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Chapter 7

Japanese Automobile Industry in the Future:
Toward Coexistence with the World, Consumers
and Employees

Confederation of Japan Automobile Workers' Union


From the end of 1991 through the first part of 1992, the events that shook Japan and the rest of the world happened one right after the other. These are, the dissolving of the U.S.S.R. and President Bush's visit to Japan accompanied by representatives from various American industries. But, while it was true that many people saw those events as surprising, at the same time they felt that "the world would be changing".

The cold war between the west and the east finally ended after about forty five years. The economy and the people's lives in the former U.S.S.R. are in critical condition and the U.S. economy is weary and balanced as if on the edge of a precipice. Under these circumstances, the world tends to focus its interest on economic problems. Viewing Japan from the outside, Japan appears like "an industrial superpower that swept the world's market, that misunderstood market economy and that did not know how to be moderate."

Looking at domestic issues, situations have been changing. For example, the Japan Federation of Economic Organization developed the "Corporate Action Charter" which listed among its planned activities for 1992 "to live together in harmony with other foreign countries economically and to correct the negative influence caused by a society in which people tend to put too much value on companies."

In these situations, some Japanese people criticize "the Japan-U.S. Action Plan" as the result of President Bush's visit to Japan. But if they look at their own positions and examine Japan's economy and standard of living, they will probably begin to understand that there are things wrong with Japan as well." The automobile industry for example, is bogged down by three factors or "triple sufferings": the employees are exhausted; the companies make only little profit; and the automobile industry is always attacked from abroad.

The Jidosha Soren (the Confederation of Japan Automobile Workers' Unions, or JAW for short) suggested that the industry be made more attractive in an opinion report to the Industrial Policy Committee two years ago. This report was based on a survey of workers in the automobile industry and its aim was to improve the industry as a whole. As well as individual companies so that the employees could feel proud of working in this industry. Unfortunately, however, the situation has been getting worse. Although an effort to shorten working hours has already begun, less progress has been made compared with other industries. Moreover, no agreement has yet been made between the management and the unions to reach 1,800 working hours a year. During the past several years, although the total number of automobiles produced consistently broke the previous year's record, the rate of operating profit for automobile makers was declining. And it finally ends up at one percent level in the 1992 fiscal year ending in March. Moreover, about 40 percent of automobile dealers will be expected to show losses. These situations are not only far from the image of the automobile industry as an industry which "makes a handsome profit" but also signify long working hours as well as a low profit despite Japan's reputation in the world for high quality products and a number of production, which is nothing else but a contradiction. Furthermore there are some movements by medium- and small-size parts manufacturers which are starting to decline orders due to labour shortage or low profits. Because of this, the industry has a sense of impending crisis, afraid that it will collapse from the inside.

Work on the opinion report focused first on shorter working hours. But since it was difficult to make a good program to shorten working hours, the project changed to analyze the relationships between production methods, the overseas market and consumers while preparing the report, it became obvious that the problems facing the automobile industry were getting serious. It then became necessary to refocus the report to examine ways of maintaining the health of the industry. Maintaining the industry in a healthy way means eventually "coexistence with others" and most importantly, it means overcoming the problems facing the industry already mentioned.

This time we have tried several new methods. One was to send questionnaires to consumers to ask them about their feelings for and expectations of the industry. Fortunately, over 6000 replies were returned to us. The second method was to collect and analyze all of the opinions expressed in the last column of the questionnaires entitled, "please express your views freely." Through the consumers' comments, we were able to obtain fresh and useful opinions that we could never have found in just figures.

We have been constantly looking from the standpoint of the labour unions for ways to fight the problems. We have finally completed our opinion report which we hope will stimulate a wide range of discussions about reform among labour and management as well the government administration, the Japanese people and the people of foreign countries.


In 1980, Japan overtook the United States as the top producer of automobiles in the world. Last year, in 1991, Toyota Motor Corporation surpassed General Motors in the U.S. as the largest producer of automobiles by one company in one country. In the last ten years, the Japanese automobile industry captured the number one position in terms of the number of produced. When thinking about the future, it is important to consider the following issues: under what conditions these figures were achieved; the current internal condition of the automobile industry; and the views and expectations of people outside the industry.

