Kondratiev B-Phases and the Relocation of Automobile Assembly: American Companies in the 1920s and Japanese Companies in the 1980s. Carl H.A. Dassbach Department of Social Sciences Michigan Technological University Houghton, MI 49931 (906)487-2115 E-mail: DASSBACH@MTU.EDU Note: Footnotes are at the end of the text and the bibliography follows the footnotes. The note numbers appear in the text in brackets. The relocation of assembly operations to foreign markets has been an important strategy for automobile manufacturers since almost the very beginnings of commercial motor vehicle production. American companies, such as Ford and General Motors, were assembling cars in Canada and Europe before 1910 while European companies such as Daimler Benz and Fiat attempted (unsuccessfully) to establish assembly operations in the United States. Since the first decade of the 20th c. numerous other companies have built and operated assembly plants in overseas markets with varying degrees of success. In some cases, these plants have endured but there are almost as many cases where overseas assembly plants, especially in the core nations of the world economy, were brief experiments and companies were, for a variety of reasons, forced to withdraw from the market. If the relocation of assembly is viewed globally, some generalizations about this process are evident. First, the purpose underlying relocation has varied depending on the constellation of political and economic forces in the world economy at a given time. At times, foreign assembly is largely an offensive strategy whose main purpose is to increase market shares or profits. At other times, it is chiefly a defensive strategy to protect market shares. Second, not all markets in the world are as easily penetrated. Overall, it has proven far more difficult to establish enduring and viable assembly operations in core markets which have their own automobile industry than in peripheral and semi-peripheral markets which lack a viable domestic automobile industry. Hence, while there are several instances of the successful establishment of assembly plants in peripheral and semi-peripheral during almost every decade of the 20th c., there are only two cases of the successful establishment of significant assembly operations in core countries during the 20th c. The first is movement of American companies to Europe during the 1920s and the second is the movement of Japanese companies to the United States and Europe during the 1980s. This paper will examine these two cases of the relocation of assembly to core markets. There are several important similarities between the two. First, B-phases of the world economy figure prominently in both.(1) Although some American companies had foreign assembly operations prior to the interwar B-phase (1920-1945), the major thrust by American companies occurs during the interwar B-phase. In the case of Japanese companies, relocation to other core areas takes place entirely during the current B-phase (1970-?). Second, both take the form of two waves and, in each case, these waves had a similar character. The first wave was largely offensive, i.e., to increase market shares or profits, and the second wave was largely defensive to protect foreign sales which had become crucial to the industry. Third, these relocations were only possible because American companies in the 1920s and Japanese companies in the 1980s possessed some advantage vis-a-vis the established producers in the region. Fourth, the trajectories of Japanese companies in the 1980s has, until now, closely parallelled the trajectories of American companies in the 1920s. These parallel pasts raise the question of parallel futures which will be addressed in the last section. The U.S. Automobile Industry: From Complete Exports to Foreign Assembly. Until the introduction of Ford's Model T in 1908, American motor vehicles were not a major presence in world markets. The success of the Model T in world markets(2) led to a substantial increase in U.S. exports after 1908 so that by 1913 U.S. vehicles accounted for 25% of world motor vehicle exports. The halt in European exports during World War I enabled American companies to substantially increase their exports and, by 1924, the U.S share of world motor vehicle trade rose to approximately 54%. During the 1920s, U.S. exports continued to grow and the American share of world motor vehicle trade reached its highest figure in the 20th c., 72%, in 1927.(3) National Percentage of Motor Vehicle Exports: 1907-1928 Country 1907 1913 1923 1928 France 57 33 11 6 United Kingdom 13 16 2 5 United States 11 25 54 72 Italy 8 6 4 4 Germany 7 16 2 1 Adpated from Foreman-Peck (1982), 868. Some of the largest foreign markets for American vehicles were countries with relatively high levels of income and no indigenous motor vehicle industry such as Canada, Australia, New Zealand, Argentina, Brazil and South Africa. Between 1920 and 1930, these markets absorbed from 50 to 60% of U.S. exports and U.S. vehicles dominated these markets. In Argentina, for example, U.S. motor vehicles accounted for ca. 90% of all vehicles sold(4) and in Australia, 80% of all sales during the late 1920s.(5) The countries of Europe, many with well established domestic automobile industries, were another major market and absorbed approximately 30% of all U.S. exports during the period.(6) Although U.S exports did not dominate European markets to the same extent as in Latin American or Australia, they still accounted for ca. 20% of all sales between 1922 and 1930.