The Japanese productivity advantage in automobile production: Can it be transferred to North America?

A number of joint ventures (JVs) have been announced recently in the automobile industry. These JVs exist for a number of reasons. One such reason is that shared development and production facilities among smaller producers can lead to shared design costs and scale economies in production. Examples of design and production sharing JVs exist. Renault (which owns 46 per cent of American Motors Corporation (AMC)) and AMC are engaged in JVs in Canada and the USA. Outside the USA, Nissan has JVs with both Alfa Romeo and Volkswagen. Honda and British Leyland have a JV as well. In addition, there are numerous supply arrangements and JVs to produce engines and transmissions among a host of other European firms. In this paper we examine the issue of the JV as a means of transferring technology. That reason was paramount in the US government’s approval of a JV between the first and third largest automobile producers in the world. General Motors and Toyota are jointly producing a Toyota-designed car in Fremont, California, with major components imported from Japan. This car, the Nova, will reach an output level of 240,000 cars in 1986 and be sold exclusively by GM. This JV was the subject of detailed scrutiny by the FTC as well as the subject of a recently settled private anti-trust law suit initiated by Chrysler. 1 Chrysler has recently announced its own JV with Mitsubishi to produce a Japanese-designed car in the USA. Ford also will produce 200,000 units per year of a Mazdadesigned car in Mexico, likely to be for sale in the USA. Mazda has announced a car production facility in the USA with a 240,000 unit annual volume, some of which will be sold by Ford. 2 Each of these investments involves a Japanese firm designing a US-based assembly and stamping plant with major auto components (engine, transmission, transaxle, etc.) imported from outside the USA.