The total number of sales of Japanese automobiles stood at 7,520,000 in 1991. However, the figures were previously only 5,020,000 in 1980 and 5,560,000 in 1985. This indicates that the market has been drastically growing during "the Heisei economic boom". The size of the automobile market at 7,520,000 is two and a half to three times larger than the market size in the former West Germany, the United Kingdom or in France, where figures for these countries indicate sales of between 2,000,000 and 3,000,000 a year. In other words, the Japanese domestic market for automobiles has grown larger than we expected.

The factors necessary to fulfil this high demand for automobiles are the present production and sales methods. Production is controlled by a just-in-time system for every step of production, from very small parts to transportation of completed automobiles. In this system, every possible effort to keep costs down, or to improve products has been pursued and "extremely rational production" is performed. Automobile sales are indicated to have "developed superior marketing" including shorter distribution routes without the existence of wholesalers. The industry is also characterized by prompt sales activities facilitated by registered information and accurately expanding sales offices. However, there is very fierce competition, known as "cutthroat competition" in sales.

Either way, those who have supported the fierce production and sales activities are workers like us who have been working for automobile makers, parts makers, dealers and transporting companies. Through all of this, the workers have supported the Japanese automobile industry by "their numbers, their working hours and their efforts".

However, in the process, when the demand for cars was drastically increasing during the Heisei economic boom, it became difficult to increase the manpower, and the investment for additional to increase capacity has been behind schedule. Under this situation, the industry had to cope with stepping up production by increasing overtime work of employees. The workers had to do 350 hours of overtime (average of automobile makers) per year, which has continued for several years. Due to the improvement of computer processing technology for information, the development sector introduced CAD/CAM systems, and the sales sector reinforced the connection between controlling customers information and daily sales activities. As a result, those systems helped to improve greatly the fields of development of products, and promoting of sales. However, behind the progress, these types of new information systems, which were introduced in certain sections in rather short period of time, caused a large gap between themselves and the ability of neighbouring sections. Thus, the workers in those sections which fell behind, made great efforts by utilizing "manpower" to adjust to the new systems.

"Manpower" is becoming an Achilles' heel for two reasons in the automobile industry.

First, the total number of employees in the work place is reducing, when the production and sales are expanding.

Secondly, employing temporary workers from outside in order to fill the labour shortage is creating a new situation in which the designating of special skills and abilities, which normally would be passed down to full time employees, is in many cases, not occurring. Generally, the number of temporary workers is related very much to the frequency of retouch of products. The regular workers are just busy enough to fulfil daily targets of production as well as giving consideration to temporary workers, and nothing more.

The strength of the Japanese automobile industry is the overall collective power in the work place, found in the team work system, high morale, workers' input into products and application technology. These positive factors are, however, fading.

In addition to the "manpower" problem, there is another problem of "low profitability. Two main reasons can be established for low profits.

First, development expenses have increased and the rate of effective return on investment has been reducing, due to the production of many models in small numbers.

In other words, profits have been lost by fixed expenses. Each car maker in Japan, because of the expanding domestic demand, has continuously introduced new models on the market at a significantly rapid rate which was never witnessed prior to three or four years ago. The auto industry has continuously been pouring huge amounts of investment in many different models because the total cost needed to remodel one passenger car is said to be at least fifty billion yen. What is more grave is the fact that the great number of older models will be remodelled consecutively one after another in the near future, while the auto industry seems to continue to burden high depreciation for some time.

Second, unreasonable reduction of costs has consequently lowered the value-added. In other words, "There is nothing left after working". The effort to cut costs was studied with regard to the method employed to conquer the past oil crisis and the stronger yen crisis. Now, however, there is no place for expenses to be reduced. Some parts companies have declined orders from the automobile makers because they cannot meet the demand for lowering costs.

