The Nikkei To Japanese Carmakers: Learn From Korea And Germany, Or Die

Bertel Schmitt
by Bertel Schmitt

the nikkei to japanese carmakers learn from korea and germany or die

“Kyo no asa nikkei wo yomimashitaka?” – did you read this morning’s Nikkei?

Today, this is the most uttered sentence in the Japanese auto industry. Under the headline “fast action needed to revamp carmakers”, Japan’s leading business daily rips its own carmakers several new orifices. The editorial doesn’t mince words:

“Japanese automakers lack the momentum of their South Korean and German rivals and may find themselves losing out big on the global stage unless they rethink their strategies.”

As far as the Nikkei is concerned, Japanese carmakers messed up big-time. Let’s start where it counts, at the bottom line:

“Although Honda Motor Co. will likely turn in the top performance among Japanese automakers for the year through March, its net profit is expected to fall short of the fiscal 2007 level, before the “Lehman shock” hit. In contrast, 2010 net profit at Hyundai Motor Co. of South Korea was triple that of 2007, while German carmaker Volkswagen AG’s profit in the first nine months of 2010 was sharply higher than that for same period of 2007.”

Japanese carmakers don’t let a day go by without complaining about the strong yen, but “the weaker performance of Japanese automakers is not attributable to the yen’s appreciation alone,” says the Nikkei. “Even in emerging markets, they lag their rivals.”

“For example, Toyota Motor Corp. is the largest automaker in the world in terms of sales volume, but it has a market share of just 7 percent in China, the world’s biggest auto market. The share is half that of Volkswagen, the top player in China.”

And who is way ahead of Japan in the emerging markets? It’s those evil twins from Germany and Korea again.

Volkswagen says it aims to keep increasing sales in China and become the world’s biggest carmaker in 2018. It commands the second-largest share in Brazil, and it is strengthening its position in India by forming a capital and business alliance with Suzuki Motor Corp.

Hyundai, for its part, boosted its position to the second and third places in India and China, respectively, in 2010. It also sells as many cars as Nissan Motor Co. in the U.S., the bread-and-butter market for Japanese carmakers, and has already topped Toyota in Europe.

Having sufficiently shamed its Japanese readership into choking on their morning ochya (tea), the Nikkei writes what borders on sedition in a quality-obsessed (and Korea-adverse) Japan:

“In terms of quality, the difference between Japanese and South Korean vehicles is not large. Unless Japanese carmakers do something to shake up the status quo, they will likely find themselves under serious threat from South Korean manufacturers.”

Honto desuka? (WTF?) The land of Nippon convulses in a communal Maalox (or make that Cabagin) moment. So what’s Japan’s industry supposed to do? The Nikkei has some good advice that will trigger more acid reflux:

“It is the time for Japan’s automakers to review their strategies, taking into account changing market trends and technological advances at foreign rivals. They should seek to regain a position of superiority in terms of cost, quality and design by analyzing German and South Korean cars more closely.”

From Wolfsburg to Seoul, auto managers are putting away their dog-eared copies of Masaaki Imai’s Kaizen and of Jeffrey Liker’s Toyota Way and prepare for what they had not done since the 60s: Factory tours in Japanese.

The Nikkei, however, is not finished yet. While it is at it, it takes a roundhouse swing at the unloved DPJ government:

“The government needs to support Japanese automakers. With South Korea forming more and more free trade agreements with other countries, automakers there enjoy tariff-related benefits in markets for 41 million vehicles, or 60 percent of global auto sales. The ratio for Japanese carmakers is far lower than that. Japan should waste no time promoting FTAs so that Japanese automakers can compete on an equal footing with their rivals in South Korea.”

And that, dear reader, is most likely where the editorial is aimed. Unpopular Japanese Prime Minister Naoto Kan faces pressure to step down after having failed to compromise with the opposition on a budget. There are nationwide local elections in April. A snap general election is possible. The opposition LDP leads in the polls, but not by a wide margin. Every vote, and every small party counts. And this is where the Free Trade Agreements come in. Japanese rice farmers are near sacred, despite the fact that most farm rice as a hobby. Only 1 percent of all rice farmers make at least half their income from rice. The farm vote is bought with a whopping 788 percent tariff on rice imports. A free trade agreement that is good for the Japanese industry is reviled by the farm lobby, which holds the rest of the industry at ransom.

The auto industry and the rest of the Japanese export machine may perish, but no politician at either side of the rickety aisle dares to alienate the farm vote. The solution seems to sit it out.

“The average age of a rice farmer is 66, and not enough young people have expressed interest in becoming farmers,” says Japan Times. “Even if Japan doesn’t join the Trans Pacific Partnership, America and other exporters just have to wait five years or so. By then, there may not be any rice farmers left to protect.”

However, in 5 years, there might be a few Japanese carmakers less unless there is “fast action.” If the Nikkei’s doomsday prognosis is correct.

PS: The U.S. car industry is never mentioned in the firebrand editorial.

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2 of 33 comments
  • Blowfish Blowfish on Feb 21, 2011

    smallcars February 21st, 2011 at 5:52 pm I (modestly) suggest that the Japanese look at my auto safety invention. if there're no semi trailers, dump trucks on the road, one can feel super safe even riding a tricycle or spend a few hours at a pool hall see how balls hitting each other and see how they react. We as human beings can only take so much shock, not sure how many Gs before succumb to internal bleeding. If it were a major component IE Aorta we can go in mins, a fractured spleen can do a lot of harm too. If it were sideways, the impact can be much lighter before something bad can happen.

  • I_godzuki I_godzuki on Feb 22, 2011

    japan does okay in China. Most people couldn't care less about the war when it comes to buying a car, I'd wager. Nissan actually outsold Toyota, Honda and Hyundai last year. Toyota and Honda lagged a long way behind GM and VW, but half of GM's cars are $4000 Wuling trucks with wafer thing margins. Toyota's mainstay is the Camry, which isn't cheap in China, while Honda's best seller is the Accord. The ranking is something like GM, VW, Nissan, with Hyundai, Toyota and Honda battling it out for 4th.

  • Master Baiter Might as well light 50 $100 bills on fire.
  • Mike1041 At $300K per copy they may secure as much as 2 or 3 deposits of $1,000
  • Sgeffe Why on Earth can’t you just get the torque specs and do it yourself if you’re so-inclined?!
  • Sgeffe As was stated in another comment, the FAA nominee went down in flames. But the NTSB chairwoman certainly didn’t, and she’s certainly not qualified either!Lots of this kind of stuff going on both sides of the aisle—Ben Carson would have arguably made a better Surgeon General than HUD Secretary under Trump, for example.
  • Art Vandelay Interesting, the Polestar 2 I had as a rental utilized Android Automotive which is what GM said it is going to exclusively, yet it still offers Apple CarPlay according to this. Wonder if GM will do the same.