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Thursday, July 26, 2012

Detroit lives, thanks to a courageous decision

Special to The Japan Times

NEW YORK — Early this month I visited Tokyo to give briefings on U.S.-Japan relations to Cabinet members of the Japanese government as well as business executives of Japan's leading multinational firms. When I asked them to assess President Barack Obama's first term, their succinct summary was to the effect that "Osama bin Laden is dead, and Detroit is alive."

In addition to Obama's courageous decision to eliminate Bin Laden, the al-Qaida terrorist leader, they appreciated Obama's policies of reviving "inshoring manufacturing (bringing it back from China) and onshoring manufacturing (new manufacturing at home)."

Unlike his Republican challenger for the presidency, Mitt Romney, and his Wall Street supporters, Japanese politicians and business executives understand that without viable manufacturing industries, the economy loses growth strength and its edge in technological innovation.

The revival of General Motors, Ford and Chrysler seems more greatly appreciated in Japan than in the United States, where the myth of self-made, libertarian market fundamentalism lingers. Republican Tea Partiers are telling the public that President Obama wrongly interfered with the auto markets and that General Motors and Chrysler could have revived themselves on their own just as Ford did.

In reality, as the recent authoritative account of Ford's rebirth, Bryce Hoffman's "American Icon," reveals, Ford's "self-help" revival would have been impossible without the government-backed low-cost loans and President Obama's "jawboning" for United Auto Workers' concessions. Besides, General Motors, Ford and Chrysler share many auto parts suppliers.

The bankruptcies of General Motors and Chrysler would have bankrupted these independent suppliers upon which Ford also depended for vital auto parts and services. Without the revival of Detroit's Big Three, the economies of Michigan and Ohio would remain in dire straits caused by the "Bush Great Recession."

Last April, on the occasion of Japan's Prime Minister Yoshihiko Noda's state visit to the U.S., President Obama's welcoming remarks at the joint press conference specifically referred to over a million manufacturing jobs that Japanese multinational firms' transplants have created in the U.S. Not only have they created a million jobs, they have also proven to be successful prototypes of the "inshoring" manufacturing that thrives in the high-wage U.S.

In particular, Toyota and Honda in the U.S. have trained and fostered "ecosystem clusters" of American suppliers of necessary parts and services. They retained their trained workers and suppliers even when sales fell sharply due to the "Bush Great Recession" of 2008-2010 and the severe disruptions of their global supply chain — the latter caused by Japan's earthquake and tsunami disaster and flooding in Thailand.

Such preservation of trained human resources and suppliers is necessary for "flexible manufacturing systems" of total quality and quick responses to market changes.

Alan Mulally turned around Boeing, and then Ford Motor Co., by emulating Toyota's "work together" business model and corporate culture. How was this possible?

The "work together" business model and corporate culture was created in America by Bill Knudsen, who left General Motors' presidency to plan and execute America's "Arsenal of Democracy" of World War II. It was a massive economic stimulus of government-led industrial policies of the "weaponized Keynesianism."

Guaranteed profits from sales of their goods and services, large and small, established and startup, manufacturing and logistic firms concentrated on product and production process innovation. Large and small manufacturers were voluntarily organized into nationwide "clustering" and "mutually supportive" business linkages. The unsung hero of the "Arsenal of Democracy" was Knudsen, a legend of American manufacturing.

After the war, to revive Japan's war-torn economy and nurture her budding democracy, Gen. Douglas MacArthur invited Homer Sarasohn, a Raytheon engineer, to teach Japanese engineers and executives the total quality manufacturing of the "Arsenal of Democracy."

His teaching was eagerly embraced by the Japanese because his philosophy of management leadership by "honor," "compassion," "honesty" and "public service" resonated well with his Japanese executive-students reared in the "Samurai Bushido" management of legendary prewar Japanese entrepreneurs like Sakichi Toyoda, the founder of Toyota Motor Corp.

They combined the best of American and Japanese manufacturing culture and refined it. Now, it is helping America revive its manufacturing activities.

Yoshi Tsurumi is a professor of international business at Baruch College, the City University of New York.

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