The problems mentioned above with "manpower" and "low profitability" have threatened the existence of the just-in-time method, which is the base for automobile manufacturing. If there is something which disturbs the production of parts in small or medium-size companies, all production lines in car makers will be halted. In such a case, other part makers cannot afford to take over the other orders. In addition, although the car makers possess great technology to assemble automobiles, they can only produce 30% of the parts necessary for assembly. Also, they do not have the development technology and production capacity for the parts which they at present purchase from part makers. There might be some danger that some of the part makers will fail to continue to function, while the car makers and part makers continue fighting over manpower.


As mentioned above, the Japanese automobile industry has maintained high levels of production and sales, but at the same time has been facing serious problems internally, such as the "labour shortage" and "low profitability". Adding to these `internal' problems, the behaviour of Japanese automobile companies is questioned by people outside the industry.

First, foreign countries are demanding more restriction on exports. Japan maintains an export figure which at less than 6,000,000 units is still more than double compared to the figures of the former West Germany, although it is decreasing gradually after a highest level of 6,600,000 units in 1986. Generally the automobile industry is assumed to be a fundamental industry common to all advanced nations. Therefore, the message being sent to Japan is becoming quite clear: "We acknowledge the excellence of quality of Japanese automobiles, but we cannot continue to accept the Japanese domination of the world automobile market, maintained by their low price strategy." In other words, the principle of market economy is not good enough for Japanese automakers to pursue.

A more worrying voice is now coming from inside Japan. Many people believe that trade problems would eventually mean that more emphasis must be placed on benefitting the nation.

Recognizing the conditions and problems outlined above, if the Japanese automobile industry continues on its present course of production and sales, then the following three outcomes will result:

1) the industry will collapse from the inside, due to the labour shortage and low profits

2) as a result of the above, the industry will be restructured and reorganized in an unsatisfactory manner

3) the industry will be isolated not only from the international economic community but also from the Japanese economic community.

The Japanese automobile industry has enough technological and production abilities to control major markets throughout the world. However, if nothing changes, the presence of the industry in Japan may be challenged.

Today, every person in the automobile industry should clearly recognize that the industry has now reached a crossroads. We have to choose whether we will maintain our present activities, or pursue a new path through a new way of thinking. It seems that Japan has no other choice other than to pursue a new path in order to relieve the triple sufferings: "employees are exhausted", "low profits" and "the automobile industry is always attacked from abroad".

It would not be exaggerating to claim that the level of workers' exhaustion and low profits have almost reached a critical point. We must listen to workers' voice very carefully: "We feel all petered out. How much harder must we work?" in the workplace.

Secondly, the public is sending us messages. Those messages were clearly apparent through the responses to Questionnaires done last year. The responses showed that the public believed that the automobile industry has been a driving force behind economic development in Japan, and has been contributing to improve living standards, while they see us with such positive opinions, many suggestions were made in the areas of production, sales methods, and corporate activities. Some suggestions included:

1 . Prolong the model change cycle.

2. Technology on safety and conservation of the environment must be emphasized.

3. Too many models to choose from; despite many models, very few are attractive.

4. Discount sales breed mistrust. Sales prices should be clear.

5. Sales activities including home visits by sales personnel and distribution of advertising pamphlets are unnecessary for customers. Contact with sales people should be kept to minimum.

6. There are too many types of dealers. The industry should create a new way of thinking taking into consideration from the consumers point of view.

7. The industry should change, so that it contributes to society instead of competing constantly among companies.

8. Inconveniences can be endured by consumers in order to facilitate shorter working hours end to develop new technology.

The most bitter message which was conveyed through the Questionnaires was: "I want a car, but I do not wish to work in the automobile industry". This is the really unexpectedly harsh response from the market.


When we look for the distinctive feature of Japan's automobile industry in terms of its labour force, we can point to its high degree of dependence on young male workers. Specifically, as the full automation of assembly lines has been difficult to effect, the strength and agility of young workers has formed the basis for facility layouts and process design. But the supply of these young workers in the labour market is going to start to decline after 1995. When the absolute number of workers begins to fall, we can predict that workers will become more demanding in their selection of the industry and company they wish to work for.

