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Monday, March 14, 2011

The Media and the Tragedy in Japan

There they go again! Déjà vu from the BP oil spill (anybody seen an oil slick lately?) and the Toyota “sudden acceleration” recalls (Did you read that Toyota was exonerated and the cause was driver error?).

The earthquake and subsequent tsunami in Japan last week were, unquestionably, a terrible tragedy. The Japanese Prime Minister said it was the worst crisis to beset Japan since WWII. Certainly, that statement is a fact – not since its near destruction has a greater disaster befallen Japan. I was born in 1940 and I have a vivid recollection of how Japan literally rose, over the years, from the ashes of complete devastation topped off by the Hiroshima and Nagasaki nuclear blasts. There are no more resilient, resourceful or intelligent people on the Planet than the Japanese. They will be back, better than ever, far sooner than anybody expects.

This column/blog is named “Earl Stewart on Cars” and I’m a Toyota dealer. So, forgive me if I focus more on the impact on Japanese auto manufacturing. Other aspects of this tragedy will be addressed by other writers, but I will address the business aspect and the car business aspect in particular. I will not be the first; many newspapers and web sites, including the Wall Street Journal and the New York Times have done so already.

I’ll start the discussion with the model car that Japan exports more of to the USA than any other, the Toyota Prius. There was absolutely no damage to the Prius plant from either the tsunami or the earthquake. Furthermore, thanks to the Japanese “just in time” parts supply manufacturing process; virtually all of the Prius’ suppliers lie safely and closely to the Prius plant.

The Prius plant and most other auto manufacturing plants were closed right after the earthquake and tsunami but most all of them are scheduled to open on March 16. There have been concerns expressed about transporting cars to the ports because of possible damage to the ports, railroads and highways. My view is that a Japanese manufacturer wouldn’t announce that they were commencing production on March 16th unless they knew they could get the cars to the port. Japan auto manufacturers won’t be building cars for domestic consumption for quite a few months due to the blow to their economy and the domestic consumer. They have only one choice which is to export. Prius is the largest selling car in Japan. With domestic consumption at a virtual standstill, the USA and the rest of the world can expect to receive record volume shipments of Priuses.

The media would have you believe that the supply of Japanese produced cars will dry up overnight, but the exact opposite is most likely to occur. That’s not to say that Priuses are going to be in large supply in the next few weeks or months. But this is due to high gas prices and the crisis in Libya, Egypt, and maybe even Saudi Arabia. All hybrids and fuel efficient cars are in short supply now. Ironically, the Japan crisis will work to increase supplies and lower prices as more cars are exported to the USA from Japan.

Lastly, although the Japan-bashers hate to admit it, even if Japan never exported one more car to the USA, it wouldn’t be a big obstacle for most Japanese car makers, especially Toyota. Most Japanese car brands build most of their cars sold in the USA in North America and use domestic parts suppliers. The average Toyota has more parts built in the USA than any other car sold in America including the Ford F-150. The Toyota Camry is the “most American car” you can buy. When you hear these redneck bigots making disparaging remarks about the Japanese and extorting their dimwitted friends to “buy American” made trucks and cars, they are really saying buy a Toyota Tundra not a Ford F-150 or a Toyota Camry not a Chevrolet Malibu.

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