November 8, 2011

Anybody ever notice this?

We all know that American workers can't compete with East Asian workers in manufacturing. 

Yet, the Korean automobile firm Hyundai started selling cars in the U.S. around 1986, but they quickly got a reputation for poor quality. A half decade ago, they started assembling Hyundais at a huge plant they built in Montgomery, Alabama. And guess what? Hyundai's reputation for quality immediately shot upwards. The 2011 Sonata has been one of the hottest selling cars of the last year in the ultracompetitive family sedan slot long dominated by Accords and Camrys (which are mostly also assembled in America).

There were almost no foreign-owned auto factories in the U.S. until the Reagan Administration, despite ideological doubts over the evils of protectionism, imposed import quotas on Japanese makers, who responded by building factories here. The import quotas were lifted decades ago, but two things remain: first, the threat that they might be someday reimposed, and second, the new awareness on the part of foreign manufacturers that -- hey, whaddaya know! -- American workers can build good cars for a good price.

Overall, this seems like one of the better decisions of the Reagan Administration. But in politics these days, victory is an orphan, at least when victories are theoretically impossible under globalist ideology.

86 comments:

NOTA said...

I think you meant "are theoretically impossible

Anonymous said...

Post hoc ergo propter hoc.

Logic HARD. SMASH IMMIGRANTS. RAR!

Luke Lea said...

Excellent point. Tariffs can be good.

Anonymous said...

Tariffs built America. Their removal is killing it.

Of course you have to know history to appreciate this, and hardly anybody knows history anymore.

Anonymous said...

correlation/causation

I am a Cult, not a Cause. said...

"Yet, the Korean automobile firm Hyundai started selling cars in the U.S. around 1986, but they quickly got a reputation for poor quality."

True, but they were cheap, and that was the advantage. Koreans could sell cheaper cars cuz their labor costs were lower(and management could exert greater pressure on their employees since labor laws weren't as stringent over there). But once Hyundai made some dough--by selling cheap shoddy cars--, they could ramp up quality as well and came up with new lines of cars. And since Hyundai came to sell cars all over the world, maybe the Korean workforce wasn't sufficient to build all the cars.

When Hyundai was just getting started, could it have entered the competition by using American workers? No, American workers, good or bad, would have been too expensive to build cheapie cars. A lot of people with limited income will take a chance with cheap stuff. They figure it's better than nothing. It's why so many people buy frozen pizza even though it sucks. It's cheaper than ordering one.

So, for Koreans to start a decent pizza-delivery chain, they had to first make some money by by selling frozen cheapie pizza and that meant employing cheaper Korean workers.

Anonymous said...

East Asian workers weren't and aren't seen as superior. Rather harder working, more cooperative with management, docile, obediant, beta. American workers are seen as surly and more alphaish.

Contrary to IQ studies, American managers are also regarded as better than their East Asian counterparts. Which is probably why Birmingham, which is majority black, can produce good quality automobiles. By the way, Birmingham's success as a manufacturing hub suggests that the US isn't as f-ed as this country's future demographics would suggest... assuming we can keep up white American TFR, get immigration under control, put up trade barriers, and keep a low-tax/low-regulation free market in place.

Germans and Japanese seem to be regarded as the best in manufacturing. Excellent managers and workers. They provide a good model for what the U.S. should do. Rather than trying to outhustle East Asian sweatshops, the US should invest in automation and innovation to increase worker productivity. We should also move up the food chain to more value-added products, the way the Germans and Japanese are doing.

Anonymous said...

Correction: Montgomery, Alabama. Not Birmingham. Point stands, as Montgomery is majority black and the second largest group are southern whites.

Anonymous said...

Interesting subject and one I have heard brought up before by Pat Buchanan who was in Reagan's inner circle at that time.

However, I have recently heard free trade supporters actually argue this is a benefit of free trade. The fact that foreign companies are free to come here and open shop they claim is a benefit of free trade. They even net the job losses the US has had with our factory outsourcing with these auto plants which were clearly built to avoid quotas.

So they have turned this example of protectionism, which is similar to what China requires of foreign manufacturers, into more proof that free trade works by using the positives of this policy to hide the negative job loss aspect of free trade.

Anonymous said...

East Asian workers weren't and aren't seen as superior. Rather harder working, more cooperative with management, docile, obediant, beta.


Nobody builds factories in Asia because Asian workers are seen as compliant and docile. Capitalists are beating a path to China's door because their labor is cheap.

Anonymous said...

The fact that foreign companies are free to come here and open shop they claim is a benefit of free trade.



The fact that they are required to come here and open shop is not due to "free trade", but to its opposite. Honda is not "free" to build factories in America. It built them here because it was forced to.

Anonymous said...

Free trade benefits consumers, but hurts workers. The effect is to hollow out the working and middle classes, but make life cheaper for the upper class.

Down the line, free trade also hurts engineers and corporate managers. When a manufacturing plant is built in China, whose professionals are going to be hired to run it? Americans or Chinese? Upper middle class professionals don't realize how much these free trade policies, and open immigration for that matter, are going to gut them down the line. Really only the very wealthy and connected will benefit from globalization in the longterm. All other Americans (poor, middle class, upper class) will be losing out to varying degrees.