Despite these changes in the operating environment, and concern over a number of areas in the automobile industry, such as profitability and production, there has been relatively little progress in the industry in terms of a common awareness of what needs to be done. Rather, the industry's current moves may amount to nothing more than an attempt to weather the storm through cost cutting and expanded production. The possibility even exists that the industry's awareness of its future direction may be just the reverse of what is needed.

Each of us, every day, in our factory and at our work place, strives to produce "better products", "faster" and "cheaper", which should be positively evaluated. But under the current situation of excessive competition, what effect will the carrying out of this policy by individual companies have on the industry as a whole? This may cause an unpleasant and serious conflict in the world and in Japan. In economic terms, this is called a fallacy of composition.

Furthermore, the unconditional beliefs that have existed to date concerning the norms of cheap mass-production of a good product will become increasingly impermissible because of the need to preserve the global environment.

Accordingly, to respond to this phenomenon, we can no longer rely on the conventional treatment of symptoms, but we must rather replace basic principles. In other words, we must replace the most fundamental concepts - such as the principles of corporate behaviour and the relationship between companies and individuals - which have caused the current concern.

Our greatest anxiety as we begin to do this is the obstacle posed by our experiences of success in having overcome various dangers in the past. The requirement now is to look upon the present situation as a grave crisis and to realize that the underlying cause of the crisis is completely different from anything in the past. Namely, we can no longer point to external factors such as the appreciation of the yen, but all concerned must appreciate that the cause is something they themselves have created.

In many cases, the essence of failure is easy to understand. It is that, despite changes taking place around one with the passing of time, one clings to previous experiences of success. If at this stage one tries to rely on these experiences, that person will be unable to see an exit from the "triple sufferings".

People in the car industry now need to develop a new way of thinking. What must be changed are not the products but the principle of corporate behaviour.

We would like to mention six perspectives we need to focus on in order to move away from the experience of success and open up new dimensions for the future.

1. Eradication of excessive competition

This is an old but at the same time new issue. It is also one that has been advocated repeatedly. Even consumers have noted in Questionnaires that "competition among companies is severe" and "the present competition should be changed".

It has become clear to everyone that excessive competition has caused the present "triple suffering": employees are exhausted, unprofitable companies, and automobile industry is always bashed from abroad. Everyone taking part in this excessive competition feels like a sufferer. Unfortunately, they actually do suffer. That is a very unhappy situation.

Two major causes for excessive competition can be identified: "homogeneity" and "excessive market stimulation policies". This sense of homogeneity is not limited to the car industry. It is an issue that is one of Japan's cultural characteristics, and thus it is not easy to solve this problem. But we should think seriously about the present triple sufferings and put highest priority on securing profits. Only then might the appeal and sense of ease brought on by homogeneity be eliminated.

More serious are the excessive market stimulation policies. These have not only caused deterioration in profitability, but have wearied our workforce. Such policies have also heightened distrust among consumers. Why is the market stimulated to such an extent? We need to ascertain the cause. We must move away from the initial emphasis on vehicles as a first priority as our standard for behaviour, and stress the objectives of securing a market share and bolstering sales. The issues for discussion of these objects are as indicated above. In other words, we should decide to shorten expanded production and sales front lines.

The mainstays of corporate management are "the appropriate appraisal of the value of the workforce" and "the reflection of this value in prices" and "the securing of value-added prices and appropriate profits".

2. Correction of Underlying Aspects of Competition

The Japanese automobile industry has become competitive enough to dominate the world car market.

Many factors are given as reasons for this competitiveness, including our abilities to develop technology, raise funds, supply parts and sell our products. But no matter how outstanding the technology and systems, they are only effective when people are involved in work.

We wonder if the Japanese automobile industry is competitive in the true sense of the word. We need to take into consideration the fact that we work about 2,200 hours each year in order to maintain competitiveness in terms of quality and prices. Apart from the issue of whether or not the intensity of work or the price setting is appropriate, these work hours are extremely long when compared to European and American companies, or even to other Japanese industries.

Such long working hours have made it difficult to obtain a workforce in Japan and have caused overseas criticism to the effect that we are engaging in unfair competition. These factors are causing the foundations of the industry to become fragile, and the doors to foreign markets are being closed.

