The “new” global imperative for the Japanese automobile industry
The Japanese automobile industry has reached a major strategic turning point. Following the collapse of the bubble economy in 1991, the Japanese domestic automobile market experienced a protracted three-year sales slump and underwent major structural changes. This forced the industry to come up with a new strategic response through restructuring and rationalization. Hard hit by the so-called Heisei recession that followed the collapse of the bubble economy, each of the major Japanese auto makers saw a dramatic worsening of its financial results, to the extent that one wonders what has happened to the competitive strength of the world's most powerful global competitors.
The contrast is striking: during the peak years of the 1980s through to 1991, when the companies' operating results were substantially stronger, the eleven auto manufacturers generated profits in a single year of around ¥1.1 trillion, but within a few years profits had fallen to less than half that, at about ¥500 billion, with three of the eleven firms reporting a loss and several others only borderline profitable.
Until this recession, the Japanese industry had generally experienced nearly constant growth, showing a rising curve of sales, volume, and profits. The only times when the industry experienced a decline in production was in 1973, as a result of the first oil crisis, and again in 1981, as a result of the second oil shock and the imposition of voluntary export restraints to the United States.