Global demand to grow over 5% per year through 2007

Global demand to grow over 5% per year through 2007

Global demand for automotive aftermarket products is projected to increase five percent per year through 2007 to $144 billion. Gains will be driven by a steady increase in the global motor vehicle parc, continued maintenance and repair of older vehicles -- especially in the developing regions of the world -- and greater use of higher value automotive electronics.

Nevertheless, advances will slow from historical rates of growth due to better quality original equipment and replacement parts and significant price competition in many segments of the market. Gains will be fastest in the developing regions of the world, which generally have a higher proportion of older vehicles and a more rapidly expanding light vehicle parc compared to the more mature markets of North America, Western Europe and Japan.

Aftermarket annual growth in Western Europe will be below-average through 2007. The slow dismantling of the current European Union (EU) Block Exemption regulations in the region will allow for greater competition and reduce the relatively higher prices of aftermarket products. Nevertheless, growth will remain respectable considering the vast size of this market. The North American market will post the slowest gains due to continuing product improvements made by Original Equipment Manufacturers (OEMs) of light vehicles, combined with a younger light vehicle fleet in the US and Canada.

The Asia/Pacific region will exhibit particularly healthy gains, with the exception of Japan. China and India are both expected to register double-digit annual gains in their respective automotive aftermarkets through 2007. Rapidly rising incomes in this region will allow for rapid expansion in motor vehicle utilization rates in most countries, currently well below global standards.

Electronic products offer best growth prospects

Mechanical products accounted for 57 percent of overall aftermarket products demand in 2002. However, these are largely mature products which are subject to intense price competition. Their share of the overall market has been declining for more than a decade, and will continue to do so through 2007. Nevertheless, the segment includes several fast growing items such as brake parts and fuel injectors. The aftermarket for electronic products such as controls, modules, sound systems and components, navigation systems and security systems, offers the strongest prospects and will significantly outpace demand in the more mature mechanical and electrical products segments.

Study coverage

World Automotive Aftermarket is a new Freedonia study. It presents historical data through 2002 as well as forecasts to 2007 and 2012 for demand by product in six regions and 20 countries. In addition, the study assesses market share data and profiles leading participants worldwide.

Automotive Industry Overview

Automotive Industry Overview
	Quantity	Unit	Date	Source
Sales
Global Unit Sales, Cars & Light Trucks	53.15	Mil.	2007	Scotiabank
GM	9.1	Mil.	2006	GM
Toyota	8.52	Mil.	2007*	Toyota
Ford	6.56	Mil.	2006	Ford
DaimlerChrysler1	4.44	Mil.	2006	DaimlerChrysler
Honda	3.65	Mil.	2007*	Honda
U.S. New Car & Truck Sales
Cars & Light Trucks Sold, U.S.	15.9	Mil.	2007	Scotiabank
Hybrids Sold, U.S.	254.5	Thous.	2006	R.L. Polk & Co.
Total Number of New-Car Dealerships, U.S., Jan. 1st	21.2	Thous.	2006	NADA
Total Revenue: New-Car & Light Truck Dealers, U.S.	675	Bil. US$	2006	NADA
General Motors Market Share	24.1	%	2006	Ford
Ford Market Share	17.1	%	2006	Ford
Toyota Market Share	14.9	%	2006	Ford
DaimlerChrysler Market Share	14.0	%	2006	Ford
All Others	29.9	%	2006	Ford
Passenger Cars Sold by Selected Country/Region, Projected
Western Europe	14.45	Mil.	2007	Scotiabank
Asia	13.78	Mil.	2007	Scotiabank
China	5.06	Mil.	2007	Scotiabank
Canada	1.65	Mil.	2007	Scotiabank
Russia	1.86	Mil.	2007	Scotiabank
India	1.13	Mil.	2007	Scotiabank
Operations and Transportation
Total Vehicles in Operation, Cars & Trucks, U.S.	244	Mil.	2006	NADA
Total Vehicles in Operation, Cars & Trucks, Global	806	Mil.	2007	PRE
Fuel used by Vehicles per Year, Global	260,000	Gallons	2007	PRE
Total Highway Miles Traveled, U.S.	300,000	Bil.	2007	PRE
* Fiscal year ending March 31.
NADA = National Automobile Dealers Association; PRE = Plunkett Research estimate.
Scotiabank = Projections by Scotia Economics, "Global Auto Report," July 2007
1 DaimlerChrysler AG split into two firms during 2007: Daimler AG and Chrysler LLC
Source: Plunkett Research, Ltd.
Plunkett's Automobile Industry Almanac 2008
Copyright© 2007, All Rights Reserved

