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If Toyota Sneezes, Will Japan Still Get Pneumonia?

New America Media, Commentary, Robert E. Cole Posted: Feb 09, 2010

KYOTO, Japan--Until the last few days, the Toyota recalls have not dominated the media in Japan as they have in the U.S. No doubt this is largely because a government-ordered recall, of the Prius, which is built and sold in Japan, was not ordered until recently. The modest coverage previously also reflected the reluctance of the Japanese media to criticize Toyota, the national champion and also a leading advertiser.

Japanese media reports often point out that the faulty gas pedal module, affecting the other car models sold in the United States, is made by U.S. supplier CTS; this implicitly encourages the Japanese public to attribute the problems to faulty American quality. This presentation feeds into the common notion in Japan that Japan-made products are better than equivalent ones made abroad. By encouraging such an explanation, however, the Japanese media ignores, and the public is made less aware, that all designs used by U.S. parts suppliers are developed by Toyota or in close cooperation with Toyota and must be approved by Toyota. Moreover, Toyota admits that it is a design, not a manufacturing, problem.

Denial is another possible reaction. Utra-nationalist fringe groups in Japan have a long history of attributing any problems arising from its trade relations with the U.S. to U.S. conspiracies to discredit the Japanese. Conspiracy theory is alive and well in Japan, just as in the United States. So some rumblings have been heard suggesting that GM or others are creating this problem to discredit Toyota.

For most Japanese citizens who have become aware of the problem, however, the overwhelming reaction is more akin to shock. Toyota is Japans leading company by market capitalization and its second largest employer. It is a company considered extremely prestigious to work for, a company that built its reputation on customer satisfaction and reliability and a company that serves as a model for all global manufacturing companies. Yet, it is being exposed as a producer of unsafe cars.

How could this happen? There is a sense among many opinion leaders in Japan that these events have been brought about by Toyotas growing arrogance, similar to the arrogance that brought down GM. There is also a sense that Japans reputation for high quality products has taken a big hit from the stumbling of its standard bearer, Toyota. Some other Japanese automakers have voiced concern that U.S. and European consumers will shy away from their products as a result of the publicity about Toyotas problems.

Moreover, these events come at a time when the Japanese are feeling increasingly insecure with China set to soon surpass Japan as the worlds second largest economy and as Korea successfully challenges Japanese industry with its high quality manufactured goods, from cell phones to TVs to autos. So, these recent events add to a growing unease among Japanese as to Japans place in the world economy.

We need, however, to make a distinction between how these events are likely to affect a Japan of 2010 with, say, a Japan of 1990. For much of Japans modern history, the rise and success of large corporations have been associated in the public mind first with the modernization of Japan and then, in the post World War II period especially, with rising standards of living. This was certainly the case up to the late 1980s and very early 1990s when Japan seemed to be riding high. Secure employment was taken for granted by many Japanese. Employees rightly perceived a tight link between company expansion and success and rising standards of living. These were the days, as captured by the congressional testimony of Charlie Wilson, CEO of GM in 1953, when the Japanese had a mindset that whats good for Japan is good for Toyota and vice versa.

Today, however, the Japanese publics view of the modern corporation has changed significantly. Since the 1990s, there has been radical corporate restructuring along with employee discharges. Work is regularly outsourced to China. Roughly one in three employees now have a non-regular job with no clear future to which they can look forward. Security is no longer guaranteed even for those with regular jobs. Income inequality has been growing.

While large companies grow ever more efficient, and have recently turned profitable again, consumers see little benefit in the form of increased wages, prosperity or security. Not surprisingly in this environment, last years lower house elections resulted in the long ruling Liberal Democratic Party (LDP), with its intimate ties to big business, being decisively routed by Yukio Hatoyamas Democratic Party of Japan (DPJ). The DPJ ran on a platform promising a consumer- rather than business-focused government. Last week, Seiji Maehara, the minister of transportation, made a critical comment regarding Toyotas failure to recall the Prius; such criticism would not have happened under the previous LDP government.

Growth in company size, efficiency, and profits are no longer seen by the public as tied to rising standards of living. Under these conditions, Japanese citizens are likely to see Toyotas current dilemma as a strong blow adding to Japans sliding position in the global economy as well as adding to the uncertainty of their own and Japans future.

Robert E. Cole is professor emeritus of the Department of Sociology and the Haas School of Business at UC Berkeley. He is currently visiting researcher at Doshisha University in Kyoto, Japan.

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