Toyota’s changed strategy saw it accepting a boost of the sales of US auto parts and vehicles. Public statements by Toyota’s senior executives showed this change. Shoichiro Toyoda, President of Toyota, explains the voluntary plan of January 1992 as follows: ‘The United States is the most important country for Japan. The prosperity of today’s Japan depends on its guidance. It is quite natural to offer any assistance to the US automobile industry in a critical situation. This is the more so because Toyota raises “co-existence and co-prosperity” as an ideal corporate policy’.98 He also answered the question of whether sales of foreign cars in Toyota’s dealer networks would lead to a reduction in home sales, ‘We have to pay such costs in order to maintain “co-existence and co-prosperity” in the world. We sell a lot in the overseas markets’.99
One of the critical reasons why Toyota changed its stance on market access lay in its growing commitment to overseas markets. As explained before, Toyota was reluctant to make inroads into overseas markets. Toyota decided on local production in America in 1984, six years after Honda and four years after Nissan. In spite of the late start, Toyota caught up with Honda by 1989 in its production volume in the United States after it started production in its own plant in May 1988. Toyota also decided in January 1989 to start local production in the United Kingdom in 1992. In June 1991, Toyota decided to establish two head divisions for administrating operations in North America and Europe.100 Thus, Toyota’s multinational operations were fully developed in the 1990s. This growing presence in overseas markets made Toyota vulnerable to reactions from foreign competitors and governments. Toyota also sought to become a true insider in each local market rather than an exporter, and had a strong incentive to develop and increase local production for maintaining steady growth. In order to attain these objectives, it had to cease its aggressive expansionist strategies as well as to promote cooperation with local competitors and parts manufacturers and to re-invest profits to the local community.
In particular, the minivan dumping suit by the Big Three in May 1991 motivated Toyota to reconsider its expansionist policy. Although the suit was directed at Toyota
98 Nikkei Bijinesu, 27 April 1992, p.67. 99 Keizaikai, 14 April 1994, p.30.
100 Nihon Keizai Shimbun, 29 January 1991.
and Mazda, the main target was Toyota’s Previa. GM, Toyota’s partner in NUMMI, participated in the suit. Toyota was shocked at the fact that GM, which had long adhered to free trade principles, took the same stance as Ford and Chrysler because Toyota considered NUMMI as making a contribution to GM as well as the US automobile industry.101 Through the incident, Toyota was reminded of the need to promote cooperation with the Big Three as well as to contribute to the US auto industry.
In brief, Japanese automakers became willing to expand market access as they intensified their international operations. Not only did they fear retaliatory treatment in overseas markets, but they saw more deals with local suppliers and the resultant expansion in imports as increasingly necessary and inevitable. These political and economic pressures played a crucial role in motivating Japanese automakers to boost the purchases of US auto parts and to sell US vehicles in the Action Plan.
CONCLUSION
The Japanese automobile industry has rapidly expanded its multinational operations and international corporate alliances since the 1980s. Japanese automakers came to exhibit more commitment to opening the Japanese market as they strengthened their international linkages. They also sought to open up their keiretsu groups. They attempted to increase deals with local parts suppliers both by offering guidance in respect of the Japanese procurement and production systems and by accepting local parts suppliers as design-in partners. The car distribution keiretsu has also been opened up by thorough elimination of exclusive clauses in dealership contracts and by handling foreign vehicles in automakers’ distribution channels. These actions were driven largely by the internationalisation of corporate activity. As Japanese automakers intensified overseas operations, they regarded it as indispensable to successful localisation to increase deals with local suppliers. In addition, they considered international procurement policies as indispensable to realise the most appropriate procurement in each local market, irrespective of the suppliers’ nationality. In distribution keiretsu,
corporate alliances are critically tied to the handling of foreign vehicles. Japanese automakers deal in vehicles that their alliance partners manufacture.
The shift in the automakers’ stance was also evident in their commitment to market access expansion. The major automakers displayed a passive attitude towards facilitating the market access of foreign products to Japan until the mid 1980s. However, they became more eager to expand market access in the late 1980s. When market access became a critical policy issue in 1989, automakers responded by announcing voluntary international cooperation programs. This response was closely linked with the internationalisation of corporate activity. This was clearly shown in international cooperation program of Nissan, which took the lead in the move among the automakers. This program stemmed from several factors including the need to mitigate trade friction with the United States and to appease criticism from the LDP government towards the automobile industry. However, internationalisation also constituted a critical pillar. Expanding multinational operations induced Nissan to take more cooperative action towards market access than other Japanese automakers, and enabled it to announce challenging and comprehensive plans.
In 1992, the major automakers announced voluntary plans to increase the purchase of US auto parts and vehicles. In the process of drawing up these plans, they strongly resisted MITI’s entreaties to purchase more US auto parts and vehicles. Superficially, they appeared reluctant to assist in the expansion of access for foreign products to the Japanese market. However, what they resisted was MITI’s aggressive demand to appease the US government and auto industry as an expedient, rather than a genuine opening of the Japanese market. Their desire to cooperate in the expansion of market access was shown by the two programs announced in the previous year. In these programs, there was a willingness to boost the purchase of auto parts from the United States and from all over the world.
Japanese automakers had reason to promote market access of foreign parts and vehicles. There was, at that time, a possibility that the US government might adopt policies to regulate production in America by Japanese automakers as well as exports from Japan. The likelihood that local production would suffer from restrictions induced them to promote market access of foreign auto parts more seriously. They also had to
make more deals with local suppliers in order to deepen their own local production operations. The shift in the stance of major automakers on free trade and market access also had much to do with the expansion of foreign parts purchases. In the past, they had aggressively pursued market share, and considered that free trade was necessary to realise this strategy. As operations expanded to the global market, more commitment to local markets and to sustaining local auto producers followed inevitably. The expansion of market access to Japan was necessary to achieve these objectives. Thus, internationalisation of corporate activity played a critical role in changing the stance of Japanese automakers in favour of open trade. This led to action to expand the access of foreign products to the Japanese automobile market.