Automobile Industry Introduction

1. Automobile Industry Introduction

In the U.S., the 2007 market was approximately 15.9 million cars and light trucks sold, down from about 16.5 million the previous year. Production in North America, during 2006, including cars and trucks of all types, totaled 11.8 million produced in America, 2.6 million produced in Canada and 2 million produced in Mexico. Globally, about 53 million new cars were sold in 2007, up from about 49 million the previous year. These estimates are from Scotiabank Group.

There are approximately 244 million vehicles in operation in the United States. Around the world, there were about 806 million cars and light trucks on the road in 2007. By 2020, that number will reach 1 billion. Currently, those vehicles burn nearly 260 billion gallons of fuel yearly.

In the U.S., as of 2006, the industry included about 21,200 new-car dealerships, 1.07 million manufacturing employees and 1.12 million retail new and used car dealership employees. Total revenues at new-car and light truck dealers exceed $675 billion, according to NADA.

The years of 2004 through 2006 will long be remembered as a pivotal period in the automobile industry. It was a period during which high gasoline prices started a sea change among U.S. consumers that is finally creating significant demand for fuel-efficient vehicles. Gasoline prices of approximately $2.00 per gallon started taking a huge bite out of family budgets in 2004, and many middle-class consumers who owned fuel guzzling SUVs and pickup trucks began to wish they had vehicles that were much less expensive to operate. By 2005-2006, with gasoline prices in the $3.00 range, the party was over for traditional, large SUVs. While gasoline prices moderated during much of 2007, they were still in the $2.70 range in most markets.

One result was the phenomenal demand for Toyota’s Prius hybrid car. Toyota responded by raising the price and planning production increases. Meanwhile, Toyota made investments in its Georgetown, Kentucky plant to enable it to manufacture 48,000 hybrid Camrys yearly there by late 2006—Toyota will likely wish it had created even more hybrid capacity. Meanwhile, there has been good demand for Toyota’s Lexus RX400h hybrid crossover. Ford launched its first hybrids, and other carmakers, including GM, were greatly encouraged in their own efforts to bring more hybrids to the market. However, response to hybrids from U.S. makers has been lukewarm at best. Consumers generally aren’t as impressed with U.S. hybrid technology as they are with that of Toyota models, and actual mileage results on the road have been disappointing, largely due to driver habits such as quick acceleration which uses more fuel. Over the mid-term, many hybrids will be available from a wide variety of makers, and technology will steadily improve.

Other fuel-efficient vehicles, such as BMW’s MINI Cooper, have enjoyed soaring demand. Consumers and emissions regulators started to take a renewed interest in advanced-technology. Clean diesel engines, like those offered in new cars from Volkswagen and Mercedes-Benz, offer exceptional performance and fuel economy while providing the quiet, vibration-free running associated with gasoline engines. Clean diesel offers a particularly attractive alternative over hybrid technology in the U.S. market, and is already widely used in passenger vehicles in Europe. In addition to clean diesel, the use of ethanol as a gasoline additive will grow rapidly in the U.S., thanks to encouragement by Congress.

Meanwhile, sales of heavy SUVs lagged miserably, and automakers such as Chevy, Hummer and Cadillac offered large dealer incentives and rebates in an effort to move these vehicles. Ford cancelled production of its larger-than-life Excursion SUV in which some owners reported getting as little as 11 MPG in the city, and GM cancelled production of the massive Hummer H1.