How competitive will we be when we have shortened our work hours from 2,200 to 1,800? To be honest, this is difficult to predict. But to put in place conditions of fair competition on a global level, we should revise our policies to place priority on the accumulation of capital and upgrade the priority of the shift toward shorter work hours. In this process of correcting the distribution of capital, which is namely the correction of the distribution of value-added prices, we are concerned about our competitiveness becoming temporarily weakened. However, it must be possible to compensate for such losses with new technologies, such as those used for environmental preservation and safety.

We should not let fear cause us to make mistakes in our setting of priorities.

3. Coexistence with the world

"Coexistence" has become the key word of the day.

There used to be a time where factors restricting the growth of the economy and industry were not very significant and it was easy to grow together. But times have clearly been changing, and today coexistence has begun to be sought. 

Factors restricting the activities of industries and companies are growing far more significant. Some of these factors continue to increase in severity, including issues surrounding the preservation of our global environment, north vs. south economic issues and the international shifting of the workforce, assisting the economic recovery of the former Soviet Union and eastern European countries and unemployment issues arising from the big difference in competitiveness between Japan and other advanced nations evident in such products as electronics goods and cars.

"Coexistence" means that each different people acknowledge each other's existence and live independently. The minimum rule required for this is fairness. Coexistence is a concept which transcends the limits of economic principles. It is using the collective wisdom of human beings to avoid seriously worsening human relations.

Needless to say, when we consider the relationship between Japan and the world, it is clear that the Japanese automobile industry must work to achieve coexistence with the world. To expand overseas markets based on a domestic structure of excessive competition is the same thing as to export excessive competition. This kind of behaviour is antithetical to coexistence.

Although the strategy of setting low prices for high quality goods may be unintentional, it is coming under restrictions in political way. Before we criticize political intervention in economic activities, we should realize that the market economy is not almighty. We should try to correct such distortions and build a relationship of coexistence as a precondition to further expansion.

These days, the world is expecting that Japan, and the Japanese automobile industry in particular, will move toward coexistence. Displaying this intention will give the Japanese auto industry smoother access to world markets.

The Japanese automobile industry has been vigorously promoting localization and distribution of production around the world. But we must attempt to aggressively transfer technology required by other countries. For a technologically advanced nation, this forms the second policy of coexistence.

4. Coexistence with consumers

Cars have a number of characteristics that differ from other consumer goods. We would like to note the following three:

(1) Cars are closely connected to many aspects of everyday life (movement and transport)

(2) Cars do harm to the environment, through noise, exhaust fumes, and expensive disposal methods. (external diseconomies)

(3) Cars are potentially dangerous to the life of the driver and to others.

Cars are personal belongings. However, as cars hold social advantages and disadvantages, it would be fair to define them as public assets. Companies in the car industry have yet to acknowledge this point because they have been too busy competing with each other. If cars were considered public assets, it would be fair to more clearly apportion responsibilities between both the suppliers and the users.

First, for the suppliers, it is necessary to create a long-term corporate management foundation to ensure technical development and a steady supply of products. In particular, suppliers should place greater emphasis on the development of technology related to life and the preservation of the environment in an attempt to use this technology in new products. In addition to equipment for being comfortable, the auto industry must develop innovative safety equipment, which has not been developed anywhere in the world.

Meanwhile, consumers expect improved technology in the areas of preserving environment and securing safety, as pointed out as the first reason for prolonging the period for model changes in Questionnaires. But as long as cars have the characteristics of public assets, an appropriate share of the expenses for the development of such technology should be borne by the consumers. The suppliers should then provide consumers with information on technologies developed for the safety and the preservation of the environment. Suppliers should also request consumer cooperation in accepting the responsibilities for paying the expenses. Furthermore, the auto industry should discuss means to provide information relating to the entire industry.

This also applies to consumer expectations with regard to the waiting period for delivery of their vehicle. It is of primary importance to correct excess competition in sales. If the auto industry can receive the cooperation of consumers by constantly providing information on the waiting period for delivery of cars, less effort will be required for sales negotiations. This should also reduce the overtime for manufacturers that accompanies changes in demand.

