Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, January 4, 1992 TAG: 9201060189
SECTION: EDITORIAL PAGE: A-9 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
MARKET GLUT
IF YOU think the Japanese are about to take all our money - perhaps even spend it on the floods of items they make that we buy - you may have another think coming.For almost all the consumer goods that Westerners purchase from Japan - VCRs, TV sets, cameras, computers, household appliances - the Japanese themselves pay higher prices. A television that costs $300 in Roanoke will carry a price tag upwards of $450 in Yokohama. The middleman is more numerous and expensive there than in most Western countries.
That the average Japanese is a long way from being able to live as does the average American isn't fresh news. It's an issue frequently raised in trade debates here in the United States. The lower cost to the consumer of Japanese products abroad than in Japan is cited by American exporters as an illustration of unfair trade practices. Free-traders respond by noting that while those low prices on Japanese goods may hurt specific U.S. industries, they benefit American consumers in general.
What's new is that the manufacturers of the one major exception to the general rule - Japanese automobiles - are also now running into problems in their home market. Japanese cars cost less in Japan than almost anywhere else; there are fewer links in the chain in Japan between maker and ultimate user. But if Japanese automakers are making out like bandits, driving Detroit out of business and giving their own people bargain prices, you can't tell by looking.
Despite their products' unquestioned quality and low prices at home, Japan's automakers are in trouble in their own country. They have failed to do what they did so well before: adjust to changing circumstances.
In 1985, Japanese automakers exported almost 60 percent of their vehicles. By 1990 that proportion had dropped to 45 percent, in part because plants had been set up abroad to turn out Japanese makes. But the industry, still geared to the high demand of a few years ago, is now overproducing.
One reason for the difficulties of the Japanese automakers is that their domestic market is pretty well saturated. Once, the manufacturers could count on growth of 12 to 15 percent a year, mainly from Japanese families buying their first cars. But that demand has been satisfied. Given the inadequacy of Japan's highways, the two-car Japanese family likely will remain the exception.
For Honda, Nissan et al., domestic growth now must come from the 5 million or so Japanese who trade in their cars yearly on new ones. It's a buyer's market, but especially so for used cars: Models only a year or two old bring little more than half their original price. That doesn't make owners eager to trade in on a new model, so the cycle feeds on itself.
There's more than one ironic twist to this. Japan prides itself on, and has won admiration for, its "just-in-time" delivery system to manufacturers. Rather than pile up costly inventories, factories order components only when they're needed.
But the parts that aren't in warehouses are instead in trucks on the crowded highways, sometimes waiting for hours to make deliveries. While this serves the interest of most Japanese manufacturers, it does little for Japanese motorists - or, indirectly, the Japanese car industry.
Hard times for Japanese automakers don't spell good times for those in Detroit. The American industry must deal with its own problems, most of which are homegrown, and not look to government or protectionism to help. Subsidies from the former would burden the American taxpayer; the latter would burden the American consumer.
Moreover, either in not very different ways would amount to a kind of defeatism, of acceptance of the notion that the Japanese work such production and marketing magic that the U.S. auto industry can never be competitive on its own.
But the current difficulties of the Japanese industry suggest they're not supermen who inevitably will sweep everyone before them. This past year, Americans have witnessed the utter collapse of a foreign empire, the old Soviet Union, that we once thought was 10 feet tall. There's no need to weave similarly fearful fantasies about the Japanese. They're as human and as fallible as we.