Car consumers outside the U.S. made history as well. The rising affluence of consumers in China created both huge opportunities and huge problems. China has become one of the world’s largest importers of petroleum products, largely to fuel its burgeoning fleet of cars and trucks. Streets and highways are clogged with new cars, to the extent that traffic and smog are a nightmare. Some Chinese cities are trying to cut down on new traffic by requiring car owners to purchase expensive permits. Meanwhile, automakers from all nations are racing to establish plants and partnerships in China to produce cars both for domestic use and for export. In fact, low labor costs and increasing product quality in China threaten auto plants located in high cost nations such as the U.S.

Vehicle sales in the booming nation of India are soaring as well. While motor scooters continue to sell at a rapid clip, a growing middle class is also creating great demand for cars. Local industrial giant Tata hopes to launch a no-frills Indian car at a base price of about $2,200 U.S. Other rapidly growing automobile markets include Russia and Mexico, along with many markets in South America.

Not to be overlooked are the vast changes taking place in automobile manufacturing. Flexible factories are reducing man-hours and costs per car, while offering a much wider range of choices for customization to consumers. Today, more than ever, car manufacturers and their suppliers are cooperating in the design and manufacture of new cars in ways that are revolutionizing the entire process.

Inexpensive cars manufactured in China will soon be on the market in the U.S. The question is not whether China will export cars and trucks, but whether consumers will be convinced that they offer safety and reliability. Meanwhile, U.S. automakers are making intense demands on their component suppliers for lower prices—these suppliers are, in turn, looking to low-cost production in China. Meanwhile, the Big Three (American automakers GM, Ford and Chrysler) face difficult times at best. The Detroit companies are under intense competitive pressure from foreign-based firms while enduring high labor costs at home. Ford and GM are both struggling to reengineer all parts of their operations, from design to manufacturing to marketing in order to cut costs and regain market share.

Chrysler has undergone the most gut-wrenching change of all: a new owner. Cerberus Capital Management, one of the world’s largest private equity investment firms, purchased Chrysler from DaimlerChrysler AG during 2007. Daimler had purchased Chrysler several years ago, only to find itself battling the many challenges facing U.S. automobile manufacturers. Daimler was more than happy to unload it. The German-based Daimler renamed itself Daimler AG. Chrysler legally became Chrysler LLC. This is one of many major investments made by Cerberus in the ailing auto industry, including investments in parts manufacturers and in car loans provider GMAC. Cerberus hopes to be able to introduce better management, new strategies and greater operating efficiencies in these companies.

While the U.S-based Big Three struggle, Toyota is attacking mercilessly. It has the capacity to manufacture over 1.5 million vehicles yearly in North America. On a global scale, the company plans to sell 10.4 million vehicles by 2009, up from 8.8 million in 2006. The big news is that Toyota most likely surpassed GM in global sales during 2007 for the first time, making Toyota the world’s largest carmaker.

The parts manufacturing business in the U.S. is equally dismal. Delphi Corp, the giant supplier that was part of GM until 1999, lost nearly $4.6 billion in 2004 alone and declared bankruptcy in 2005. The company hoped to exit bankruptcy by the end of 2007.

Asian car manufacturers are generally enjoying booming success, with Toyota and Honda at the forefront. South Korean makers Hyundai and Kia have established themselves as true, high-quality manufacturers with a growing global customer base. They will give the Japanese very tough competition.

European manufacturers have challenges of their own. High costs, tough labor laws, daunting government regulations and a few disappointing model designs have hampered recent results.

There is one exciting new development in the U.S. car manufacturing industry: Tesla Motors. This company may be on the verge of a significant success with its revolutionary, all-electric sports car.

