Raw Japan

Slices of Japanese business, politics and life

Yes, there is a difference between American and Japanese cars

By Bob Lutz
June 20, 2011

By Bob Lutz
The opinions expressed are his own.

A lot of words have been written in the past few post-tsunami weeks about the negative impact of the disastrous tragedy on the short-term future of Japanese cars in the U.S. market. In parallel, many articles proclaim this to be a “historical window of opportunity” for the “Detroit Three,” now able to deliver to waiting customers an abundant supply of new vehicles while, at Toyota, Honda and Nissan, the cupboard is bare.

It’s telling that we’re *not* hearing the Japanese-brands inspired propaganda offensive of a few years back, when the media duly repeated that “there is no longer such a thing as an American car or a Japanese car.” The Japanese, it was stated, now all have plants in the U.S., whereas most U..S companies import components from the Far East, or Latin America,  thus compromising the promise of saving U.S. jobs. For buyers with a patriotic streak, it was all-American-apple-pie-OK to buy a Japanese brand, these being “just as American” as a Ford, Chevrolet, Dodge or Jeep. The (then) World’s Smartest and Finest Car Company, Toyota, even placed ads asking who’s more American? Toyota USA, adding manufacturing jobs and plants in the U.S., or the Detroit Three, busily, at that time, laying off workers and shuttering plants?

Fast-forward to the earthquake and tidal wave of 2011: the allegedly red-white-and blue Japanese brands suddenly find their supply lines dried up, while the supposedly import-component laden domestic cars, (albeit with some minor work-around shortages) continue to deliver a river of new vehicles, unabated. And, thus, another popular myth bites the dust.

In the past months the Detroit Three have, in fact, come roaring back. The Chevrolet Malibu, the 2007 “Car of the Year,” has shouldered past the Japanese brands and is now the number one car in the mid-size segment. Even more astonishing is the Chevrolet “Cruze,” a best seller around the world, and now America’s number one compact car, relegating the perennial favorites, Honda Civic and Toyota Corolla, to the runner-up spots.

Will all this Detroit resurgence be reversed when Japanese car supplies build up again? I predict it will not.

The current weakness of the Japanese brands goes beyond the natural catastrophe that slowed output. The roots of the end of the nation’s infatuation with Japanese cars go way deeper; more profound, underlying factors are at work. The manifest ineptness on the part of Toyota in dealing with the unintended acceleration crisis has permanently taken that company from “God-like” to “just another good car company.” They, and other Japanese brands, have also suddenly developed a curious inability to produce winning designs. Gone are the Hondas that scream “buy me” thanks to their lovely proportions and superb interior: evidence of the cost-cutting now abounds.

This sudden weakening of the product is accompanied by massive, unprecedented strides by the domestics: rather than the embarrassing exercises in mediocrity that formerly emanated from Detroit, “the three” are now fielding the most competitive products in their history. Whether Buick, Cadillac, Dodge, Jeep or Ford, Detroit’s new offerings, from Camaro to the Sonic, are beautifully-styled, superbly-crafted, presenting world-class ride and handling with fuel economy better than the Japanese rivals. After 30 years of less-than-stellar focus on cars, a restructured and re-energized Detroit is out to conquer with cars that, viewed objectively, are now nicer and better value than those of Japan. And, since bad news always comes in batches, there’s the dollar-yen relationship: at roughly 80 yen to the dollar, the historic Japanese cost advantage has turned into a millstone, forcing content reductions in the vehicles, narrower profit margins, and higher prices.

Yes, the Japanese will recover somewhat from the current nadir. But the all-conquering days are over. GM, Ford and Chrysler are attacking with a vengeance, this time not with incentives, but with superior products. And let’s not forget the elephant in the room: the rapid growth of Hyundai-Kia, taking away those value-conscious buyers that usually defaulted to Honda and Toyota. All in all, I’d say that, in coming decades the US market will cease to be the golden goose that so richly nourished the coffers of the Japanese car industry. Welcome to the “Tough road, hard work” club, guys!


long live hyundai…

Posted by Ocala123456789 | Report as abusive

This is a shameful opinion piece, but to be expected by the author. Funny how at no point does he get into all the Detroit 3 factories in Mexico, and the fact that the only decent cars being produced by US companies are the European designed versions, because the US engineers have lost the plot and are still in SUV land.

Each manufacturer has a global supply chain, which is naturally biased towards their parent company, but ask most people in the South (GA, TN, SC) if Kia, VW, BMW Toyota et al support US workers with huge investments, compared to the empty wastelands that used to be GM factories.