(7) American companies were some of the first motor vehicle manufacturers to successfully establish and operate assembly plants in their overseas markets. The majority of these plants were built in the period from 1905 to 1930 in two fairly distinct waves. The first wave, which can be characterized as largely `offensive', ends in 1920 while the second wave, which can be characterized as largely `defensive', occurs between 1920 and 1930. During the first wave, American companies, notably Ford and General Motors, established assembly plants in Canada and England, and Ford also built plants in Argentina, France and Spain. The chief motivation for building plants overseas during this first wave was to reduce the costs involved in preparing and shipping vehicles. Preparing assembled vehicles for export was costly because the vehicles were packed in large crates(8) and shipping costs were high because the crates approximated the size of the vehicles. By assembling in foreign markets, companies could dispense with crating and significantly lower shipping costs since components for approximately nine vehicles could be shipped in the same space as two assembled vehicles.(9) This first wave is `offensive' since the cost reductions realized through foreign assembly were primarily used to either lower prices in foreign markets and thereby increase sales or increase the profits of the foreign branches.(10) In general however, American manufacturers were far more concerned with the rapidly expanding domestic market and did not, during the first wave, devote a great deal of attention to their foreign markets or build many assembly plants. In 1919, for example, foreign assembly only accounts for ca. 8% of sales outside of North America.(11) During the second wave, American companies substantially increased both the number of foreign assembly operation and the number of vehicles assembled overseas. Between 1920 and 1930 they built more assembly plants outside North America, approximately 50, than in any other decade in the history of the industry and, by 1930, approximately 60% of all American vehicles sold overseas were assembled in these plants.(12) Two factors are prominent in this rapid and massive shift to foreign assembly by American companies. One was the maturing of the domestic market during the 1920s which increased the importance of foreign markets for American companies. After 1922, demand in the U.S. shifted from first time purchases to replacement purchases and sales stopped growing.(13) Exports therefore became the only means for increasing sales and, in fact, account for the entire growth in output of the U.S. industry between 1922 and 1930.(14) The second factor was the political consequences of the interwar B-phase, first evident in Europe. As the European countries struggled with reconstruction, inflation, unemployment, and generally failed to regain their pre-war momentum, governments responded by attempting to close their markets to outside competition with tariff barriers on manufactured imports.(15) By the mid-1920s other nations followed this lead and erected tariff barriers. As a consequence, duties on motor vehicle imports, which ranged from 0 to 14% before the war,(16) rose dramatically in the period after 1919. The leader in the move to protectionism was Great Britain with the retention of the wartime McKenna duties. Prior to the McKenna duties, assembled motor vehicles were given free entry into Great Britain; afterwards they were charged a duty of 33.3%. Similar high protective duties were established elsewhere. For example, France imposed a duty of 45% ad valorem; in Germany, a duty based on weight added approximately $500 to the price of imported U.S. vehicles; Australian duties and other charges amounted to 77.5% of a vehicle's value, and Argentina imposed a 30% duty on assembled imports. While tariffs on motor vehicle imports became nearly universal during the 1920s their purpose varied depending on the country. In countries with no domestic motor vehicle industry such Brazil and Argentina, tariffs were used to promote local assembly by admitting components at a lower duty than assembled vehicles. (17) In Australia, tariffs were initially structured to promote local assembly but gradually altered to protect the developing component industry and induce foreign companies to shift from imported to domestic components.(18) In Europe, tariffs were used to protect the domestic industry from American competition and, by the mid-1920s, there were no substantial differences between the duties on components and assembled vehicles.(19) Whatever the intention of tariffs, the net result was the same: prices for assembled American motor vehicles in foreign markets increased tremendously. By the mid-1920s assembled American vehicles were at least 50%, up to 157% and, on the average, 112% higher in foreign markets than in the United States with an average of 60% of the increase due to the effects of tariffs.(20) All the major American producers responded by establishing assembly operations in their major foreign markets. Ford, which had five foreign assembly plants prior in 1919, added 16 new plants during the 1920s: eight in Europe, four in Latin America and the other four in Australia, India, South Africa and Japan.(21) General Motors established 21 plants,(22) Chrysler and Hudson each opened four plants in Europe and other American companies established an additional five.(23) Foreign assembly could not, however, be used in all overseas markets since some foreign markets did not have adequate sales to support an assembly operation. Moreover, even in markets which were capable of supporting an assembly operation, the cost reductions from foreign assembly varied. The greatest reductions, up to 60% compared to an assembled import, were realized in countries which levied less duty on imported components than on assembled vehicles such as Argentina. In Australia, the cost reductions were on the order of 30 to 40% while in Europe local assembly only provided a 20% cost advantage over assembled imports.