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Staff writer In 1957, Toyota Motor Corp. shipped two samples of its Toyopet Crown sedan to the United States as the first Japanese cars exported to that market. Nissan Motor Co. followed with Datsun compacts in 1958.

Executives and employees of New United Motor Manufacturing Inc. in Fremont, California, surround a Chevrolet Nova in 1984, the first car produced at the joint venture there between Toyota Motor Corp. and General Motors Corp.

But the challenges ended in miserable sales: Japanese cars were not designed for highway driving or prevailing American tastes and neither Toyota nor Nissan had sales networks in a country dominated by the then Big Three — General Motors Corp., Ford Motor Co. and Chrysler Corp.

This was the reality of the Japanese auto industry more than 40 years ago. Today, Japanese automakers have secured a major presence in the U.S. as well as globally.

Last year, Japanese makers sold 2.81 million cars in the U.S., winning a 31.7 percent share of the market. Their U.S. plants produced 1.83 million cars, while exports of cars to the U.S. came to 1.64 million.

The U.S. market occupies a major portion of their business. It accounted for 30 percent of the 9.2 million Japanese-brand cars sold in major countries worldwide last year.

In fiscal 2000, Toyota gained 205.7 billion yen, about 24 percent of its group operating profits, from its North American operations and Honda Motor Co. earned 276.5 billion yen in profits from the region, or 68 percent of its global total.

During their ascent to prominence, Japanese carmakers viewed their U.S. counterparts as both rivals to catch up to and partners to collaborate with. In a sense, their relationship is symbolic of the economic ties that have linked Japan and the U.S. for the past half century.

“The auto sector sits in the center of manufacturing in both Japan and in the U.S.,” said Takao Suzuki, vice chairman of the Japan Automobile Manufacturers Association.

“The trends of the auto business have generally reflected the economic situations of the two nations, especially since the 1970s,” said Suzuki, a former senior official of the Ministry of International Trade and Industry, now the Ministry of Economy, Trade and Industry.

Infancy after war

When Japan signed the San Francisco Peace Treaty with 48 countries in 1951, ending the Allied Occupation, its auto industry was still in its infancy and being nurtured by a government intent on turning car manufacturing into a cornerstone of the nation’s economic recovery.

It took nearly two decades for the auto industry to become a major player. Until 1970, the industry was protected from foreign competition with import restrictions on auto parts and direct investment.

Meanwhile, the U.S. Big Three, which produced about 6.7 million cars in 1960, was paying little heed to Japan and casting its eyes instead on the European market. Japan’s car output that year was just 165,094 units, with a mere 7,013 exported abroad.

During the 1960s, Japanese carmakers, engaged in cutthroat competition at home, tried to upgrade their technologies and production, learning mainly from European makers of small cars.

When the U.S. began urging Japan to liberalize direct investment and auto part imports in 1967, Tokyo embarked on a drive to make its auto industry internationally competitive so it could open the Japanese market.

“The government was virtually aiming to fix a few firms as carmakers,” recalled Kazuhira Seki, senior counselor and chairman emeritus of Isuzu Motors Ltd.

“But Isuzu (mainly a truck maker) had difficulty because we were not successful in producing quality cars, and our truck sales were in decline,” he said.

In search of a partner that would help Isuzu survive as a carmaker, the company secretly began capital partnership negotiations with GM in 1970, according to Seki, who was involved in the six-month-long talks.

GM eventually acquired a 34.2 percent share of Isuzu in 1971. While the deal gave GM a beachhead in Asia, Isuzu marketed a jointly developed model, the Gemini compact sedan, in 1974 and used GM’s sales channels to gain access to overseas markets, he said.

Mitsubishi Motors Corp. meanwhile formed a capital alliance with Chrysler, which acquired a 15 percent stake in MMC when it was spun off from Mitsubishi Heavy Industries Ltd.

With the two deals, the government liberalized capital tieups between Japanese and foreign carmakers in 1971, on condition that foreigners would not take management control.

Then came oil crisis

In the early 1970s, Japanese automakers were still lagging behind their Western rivals in competitiveness. But business conditions changed in their favor as air pollution became a major issue in industrialized nations and the 1973 oil crisis boosted demand for more energy-efficient vehicles.

“The oil crisis hit Japan’s economy as well, but Japanese companies were quick to turn their products into energy-saving ones,” said Suzuki of JAMA. “(The oil crisis) turned out to be a chance for Japanese automakers to optimize their technological sophistication in the manufacture of compact cars with high fuel efficiency.”

