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Ciptapangan Visitor
Inside Japan's Big Car Makers, U.S. Hires Gain New Influence
posted by admin on 22/06/06

American executives are getting more involved in decision making.

Japan's car makers have been breathing life into the U.S. auto industry by building plants and hiring American executives, designers, engineers and assembly-line workers. Now, these Americans have begun exerting influence in the opposite direction: over decision-making back in Japan.

Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. -- known within the industry as the "J-Three" -- are training more American executives for senior management positions. Toyota, which this year is likely to surpass General Motors Corp. as the world's biggest car maker, has assigned Americans to supervise new-factory construction in North America, a task previously entrusted largely to Japanese production gurus.

At the California design studios of Toyota, Nissan and Honda, Americans are developing cars to appeal to American tastes. They designed Toyota's edgy midsize sport-utility vehicle, the FJ Cruiser, and Honda's popular Acura TL luxury sedan. At Japanese technical facilities in Michigan and test tracks in Arizona, Americans are deciding how best to meet U.S. government specifications.

"Toyota, when it realized it is going to be the global and dominant car maker, realized it can't control everything from its central office in Japan," says Ian Cartabiano, an American who passed up a job with GM to join Toyota's California design studio, where he designed the Avalon sedan for the U.S. market.

At Nissan, Americans now head such crucial divisions as product planning and global marketing. "The American management at Nissan is not isolated," says Carlos Ghosn, the French chief executive officer of Nissan. "We are using a lot of their skills at the corporate level, and we are telling our high potential candidates in the United States, 'Your career is not in the U.S. Your career is global.'"

For years, Japanese car makers were wary of relying on American managers. U.S. auto executives were seen as good with the big picture, but unfamiliar with hands-on factory-floor management as practiced in Japan. The Americans, Japanese executives believed, weren't tuned in to Japan's system for creating cars, or to its obsession with keeping quality high and costs low. So Toyota and its competitors sent seasoned Japanese executives to North America to oversee engineering, manufacturing and sales.

Today, the American market has become more important than ever. Japan's domestic car market is just one-third the size of its U.S. counterpart, and the nation's shrinking population means sales at home aren't likely to grow. The U.S. population, on the other hand, is expanding, and the J-Three have been able to steal market share from GM and Ford.

North America accounts for 34% of Toyota's sales, but about 43% of its operating profits, according to estimates by CLSA Asia-Pacific Markets, a brokerage firm. Nissan earns at least 60% of its operating profits from North America, and Honda earns about 75% of its operating profits there, CLSA says. The brokerage firm says Honda loses money in Japan. Honda declined to comment.

Japan's car markers have learned that Americans have much different tastes and face far different driving conditions than Japanese buyers. In Japan, Toyota's Camry sells poorly. In the U.S., it has been the top-selling car for eight of the past nine years. Toyota sells three times as many Camrys to Americans each month as it sells to Japanese buyers in an entire year.

So Japan's car makers are designing more models to appeal directly to Americans. Next month, Toyota plans to release in the U.S. a gasoline-electric hybrid Camry that Japanese consumers will never see. Honda designed the Ridgeline pickup strictly for the American market. Nissan's Armada SUV is another such vehicle.

American executives are getting more involved in deciding what will fly. Honda's Acura TL luxury sedan was due for an upgrade in 2003. Honda needed a successful relaunch to jump-start Acura sales, which had been bogged down by the company's failure to differentiate the Honda and Acura brands. Typically, product-planning decisions of such magnitude were made largely by Japanese executives, after fielding some advice from Americans. Some Honda executives worried that ideas generated by U.S. employees were being stifled.

For the Acura TL, Japanese executives were leaning toward a low-risk design drawn up by a team in Japan, a round-edged look intended to appeal to older buyers. But at a planning meeting at Honda's U.S. headquarters in Torrance, Calif., Erik Berkman, a veteran American engineer, told his Japanese bosses that before they moved forward, they needed to know that all the Americans assigned to the project favored a different design, according to people familiar with the matter. Honda's California styling center had come up with an edgier look with sharper lines and a more aggressively styled grill.

Koichi Amemiya, the ranking Japanese executive at the meeting, heeded the Americans. That new version of the TL is now the best-selling car in the Acura lineup. Honda also released a version of the more conservative Japanese design as the Acura RL, and it has not sold well in the U.S.

Honda's U.S. operations now design 30% of Honda and Acura cars and 48% of the SUVs and pickups sold in the U.S. Hirohide Ikeno, head of Honda's North American research and development, says more and more features on Honda cars sold around the world were designed and engineered in the U.S.