Do you think the Clintons and his Goldman Sachs banker son-in-law are hurting? How about the McCains and Bushes? Kennedys? Bill Gates's family? Jobs's family? Bloombergs? Perrys? Romneys?

The elite are winning like anything and they don't understand why the hell you rednecks are such whiners. They deduce it's probably because you're a bunch of white trash losers.

Our elites also tend to not have much attachment to any nation.... other than Israel.... As Senator McCain said, this land was Mexico's before it was ours. Wasn't Clinton talking about how wonderful it'd be if all our borders dissolved back on 9/10/2001?

Anonymous said...

Nobody builds factories in Asia because Asian workers are seen as compliant and docile. Capitalists are beating a path to China's door because their labor is cheap.

Unions in South Korea are more militant than American ones. They stage major protests, take over factories, clash with police, etc.:

http://www.youtube.com/watch?v=znMSlqp2KYQ

American unions probably haven't been this militant in over a century.

Anonymous said...

Foxconn in China which manufactures Apple Computer and PC parts is starting to replace workers with robots:

http://news.cnet.com/8301-17938_105-57318260-1/foxconn-to-build-taiwan-robot-kingdom/

Anonymous said...

By the way, elites respect and fear Israel and its diaspora because they're winners. They win against the Arabs, their coethnics run the media and banking system of the U.S., they have America's politicians groveling to them every election cycle, they can get people like Mel Gibson and Rick Sanchez blacklisted. Everybody respects a winner.

Back before the WASPs went soft, people respected them too. Even Jews, who often Americanized (Rudnitsky to Rudd) their names to fit in.

Lesson: don't go soft. People respect strength. As Whiskey might say, be an alpha.

Anonymous said...

Chinese labor is cheap for a variety of reasons. One is the lower wage rate in their market. Another is that workers can be pushed to work long hours and not complain much, which reduces costs further. Docility and industriousness translate into lower labor costs.

morleysafer said...

It is an interesting "footnote" esp. since Dems were born again as the blue collar scourge of globalism; thus Reagan compromised. Forgotten 1980s alternative history...

However foreign autos progress could be a combination of E. Asian management & supply-chain logistics meets good "infrastructure" (in the Elizabeth Warren sense). That would be more special-case Schumpeter than tariff triumph. Hard to call Toyota, Hyundai, VW a smash success without recognizing they siphoned from Detroit.

Mel Torme said...

"Capitalists are beating a path to China's door because their labor is cheap.".

That's not the only reason. In China things can get done without a huge amount of interference from lawyers, unions and government. It makes a big difference for a start-up company that you don't have to wake up in the middle of the night worried s__tless that a letter from some gov't agency or lawyer shutting you down will be in the mail in the morning.

Secondly, the building of almost all of these auto plants in the South should tell you something about the union problem, and I'm surprised Steve didn't mention that.

Let's see, Nissan in Mississippi, Mercedes in Alabama, BMW in S. Carolina, etc. (Toyota is in Georgetown, Kentucky, still in the South, per se, but north of Lexington so almost to the Union territory of Ohio.

Isn't there a Honda plant in Ohio? (or where is it?)

Trew said...

I think the foreign car manufacturers are non-union. I wonder if that has anything to do with their success and reliable products.

Simon in London said...

Same here in the UK - overseas companies make great, very reliable cars with British factory workers. Everyone thought British workers were incapable of doing a good job; our mass-market cars were rubbish. Yet when companies like Nissan came in they seemingly had no trouble in making their UK plant the best in Europe.

The conclusion seems to be that the problem lay not with our workers, but with management attitudes & practices - and it sounds as if the US is similar.

Anonymous said...

Hyundai cars got a lot better because they became more expensive.

Georgia Resident said...

I remember bringing up this point with a free-trade fanatic (he's a good guy, really, just a bit insane in his devotion to libertarianism) friend of mine. I pointed out that the main reason the Koreans and Japanese built US plants in the first place was the threat of trade quotas. Now that this protectionist victory has produced fruit, the proponents of free trade are trying to claim it as their own. Protectionists should cite examples like this to show how protectionism can, indeed, create jobs (not to mention they are jobs that, from what I've seen from my own experience, employ a lot of negroes, which should in theory make the leftists overjoyed).

Anonymous said...

Simon, unions were a major problem in the United Kingdom until Thatcher came to power. Right?

Anonymous said...

Many stories abound regarding the hoplesness of British management in the car industry. Even if they arent all true the volume says something.

Off the top of my head...

The original model Mini sold in its millions but due to an accounting error lost money for many years.

The minimal co-operation with the makers of the original Italian Job.

While Rover still existed the owner of EasyJet approached them regarding buying 1000s of cars for his new Easy rent a car business. He claims they didnt even ring him back.

If British car manufacturing management had one talent it was for missing a wide open goal.

The problems were not essentially technical, they were about design, quality control, marketing.

Polichinello said...

Honda had a motorcycle factory in the U.S. in 1978, and its Marysville plant opened up in 1982. True, this was after the quotas were imposed, but the plant had been in the works. The other Japanese companies were looking at their own plans to expand here as well. There a number of cost savings when you make your product in the market where you sell it.