When the Muskie Act — legislation to drastically curb vehicle exhaust emissions — was enacted in the U.S. in 1970, the Big Three were slow to adapt to the situation.

In 1975, Japan became the world’s No. 1 exporter of cars, shipping 1.83 million units, about 40 percent of which were bound for the U.S. By 1980, that figure had more than doubled.

But like textile, steel and electronics in the late 1960s and 1970s, the bilateral auto trade imbalance soon became a major political issue.

In 1980, Japan’s merchandise exports to the U.S. reached $31.37 billion, while imports from the U.S. amounted to $24.41 billion. Automobiles accounted for about 30 percent of the exports and less than 1 percent of the imports.

This time things were more serious because roughly one in every six jobs in the U.S. was auto-related. In 1980 alone, over 180,000 auto industry workers were laid off, according to U.S. government documents.

To help ease the friction, Japanese carmakers were forced to voluntarily restrain exports in 1981 and set a limit of 1.68 million cars. The limit reached 2.3 million between 1985 and 1991.

“The voluntary export restraint was proof that Japan’s auto industry had become a threat to the Big Three,” Suzuki said.

In addition, under pressure from governments of both countries, the automakers started manufacturing operations in the U.S. Honda built a plant in Marysville, Ohio, and began making the Accord sedan there in 1982. And Nissan started producing Frontier pickup trucks at its factory in Smyrna, Tenn., in 1983.

Masuo Kiyota, who served as a vice president of Nissan’s U.S. unit between 1981 and 1985, said the startup of the Tennessee plant was a challenge that Nissan could not ignore in a country with an advanced automobile culture.

“Japanese carmakers had been trying to catch up with their American counterparts for years. Finally, the quality of Japanese cars was recognized by U.S. consumers, and it gave us confidence,” Kiyota said.

Likewise, Toyota launched a joint venture with GM in Fremont, Calif., in 1984, manufacturing first GM’s Chevrolet Nova and later Toyota’s Corolla compact.

Despite the friction at the government level, Japanese carmakers’ inroads into the U.S. were generally welcomed by local communities as job creators. As of 1999, the number of Americans employed at Japanese automakers in the U.S. reached 46,000, according to JAMA.

“U.S. state governors, including (former U.S. President) Bill Clinton as Arkansas governor, came to see us to invite our plants to their states,” recalled Toyota Chairman Hiroshi Okuda, who is also JAMA chairman.

With the increase in local production by Japanese carmakers, the voluntary export restraint became meaningless and was lifted in March 1994.

But automobiles continued to be a major subject of trade disputes between the two nations. In recent years, the U.S. has continued urging Japan to expand foreign access to its car market and purchase more foreign auto parts.

Survival overtures

Koichi Shimokawa, a management professor at Tokai Gakuen University and an auto industry expert, said Japanese carmakers overtook the Big Three in terms of competitiveness in the 1980s. The titans of Detroit then started learning from Japanese cost-efficient manufacturing systems, including Toyota’s just-in-time production.

But after the economic bubble burst in the 1990s, Japanese automakers fell into a financial crisis resulting from excessive investment in plants and sales channels and a slump in domestic car demand, and went looking for help from abroad.

Mazda Motor Corp. handed its management over to Ford in 1996 when Ford raised its stake in the Hiroshima-based firm from 25 percent to 33.4 percent. Ford executives have since served as Mazda presidents.

But Shigeharu Hiraiwa, a Mazda board member in charge of its corporate communications and liaison division who earlier served as general manager of its European unit, said he saw the move as a chance for the automaker to expand its global business.

In fact, intensifying competition and the prospect of huge investments in environment-friendly vehicle technologies for future survival have triggered a global wave of industry reorganization and partnerships.

Following the Mazda-Ford alliance, GM reinforced its capital relationship with Isuzu and Suzuki Motor Corp. while buying a 20 percent stake in Fuji Heavy Industries Ltd., known for its Subaru cars.

Nissan came under the control of French carmaker Renault S.A. in 1999 and MMC tied up with German-American auto giant DaimlerChrysler AG in 2000.

Although Toyota and Honda remain independent, collaboration with foreign partners seems essential to carry out their strategies to obtain a larger share of the global market and develop new technologies.

In 1999, Toyota agreed with GM on joint research and development of environmentally friendly vehicle technologies, including hybrid car engines and fuel-cell vehicles.

Shimokawa said mutual dependence is becoming more important for carmakers to survive competition. Japanese and foreign carmakers jointly develop new auto technologies and new platforms, procure parts, and use plants and dealer networks for operational efficiency through joint projects, he observed.

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