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U.S. tries in vain to tap into Japan parts market


TOKYO -- The young office worker wheeled his sporty Pao mini-car into his Nissan dealer for its inspection, the dreaded "shaken" required every two years for personal cars. At the end of the day, he was $1,292 poorer.

What did he get for another sticker on his 5-year-old car, which has only 28,000 miles on it? A new set of brake pads and shoes, a new oil filter and fresh oil and a fill-up on his radiator water.

"This is too expensive," moaned Isao Miyashita, a 32-year-old technician for a computer service company. "I don't know if the parts are too expensive. I can't tell because the manufacturer includes the parts at this fixed price."

The U.S. and Japan just kicked off another round of negotiations in the never-ending saga of reopening Japan's auto market to greater foreign participation. The U.S. is threatening to slap sanctions on a range of Japanese-made goods unless there's further progress in closing the automotive trade deficit, which reached $36.7 billion last year.

The U.S. wants to see more Japanese dealers carrying U.S.-built PTC cars. It wants Japanese automakers to extend their voluntary plans to put more U.S.-built parts into their vehicles. And it is seeking to open Japan's lucrative replacement parts market -- symbolized by the notorious shaken system -- to foreign parts makers.

While consumers like Mr. Miyashita are grumbling about the high prices paid to the garages during the shaken, foreign manufacturers are drooling at the prospect of getting in on the huge profits those prices represent. So far, that's about as close as they've gotten.

Untapped 'aftermarket'

U.S. firms imported just $1.13 billion in automotive parts into Japan in 1993, virtually all of that put into new cars. The $45 billion Japanese consumers paid for repair parts -- the so-called aftermarket -- remains an untapped wilderness for foreign manufacturers.

Overall sales by U.S. parts manufacturers to Japanese automakers totaled $15.5 billion in 1993 and the estimated 1994 total is $21.2 billion, surpassing the voluntary targets set in January 1992 when President George Bush visited Tokyo with the Big Three chief executives in tow. But more than 90 percent of those sales were generated from parts sold to Japanese-owned transplants in the U.S. for installation in new cars.

U.S. firms blame their poor showing in Japan's aftermarket on the tight grip car manufacturers have on their dealers and repair shops.

Of the 80,000 repair shops licensed by the Ministry of Transportation to issue shaken stickers, 40 percent are owned wholly or in part by auto manufacturers. Most of the other shops also insist on using "genuine replacement parts," that is, parts provided by the same suppliers who sold the manufacturers the original equipment.

Even the 20 percent of the market represented by independent garages who do incidental repairs such as changing spark plugs or fixing tires remains off limits, due in large part to a multilayered distribution system.

"We've been here for 20 years and we don't know where to start," said Kurt Mueller, director of Dana Japan Ltd., the local arm of the Toledo, Ohio-based auto-parts giant Dana Corp. A $6 billion corporation globally, Dana managed to sell just $30 million in parts in Japan last year, mostly axles, shafts and other drive-train parts to truck manufacturers.

Dana has a worldwide goal of generating 50 percent of sales from the aftermarket, up from 40 percent at present. Company officials say strong aftermarket sales can insulate the firm during times when there is a sharp falloff in new-car demand. During recessions, people tend to buy more replacement parts for their more frequent repairs on older cars.

But the company hasn't gotten to first base in trying to implement the strategy here. "The OEMs [original equipment manufacturers] control the aftermarket," Mr. Mueller said. "Even in the few instances where our parts make it into the original vehicle, most of those vehicles are bound for the U.S., so it doesn't help us in the aftermarket here."

Powerful 'keiretsu'

New rules in the U.S. requiring carmakers to post the percentage of the car built in the U.S. -- so-called domestic content labeling -- has encouraged Japanese carmakers to put more foreign-built parts into their vehicles bound for overseas markets. But it's actually working against U.S. suppliers who are trying to get their parts into cars destined for Japanese consumers.

Those efforts have met increased resistance from Japan's domestic-parts industry, which is seeing its sales erode in the U.S. Most of these firms are members of the large automakers' keiretsu, the family of firms that have cross-shareholding arrangements with each other. Both carmaker and parts maker now sees every foreign-built part sold here as a lost sale for themselves.

So far, Japanese negotiators are balking at all the U.S. demands. Government officials say they will not pressure automakers to extend and increase their 1992 pledges, which set a goal of $19 billion a year.

They want to avoid any type of numerical indicator for measuring progress, which they fear will be interpreted as a target down the road. Government officials this week also lashed out at U.S. efforts to meddle in Japan's auto-parts aftermarket.

If the U.S. insists that automakers re-establish voluntary goals for buying parts, "it will make things very difficult," said Yoshihiro Sakamoto, vice minister for international affairs at the Ministry of International Trade and Industry.

Undersecretary of Commerce Jeffrey Garten, in Tokyo to restart the talks, said, "We want to see concrete results and we want to be able to measure the results. We believe the 1992 voluntary plans played [a] positive role. Whether [new plans] will be forthcoming or not depends on the auto companies."

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