(24) Still, despite the minimal tariff advantages realized by assembly in Europe, American companies concentrated their efforts in Europe because Europe represented, in the latter half of the 1920s, the most rapidly growing market for automobiles. During the second wave, relocation is primarily defensive. While concerns with increasing profits or expanding market shares never totally vanish, the relocation of assembly to foreign markets during the 1920s is primarily a means for attenuating the upward pressure of tariffs on prices. Hence, the cost reductions realized through savings in packing, transport and the use of less expensive labor for assembly(25), were translated into price reductions. These price reductions had one purpose: to protect foreign market shares and enable U.S. companies to retain and possibly expand their foreign sales which, as already noted, accounted for the entire increase in output of the American industry after 1922.(26) The American Advantage of the Twenties Where the ability of American automobile producers to successfully export to and later establish assembly operations in countries with no domestic industry can be accounted for by the absence of competition, in Europe the situation was markedly different. Many of the European countries, especially those which represented the most important markets for U.S. automobiles such as Great Britain, France, and Germany had a well established motor vehicle industry and yet, American companies managed to penetrate these markets with exports, successfully operate assembly plant and compete in these markets even with the additional costs resulting from tariffs during the 1920s. American companies could compete in these overseas markets precisely because they an advantage over their local competitors and there are several factors which contributed to this advantage. Some are contingent and a consequence of geography and the uneven development of the industrialized nations during the first half of the 20th. century. One however, is structural and remains, even today, an important if not sole source of advantage. Geographical factors which contributed to the American advantage include the fact that the United State had the largest domestic market in the world. As American automobile producers, especially Ford and General Motors, expanded to serve the domestic market, they created economies of scale in production far beyond those possible in the smaller markets of Europe. Geography also influenced labor costs in the United States. The frontier (in the larger sense of the term) meant that American labor was (and could be) far more mobile than European labor, hence, labor prices were higher in the U.S. Geography also indirectly benefitted American companies because of both the abundance of raw materials in the U.S. and their ease of extraction which meant that inputs such electricity, coal, oil, steel, were considerably less expensive than in Europe.(27) The size of the U.S. market and the high cost of labor, in turn, influenced technological development in the U.S. at the levels of product, process and organizational innovation. A large, relatively wealthy market led to the development of products which are amenable to long, standardized production runs, e.g., the Model T. Market size, labor costs and product innovation, in turn, led to process innovations such as the early development and adoption of specialized, high precision, high speed machine tools.(28) Finally, when U.S. firms began to seriously relocate production overseas, they already had considerable domestic experience in establishing branch assembly plants since this was the chief means used to serve the U.S. market after 1915. While each of these contributes to the American advantage vis-a-vis European producers during the 1920s, there is, in addition to these contingent differences, an essential difference between American producers and other automobile producers in the world: mass production or Fordism. Confronted with a unique combination of problems, e.g., expanding production in response to growing demand, high wages, and high rates of labor turnover, Ford developed (and other American companies quickly adopted) a social organization of production which enabled these companies to extract more labor from its workforce than producers in other nations.(29) Taken together, these contingent and structural factors give American firms a tremendous advantage vis-a-vis European manufacturers. This advantage was already evident as early as 1913 when Ford could sell its Model T, including duty, freight and taxes, for less than a comparable vehicle in any market in the world.(30) Despite some minimal interruptions caused by World War I, American automobile production expanded almost constantly between 1910 and 1920 and this expansion served to reenforce the industry's advantage. Hence, when American producer relocated assembly to their foreign markets, and especially Europe, they approached these markets from a position of strength unrivaled by producers from any other country. The Japanese Motor Vehicle Industry: From Assembled Exports to Foreign Assembly. Prior to World War II, Japanese domestic motor vehicle production was almost entirely trucks. Following World War II, the Japanese government through MITI (Ministry of International Trade and Industry) directed the motor vehicle industry towards the manufacture of passenger cars. To strengthen the position of the domestic companies, MITI undertook several measures. During the early 1950s technical tie-ups between Japanese companies and foreign producers, mainly English, were established; motor vehicle companies were given preferential tax and depreciation rates; and tariff and tax barriers were erected which raised the price of imported cars by 70%. To further curtail the sales of imported vehicles, MITI slashed the amount of foreign exchange available for motor vehicle imports by 95% in 1955. As a result, imports, which accounted for 80% of the Japanese market in 1955 drop to slightly more than 2% of the market in 1960.