Japanese Automakers To Japanese Government: Want More Jobless? No Problem, We Can Deliver

Bertel Schmitt
by Bertel Schmitt

Did we mention that there is a steady drumbeat by Japanese companies that openly think about, or deny (with huge qualifications) moving more and more production outside of Japan? Did we imply that a lot of this noisy thinking might be targeted at the current Japanese administration with which the carmakers are as much at odds as a carmaker can be with an administration that comes with full union backing and is full of former union officials? (Oops, never mind.) Anyway, Japanese carmakers are accusing their government of losing the war of the soft currency (led by the U.S. that lets its dollar slide while accusing others of manipulating their currencies – a good offense beats any defense.) Now the rhetoric is getting less circumspect.

Today, the Yen stands at 81 against the dollar. And Japan is hitting back on all fronts. “Although Washington has long criticized Beijing for not revaluing the yuan quickly enough, many countries now consider the recent sharp fall of the dollar more of a problem than the Chinese currency,” said Yuji Kameoka, chief foreign exchange strategist at the Daiwa Institute of Research to The Nikkei [sub].

The biggest broadside however is fired against Japan’s own government. Under the (for Japan) highly unambiguous headline “Govt Must Stem Carmaker Exodus,” The Nikkei [sub] runs a long editorial that demands (imagine that, in Japan) that “the Democratic Party of Japan-led government should take immediate steps to slow the exodus of Japanese car production to other countries as the trend bodes ill for Japan’s manufacturing sector.”

The Nikkei praises places like Thailand, because “it offers such attractive inducements as promising corporate-tax exemption for eight years to those producing fuel-efficient models. It has also signed free-trade agreements with other ASEAN members and Australia, making it a strategic location from which to export to these markets.”

“In contrast, Japan is increasingly portrayed as the country least suited to host factories for a number of reasons. Its domestic market has shrunk amid a falling population while its corporate tax rate is among the highest in the world. Its government has signed few free-trade or economic partnership agreements. In addition, it appears to be toughening labor regulations at a time when the yen’s value is rising.”

The Nikkei reminds its own government of other industries that are long gone, and that the car industry may soon follow:

“Japanese carmakers used to be less willing than textile and consumer electronics makers to move production to these countries because manufacturing cars requires much larger capital outlays. But they have begun to do so as demand is growing sharply in emerging economies. Their moves overseas are inevitable and cannot be halted given these circumstances.”

The Nikkei makes (by Japanese standards) very blunt demands:

Additional auto production, equivalent to an aggregate 2 million units or so annually, is forecast to be moved overseas from Japan over the next two to three years. In light of this, the government must immediately intensify its efforts to sign economic partnership agreements and significantly trim the effective corporate tax rate if it wishes to slow the outflow.

The Kan government must be alert to Japanese carmakers’ moves because the fate of the auto industry — the largest component of Japan’s manufacturing sector — has far-reaching implications for the sector as a whole.

The Nikkei has always been the voice of the industry. The message is clear: Do something, or we are out of here. Do nothing, and you will be out of here. In Japan as in the U.S.A., the Democratic Party is supposed to be the party of jobs, not the party of jobless. Don’t do that job, and you’ll be out of a job. You are worried about high unemployment? We can give you much higher unemployment, if that’s what you want.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Obbop Obbop on Oct 19, 2010

    Whatever the outcome of currency valuation or trade wars or whatever I remain firm in my believe that USA dumpsters will continue offering the finest dining among the world's trash receptacle. USA!!!!!!! We're Number One!!!!!!!!

  • Steven02 Steven02 on Oct 20, 2010

    The US imports so much that its currency won't be that high forever and it currently falling. Japan does much of the same, but also for many years kept the yen artificially low. Now China is doing what Japan did. Go figure, when you can export everything and keep jobs, people are happy.

  • Akear I just wish GM could produce a vehicle 80% as good as the crown.I sat in a Trax at a Chevrolet dealership this weekend and was shocked how cheap it felt. GM does not care.GM - what a disgrace!
  • Akear I like the grill treatment of all Mitsubishi products. It is an interesting and original design.
  • El scotto Some rambling thoughts; Elon is pulling billions in cash out of Tesla. Tesla will be around, Elon won't let them fail. Mitsubishi is an odd place, you can't sell vehicles if you don't have dealers. Out of all the "Automalls" near you, how many have a Mitsubishi dealership? The Agnellis owned Fiat, Fiat got sold to Stellantis. The Agnellis control Exor. How much of Stellantis does Exor own? I really should be drinking beer with Billy Ford and talking Big-10 trash with him. Ford and Lucid should work out a partnership. You want an electric Lincoln? Have Lucid build it and slap a Lincoln name plate on it. BTW, kick Farley's butt to the curb.
  • Akear US contentChevrolet Trax - 5%Honda Pilot - 52%What a disgrace!I glad Consumer Reports panned the Trax, and put it on its avoid list.
  • Akear This is similar to what lazy GM and Ford used to do.