Eamonn Fingleton: Detroit's Collapse: the Untold Story

Eamonn Fingleton: Detroit's Collapse: the Untold Story

For decades East Asian competition has played a controversial role in the decline of the American car industry. Both Japan and Korea have long been accused of unfair trade and closed markets. For their part Japanese and Korean officials have argued that their markets are open and that an incompetent and heedless Detroit doesn't make the sort of cars their consumers want.

In all the charges and countercharges, little of the remarkable truth of Detroit's trade problems has come out. To see how well -- or rather how badly -- you understand the background, try this quiz:

1. What was the Detroit companies' share of the Japanese market in 1930? (a) About 90 per cent. (b) About 20 per cent. (c) Less than 4 per cent.

2. How many models do the Detroit corporations currently make with the steering wheel on the right (the standard configuration for Japan)? (a) More than 40. (b) 12. (c) 3.

3. What was the combined share of all foreign makers – American, European, and Japanese – in the Korean car market in the last decade? (a) Less than 2 per cent. (b) Around 15 per cent. (c) More than 70 per cent.

The correct answer in each case is (a).

If you flunked, don't feel bad. Just cancel your newspaper subscription.

... Given their well-known ability to work together in government-led cartels, Japanese corporations in particular boast a "comparative advantage" in pressurizing media ad departments.

Protected Japan

No nation has benefited more from protectionism than Japan. In recent years, however, the fact that the Japanese car market remains as protected as ever has dropped off the American press’s radar. Although Japanese officials first proclaimed the market open as far back as the 1970s, as of 2008 the combined share of all foreign makers was still just 5 per cent. This was only a fraction more than in the 1980s and the second lowest in the developed world after only Korea. ....

... Many journalists seem blind to the practical details of other nations' car industry protection tactics. What sort of tactics? Speaking in Washington in 2007, Steve Biegun, a strategist for Ford, provided some eye-opening recent Korean examples:

* Ford was barred from airing advertising commercials except between 2 a.m. and 6 a.m.* Its showrooms' floor space was restricted by government regulation.

* Korean tax officials automatically audited anyone who bought a foreign car.

Japan has used similarly disingenuous techniques in the past and indeed the tactic of hitting buyers of foreign cars with tax audits was invented in Japan.

... To be fair Tokyo has now renounced this technique. But the fact that such a stratagem persisted into the early years of this decade surely substantiates the Detroit Three's contention that Japan is hostile territory, where their products are distinctly unwelcome.