(31) The closure of the Japanese market to imports was accompanied by MITI's efforts to stimulate exports through various incentives. The majority of Japanese automotive exports during the 1950s were to peripheral and semi-peripheral markets such as Thailand, Taiwan and Brazil although a few vehicles were exported to the United States. While Japanese vehicles sold well in other countries, the underpowered, flimsy Japanese cars were not well received in the United States and so, sales were minimal. But, even in the late 1950s exports, especially trucks, were important for the Japanese industry and accounted for almost 10% of total motor vehicle production in 1959.(32) During the 1960's Japanese production increased tremendously due to a rapid growth in both domestic and export sales. Between 1960 and 1970 output of the auto industry rose from 482,000 units to 5.2 million units as domestic sales skyrocketed from 443,000 to 4.1 million units and exports grew from 39,000 to 1.1 million units. By 1970 exports account for 22% of Japanese passenger car production and 13% of total truck production. Over the next ten years, exports become increasingly important as the Japanese domestic market experiences the same transition during the 1970s as the U.S. market in the 1920s. In the early 1970s, the growth in domestic sales slows and, after 1973, practically stops as the market `matures' and demand shifts from first time purchases to replacement purchases.(33) Exports thus become the only means for the continued growth of the industry and all the Japanese producers begin to strenuously pursue export possibilities. Between 1970 and 1980 exports grow from 1.1 million units to almost 6 million units and, by 1980, Japanese vehicles represent nearly 80% of world exports.(34) More importantly, exports absorb over 50% of the industry's output and account for almost all the growth in production since 1973. As exports expand during the 1970s, Japanese motor vehicles become a major presence in all the industrialized nations. Total Number of Japanese Motor Vehicle Exports to Selected Markets, 1970 and 1980. (in 1,000s) Country 1970 1980 United States 422 2,407 Canada 73 184 West Germany .4 257 United Kingdom 5 204 France 1.5 72 Data from Japan Automobile Manufacturers Association,Inc., Motor Vehicle Statistics of Japan, 1970 and 1980. The United States is the single most important market for the Japanese, absorbing approximately 40% of exports during the decade. Because the growth in Japanese exports to the U.S. exceeded the rate of growth of the domestic market, the Japanese share of the U.S. market rose from 4.2 % in 1970 to 22.8% in 1980. Over the same period, the Japanese also increase their share of the European market from 1.1% to 9.8%.(35) This rapid expansion in market shares combined with the onset of the second B-phase of the 20th c. in 1970 leads to growing concerns about the Japanese "invasion" by both governments and automobile manufacturers in Europe and the U.S. At first, attention focused on the non-tariff barriers to imports into Japan. After these were eliminated in 1976 (and without producing any substantial increase of imports into Japan), the next step was protectionism. Unlike protectionism during the 1920s, protectionism in the late 1970s and early 1980s does not assume the form of tariff barriers. Instead, markets are protected through limits on either the number of Japanese imports or their total market shares. The governments of Italy and France simply placed caps on Japanese imports. The Italians invoked a provision from an old treaty to limit Japanese imports to 2,200 units per year and the French limited Japanese imports to 3% of their market. The U.K. negotiated an agreement with the Japanese government initially limiting imports to 9% of the market and later, to 11% of the market. In the United States, there was considerable support for protectionist legislation in Congress - the Danforth-Benetsen bill - but it was defeated. Realizing that the problem would not change in the immediate future, the Japanese government negotiated an agreement with the United States in 1981 (the VRA or Voluntary Restraint Agreement) which limited total Japanese passenger car exports to the United states to 1.8 million units during the first year and then gradually rising to 2 million units per year during the last official year of the agreement, 1984. With 70% of Japan's motor vehicle exports controlled or constrained in the early 1980s(36) by either caps or restraint agreements, Japanese producers were forced to reconsider their strategy of exporting assembled cars from Japan. Foreign assembly offered one way to circumvent many of these restrictions but in the early 1980s, not every Japanese producer resorted to foreign assembly, mainly because assembled exports had a substantial cost advantage, ca. $2000, over vehicles produced elsewhere in the world. Instead, Japanese producers in the 1980s, like American producers in the 1920s, move into foreign assembly in two waves. The first wave, from 1981 to 1985, is directed towards the U.S. and, like the first American wave, was largely offensive: motivated by efforts to increase U.S. sales and, indirectly, sales