By this time there are few people, even in Detroit, who dispute the unmistakable fact that Japanese cars have a qualitative edge over those produced on American assembly lines. It goes much deeper than--as some American auto moguls used to say--a Japanese advantage in "fit and finish."
In fact, management and labor in the United States are acutely aware of this reality, and are cooperatively trying to do something about it. For the first time anyone can recall, for example, a Ford labor-management team has been making the rounds of the Japanese plants, interviewing workers and managers to see what lessons they can bring back home.
Ichiro Shioji, president of the Japan Auto Workers Association, observing that the American unions used to think the Japanese unions were captives of the companies, said with a smile, "I think the attitude in their thinking now is that maybe there are some good points in Japan, and if so, Americans could learn from the Japanese or could imitate something."
Shioji is gentle. In fact, he predicts "recovery of the American car industry" if labor and management learn a basic lesson--to substitute cooperation for confrontation. But the underlying point is not lost on a visitor: For so long it has been said that the Japanese have imitated their way to industrial success. Now, it is the Americans who are trying to regain market shares by studying Japanese design, marketing and--above all--management methods, and the Japanese get not a little satisfaction from that.
But American manufacturers--perhaps preparing for the 1982 round of wage talks with the United Auto Workers--still complain that the Japanese manufacturers have such a huge advantage in direct labor costs that the U.S. companies never will be able to compete unless the high UAW hourly wage, which is 80 percent higher than that paid in other U.S. manufacturing industries, is rolled back.
This reporter's study on the scene of Japanese labor costs confirmed that the large Japanese auto firms do pay less for their labor than American firms, in part because the U.S. Big Three were willing, during the last contract talks, to yield to UAW wage demands despite a fall-off in productivity gains, expecting to fob off the inflated costs on the American buying public.
But it is quite clear that the disparity in labor costs between the United States and Japan is far less than claimed by the U.S. industry and, in any event, it explains only partially the remarkable Japanese penetration of the U.S. market. Japanese cars now account for 22 percent of new-car sales in America. With Japanese quality steadily improving, their cars also sell like hot cakes in Europe and elsewhere in the world.
If, as several American studies suggest, Nissan or Toyota can build a car in Japan and ship it to the United States for around $1,500 less than it costs Detroit to build a comparable car, no more than half the difference can be attributed to lower labor costs. The rest must be chalked up to management deficiencies and excessive fat on the management side. A symbol of the latter problem is that the American auto executive, even in bad times, earns (in salary and bonuses) three to four times the pay of his Japanese counterpart.
Moreover, the Japanese do not turn their cost advantage into a pricing weapon: demand for Japanese cars persists, often at a retail premium over American cars, because of consumer recognition of performance quality. This is a tribute to the stunning productivity achieved by Japanese workers, who regard themselves as "members of the company" as well as members of a union.
Throughout the Japanese economy, worker productivity increased at a spectacular 9.3 percent annual rate between 1975 and 1980, compared with 1.6 percent in the United States, according to the Japanese Institute of Labor. In 1977, the average Japanese auto worker produced 33 cars a year, compared with 26 cars per American worker and 16 1/2 for a West German worker.
A private auto analyst estimates that a Japanese company gets 2 1/2 to 3 times as many completed engines per worker per year as a U.S. company. "When you have productivity like that, wages hardly matter," he said.
Still, General Motors Corp. President Roger B. Smith believes the U.S. companies "cannot compete" with Japan because of their advantage in labor costs. Takashi Ishihara, president of the Nissan Motor Co. thinks that view misses the point. It all comes down to relative value, he says. In an interview, he cited the case of the small Datsun Bluebird, which is shipped to the United States in two models, the more luxurious of which, at $11,000 a car, accounts for more than 60 percent of the business.
A study by a Detroit consultant, James E. Harbour, cited by Business Week, found the wage-cost difference per Japanese car to be $420. This leaves an advantage of more than $1,000, which Harbour attributes to better inventory control and use of quality circles to cut production costs. Above all--and this was repeated to me by Sony President Akio Morita and other Japanese executives--American management must bear the brunt of the blame.
To reduce the matter to a few key statistics, U.S. auto manufacturers like to suggest that the American auto worker gets almost double the pay of the Japanese auto worker--about $11.57 for a Ford or GM worker compared with $6.15 an hour in Japan. Counting fringes, both the U.S. companies and the UAW generally put the typical U.S. hourly wage at about $20, or about $8 to $10 an hour more than they say the Japanese worker gets. And looking to 1982, they spell out their fear that the gap will widen.
What happens to the U.S. wage structure next year remains to be seen. But this correspondent, after talking to Japanese and nonJapanese technical experts, believes the disparity is really not as wide as advertised in the United States, and is likely to narrow, rather than increase, as the Japanese labor force, in which the pay system emphasizes seniority, grows older.
"Every year," says Shioji, "the average age of auto workers is increasing, so compared to other industries, the Japanese auto industry's wages are gradually becoming higher.
"I do not know what the average age of UAW people is, but if it's 40--when Nissan's workers' average age reaches 40, I think there will be no big difference between these two workers' wages."
Often, says Shioji, foreigners attribute penetration of their domestic car markets to low wages. But Shioji, who thinks that Japanese manufacturers should build plants in the United States to help the U.S. economy, says "this is definitely not the reason at all. Recently, relatively speaking, wages here are a little lower, but this is because of the exchange rate."