Detroit is coming back, which is a great thing for our country, but we should NEVER, EVER buy cars just based on patriotism, because that is what caused them to get so damn awful in the first place. Ford, who did not take billions of our money, makes the best products so far, because they have got the fact that you need quality to compete. Chrysler is getting there thanks to Fiat. GM is still not sure, and is throwing a lot of old re-badged stuff around.

Posted by GA_Chris | Report as abusive

Yes, the american auto industry is roaring back, having saved thousands of jobs. Yet Obama is criticized by the Republicans for having saved the industry!

Posted by luiscatan | Report as abusive

My only comment is that my 2004 Camry is better, over all, than my 2009 Camry. Have to upgrade to Avalon to get better, it seems, and I am not sure it is worth the money. They may be pushing the Lexus models.

Posted by RobbySh | Report as abusive

Now, where are the diesel and diesel-electric hybrids from the Big Three – they sell models on sister platforms in Europe that are diesel and get over 30mpg city and well over 50 mpg highway? Diesel-electric hybrids get better than 100 mpg. Want to be World-beaters, Detroit? Get diesel and diesel hybrid models of your cars.

Posted by Husker6.5 | Report as abusive

The death of the American car companies during the 1970s and ’80s was a serious of wounds self-inflicted by company managements, which made it impossible for U.S. car companies to respond to the Oil Embargo of the mid-’70s. Some of the basic short-comings were still evident during the first decade of the 21st century. Since Bob Lutz wrote a book called “Car Guys vs. Bean Counters: The Battle for the Soul of American Business,” he may agree with these views.

During the 1960s, American car companies — like other American businesses — started to think of themselves as generic businesses applying business models to the marketing of a generic product. They didn’t really care what product they were selling — hemorrhoidal suppositories, cars, it was all the same. They invested heavily in advertising and other marketing services, and they spared no expense on those things. In order to pay for it, they relentless removed the quality from all of their products until they became incapable of making a first-class product. They just didn’t know how to do it anymore. This did not just happen to the car companies. It happened to every type of business in America. Food businesses, clothing businesses, just about everything sold to consumers in America experienced a decline in quality during the 1960s, ’70s, and ’80s. The greatest economy in the world was, in effect, ransacked by managers applying a business school philosophy that, in essence, legitimized self-dealing and encouraged senior managers to plunder their employers. Thus, when the Oil Embargo hit and America needed fuel-efficient cars, the American car companies were unable to respond because they had been converted into “cash cows” — which means companies in which little or no investment is made in research and development, enabling such companies to operate at inflated profit margins until their products become obsolete — at which time they are shut down or sold. Not every industry was hit as hard as the automobile industry, but all sectors of the U.S. economy are affected by the philosophy that a manager has a moral imperative to act purely in his or her self interest. This philosophy has spread beyond the industrial sector and accounts for the changes we have seen in academia and the health care industry.

Posted by Bob9999 | Report as abusive

I’ll start buying American cars again when they stop making them cheap and ugly looking. Foreign cars are better because they are engineered better. Just look at the fit, finish and interior trim of an American car verses a foreign can. No comparison.

Posted by runningman | Report as abusive

I love it!

For too many years, I was forced, by the poor quality of US brands, to buy Japanese, and even some European brands.

I look forward to owning US Brands again, and for a long time to come.

Posted by JamVee | Report as abusive

I absolutely love my Pontiac Solstice. Its a fun car thats a pleasure to drive and, its great on gas.
This car was pushed by Bob Lutz. GM owes much of its current success to Bob.
I only wish the Government would have left the Pontiac brand alone.
I also have a 1986 onc Fiero that runs ike a top and gets a combined average of 34 miles per gallon.
But… bring back the Solstice!!!

Posted by Manoli | Report as abusive

America should be proud that American car companies are rebounding, that GM is #1 in the two largest markets in the world, China and the U.S. and will be #1 globally again in 2011.

GM is expected to sell on the order of 2.5 to 3 million more vehicles than Toyota globally in 2011, reclaiming #1 in the world, over 1 million ahead of #2 VW.

GM has generated $Billions in profits for 5 successive quarters, $3.5B last quarter alone. The company has received no additional government funding since the capital invested to finance the bankruptcy in 2009, all but $26.5B of which has been returned through loan repayments and stock sale in the IPO.
If the remaining government stake were sold at today’s price (down along with Ford and the auto sector), taxpayers will have lost around $10-12B. A lot of money, but to bring perspective, a few days interest on our national debt, about $2 or $3 out of the pocket of most taxpayers.
Meanwhile GM is resurgent, hiring engineers and other workers and investing over $5B in capital improvements in America in 2010 and 2011 with cash generated by the business, while maintaining hundreds of thousands of good paying jobs which many communities across the midwest depend upon.

Posted by DanDetroit | Report as abusive

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