Domestic Market Sales in January-July 2007

Domestic Market

Sales in January-July 2007

Jakarta - GAIKINDO,

Though the automobile market shows a slight drop (2.7%) in July compared to the previous month (from 39,396) units down to 38,320 units), it is still higher by 75% on top of the 21,891 units recorded in July 2006. In the meantime, the total market from January-July 2007 which is recorded at 235,571 eventually indicates an increase of 37.3% above the 171,525 units recorded in the same period of 2006.

A consistent increase in the domestic automobile market was recorded during four consecutive months from March to June 2007. June total sales turned out to be 39,396, or slightly above the previous month with 38,311 units to finally ends the year’s first semester performance in 197,251 units or up by 31.1% compared to 149,634 units recorded in the same period last year.

As for the sales performance in this year's second semester, GAIKINDO is expecting further increase as well. The hope for the increase comes from the promising national macro economy, thanks partly to the lower central bank rate (SBI) to 8.25%. Besides, GAIKINDO also expects The 15th Indonesia International Motor Show 19-28 July will contribute to the more thriving market in the second semester.

Manufacturers and distributors seem to never cease coming up with new models. They are, to mention some, Nissan (Grand Livina, Latio), Chery (QQ, Foton, Great Wall), Ford (New Escape, New Ranger, New Focus), Hyundai (Avega and Coupe), Isuzu (Elf), Suzuki (Karimun Estilo, New Vitara, Swift, dan APV), Toyota (New Vios, Rush, Yaris, Avanza VVTI), Honda (New CR-V, New City, New Jazz, Civic Hybrid), Chevrolet (Estate, Kalos, Captiva), Mitsubishi (Colt Diesel and Fuso truck).

It is also interesting to watch the growing numbers of export market which is indicated by the increase of units as well as number of export destination. Export volume in 2007 is 30,000 units up from 17,000 in 2006. Export destination also adds up from 19 countries to become 23 countries in 2007.

Quotes:

Joko Trisanyoto, PT Toyota Astra Motor marketing director: "We project to make total sales over 56,000 units of Avanza models and over 35,000 units of Innova this year."

Priyo Kurnianto, PT Indomobil Niaga International Suzuki public relation head: "We are optimistic to make 65,000 units of sales this year, which means 40% increase compared to 44,760 units in 2006."

Johanes Loman, PT Astra International Tbk chief executive Daihatsu sales operation: "We plan to seize 12% of the domestic market this year, compared to last year’s 10.5%."

Jonfis Fandy, PT Honda Prospect Motor sales and marketing director: "We predict domestic automotive market will increase 20% in 2007."

Honda Automobile Business Report 2006

Automobile Business Report 2006

as higher sales of the Step Wagon, which underwent a full model change.

In April 2005, we introduced the all new Airwave station wagon, featuring high utility in a compact body. In May, we released the new Step Wagon, after lowering the vehicle's floor level and center-of-gravity and providing a more user-friendly body size, more internal space and sedan-like driving performance and comfort. In September 2005, we launched the new Civic, featuring an innovative, monoform design and more ample interior space. In March 2006, we began sales of the new Zest minicar, incorporating low-floor design technology for greater cabin room, occupant access and storage space.

In addition to these and other products with new levels of value, we enhanced marketing efficiency by deploying advanced information technologies while strengthening our sales and service capabilities. In these ways, Honda strove to maximize the lifetime satisfaction of its existing customers in Japan, now totaling around 9.0 million

.

North America In calendar year 2005, automobile demand in the United States remained high, at around 16.99 million units. In the passenger car segment, we reported an increase in unit sales of the new Civic model, which offers excellent safety features and superb fuel economy. Sales of the Acura TSX, a sport sedan, were also strong. In the light truck segment, the all-new Ridgeline, a next-generation truck launched in March 2005, experienced strong demand, as did the Pilot, a mid-size SUV, and the Odyssey mini-van. As a result, overall sales in North America grew 6.8%, to 1,682,000 units. In October, we launched a new Brazilian-made Fit model in Mexico. Further north, we unveiled the Acura CSX, an Acura-brand entry model designed specifically for the Canadian market. In January 2006, we received "North American Car of the Year" and "North American Truck of the Year" awards for the Civic and the Ridgeline, marking the first time in history that the same manufacturer has won both categories in the same year. In addition, Honda vehicles were selected as Top Picks in five of the 10 automobile categories rated by U.S. Consumer Reports magazine for 2006 models. These rankings reflect excellent feedback on our introduction of models in the passenger car and light truck categories that offer excellent fuel performance and safety features.

