NAGOYA, JAPAN -- David Dembo has discovered the rewards of doing business the Toyota way -- and the difficulties.
For six years, Dembo, the president of a New Jersey-based maker of leather seat upholstery, struggled to gain Toyota Motor Corp.'s business. In 1988, Garden State Tanning's persistence finally paid off. It won a big Toyota contract to supply the seat coverings for the luxury Lexus model.
From 1982 until 1988, "our foremost problem was we weren't listening to Toyota," Dembo told a gathering of American and Canadian auto parts manufacturers here this week. "We assumed we were the experts on auto upholstery. We discovered that whereas customer and supplier may be adversarial in America, they are partners in Japan.
"It is as our parents always taught us," Dembo concluded. "Nothing ever comes easily."
Still, Garden State Tanning remains a rarity in the world of Japanese auto production: an American supplier. So rare, according to U.S. industry figures, that Japan exports about $12 billion a year in auto supplies to the United States, 20 times the amount that American companies export to Japan.
Japanese companies are famous -- notorious might be the better word -- for preferring to buy supplies and parts from other Japanese companies rather than foreign firms.
So when Toyota Motor Corp. invited top officials from 53 American and Canadian auto parts companies to attend a three-day meeting on how to increase their sales to Toyota -- and when Toyota invited American reporters to sit in -- some obvious questions arose.
Was the company sincere in proclaiming its desire to expand its purchases from overseas suppliers? Or had the North Americans come to this city in Japan's industrial heartland to participate in a public-relations exercise?
The consensus of the suppliers -- all of whom have done business with Toyota in the past -- was that the meeting, while unlikely to generate a sudden boom in orders, was no mere PR ploy. "We take it very seriously," said Gene Kellogg, international sales manager for Sylvania Automotive Lighting, which makes headlights and interior lamps for cars. "Toyota is looking for alliances, and we're looking to get closer to them, too."
The meeting, the first of its kind held by a Japanese auto company, provided a vivid illustration of how Japanese industry is trying to show an interest in U.S. products in hopes of defusing the increasing unfriendliness toward Japan among the American public.
Japan's computer and electronics makers, for example, recently dispatched a buying mission to the United States, and Nippon Telegraph & Telephone Corp. announced last week that it will intensify overseas procurement efforts.
And the government has stepped up its exhortations to buy foreign goods, plastering the slogan "Import Now!" all over Tokyo, from stickers on taxis to a banner draped across the Ministry of International Trade and Industry building.
Yet the Toyota meeting also underscored that progress is likely to remain slow for U.S. companies seeking to penetrate the Japanese market. Breaking into Toyota's charmed circle of suppliers remains a daunting task -- and the only companies likely to make it are those that can painstakingly prove their reliability at doing business Toyota's way.
"I think the Japanese automakers have a sincere desire to improve their relationship with foreign suppliers," said John Creamer, a Tokyo-based representative of the U.S. auto parts industry.
But, Creamer added, "Under the Japanese system, automakers try to develop long-term stable relationships with a selected number of suppliers." Indeed, the ties are so close that the automakers trust the suppliers to help design the components for new-model vehicles -- a practice Detroit has begun only recently.
"For American suppliers to really develop high-value-added products for Japanese automakers, they have to participate in the design of those cars," Creamer said. "There's a fairly large challenge trying to figureout how a company thousands of miles away, speaking a different language and using a different set of engineering standards, can become involved in helping to develop these component systems."
The closeness of the ties between big Japanese companies and their suppliers has become a thorny issue in U.S.-Japan relations. Critics contend that much of Japanese industry is divided into keiretsu -- groups of interlinked companies that usually own each other's stock and show strong preference for dealing with other keiretsu members, to the disadvantage of outsiders.
Toyota itself has been singled out for its alleged keiretsu behavior. American corporate raider T. Boone Pickens, who has sought to gain control over Koito Manufacturing Co., a Toyota supplier, has accused Toyota of enjoying an unfairly cozy relationship with Koito and protecting its management.
Earlier this month, moreover, U.S. Federal Trade Commission Chairman Janet Steiger said the FTC would examine allegations that the American subsidiaries of Toyota and other Japanese automakers have brought their keiretsu system to the United States, unfairly discriminating against U.S. auto parts suppliers.
Toyota officials bridle at the charges. They observe that General Motors Corp. simply bought many of its suppliers outright several decades ago and that most of the purchases GM makes from outsiders consist of low-value-added products such as tires.
But in a keynote address at this week's meeting, Iwao Okijima, a Toyota managing director, acknowledged: "With our domestic suppliers, we have reached long-term, stable relationships... . This makes it easier to undertake long-term strategies... . We cannot deny that there is still a lot to do to establish the same relationship with you."
Currently, about 20 foreign auto parts makers participate in the design of components for new Toyota cars. Among them are American companies TRW Inc., which makes air-bag systems, and Motorola Inc., which makes microprocessors.
Toyota officials said they want to increase this number substantially. In speeches, they pledged to take steps aimed at making it easier for North American firms to become involved in parts design. The company is expanding its research and development facility in Ann Arbor, Mich., and it plans to send hundreds of Japanese engineers to the United States to consult with suppliers.
But in those same speeches, the officials left no doubt that they expect the suppliers to adhere to the strictest standards of quality, cost control and convenience of delivery. The message was plain: So far, foreign parts makers haven't been doing well enough.
Osamu Obata, a deputy general manager of the purchasing division, showed a slide depicting the different rates of defects among Japanese and foreign-made parts -- 0.1 percent for those manufactured abroad, 0.001 percent for those made in Japan.
Over and over again, the Japanese politely admonished their American listeners: "We request that you make the maximum effort... . Your cooperation will be highly appreciated."
Imports of Japanese Auto Parts to Factories in the U.S 1989...$11.1 billion
U.S. Auto Part Sales to Japanese Automakers in Japan 1989......$638 million
U.S. Parts Suppliers Doing Business with Japan 1989: 527...1988: 298
Defect Ratios for Toyota's Auto Part Suppliers
From Japanese Suppliers: 1 part in 100,000
From Foreign Suppliers: 1 part in 1,000
SOURCES: Japanese Automobile Manufacturers Association; Automotives News; Toyota Motor Corp.