One of the benefits the quotas had for the Japanese was to allow them to make more money off of the cars they sold here per unit. It also gave GM some breathing space, so they could continue shitting out crappy GM-10's from places like Framingham for a few more years. I'd say the results of Reagan's quotas are little more mixed than Steve is arguing here.

Harley-Davidson might be a better example of successful quotas and tariffs.

Wes said...

I still have mixed feelings about protectionism - especially among first world nations. Japan has it for sure, but does it really help their standard of living. As we noted here a while back, most of Japan looks pretty drab and small to me. A reader of this blog who lives there confirmed it. Do a Google Street view of Japan. It's not impressive, even though the GDP numbers look great

Steve Sailer said...

Japan looked even less impressive in September 1945.

Anonymous said...

One of the benefits the quotas had for the Japanese was to allow them to make more money off of the cars they sold here per unit.


The quotas did not "allow" the Japanese to make more money per unit off of cars built here. To the extent that the Japanese can make a bigger profit per car by building cars here rather than by building them in Japan and shipping them here, that was as true before as after the quotas.

Anonymous said...

As we noted here a while back, most of Japan looks pretty drab and small to me.


Have you ever seen a typical Manhattan apartment?

Anonymous said...

Simon, unions were a major problem in the United Kingdom until Thatcher came to power. Right?

She dealt with them by allowing those union dominated industries to die.

It became necessary to destroy the village to save it...

Anonymous said...

Chinese labor is cheap for a variety of reasons.


Only one reason - there's a lot of it.

DAJ said...

Japan looked even less impressive in September 1945.

Good one, Steve!

corvinus said...

Let's see, Nissan in Mississippi, Mercedes in Alabama, BMW in S. Carolina, etc. (Toyota is in Georgetown, Kentucky, still in the South, per se, but north of Lexington so almost to the Union territory of Ohio.

The right-to-work South has a big advantage over the union-dominated North, both due to looser labor laws as well as lower cost. In addition, building cars in the American South is cheaper than doing so in Japan or Korea or Germany due to the decline in per capita US GDP and weaker dollar. White American labor, while still unable to complete with the Chinese (instead, Vietnam and Mexico are elbowing in on China's cheapness advantage), is certainly capable at competing in medium-range goods like autos.

Whiskey said...

Bob Lutz in "Car Guys vs. Bean Counters" makes the same point, but says also that the major difference was that Detroit's factories were staffed by older workers with high health costs and new factories had new and young workers with few health costs. Averaging up to about $3,000 a car IIRC.

And yes Tariffs DID build America. Hamilton was right.

One thing fascinates me. Bob Lutz used to work at BMW. He states, that the difference between the Chevy Malibu and BMW 3 series is no more than 5% in parts costs (labor excluded). That nearly all cars share the same parts, almost without exception. Fascinating.

Bill Shakespeare said...

The observation of Japan's unimpressivity at least puts one theory to rest, that all these are unreleased comments from Steve Jobs' pipeline

Georgia Resident said...

"Do a Google Street view of Japan. It's not impressive, even though the GDP numbers look great."

Actually, the situation seems to be the opposite. Japan's GDP numbers have pretty well sucked for the last twenty years, yet Japan still seems to be a pretty okay place overall. Probably because they have no NAMs, a very low crime rate, and a high level of social cohesion.

These are intangible factors for the most part, but they can make fairly drab surroundings a lot more pleasant. So the average lower-income Japanese may be as poor as the average American ghetto-dweller by purchasing power, but enjoy a higher standard of living in real terms because they don't live in fear of their neighbors or get shot at on the way home. The main problem Japan has is that it is severely crowded, making living arrangements rather tight, and it has an aging population. The latter problem should, in the long term, alleviate the former problem (provided the Japanese maintain their sensible immigration policy), but the short-term effects will no doubt be painful.

Anonymous said...

this victory was co-opted, it is now proof that globalization works without protectionism. This of course ignores the protectionism required to make it happen in the first place.

Anonymous said...

Do a Google Street view of Japan.

This Youtube channel has good POV walkthroughs of various parts of Japan:

http://www.youtube.com/user/egawauemon

Anonymous said...

As we noted here a while back, most of Japan looks pretty drab and small to me.

The people there are small. And it's pretty mountainous and crowded.

Anonymous said...

Americans have good productivity, but to create manufacturing jobs we need to undo the high dollar policy started under Robert Rubin, which would be equivalent to tariffs on imports and subsidies for exports.

Wes said...

I just don't see many displays of great material living in Japan compared to America. (Excluding the intangibles). I'm not asserting this is fact, I am curious to find out.

They haven't had time to rebuild since Sept 1945? Or is it the lack of land? The population density is high, although only 35% higher than the UK. Of course, England doesn't strike me as having a US standard of living either.

Or maybe a lot of their wealth is locked up in factories and other boring wealthy producing assets, as opposed to gaudy American displays? I just don't know.

Wes said...

Also, on cultural and social issues, Pat Buchanan has been spot on. And perhaps on economics (I am less sure about the value of protectionism). Of the many reasons Pat's message has failed to resonate may be his pitch fork appeal: He wasn't very glamorous.

I've been in the corporate world (low level) and saying you were a Pat fan would probably be a clunker in social situations. Like saying you enjoy HeeHaw. If any of his ideas are to get traction, they need to be associated with a bit of cache'.