in other countries. During the second wave, 1985 to the present, additional Japanese companies build plants in the U.S.; companies which already have plants in the U.S. expand their operations; Japanese manufacturers build plants in Europe, and many companies also begin to move into manufacturing outside of Japan. Like the second American wave, this wave is also largely defensive, in response to rising prices in the major export markets. During the first wave, the Japanese concentrate their efforts on the U.S. market for two reasons. First, the restraint agreement with the United State only applied to imports(37) so U.S. assembly would enable the Japanese companies to "end run" the quotas and increase U.S. sales without provoking political repercussions for violating the restraint agreement. Second, the restrictions on Japanese sales in most European countries only applied to vehicles exported from Japan. By assembling cars in the United States and exporting them to Europe as well as other countries which limited Japanese imports, e.g. Taiwan, Japanese producers could, in effect, conform to the letter of the agreements and restrictions if not the spirit. The first Japanese company to establish a significant assembly operation in the U.S. was Honda.(38) Within 18 months of the VRA, Honda converted a motorcycle plant in Ohio and began assembling two passenger car models, Civic and Accord. In June 1983, Nissan began assembling trucks and passenger cars in Tennessee and, in December 1984, Toyota, in conjunction with GM, started assembling cars in Fremont, California. Locally assembled vehicles did not replace imports from Japan, instead they were used to increase U.S. sales. But even with these additional units, high demand for Japanese cars in the U.S. during the early 1980s led to shortages which raised prices by additional 40% or $2500 between 1980 and 1985.(39) A second and far more consequential upward pressure on prices in the U.S. as well as elsewhere was the strengthening of the Yen against the Dollar and other major currencies. Between 1980 and 1988 the Yen gained almost 78% against the dollar with the major portion of this gain, 71%, occurring between 1984 and 1987. The Yen also registered similar, if not as enduring, gains against other currencies. Between 1980 and 1988, it gained 74% against the Deutschmark, 132% against the Pound Sterling, and 155% against the Franc.(40) While not all the gains made by the Yen against other currencies are translated into price increase, Japanese producers were forced nonetheless, to raise their prices. In the U.S., for example, Japanese car prices rose by approximately 20% or $2000 between 1985 and 1987.(41) This upward pressure on prices initiates the second wave of relocation. More importantly, the strengthening of the Yen, especially against the Dollar, also begins to undermine the cost advantage of manufacturing in Japan. As the exchange rate moves into the vicinity of 150 Yen to 1 Dollar, the costs of production in the U.S. became comparable to Japan and Japanese companies begin to see the United States as not simply an assembly site but also a cost effective manufacturing site for exports to Japan and Europe.(42) In the U.S. three new companies build assembly plants during the late 1980s - Mazda, Mitsubishi (with Chrysler) and Fuji- Isuzu. Honda expands its assembly operations and initiates drivetrain production in Ohio; Nissan begins construction of drivetrain plant, and Toyota establishes a second, solely owned plant, to assemble passenger cars and eventually build engines and drivetrains. In Canada, Honda and Toyota establish assembly plants, and Suzuki and GM form CAMI to assemble vehicles for the North American market. In Europe, Nissan, Isuzu, Toyota, and Honda (in conjunction with Rover) build plants in the U.K and Toyota enters into a co-production agreement for trucks with Volkswagen in Germany. The Japanese Advantage in the Eighties In the last fifteen years there has been considerable discussion about the Japanese advantage. At first, discussion of the Japanese advantage focused on the basis for the ability of Japanese firms to manufacture and successfully export high quality, low cost products such as consumer electronics, computers, machine tools, and motor vehicles to other industrialized nations. More recently, the question of the Japanese advantage has been raised in relation to the ability of Japanese companies to successfully establish and operate motor vehicle assembly plant in the U.S. and Europe.(43) In the case of Japanese industry in the 1980s, as with the American industry in the 1920s, contingent factors which contributed to its advantage must be distinguished from structural factors. Most of the discussion of the Japanese advantage has however, tended to focus on contingent factors. In the mid-1970s, the focus was on the motivated Japanese work force and lower labor costs. These, it was claimed, enabled Japanese producers to export to industrialized economies despite raw material and energy costs on par with, or above, the levels of the remainder of the world. By the late 1970s other contingent factors such as higher levels of automation and kanban, or the system of "just-in-time" production, were seen as contributing to the Japanese advantage. In the early 1980's attention shifted to Japanese management philosophy and practice. Some argued that the Japanese advantage was a consequence of the Japanese management style.(44) Where western, and especially American, management is notoriously short-sighted, primarily oriented towards short-term, i.e., annual profits, and characterized by individuality and conflict, Japanese management adopts a longer perspective, forgoes high short term profits for long term growth and market position, and is characterized by group identification and consensus formation. Others, in attributing the Japanese advantage to management practices and philosophy, focused on the keiretsu or industrial group.