Based on the message from consumers as indicated in the Questionnaires, it is time to cut out unnecessary components in production and sales methods. Much of the problem of long working hours and low profit will be improved through cooperation with consumers.

5. Coexistence with employees

We need to establish "individuality". The Federation of Economic Organizations also advocates correcting social evils that have arisen from the excessive emphasis on corporate growth. This demonstrates the extent to which the relationship between companies and their employees has become distorted. The increasing number of people changing their jobs more frequently or working on a temporal contract basis is further indicative of a move away from the restrictive relationships imposed by companies.

We the employees must also examine ourselves. Have we not been looking to the company for too great a portion of our lives? Certainly, whether or not corporate life is meaningful will continue to be an important issue. But this does not mean that employees should become overly engaged in the life of time.

We wonder if companies have been asking too much of their employees. Under the pretext of sharing a common destiny, which is pleasing to the ear, companies do seem to have been too demanding of their workers.

Companies and their employees have turned inwards into the confines of the company. This has created a gap between companies and society. This gap has caused the trade conflict and the misreading of consumer requirements. This in turn has entangled companies in the practice of placing primary importance on production and sales. This sense of "family" or unity between companies and their employees is therefore not in harmony with era of coexistence.

The sense of "family" is supported by devotion of each member, which sometimes requires self-sacrifice. Because there is no equality, there is no relationship of coexistence.

What is needed now is for companies and employees to build a relationship of coexistence, making the self-realization of employees through their work go hand-in-hand with healthy corporate development.

If the Japanese auto industry starts to take steps toward reform to achieve a healthy existence, the relationship between individual tasks and employees will naturally alter. A growing number of workers will want to be transferred to sections where the quality of work is high, there is little overtime, or they can make decisions at their own discretion. The next step to achieve corporate coexistence with employees will be to look at the current situation where workers can choose companies but not their work place within the company.

Also of importance in this move toward coexistence is to allow employees to acknowledge that they are fairly treated in terms of working hours and wages. Furthermore, it is important for the company to provide an environment and set up systems that give equal motivation to all employees. This would include allowing the employee to have a say in his or her transfer and setting up an appropriate evaluation system.

If companies are unable to bring themselves to coexist with their employees, then coexisting with consumers and with the rest of the world will also be difficult.

6. Changes in paradigms of corporate activities

It is a fact that the Japanese auto industry has achieved remarkable growth. But in a rapidly changing environment, including labour shortage and deterioration in profits. Japanese automakers have come face to face with a number of different issues. These include preservation of the global environment and coexistence with employees, consumers and the rest of the world. They have reached the stage where they have to ask themselves the questions; "For whom is the company making progress?" and "What is our corporate development for?"

The answer to these questions is simple. It is to secure the appropriate addition of value and distribute wealth equally among employees, the company and society. The automobile industry especially must increase the portion of wealth distributed to their workers to correct the distorted competition which is being fought at great costs. In other words, the industry must correctly evaluate and compensate its workforce.

Great turns in history have always been preceded by pioneers. We hope that the top officials of automobile industry will show the courage needed to make decisions and demonstrate strong leadership.


1) Prospects are small for progress in reducing working hours unless an investigation is made into the causes of the vulnerable profitability structure revealed by efforts to reduce working hours.

2) As long as the current excessive competition continues, not only will the exhaustion of workers increase, but it will also be difficult to recruit new workers, endangering the automobile industry in terms of work force, which is a vicious cycle.

3) As efforts to reduce working hours based on the present situation have not been promising; by conversely envisioning a situation with 1800 working hours as a given, the obstacles and direction for redressing them should be clarified.

4) The automobile industry has been devoted to "putting top priority on users demands" and "providing users with new functions, not having users waiting." The cost of such an unreasonably dedicated service has been borne by workers, parts makers, and dealers, which resulted in the situation today.

5) The automobile industry, which is one of fundamental industries, cannot be allowed to fall "behind in reducing working hours" due to internal reasons of socially accepted ideas.

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