I know, superficial, but welcome to the world.

David Davenport said...

Am I the first to mention that the foreign awtoe-MOE-beel assembly plants planted in former Confederate states are all union-free, unburdened with the United Awful Workers Union?

The South's newest foreign car plant is the Volkswagen plant in Chattanooga, which opened this year to make model year 2011 Passats.

From: kausfiles.com

Truth About Cars treks to the South to see how bad conditions really are. TTAC‘s Bertel Schmitt interviews some workers at VW’s Chattanooga, Tennessee factory, noting that “In July [2011], UAW President Bob King said that organizing foreign auto plants is a matter of life and death of the union.” Schmitt’s conclusion: “[A]ny plans of the UAW to unionize Volkswagen Chattanooga are doomed.”

If it indeed is a matter of life and death ... More »

The first Japanese car factory in the USA was the Nissan factory at Smyrna, Tennessee. Work on the factory there started in 1983. I can't recall or find the first model year Nissan car produced there.

The important point, as Steve said, is that Nissan and the other foreign car makers started making 'em in the USA because Ronnie Reagan insisted they do so, not because of the invisible mystic hand of free free free trade.

What's is still controversial is the per cent domestic American content of some of these assembled in America cars. A lot of valuable parts are made overseas, then shipped to the final assembly plants here.

However less than 100% American parts content is better than no domestic content.

Wes said...

I suspect that protectionism is a more negligible factor than most think. Nations have thrived with and without protectionism, so it is probably more a function of the quality your population, along with some minimum level of economic freedom.

The US, Britain, Japan, Germany and Australia all have differing policies yet they are (were) all great places to live. Conversely, the Congo can be as capitalistic or protectionist as it likes, and it will still be a bad place to live.

David Davenport said...

It was four cylinder Nissan pickup trucks, starting in 1983:

On to Tennessee

An all-new pickup - the last to carry the Datsun name - appeared in 1979, and sales continued to soar. Thanks to this success, Nissan made a corporate decision to become the first importer to manufacture pickups in the United States.

After an extensive search, Nissan chose Smyrna, Tenn., southeast of Nashville, as the site of the Nissan Motor Manufacturing Corporation U.S.A. (NMMC) facilities. In the past two decades, Nissan has invested more than one billion dollars into the plant and region, becoming a significant member of the Middle Tennessee business environment. Since the first Nissan pickup rolled off the Smyrna assembly line in 1983, more than 1.7 million trucks have been built at NMMC.

http://www.pickuptrucks.com/html/history/nissan_segment1.html


///////////////////////////////////////////////

Also, here's your tax dollars at work, shuttin' Deetroit down Dept.:

Nissan to receive $1.6 billion loan to modify Smyrna plant ( A pretty good score from the Federal piggy bank, considering that TN outside the Memphis and Nashville city limits is a Republican state. --DD )


Posted: Tuesday, June 23, 2009 10:47 am

Nissan North America Inc. announced today that it has been conditionally approved by the U.S. Department of Energy for a $1.6 billion loan to modify its Smyrna manufacturing plant to produce zero-emissions vehicles and state-of-the-art lithium-ion battery packs to power them.

Ford and newcomer Tesla were also expected to receive funds from the U.S. Energy Department for development of fuel-efficient vehicles.

Nissan announced earlier this week that it expects to become the first company to offer all-electric vehicles.
( The Nissan Leaf. All North American Leafs and their battery packs are to be built in TN., although some components will be imported from Asia. )

"This is a great opportunity that the Department of Energy has given Nissan," said Holly Weber, vice president of economic development ...

Rutherford County Major Ernest Burgess said ... employment could be increased substantially at the Smyrna plant.

More than 1,300 new employees could be hired when the plant is in full production, according to the U.S. Department of Energy.

The Smyrna plant currently employs about 3,900. Construction at Smyrna is scheduled to begin by the end of this year, after an environmental assessment is completed. ...


Nissan also moved its Nissan North America HQ from Lost Anglos to the suburbs of Nashville a few years ago. Was it in the Gardena or Garden Grove or what part of LA? Doesn't matter, does it.

Anyway, helping to shut CA down as well as Deetroit.

Song "Shutting Detroit Down" can be heard on Youtube. Written by a man who built one of the ugliest eyesore houses in Nashville to spite people.

Anonymous said...

"The conclusion seems to be that the problem lay not with our workers, but with management attitudes & practices - and it sounds as if the US is similar.'

That's exactly what W Edwards Deming , the management consultant, said.Just about everything that goes wrong with a company can be blamed on management.

Anonymous said...

"I've been in the corporate world (low level) and saying you were a Pat fan would probably be a clunker in social situations. Like saying you enjoy HeeHaw. If any of his ideas are to get traction, they need to be associated with a bit of cache'."

The funny thing is Pat seems to be a highly intelligent, sophisticated person. I am sue he reads an knows much more than most of the people who make fun of him. Although I thought he was weird in the 90's too.

Anonymous said...

"And yes Tariffs DID build America. Hamilton was right."

You can throw in govt subsidizing the hi-tech industry.

Govt subsidy and strategic protectionism is what made the West rich. Once the industry got going they could let the market work.

Buchanan and Chomsky actually sound alike on SOME issues.

Reg Cæsar said...

