The Oil Shock and the Rise of the Japanese Car

In the previous episode, we saw how postwar Japan honed a ‘philosophy of how to make things’ out of scarcity. Just-in-time, kanban, kaizen — a quiet revolution that cut waste and raised quality from the ground up. But however good and efficiently a car is made, without a stage where the world needs it, its strength remains unknown.

That stage came from a wholly unexpected place. A war that broke out in the deserts of the Middle East crossed the Pacific to become lines at America’s gas stations, and would soon set the lines of Japan’s auto factories running day and night. Cheap, small, and fuel-efficient — the very traits of the Japanese car, once apt to be seen as ‘lacking,’ suddenly turned into what the age demanded.

1973, the Tap Shut Off

In October 1973, in the wake of the Fourth Arab-Israeli War, the oil-producing nations of the Middle East moved to cut crude output and embargo certain countries. The posted price of crude was raised sharply in a short span. This was the First Oil Crisis — the so-called oil shock.

Nations that had relied on the Middle East for most of their oil were severely shaken. Japan in particular, dependent on imports for nearly all of its oil and on the Middle East for much of that, felt the impact gravely. A panic symbolized by the toilet-paper hoarding frenzy spread, and the era of high economic growth came to its end.

But this crisis brought an unexpected upheaval to the world of the automobile. When gasoline grows costly and hard to obtain, the cars people want change. From large cars that guzzle fuel to small cars that run far on little — the center of gravity of demand shifted, quietly but decisively.

Emblematic was the American market. American consumers, who against the backdrop of a vast land had loved large, luxurious cars, began to turn their eyes to the small Japanese car amid the long lines at gas stations. In 1974, while forced to cut production at home, Japan’s automakers greatly expanded their exports. The fuel efficiency and quality honed in scarcity were rewarded in an age of crisis.

The Rise, and the Discord

But rapid growth is forever shadowed. The surge in Japanese car exports to America brought pain to America’s auto industry and to the people who worked in it. American makers centered on Detroit fell into a sales slump, and plant closures and layoffs came one after another. The discontent of workers who lost their jobs turned, in time, into the cry that ‘it is the Japanese cars’ fault.’

In 1980, the United Automobile Workers and others, on the basis of a clause in trade law, are reported to have filed a petition with the U.S. International Trade Commission seeking limits on the surging imports of Japanese cars. In some places, scenes of protest in which Japanese cars were smashed with hammers are said to have been seen. This was the Japan-US auto friction — the discord known as trade friction.

Under mounting pressure, in 1981 the Japanese government and auto industry came to introduce ‘voluntary export restraints,’ curbing by their own hand the number of cars exported to America. It is said to have been a bitter choice made to avoid friction. A nation that upholds free trade accepting a ceiling on quantity before political pressure — that contradiction, too, was one of the realities this age held.

Behind the friction lay a clash of emotion beyond the mere matter of numbers. On the American side was a sense of crisis that the nation’s core industry and the livelihoods of its workers were being threatened; on the Japanese side, a feeling of: why must a market won through fair competition be closed to us? Each side’s claim held its own rightness. Behind the figures of the economy there always lie the livelihoods and the pride of people.

Here, to take up only one side — the rise or the discord — would not be fair. The Japanese car was chosen because of consumer support for its fuel efficiency and quality. At the same time, it is also a fact that its surge dealt a real blow to American employment and industry. When cheap, good goods flow across borders, it is a boon to the buyer but a pain to the competing maker and that maker’s region. The light and the shadow of free trade revealed themselves vividly upon the vast industry of the automobile.

Crossing the Sea — Local Production as an Answer

If exports are restricted, one must seek another path. What Japan’s makers chose was ‘local production’ — building factories within the other nation and making cars there.

In 1982, Honda began production at a plant in Ohio. It is said to have been the first Japanese automaker to undertake local production of passenger vehicles in the United States. Nissan followed, setting up a plant in Tennessee, and Toyota, in 1984, established the joint venture NUMMI with General Motors on a fifty-fifty basis, beginning production at a former GM plant in California, the records tell.

Local production carried several meanings at once. It was an expedient to circumvent export restrictions, and at the same time it created jobs in America’s regions and served to soften the friction. Furthermore, through the joint venture with GM, the shop-floor wisdom of the Toyota Production System was brought into an American factory and shared with local makers as well, it is said. The ‘philosophy of how to make things’ we saw in the previous episode began to put down roots across the sea.

The crisis of the oil shock gave the Japanese car a stage upon the world. The fuel efficiency and quality honed in scarcity were surely rewarded in an age of crisis. But that rise also came with the pain of remaking the relationship with other nations, in the form of voluntary export restraints and local production. Light and shadow are always the two faces of a single coin.

And another question was about to be thrust upon the ever-growing auto industry. Fast, cheap, in great number — the car that had run on in that way begins to be called to answer for another price: human life, and the fouling of the air. The next episode is the story of safety and the environment — the price the car could not, in the end, avoid facing.