Atlantic Unbound

NPR Commentary -- May 15, 1995
by James Fallows

Japanese Steering Wheels

I think my head will explode if I hear one more Japanese official say that the reason U.S. cars have only one per cent of the Japanese market is that the steering wheels are on the wrong side.

This argument is just true enough to sound convincing to Americans when they hear it the first time. The Japanese, after all, drive on the left. But after you've heard it a few hundred times, you begin to say: something does not make sense.

If wrong-side steering really were the problem, Ford, Chrysler, and General Motors would have to have been incredibly stupid, over decades, not to make the change. Idiocy on this scale is hard to imagine, even for car companies, especially considering that these same companies already make cars for driving on the left. In Australia, Malaysia, and other left-side-of-the-road countries I have seen Ford and GM models with appropriate steering wheels. We're asked to believe that companies would adjust for these smaller markets but can't be bothered to do so in Japan.

Why, then, are the steering wheels on the wrong side? For one thing, many of them aren't. Led by Chrysler, U.S. companies have offered more and more Japan-side versions and say that most models are now available that way. Moreover, many Japanese customers seem to want their steering wheels on the wrong side. The best-selling foreign cars there have long been German - Mercedes, BMWs, mostly with steering on the wrong side. By contrast, the Koreans have built exactly the cars Japanese officials say they're looking for -- correct steering wheels, small engines -- and they have done even worse in Japan than Americans have. For many customers considering imports, wrong-side steering seems to have an exotic cachet. Ford now offers only one wrong-side car in Japan, but that one product--the Mustang--is by far its hottest model, with four-month back orders.

It's silly even to be distracted by steering wheels, since Japan's $35 billion trade surplus in cars and car parts with America is rooted in far deeper differences of economic structure. To give just one example: Americans take it for granted that a Chevy or Ford dealership here may also sell Toyotas, but with a few exceptions it has been unthinkable for a Toyota dealer in Japan to handle any American cars. Even to get their cars shown, therefore, U.S. companies face the nightmare of buying land for a whole new dealer network, at staggering cost.

My experience in Japan tells me that tough measures, like those the Clinton administration has proposed, are the best way to deal with these structural barriers. You may disagree - but if so, don't tell me about steering wheels. I already feel the pressure building in my head.



A few extra points I didn't think of or cram into the NPR piece:

1) I think this deal has to be seen as a 60/40 good/bad outcome for th US. The good involves, strangely, the "voluntary" targets. The reason the Japanese were resisting them until the last two or three days is that they KNEW the U.S. would treat them as all-but-official promises. Hashimoto can now stump through Japan saying that he gave up nothing significant, but two weeks before the deal he was saying that it would be dangerous to make even an informal agreement, since inevitably the Americans would turn it into a promise. He was right.

2) As a matter of negotiating atmospherics the US side actually did quite a good job. As I think I said here, on NPR, and elsewhere six or eight months ago, *the* crucial decision in these whole negotiations was always an assessment made in Tokyo. If the Japanese government thought that the US really meant it, and would actually impose the sanctions without a deal, then at the last minute the Japanese would scramble to make a deal. But if they thought the US could be bluffed off, they would do everything possible to stonewall, confident that the US would not pull the trigger in the end. Clinton was convincing to the Japanese -- and to me -- that he was going to do it. So he got a better deal than he would have a month ago.

3) The bad of the deal is obvious: this is not going to make any significant difference in the structrure of the Japanese auto industry, and it's a step back from 1986 when the Japanese government backed up the targets for foreign presence in the semicondcutor market. But Kantor made clear in his statement that they knew many battles over autos lay ahead; and the Japanese made clear that thy would not EVER repeat their mistake in the semiconductor deal.

4) Did the US give up the right to impose sanctions ever again? The deal on the table says that the US will not impose sanctions to enforce the targets set out in this plan. I have reason to beileve that the US will interpret this in a hair=splitting way. If, two years from now, the parts sales and dealerships don't mean the targets, the US will not impose sanctions because of that. What it WILL do, however, is say that the failure to meet those targets is a "symptom" or "important piece of evidence" for continued structural barrires in the Japanese market, and it will take steps to deal with those structural barriers.

5) The next step the US should take is to push the Kodak case. That is an *open and shut* instance of conspiracy, collusion, and government interference to keep a foreign product off the Japanese market.

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