(45) It was argued that unlike American companies which have internalized upstream activities, such as component manufacturing, and downstream activities, such as marketing and advertising, Japanese companies tend to be more specialized. Major manufacturers do not internalize many activities, instead, they are at the center of networks of cooperating banks and companies, a keiretsu. Frequently, major manufacturers may hold some share of these companies or provide them with loans and other forms of working capital but they do not own the other companies in their network. Instead, they establish long term contracts and arrangements with the members and cooperate in financing, research and development, and manufacturing. Most recently, and largely in response to the success of the Japanese auto transplants outside of their networks, the Japanese advantage has been ascribed by members of the MIT International Motor Vehicle Program, in their book The Machine that Changed the World, to "lean production."(46) Created during the 1950s and 60s by Toyota - "the birthplace of lean production" - the authors, in effect, claim that lean production is the culmination of all the various "advantages" attributed to the Japanese since the late 1970's. As they write in the frontispiece of their book: The principles of lean production include: teamwork, communication, efficient use of resources (and) continuous improvement. Lean production vs. Mass production requires: 1/2 the human effort in the factory, 1/2 the manufacturing space, 1/2 the investment (in) tools, 1/2 the engineering hours, (and) 1/2 the time to develop new products. Lean production, as it turns out however, is not something easily attained. From asserting that the advantage of Japanese car producers is lean production, the authors later write that "Japanese does not equal lean"(47) implying that not all Japanese auto companies are lean producers. Moreover, they maintain that lean production must be learned over time, it cannot be duplicated. Hence, the advantage of certain Japanese automobile companies does not lie in possessing lean production (because lean production is not a "thing") but in the fact that they have learned how to be lean producers over 20 odd years. If we however, examine Japanese factories it is evident that neither automation, management practices nor their culmination in "lean production", is the true source of the Japanese advantage. While various "lean techniques" may give Japanese plants a slight but diminishing "edge" on American and European producers(48), the real basis of the Japanese advantage has little to do with these largely contingent factors. Rather, the structural basis for the Japanese advantage vis-a-vis European and American producers, which becomes evident once all are operating under the same conditions, lies in the ability of Japanese companies to control labor and intensify the tempo of work far beyond levels which have, until now, been politically and socially acceptable in the other industrialized companies. To intensify production, Japanese companies use a combination of objective and subjective strategies of labor control, many derived from Taylorism and Fordism. What the Japanese have done however, is to combine these in a fashion never seen before and with a singlemindedness of purpose which is unique. The objective strategies of labor control include high production line speed, constant job rationalization or kaizen, and kanban.(49) The subjective strategies include locating plants in depressed areas and paying above average wages, purposely recruiting workers who have no industrial experience, constant supervision by team leaders, and peer pressure. A uniquely Japanese innovation is the use of temporary workers to intensify the pace of production.(50) Taken together, these strategies have one intention: to increase the extraction of labor from the workforce. This is the essence of the Japanese advantage, in Japan as well as the United States, (51) and aptly captured in the following passage about the Mazda factory in Flat Rock, Michigan. Because workers at Flat Rock were actively engaged in their work for 57 seconds out of every minute, compared to the 45-second-a-minute average pace of the Big Three auto worker, a Mazda workday, in essence, included more work than a Ford or GM workday - 12 seconds more every minute, 12 minutes more every hour, 96 minutes more every eight hour day, and one eight hour day more every 5-day week. (emphasis added) (52) The real basis for the Japanese advantage, which become evident once firms are operating under the same conditions, does not lie in some radically new way to manage enterprises or organize production. Rather, the structural basis of the Japanese advantage of the 1980s is, in fact, the same as the structural basis of the American advantage of the 1920s: the ability to extract far more labor from the work force than comparable firms in the industry. Japanese production is less of a fundamental innovation in production, even the so-called "lean techniques", and far more a further refinement of Taylorism and Fordism. Work in these factories shows that there is, in fact, no special secret to the Japanese advantage other than the fundamental secret of capitalist production discovered by Marx, namely, the most successful producer, and the one who enjoys an advantage vis-a-vis producers in all other nations is the one capable of extracting the greatest amount of labor from the workforce. Parallel Pasts; Parallel Futures? There are several parallels between the relocation of motor vehicle assembly overseas by American producers during the 1920s and a similar relocation by Japanese producers in the 1980s. Both take the form of two waves. The first wave is offensive and largely driven by efforts to increase profits and/or market shares. The second wave is largely defensive, propelled by an upward pressure on prices resulting from B-phases in the world economy (although these upward pressures assumed somewhat different historically specific forms). Given these parallel pasts, can we expect parallel futures? One parallel future is already becoming evident: the establishment of separate and independent production facilities overseas.