Can we all admit now that Reagan was a shrewd moderate, eschewing both hardcore free trade and protectionism, and playing one against the other?

beowulf said...

Its nice to see Mitt Romney taking Pat Buchanan's side on illegal immigration and trade deficit issues. If he's nominated, he'd be the strongest major party nominee on these issues since, well, ever.

Even more heartening, Paul Krugman kept it real in a post today.
But then the question is, why do we find it so hard to achieve full employment even with saving somewhat low by historical standards. And the answer seems clear: it’s the trade deficit. America in the 70s and 80s could have high savings, not hugely strong investment, but still have full employment because trade deficits weren’t as large compared with the economy as they are now...
Do you sort of see why I’m a hawk on China policy?

http://krugman.blogs.nytimes.com/2011/11/08/the-return-of-secular-stagnation/

Anonymous said...

Actually, Japanese auto manufacturers can build cars much cheaper at home than in US screwdriver plants.The US plants are effectively a hidden tax on the consumer.
I find it hard to credit that dumb klutz Reagan with anything.Methinks the Japanese put their factories on US soil as a 'goodwill' gesture and as a cunning ruse to forestall threats and moans.You see if a politico or whatever starts moaning about Japan 'stealing' American jobs, the existence of the screwdriver plants can be cited as a palliative.
Methinks also that the whole 'free trade globalist' paradigm is seriously f*cked up and has f*cked up America.If America is to be saved an entirely new way of looking at things must be established.Screw the 'clever economists' and therioticians.

Anonymous said...

Steve.
You miss the main point.
All these screwdriver plants are pure bullshit.
All they do is bolt together high value pieces imported from the far east (or press out low value pieces)using far eastern machines and far easern managers and repatriate monet to the fare east.
They are purely just for show.A mirage, a charade, an illusion.Hired Americans play at building cars in these factories - rather like kids building Tamayo aircraft carriers.This pantomime convinces politicians and others that 'American workers' are building Korean cars in the USA and all is fine and rosy in the garden and 'ain't globalisation great?'. Nothing can be further from the truth.The wealth gets shipped back to Jpan, the USa sells more bonds to Jpan to pay for it, and a few yeras later dumb-ass politicians moan that there's no money in the kitty and perform foot stamping histrionics about the death of the Euro.
Oh no.One thing they will never, ever do is question globalist, free trade dogma.Oh no, they will never do that.You see they are 'clever' people - and 'clever' people read the WSJ and 'The Economist'.
Something to bear in mind when the Hogarthian dogs gnaw your skin-clad bones.

eh said...

We all know that American workers can't compete with East Asian workers in manufacturing.

In what sense?

FWIW, the US leads in worker productivity.

Or maybe you were being sarcastic.

Simon in London said...

anon:
"Simon, unions were a major problem in the United Kingdom until Thatcher came to power. Right?"

Yes - public sector unions are still a major problem, but Thatcher destroyed the power of the private sector unions, as well as the Miners' union - she did the this partly by shutting down the coal industry and most of the manufacturing sector.

London is still held hostage by Bob Crowe of the London Underground workers' union. And our education system has continued to get worse (school standards are unbelievably low), though it's debatable how much the teaching unions are directly responsible; it was more a govt thing, both Tory & Labour, plus cultural Marxist control of the teacher training colleges goes back a long way.

Anonymous said...

Japan as a protectionist heaven is soon to be history. The Prime Minister is currently participating in discussions in Hawaii to join the Trans-Paciffic Trade Partnership which would reduce all tarriffs to zero between participating nations. Full members currently are Brunei, Chile, Singapore, New Zealand, and prospective nations include the US, Austrailia, Malaysia and Peru.

Prime Minister Noda currently has massive opposition in parliament, and very little public support, but is stubbornly pushing on, partly because of support in the manufacturing sector, but mostly because the TPP plans have been the Democratic Party's only way of showing that they can ... you know... DO STUFF.

The Japanese have a tendency to fall for sappy mottos: "diversity is strength," "globalisation is the future" etc. Some people have the brains to see through it, sadly they are not the PM.

Polichinello said...

The first Japanese car factory in the USA was the Nissan factory at Smyrna, Tennessee. Work on the factory there started in 1983.

No, Honda, Marysville, 1982. These plants are huge operations that require years of planning and negotiation. These facilities were already in the works before Reagan imposed the quotas.

The cost advantage to producing here was already apparent. First, as I noted above, you enjoy better marketing flexibility when you make your cars in the same country. Second, you save on shipping costs, as cars don't stack up like Pringles in a container ship. Third, you can take advantage of different countries' marketing characteristics. Again with Honda, they make all their bigger cars here, because they sell most of them here, and then they'll export a few to satisfy the smaller demand in foreign markets.

Also, the Japanese are not across the board great at quality. Compare a Mitsubishi product to just about any car, and it will come off the worse.

As far as building in the South goes, the Koreans, Germans and Japanese are doing that to avoid the UAW, which is quality killer. Its rigid work rules make any kind of change to improve quality prohibitively expensive. Toyota could only get decent quality out of the NUMMI plant in Fremont after putting the fear of God in the UAW workforce there, but even that was a losing battle, and they've moved their Tacomo production down to San Antonio.

Liesel said...

