Sunday, November 23, 2014

Japan's "economic war," auto safety defects, and price-fixing

A wave of recriminations has broken upon Japan.

This past week we were torn between gazing in horror at two concurrent Japanese auto industry scandals--first, the Takata airbag defect that remained covered up and unrecalled for far too long as airbags exploded like small bombs and people incurred sometimes-fatal shrapnel wounds that police thought were murder by knife blade. Takata sent an executive to answer questions in a Senate hearing. He prevaricated, mumbled, and after long moments of silence eventually managed some statements that may have kept him a nanometer this side of the perjurious red line. Secret settlements have played an important and awful role in this debacle, keeping the public from knowing the truth until finally it has burst forth and we've reached a crisis point of public anxiety over auto safety.

Second, we heard from Automotive News Asia editor Hans Greimel, who treated us with a dose of truth that I found very unusual to be coming from within anywhere in the auto industry. Big Kudos to Hans who interviewed price-fixer "Mr. X" and gave the world an extensive expose of the inside story of auto parts price fixing practices, basically, business as usual in that business. Mr. X is one of the many Japanese executives indicted and jailed for price fixing of auto parts in the largest anti-trust crackdown in U.S. history. As Hans revealed, these executives are sheltered by their companies in exchange for taking the fall with the DOJ, and in some cases, are fugitives from prospective extradition, basically thumbing their noses at DOJ attempts to enforce US law. I wonder what supplier price fixing does for auto safety.

How do these two affairs relate?

To your simpleminded analyst here, the common denominator appears to be the deteriorated, decadent aftermath of Japan's post-war "economic war," where, in the decades following its military defeat, Japan turned to conquering the world with its products, in a deliberate, coordinated effort to achieve economic dominance and a robust trade balance. In other words, Japan tried and succeeded --by hard work, technical genius, concensus management, lean production, and business cunning--in vacuuming up a nice chunk of the world's wealth, and reaching out to control even more. This economic offensive continued for some decades, but those Asian neighbors among whom Japan had sown the seeds of fierce hatred by its war crimes, then bested Japan at its own game, waging its own war of lower wages, and outstripping Japan's competitiveness in all kinds of products as they evolved into commodities. Meanwhile, the Japanese themselves may have fallen into a social malaise of sorts. This has led to years of economic stagnation. It's a well-known story.

Under pressure, and without any intrinsic sense of right and wrong, some but not all Japanese executives have resorted to a lot of unethical and illegal business practices just to get by with their shareholders, and they have been getting caught for years, but are getting caught more and more. Toyota, as Japan's largest industrial enterprise, cannot help but be involved in these megatrends, both as perpetrator of unethical conduct and as victim of forces that even they cannot control.

How can Japan's big companies get out of these messes and regain the trust of their customers? I humbly suggest that whatever legal and ethical compliance practices that they have been forced to adopt in overseas markets like the US should be pressed into the gray matter of the highest executive ranks back in Japan, and not only at companies with brands, but among the many no-name suppliers as well. When they have really learned that their unacceptable business practices will get them in deep trouble, they need to learn business ethics just as they have learned so much technology and so many other things. In short, they need to apply their learning abilities to the project of learning, really learning, and taking it deeply to heart, how not to make money when lives are at stake. That would be a good start.

Automotive news - secret airbag settlements