(53) In the 1930s Ford established complete production facilities in Germany and England and GM, by acquiring Opel and Vauxhall, in effect, did the same. As has already been noted, more and more Japanese producers are moving into the production of key components - engines and drivetrains - in the U.S. and Europe.(54) A second future parallel is also visible: in the 1930's American companies in Europe became autonomous operating units with little or no connection, other than ownership and the transfer of profits, to the home office. This also appears to be occurring with the Japanese, especially in the United States. Honda, Toyota, and Nissan have restructured to increase the autonomy of the U.S. operations, established design facilities in the U.S, and are performing an increasing amount of R&D, product engineering, and testing in North America.(55) Connected with the creation of autonomous operating and manufacturing units in the overseas markets is the development of products by the overseas units for foreign markets. Beginning in the 1930s American companies in Europe designed and manufactured vehicles which were not manufactured in the U.S. but exported to third markets as well as the U.S. This development is also evident with the Japanese. Honda has moved the furthest along this path, manufacturing two cars in the U.S., the Accord Station Wagon and Coupe, which were designed for the U.S. market, not manufactured in Japan or Europe but exported to these countries. Several other Japanese companies have established design facilities in the U.S. Nissan, for example, has designed trucks in the U.S. and Mazda, a sports car. Finally, will these parallels continue? If so, the experience of American companies in Europe provides the basis for a scenario about the future of Japanese companies in the United States and Europe. The trajectory of American companies during the 1930s eventually resulted in the loss of the advantage which they held vis-a-vis local producers. Once American companies established or purchased autonomous operating units in Europe and built products adapted to local markets, this deprived them of inputs produced under the greater economies of scale in the United States. At the same time, these companies found themselves operating under the same structure of costs as European companies. On the one hand, they paid the same price for labor and raw materials as their European competitors and, on the other, they lost their fundamental structural advantage of mass production with the diffusion of Fordism to Europe during the late 1920s and 1930s. As a consequence, by the late 1930s, there were no significant differences between American companies in Europe and their European competitors. Japanese companies in Europe and especially the United States appear to be taking the same route. The movement toward establishing independent operating and manufacturing units in the U.S. is already evident. The development of models for the U.S. market is already occurring and, if the dollar continues to weaken against the Yen and other European currencies, it is likely that more special models for "weaker" markets, peripheral and semi-peripheral states and the U.S. and Great Britain, will be developed. At the same time, Japanese production and labor control techniques are, as has already been noted, rapidly diffusing in the United States and Europe. Given both the trends of the Japanese companies and the American experience of the 1930s, it can therefore be expected that by the late 1990s the playing field will, in effect, `level'. Japanese motor vehicle producers will no longer be the same formidable presence in the industrialized nations but merely one of the competitors in these markets. NOTES 1.While B-phases are an important factor in both cases, it is not my intention to either review the literature or undertake a lengthy discussion of long waves. This literature is well known and need not be reviewed here. I accept the generally acknowledged dating of 20th c. B-phases, 1914-1945, and 1970-?. I also accept Arrighi (1989) characterization of A-phases as periods of "customary arrangements" and B-phases as periods of "excessive competition" as well as his characterization of successive long waves as historically specific stages of capitalist development. Overall, I believe that Arrighi (1989) makes a significant contribution to conceptualizing long waves as global and social processes. 2. For a detailed discussion of the Model T in world markets, see: Wilkins and Hill (1964). 3. U.S. shares of world motor vehicle exports for 1919, estimated. For other years, taken from: Foreman-Peck (1982), Table 1, 868. 4. Jenkins (1977), 49. 5. Phelps (1931), 604. 6. Calculated from: United States Department of Commerce, Bureau of Foreign and Domestic Commerce (1920-1930). 7. Calculated from Phelps (1931), Table 1, 721-724, and Table 7, 8. See Wilkins and Hill (1974), 28, for a description the packing operation which, by itself, took four men about one hour. 728. 