But during this same time period the Ford Fusion improved & finally began to complete with the Altimas, Camrys and Accords as well.

As a brand new company Hyundai likely did not have the reasources to built such quality cars. It is entirely possible they could have achieved the same results with manufacturing in Korea.

Polichinello said...

The quotas did not "allow" the Japanese to make more money per unit off of cars built here.

No, you misunderstand. It allowed them to make more money off of the cars they made THERE per unit. It artificially restricted supply, so they could raise their prices, as demand for Japanese quality had already taken hold in the market. It was a U.S. government imposed cartelization of the auto market.

Did it give American automakers some room to breathe? Yes, but given the way they and their UAW workforce pissed away that opportunity, it was not an unalloyed good.

memphibian said...

About unimpressive Japan:
Perhaps much of Japanese national wealth is tied up in common use infrastructure. For example, bridges and roads in the USA are in a sorry state. The Interstate highways where I live (Mid-South) are in awful condition outside of the newly constructed segments. Same was true in So-Cal when I lived there. What I've seen from photos of Japan is a road surface built to or maintained at a higher standard than in the US. Whose choice is better? There is no easy answer to that question.

Take Memphis(please!). The city's neighborhood through streets are terrible except in the high income neighborhoods. The traffic count that passes through the 'hood seems not to matter in allocating repair funds.

US prosperity, such as there is, is privatized. In other places, less so.

Robert Holmgren said...

It's instructive to look at a sticker on the window of a new car to see where it was assembled and where the parts came from. I recall doing this for a Ford product as well as a Honda. The Ford was assembled in Mexico and had 50% foreign parts. The Honda was assembled in Ohio and had 50% foreign parts. Aside from where the profits went it seems that Honda was better for the American worker.

L said...

What's always gotten me is how the Japanese, German and now, Korean, automakers do just fine building cars in the US, yet the American makers open plants in Mexico and other countries. What gives with that? I know the American makers are UAW shops while the foreign makers are non-union. Is that the issue? If so, then why don't the American makers simply fire the UAW and operate like the foreign manufacturers?

Anonymous said...

By the way, elites respect and fear Israel and its diaspora because they're winners. They win against the Arabs, their coethnics run the media and banking system of the U.S., they have America's politicians groveling to them every election cycle, they can get people like Mel Gibson and Rick Sanchez blacklisted. Everybody respects a winner."

Allegedly weaseling to the top doesn't mean there will be a long stay. The fall will be fun to watch.

BTW, being a welfare state supported, defended and built by others, that has a hard time beating rag-tag refugee militias on its own--when it isn't losing to rag-tag refugee militias--isn't exactly awe inspiring.

Luke Lea said...

Free trade in Britain, which justified the removal of tariffs on imports of grain from the U.S., undermined the incomes and hence power of the landed aristocracy in favor of the new factory-owning class, whose profits went up because they could henceforth pay their workers less (subsistence wages -- iron law of wages still a fact of life back then).

Similarly the liberalization of trade with China under the new rules of GATT in 1994 (and to a lesser extent with Mexico under NAFTA) greatly increased the incomes of capital at the expense of labor (as have, to be fair, mass immigration and refusal to adjust length of the working day to compensate for automation).

In other words, tariffs are about power when it is between countries with vastly different relative endowments of the factors of production (in America's case it was cheap and abundant land to grow wheat on, in China's case cheap and abundant factory labor.) It's about Who? Whom? as Steve likes to say.

OTH, trade between counties with similar wage rates (U.S., Europe, Japan, Canada, Australia) can be good for everybody concerned.

Where are the political economists when we really need them?

David Davenport said...

The first Japanese car factory in the USA was the Nissan factory at Smyrna, Tennessee. Work on the factory there started in 1983.

No, Honda, Marysville, 1982. These plants are huge operations that require years of planning and negotiation. These facilities were already in the works before Reagan imposed the quotas.


Marysville, OK, you are correct.

And you're right about US political pressure on the Japanese to build cars in America. The much-reviled Jimmy Carter admin. probably started it.

Regarding the VW Passat operation in Chattanooga: it's probably cheaper to build Passats there than in Germany. For all I know, assembling Japanese cars over here may cost less than doing it in Nippon nowadays.

Regarding domestic content, I think Nissan may claim that the percentage of American made content is increasing. For example, engine blocks and cylinder heads for Nissan vehicles rolled out from the Symrna factory are cast in TN.
Yep, a nonunion foundary. Those parts used to be imported.

David Davenport said...

Rather than trying to outhustle East Asian sweatshops, the US should invest in automation and innovation to increase worker productivity.

From what I gather, the nonunion car factories in Ye Olde South have their fair share of welding robots and other industrial automation.

Not even the UAW peepul who are trying to unionize these factories claim that the workers there are being sweated in the Henry Ford I, proletarians in suspenders and cloth caps kind of fashion. The UAW's main sales point is that the UAW can get 'em a pay raise.

We should also move up the food chain to more value-added products, the way the Germans and Japanese are doing.

But cars are big-ticket, expensive products with much value added over the cost of raw materials.

What other products do you have in mind?

Me, I wonder how much un-automated hand labor is actually needed to make laptop computers, cell phones, and iPads. Why must all that stuff be made in East Asia?

