunami, model shortages and plant shutdowns from the Japanese firms in the US were expected—Toyota’s US transplants operated at 30% capacity for weeks. Yet, the effects were felt by American firms as well. As the Congressional Research Service reported, the production of highly specialized parts such as diodes, microprocessors, circuit boards, and voltage regulators that have few alternate suppliers were affected by the disasters, resulting in assembly line disruptions in Detroit and throughout the US. General Motors was forced to temporarily close a plant in Louisiana, and Ford and Chrysler moved up plans to idle plants to conserve parts sourced from Japan.
After over 30 years of investment and integration, Japanese automakers are now a significant force in the American automotive industry, not just through rising market shares, but the jobs and products they have produced in the US. American cars are made with Japanese parts, Japanese cars with American labor, and companies that cooperate on technology and innovation as much as they compete in the showroom. Now as Japanese and US firms continue joint ventures in new markets in Asia, and recover from the 3/11 supply chain disruptions, it is clear that, at least in certain segments of the market, the US auto industry is one vehicle with two primary drivers.
Additional References:
Arnesen, Peter J, ed. The Auto Industry Ahead: Who’s Driving? Ann Arbor: Center for Japanese Studies, University of Michigan, 1989.
Law, Christopher M, ed. Restructuring the Global Automobile Industry: National and Regional Impacts. New York: Routledge, 1991.
Liker, Jeffrey K., W. Mark Fruin, and Paul S. Adler, ed. Remade in America: Transplanting and Transforming Japanese Management Systems. New York: Oxford University Press, 1999.