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Friday, May 19, 2006
Cho warns domestic automakers about fallout from success in U.S.
Japanese automakers should be careful of possibly sparking trade friction with the United States due to their growing strength in the American market, the new chairman of the Japan Automobile Manufacturers Association said Thursday.
But Fujio Cho told The Japan Times ahead of assuming his post as JAMA chief that Japanese carmakers, because of their increased local production, should not be too worried because they are unlikely to experience the severe bashing from the U.S. public that occurred in the late 1970s and 1980s.
"Two-thirds of Japanese cars sold in the U.S. are produced by Americans there and it has become a U.S. industry," Cho said. "Japanese companies are hiring a huge number of locals, contributing to the U.S. economy."
Japanese carmakers boosted their U.S. market share to a record 32.2 percent in 2005. At the same time, the combined share of the Big Three -- General Motors Corp., Ford Motor Co. and the Chrysler wing of DaimlerChrysler Group -- fell a record 56.9 percent in new car sales.
Cho, former president and vice chairman of Toyota Motor Corp., played a key role in setting up the automaker's first plant in the U.S. in 1986, and became president of Toyota Motor Manufacturing, U.S.A., Inc. in 1988.
He said Japanese and U.S. carmakers are rivals but, at times, also allies, pointing out that the two sides have joined in research programs on automobile technology.
"It is important that we balance ourselves between competition and cooperation, and not just push our way" into the U.S. market, Cho said.
Japanese automakers are expanding their overseas production capacity, but output at home has remained flat for the past years.
Cho said Japan should maintain an annual domestic production at least at the current level of 10 million units.
"We should maintain this level for the sake of the Japanese economy, to maintain Japan's technology and to ensure employment," he said. "If we cut back on domestic production, it will deal a heavy blow on the economy."
Nearly 20 percent of Japan's population is believed to be connected to the automobile industry, Cho figured, including salespeople, gas station attendants and maintenance workers.
"We have to be aware of that," he said.
Passing along technological expertise to the next generation is also key to a robust industry, especially when the baby boomers start to retire next year, at the age of 60.
Cho said automakers should create programs in which knowledgeable people can continue working even after reaching retirement age so they can train younger ranks.
He also expressed concern about the skyrocketing price of oil. Many gas stations raised their prices about 4 yen per liter earlier this month.
Cho said the higher prices will probably push customers to buy the more fuel-efficient compacts and minicars, meaning less profits for automakers.
Higher costs for such raw materials as steel will also hit the industry hard.
"The industry is facing a difficult period in terms of the price of oil and raw materials," Cho said.
"We cannot raise the price of automobiles just because the raw materials have become expensive," Cho said. "We and suppliers of (raw material) have to make efforts to slash costs to maintain the current (vehicle) prices."