Polichinello said...

I know the American makers are UAW shops while the foreign makers are non-union. Is that the issue?

Yes.

If so, then why don't the American makers simply fire the UAW and operate like the foreign manufacturers?

Well, you can't do something that drastic overnight, and it would incur all sorts of political blowback. The Democrats are owned by the UAW, so if any of the Big Three tried to do that (once the contract had expired) they'd face enormous government interference of the sort that would make the Boeing-South Carolina NRLB contretemps look like a church social.

Q said...

A number of factors led to the American revolution, but one of them was that the British wanted the colonies (all the colonies, not only the American ones) to send raw material to Britain, import British finished goods, and not to do any high-value-added manufacturing of their own.

Under this scheme of things America would have remained an agricultural economy with little manufacturing base. By an amazing coincidence, that's exactly what the current so-called "free traders" want for America also - lettuce farms good, factories bad. Import barely literate peasent workers? Why not? Export good paying manufacting jobs? Of course!

Somewhere Alexander Hamilton is spinning in his grave.

Wes said...

So we "saved" Harley Davidson with high tariffs on motorcycles right? What good came of that? A few fat lawyers get to ride a "hog", and the rest of us have to pay inflated prices for the much better and cheaper Japanese bikes. I'm afraid this is what most protectionism gets you: It protects lazy union workers at the expense of the general population.

David said...

>In China things can get done without a huge amount of interference from lawyers, unions and government.[...] [Y]you don't have to wake up in the middle of the night worried s__tless that a letter from some gov't agency or lawyer shutting [your start-up business] down will be in the mail in the morning.<

Try not bribing the local communist officials lavishly enough.

David said...

>I'm afraid this is what most protectionism gets you: It protects lazy union workers at the expense of the general population.<

How is the presumably non-"lazy" general population benefitted by having to work as hard as they do for less pay?

Wes said...

David,

Maybe wages are lowered for some, although products are cheaper overall. But that's a fair point. The costs are not evenly distributed over a society. Many benefit, some lose.

I would say it is incumbent on those that will lose from lower wages (and therefore need to make prices on goods higher through protectionism) to at least be nice to the population of people that have to bear higher prices for their benefit.

What we saw instead were loud, arrogant, fat, lazy union boys braying that it was the "patriotic" duty of all Americans to buy their shoddy overpriced products. Not a good PR approach. And it failed miserably.

I heard a fat, cigarette-smoking auto parts dealer try and berate a woman for buying a Japanese car back in the 80s. He smirked and said, "well when it breaks down you won't be able to get it worked on". She smiled and said, it's not an American car, it won't break down.

We have to remember what crap Detroit was pushing on us and the arrogance that went with it. Don't try and hold me up at gunpoint, and then portray yourself as "patriotic". They did and it failed. Maybe some protectionism would have been good, I'm not convinced, but I would be willing to try some. But they have to at least say Thank You to those of us that will have to pay inflated prices.

Anonymous said...

Maybe wages are lowered for some, although products are cheaper overall. But that's a fair point. The costs are not evenly distributed over a society. Many benefit, some lose.


More like some benefit, many lose. That's what the income data for the last forty years indicates. Don't let your emotions towards those fat union guys blind you to reality.

Anonymous said...

"Japan as a protectionist heaven is soon to be history. The Prime Minister is currently participating in discussions in Hawaii to join the Trans-Paciffic Trade Partnership which would reduce all tarriffs to zero between participating nations. Full members currently are Brunei, Chile, Singapore, New Zealand, and prospective nations include the US, Austrailia, Malaysia and Peru.

Prime Minister Noda currently has massive opposition in parliament, and very little public support, but is stubbornly pushing on, partly because of support in the manufacturing sector, but mostly because the TPP plans have been the Democratic Party's only way of showing that they can ... you know... DO STUFF.

The Japanese have a tendency to fall for sappy mottos: "diversity is strength," "globalisation is the future" etc. Some people have the brains to see through it, sadly they are not the PM."

The new protectionism is moving over to non-tariff barriers to trade, and the Japanese have done quite well in that regards already. I wouldn't count them down and out.

Anonymous said...

"Post hoc ergo propter hoc.

Logic HARD. SMASH IMMIGRANTS. RAR!"

On that note:
http://imageshack.us/photo/my-images/802/comparisony.png/

The immigrant percentage of the population is an excellent preditor of how much wealth the top 1% has(and by extension how much less the rest of us have).

Spike Gomes said...

I worked in Japan for a year training Japanese factory floor managers in conversational English for their stints in America and other places abroad. It was an extremely illuminating experience.

First off, while America/Canada/Britain was the preferred location for foreign deployment, as you could take your family there, any sort of deployment at all was generally seen as extreme bad luck. Japanese like being tourists, but they don't like living abroad so much, especially if they have families. Three to Five years outside the Japanese schooling system makes kids sink like a stone when thrown back into the "cram it and exam it" Japanese system, and the girls end up "Westernized" which makes them utterly miserable as the whole "nail that sticks up" thing is enforced pretty hard on girls who think becoming a chipmunk-voiced fashion victim is stupid. Even if they were single it meant living in a place where there was no place to get comfort food, and dealing with workers who openly question orders and refuse to work the mandatory unpaid overtime common in Japan (even us Western workers were expected to put in the pre and post work 45 minutes unpaid prep labor and clean up labor for the offices).