Bumsuk Lim, a former Honda designer who now teaches at the Art Center College of Design in Pasadena, Calif., says he advises students to consider working for Japanese car makers rather than for design powerhouses such as BMW AG and Volkswagen AG's Audi. Companies such as Toyota produce a wide line of vehicles and are still developing a uniform design theme, he notes. "For young designers coming out of school," he says, "that's too great an opportunity to pass."

Japanese car makers hope that products developed for Americans will help them respond to German advances in Japan's car market. For years, Japan's wealthiest consumers have shunned Japanese cars in favor of brands such as Audi, BMW and Mercedes-Benz. During the first six months of 2005, European luxury brands accounted for more than 90% of car sales over $50,000, according to a study by Tokyo car importers. Toyota had never even offered its Lexus brand, the No. 1 luxury brand in the U.S., to Japanese buyers.

Japanese car executives had always viewed flashy American car designs as too cloying for the home market, sometimes dismissing them as "reeking of butter," a reference to rich American food. They are now rethinking that conclusion. "Sometimes," says Honda Chief Executive Takeo Fukui, "things that smell of butter can actually do surprisingly well in Japan."

Honda has said it plans to begin importing to Japan its luxury Acura line, including its American-designed TL. After spending $2 billion to revamp its dealer and service network, Toyota introduced the Lexus line to Japan last September. Toyota has grabbed a 30% share of the luxury-sedan market since the launch.

As its U.S. operations grow more important, Toyota has discovered that some Japanese management practices don't translate well. Mitsuo Kinoshita, Toyota's executive vice president in charge of human resources, recalls that when he worked as a factory manager, very few practices were committed to writing. Knowledge was passed from one generation of engineers to the next, much as a craftsman trains apprentices. This hands-on learning method, he says, is "almost like breathing the factory air."

But Toyota is growing so fast in North America, with 12 plants and two more on the way, that it doesn't have time to train American managers that way. In 2001, it codified for non-Japanese employees its "Toyota Way" -- a set of values that include improving processes, eliminating waste, teamwork and a relentless focus on quality. It also created a crash training program it calls the "Toyota Institute." American executives are sent to Japan for a two-week course, then to the University of Pennsylvania's Wharton School to work on case studies.

To Toyota's top executives, American managers can seem overly concerned about job descriptions and reporting lines. Yet they are often more disciplined than Japanese executives about following an agreed upon plan, says Mr. Kinoshita, the Toyota human-resources executive, and they work with an intensity that is impressive. "You get on an airplane and the American will get right to work," he says. "We Japanese will watch the movie and drink."

Toyota had long depended on Japanese experts to set up new North American factories. Recently, it asked American managers to set aside their work at Toyota plants in Georgetown, Ky., and Princeton, Ind., to help set up new factories in San Antonio.

Three years ago, when Toyota first promoted an American to managing officer, the level just below director, it outfitted the conference room at its Nagoya headquarters with booths for translators. Today, six non-Japanese attend meetings of Toyota's 48 managing officers, including two Americans and executives from Canada, Australia, Britain and Greece.

Toyota's 26-member board of directors, most of them lifetime Toyota employees, does not yet include any foreigners. Last June, at a news event to announce a board reshuffle, Toyota's new president, Mr. Watanabe, was asked why a company earning so much from the U.S. didn't include an American on its board. He responded that Toyota had decided that for the time being, there were no appropriate candidates.
But as overseas revenues grow, that may change. Senior executives say the top candidate is Jim Press, the 59-year-old president of Toyota's U.S. operations, a 26-year Toyota veteran. "They said they haven't found somebody worthy," says Mr. Press, shrugging off Mr. Watanabe's comment with a laugh.

Japan's car makers are adopting what Mr. Ghosn, Nissan's chief executive, characterizes as an American approach to corporate finance. Shares of all three Japanese car makers trade in the U.S., with Honda and Toyota listed on the New York Stock Exchange. As a result, the companies are moving to staff investor-relations departments with English speakers and to report quarterly earnings under standards expected of U.S. companies.

At Nissan, which trades as American depositary receipts on the Nasdaq Stock Market, Mr. Ghosn says the gauge of performance has shifted from market share, the traditional measure in Japan, to metrics such as profitability, cash reserves and return on investment. "These are the direct influence of the U.S. side," Mr. Ghosn says.

Write to Jathon Sapsford at and Norihiko Shirouzu at

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