A better perspective on the question of wages can be gained by abandoning the hourly wage comparison and looking at the total monthly compensation package. Under the Japanese system, there is a package of fringe benefits and the special allowances provided by the "lifetime" employment system that make the working relationship unique.
"In the Japanese system," says Lester P. Slezak, labor counsellor at the American Embassy here, "the worker is used and regarded as an investment. There is a mutual trust between him and management. If he leaves, it is regarded as a loss, and layoffs are very much a last resort." By contrast, auto workers in the United States say they're regarded as a commodity, not an investment.
The last strike in the Japanese auto industry was in the early 1950s.
Both production and nonproduction workers in Japan receive monthly salaries. Figures supplied by Nissan, and corroborated by the union, indicate that a 34-year-old worker with 11 years on the job would earn 277,992 yen per month (inclusive of a bonus paid twice annually) and 76,246 yen for specified fringe benefits (including a reserve for retirement allowances), for a total of 354,238 yen. But when a night shift allowance is added in (workers regularly work the night shift every other week at a premium rate of 55 percent), a total average figure of 416,000 yen a month is estimated to be a fair representation of the monthly value of working in a Japanese auto plant.
When I was reporting this story, the exchange value of the yen was between 225 and 230 yen to the dollar. Taking 227.5 as the mid-point, 416,000 yen a month equals about $1,828.57, or $21,942.86 a year. According to the UAW, a similar U.S. worker makes $2,800 a month, or $33,600 if he works a full year. That's about 53 percent more than the Japanese worker, but far from the nearly 2-to-1 ratio that American auto makers would have one believe.
But beyond the actual money cost of the various fringe benefits that form part of the Japanese compensation system, there is a qualitative difference in the Japanese system that ties the worker close to the company. In addition to health insurance, old-age pension insurance, accident compensation and other benefits familiar to American workers, there are "welfare services" that are not legally required, but that are usual and customary among major enterprises.
In the auto industry, according to a tabulation made by the American Embassy here, these include subsidized housing (dormitories for single men, a home-ownership scheme for married men); subsidized interest rates for car purchases (Nissan's current rate is 5 1/2 percent); congratulatory and condolence cash gifts on occasions of marriage, births and deaths in the family; company-subsidized meals and company-financed recreational and cultural facilities.
Typically, an employe can get breakfast for 100 yen (44 cents), and either lunch or dinner for 150 yen (65 cents). A bachelor can live in a Nissan company dormitory near the Oppama plant for well under $20 a month, while company houses are available for rent at $30 to $50 a month. The home-ownership plan, which the company encourages workers to join, provides low-interest loans up to about $88,000.
At retirement, a worker who has been with Nissan for 30 years and winds up as a general foreman gets a lump-sum payment, to which he has made no contribution, of almost 12 million yen, or roughly $50,000 (less for fewer years or retirement below that level.)
In essence, it is a company "big brother" approach that well suits the closely integrated Japanese society, and doubtless would not appeal to the individualistic American. But it does represent a big piece of the total compensation of auto workers--and a cost to the producer--and indicates why the hourly pay comparisons are invalid.
I asked a UAW official what sort of unemployment benefits were paid to Japanese workers. "They don't have any unemployment," he snapped.
The history of recent years shows that Japanese cars have enjoyed a spectacular boom in the United States from 1970 to 1979, during which time Japanese production workers saw their wages rise from less than 25 percent to about 66 percent of the American level.
In an interview at his headquarters here, union president Shioji predicted that the gap between the total wage package of the American and Japanese workers would be eliminated in a few years, and that even so, Japanese cars will maintain their sales because of their qualitative edge.
The really big difference on the labor-management front--a visitor gets a palpable sense of it as he goes through the Japanese plants--is that there is an attitude of cooperation rather than confrontation. On an earlier visit, I went through the Toyota assembly plant at Nagoya. This time, I explored both the Oppama and Zama plants of Nissan.
It is always the same: There is a sense of unity and order in a setting of modern, clean equipment, not the open hostility for management that one feels on the assembly lines of American auto plants. It's accepted practice in Japanese assembly plants that a worker can push a red button at any time to stop the line. No one likes to do it--the workers like to say they haven't had to stop the line--but the knowledge that they can, that that red button is there, is a psychological plus for the dignity of the worker.
Says union leader Shioji, "In Japan, in order to improve productivity and product quality, the labor side and the management side cooperate with each other. In 1955, we started to think how we can improve productivity, because at that time the United States started to teach the Japanese the importance of the productivity improvement.
"And the unions did not oppose the introduction of foreign techniques, but their attitude was that by cooperating positively in the introduction of these technologies they could also profit from the results, the fruits, of such introductions."
But can this strong bond between the companies and the unions continue with the arrival of factory robots? (Ironically, many of the robots this reporter saw doing incredibly complicated jobs at the Zama plant 22 miles from here are produced by Kawasaki Heavy Industries Ltd., under license by Unimation Inc. of Danbury, Conn.)
Shioji's view is that the Japanese worker doesn't regard the robot as a rival, but "as a buddy or companion worker." So far, he says, live workers team up with robots "to raise productivity--the robots do not demand higher wages, but because of them, our wages go up. In the States, robots are workers' enemies."
He admits there has been an element of "luck." Even after the second oil shock, Japan was able to expand exportation of cars, "and therefore we were able to expand exports, and introduce robots rather smoothly, without a lot of resistance from workers. This has continued up to the present time, but I think the future will be different--we don't know about the future." h