Offshoring manufacturing makes sense nowadays. If you go to Japan, most of the cars are unrecognizable compared to the models that are sold in Japan. Stuff made to sell in Japan is made there, stuff made to sell in America was made in America. (As a side note, Scions, those toaster cars, are a really popular body style in Asia. Go figure. They look ridiculous to me).

As for the lack of productivity in Asia, there's lots of reasons for that. One is that there's a lot of effort put into "appearing busy" in a Japanese office. At any given time, I can garentee that there's goldbricking going on that looks like work. Mine was drawing excessively elaborate situational flash cards for instruction. Another is that in Japan human resources aren't very efficiently managed. They can figure out how to put together a car assembly line very well, but trying to reorganize office furniture layout or discuss customer retention is like a freaking Chinese Fire Drill behind closed doors. The final thing is a very meticulous approach to work. One of the guys I taught was in charge of car door assembly was complaining about having to redo a bunch of door linings on the assembly line because they were 1.3 millimeters off due to robot miscalibration. He said he understood the need for ultraprecision when it came to engine blocks and brakes, but that the door linings being slightly off would not affect door function and moreover be later covered with rubber.

morleysafer said...

David Davenport: actually you were the 4th or 5th person to mention it (right-to-work) and the pressure on Toyota, Honda, et al. started long before Carter's reign. cf Smithsonian Agreement.

Wes said...

Don't let your emotions towards those fat union guys blind you to reality.

Good point. I do think anti-union bias (often justified) blinded a lot of people to what was happening.

morleysafer said...

Anonymous 8:57: yes, definitely. Importing immigrants by the barrel is immensely beneficial to the overdogs while the benefits to everyone else remain fuzzy. So if that was a "simplistic moral argument" version of the dollar-cents breakdown then I hope I would be a judgmental reactionary homophobic denier "moralist"

Reg Cæsar said...

The immigrant percentage of the population is an excellent preditor of how much wealth the top 1% has(and by extension how much less the rest of us have). --anon.

Only in the West, and there, in the West of the West.

Brazil, Peru, South Africa, Indonesia and Malaysia have negligible immigration, and much worse income stratification than we do. Racial diversity, or, rather, extreme gaps between races, seems to be the key-- whether it's imported today, imported centuries ago, or indigenous.

Really, were the high-immigration Great Plains more stratified than the low-immigration South ca. 1900? I doubt it.

However, the commenter is very right, if he's referring to the red county/blue county divide.

Polichinello said...

That's what the income data for the last forty years indicates. Don't let your emotions towards those fat union guys blind you to reality.

Transplant worker wages are competitive with UAW wages. Once you factor in union dues and cost of living, transplant workers do far better, really.

Overall, in the larger economy, yes, you have a good point, but when it comes to the auto industry, sorry, it's the union to blame. It's the one factor that's persisted through decades of shifting management and cycling economies.

Here, it's not even really the pure wages. It's the mess of union work rules that eliminates any sort of production flexibility. Every change, every work order has to pass through a byzantine process of union and shop approval. You can get by in a good economy with that system, but when the economy goes bad, you're toast, and that's what a happened to the Big 3.

(Yes, I know Ford didn't go technically bankrupt, but they only avoided it by going deeply into debt right before the recession to give them a stock of cash to see them through. That option won't always be available.)

Anonymous said...

Good article except for this part: "Populations in Russia, Japan and most European countries are declining and aging, which will limit their economic potential in the decades ahead. China’s median age is also rising rapidly (an unintended consequence of the one-child policy), and this will be a powerful drag on its economic vitality. By contrast, U.S. population growth is high compared with the rest of the developed world, and U.S. median age will be lower than any of the other serious players."

Yes, there's population growth in America, but is Third-Worldization of America a good thing? After all, Africa and Middle East have high population growths, but they are economic basketcases. Would US or Europe do better with more of such people--or with subliterate illegal Mexicans? It's one thing to argue that white Americans and Europeans should have more kids--or create a system of massive cloning of the best, brightest, and healthiest. It's another thing to welcome massive influx of sub-talented peoples from the Third World and expect them to contribute much to a First World economy.

Evil Sandmich said...

My brother-in-law works for Toyota, in Michigan no less, and the particular model that he works on is built and engineered in the U.S. I won't mention the model lest in bring out the haters (I don't care for the model myself as it's almost exclusively driven by ancient people that I get stuck behind on the road).

Anonymous said...

No one pointed out that Japanese manufacturers may have moved production to US because of the strong Yen? Wasn't it cheaper to build Hondas in Ohio rather than Japan in the 1980s?

Anonymous said...

I had a Toyota built in Derby, UK which was a great car. Hondas, Nissans and Toyotas are all built in the UK for the European market.

But I take the point about the parts and engineering. The Honda plant had to halve production for 6 months after the Japanese earthquake due to shortage of Japanese parts.

Laban Tall

Sam said...

Korean companies headhunt Japanese engineers.

morleysafer said...

Anonymous 1:33: I don't know how it was cost-effective due to the yen. 1970s $ policy induced more exports from high-tariff nations, though steel/autos, textiles, electronics were already ailing.