9. Donner (1967), 13. 10. See: Wilkins and Hill (1964). 11. Phelps (1931), 659. 12. Phelps (1931), 659. 13. Epstein (1928), Chapter 10, and Katz, (1977), Chapter 2. 14. Phelps (1931), 553. 15. For an excellent discussion of the interwar period in Europe, see: Landes (1969), Chapter 6. 16. Great Britain imposed no duty, Germany 2-3%, France 8-12%, Belgium, 12%, and most other countries imposed minimal duties, ranging from 3 to 8% ad valorem. Bardou, et.al. (1982), 47 17. Jenkins (1977), 49. 18. See, Maxcy (1963). 19. Phelps (1931), 662-663. 20. Phelps (1931), 605. 21. Wilkins and Hill, (1974), Appendix 2, 434-435. 22. Dassbach, (1989), 142-143. 23. Phelps (1931), 653. 24. Phelps (1931), 655-666. 25. Phelps(1931), 645, points out that the average wage in a French auto plant in the 1920s was $1.60/day versus $6.00/day in a U.S. plant. 26. Phelps (1931), 553. 27. See: Foreman-Peck (1982), 872-874. 28. Already in 1905 American companies were using a crankshaft grinder which could automatically grind and polish a complete crankshaft in 15 minutes as opposed to the five hours of skilled hand work required for the same process in Europe. Foreman-Peck, (1982), 869. 29. See: Dassbach (1991). 30. Wilkins and Hill (1964), 40. 31. Dyer et.al. (1987), 118. 32. All data on the Japanese motor vehicle industry either computed from or taken from: Japan Automobile Manufacturers Association, Inc. (1991a). 33. During the second half of the 1970s domestic sales never exceed 5.1 million units of year and average 4.7 million units a year. 34. Altshuler et.al. (1985), 24. 35. Japanese shares of U.S. and European market from: Altshuler, et.al. (1985), Table 2.6, 25. 36. Dyer et.al. (1987), 140. 37. Clearly, the U.S. government and U.S auto producers were aware of the fact that Japanese companies could "end run" the VRA and establish assembly facilities in the United States. Apparently, U.S. automakers, in particular, did not see this as a threat since they believed that assembly in the U.S would deprive the Japanese of "cheap labor and the weak yen", largely thought, at that time, to be the basis of the Japanese cost advantage. This assumption proved to be incorrect. See: Business Week (1989). 38. Here is should be noted that the first Japanese company to begin "assembling" vehicles in the U.S. was, in fact, Nissan. Nissan, 39. Berger (1988), 60.which relied heavily on truck sales in the U.S., responded to a U.S. tariff of 25% ad valorem on trucks, a product of the "Chicken War" between the U.S. and EEC in the 1960s, by establishing assembly operations in various U.S. cities during the 1970s. Assembly consisted of merely reattaching a truck bed and to an assembled chassis but it enabled Nissan to avoid paying the 25% duty. See: Rae, 1982, "The "Chicken War"", 104-105. 40. OECD,(1988), 132. 41. Teahan and Flax (1987). 42. See: Warner, (1988), who also points out that a strong Yen lowers the price of vehicles imported into Japan by American and European producers. 43. This section draws on: Dassbach (1992). 44. Notably, Ouchi (1981). 45. See, for example, Altshuler et.al. (1985), Chapter 7. 46. Womack et.al., 1990. 47. Womack et.al., 1990, 242. 48. As American and European producers adopt Japanese techniques, see, for example, Clark (1990). 49. In the early 1980s, kanban or "just-in-time" production was widely vaunted as one of the key secrets of the Japanese advantage. Kanban attempts to convert motor vehicle production into a continuous flow in which all parts are, in theory, made as they are needed thereby eliminating intermediate or buffer inventories. The supposed benefit of reducing intermediate inventories was a reduction in the amount of capital invested in inventories. Examination of Japanese factories in the U.S. shows however, that kanban has a far more consequential "benefit" for Japanese producers. Because there are no intermediate or buffer inventories, the rationalization, or kaizen-ing, of one work process is `telegraphed' to the associated upstream processes. For example, if the amount of time needed to install a gas tank is decreased this, combined with the fact that Japanese companies will not permit workers to create buffer inventories even during their breaks, means that the workers fabricating the tanks must also work faster, even without any rationalization of their work process. This increased work tempo among the workers fabricating the gas tanks maintains, according to Mazda literature, "the will to kaizen" among these workers. See: Fucini and Fucini (1990), 162-163. 50. Temporary workers are promised, once they have proven themselves with exemplary job performance, a full-time job. These workers are then randomly placed on the line or in work groups and work at breakneck speeds thereby exerting pressure on the other regular workers. Few temporary workers however, get full-time jobs. On the use of temporary workers in Japan, see Kamata (1982), in the U.S., see Fucini and Fucini (1990). 51. For the Nissan plant in Tennessee, see: Junkerman (1987); for the GM/Toyota plant, known as NUMMI, in California, see: Parker and Slaughter (1988); for Toyota in Japan, see: Kamata (1982) and for the Nissan plant in Japan, see: Junkerman (1982). 52. Fucini and Fucini (1990), 148. 53. The following discussion of the trajectory of American companies in Europe during the 1930s draws on: Dassbach (1989), Chapters 5 and 6. 54. See, for example, Japan Automobile Manufacturers Association, Inc (1991b), 16-18. 55. See, for example, Snyder (1989a) and (1989b) or Business Week,(1988). BIBLIOGRAPHY Altshuler, A., et.al. (1985) The Future of the Automobile. Cambridge: The MIT Press. 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