Europe

In Europe, overall automobile demand remained almost unchanged in calendar year 2005, at around 17.66 million units. Nevertheless, Honda's unit sales in fiscal 2006 climbed 9.0%, to 291,000 units. This was due mainly to increased sales of the five-door Civic, released in January 2006, after a full model change that resulted in a well-received sporty and sophisticated design, and the FR-V series, which benefited from the addition in August 2005 of a version with the Honda-developed i-CTDi*1 diesel engine, and continued robust sales of the Jazz. To meet growing demand for diesel-powered vehicles in the region and to strengthen our manufacturing system, Honda of the U.K. Manufacturing Limited began assembly of diesel engines. We included a diesel model in the new five-door Civic line, and the Accord, CR-V and FR-V are also available with Honda-developed diesel engines. In these ways, we enhanced our competitiveness in the extremely challenging European market.

*1: i-CTDi
This is a proprietary diesel engine developed by Honda that optimizes combustion through the adoption of a high-pressure fuel injection system, combined with a newly developed emission treatment system. The i-CTDi is also compliant with Euro 4 emission standards for 2005.

.

Asia In Asia, total unit sales of automobiles and automobile parts sold by Honda and its subsidiaries and affiliates edged up 1.8%, to 521,000 units. In China, the passenger car market expanded considerably, with demand reaching around 3.20 million units in calendar 2005. Guangzhou Honda, an affiliate accounted for under the equity method, recorded healthy sales of the popular Accord and Odyssey models. Another equity-method affiliate, Dongfeng Honda, enjoyed strong sales of the CR-V. Total unit sales in China of completed vehicles by Honda and its subsidiaries, as well as sales of component parts sets for production to equity-method affiliates amounted to 263,000 units, on par with the preceding term. In February 2006, Dongfeng Honda expanded its capacity to 120,000 vehicles per year, in an effort to meet rapidly expanding Chinese demand. Further, in June 2005, Honda Automobile China became the first passenger car maker in China to export vehicles to Europe from a plant that specializes in the production of export models. In these ways, Honda will continue using its accumulated China-related expertise to deliver top-level products in terms of both improved quality and cost. Demand continued to expand in other Asian markets, with major increases in sales of the City in Pakistan, India and elsewhere. Sales were also up in Taiwan, contributing to strong sales in the Asian region. In terms of manufacturing and R&D, we expanded manufacturing capacity at our plant in India and established an R&D facility in Thailand. These are a few examples of Honda's efforts to strengthen its systems to respond swiftly to diversifying local needs. Other Regions Unit sales in other regions grew 14.2%, to 201,000 units, due mainly to increased sales in South America, Oceania and the Middle East. In Brazil, sales of the locally produced Fit increased. In Australia and the Gulf states, we posted healthy sales of the Accord, Civic and other models.

Upper left: Acura RDX The combination of a turbo engine and Super-Handling All Wheel Drive (SH-AWD) makes the Acura RDX a model with good fuel economy in an entry-premium SUV. (for the North American market)	Upper right: Fit This model is popular because of its good utility and an engine that achieves good drivability as well as fuel economy. (for the North American market)
Lower left: Civic Type R concept This three-door model features a high-performance engine and bold and emotional styling. (for the European market)	Lower right: Civic Strong marks for good driving performance, economy, environmental performance and interior comfort give the Civic an appealingly high level of quality. (for the Chinese market)

Outlook for Fiscal 2007 For fiscal 2007, we expect total unit sales of Honda automobiles to rise 9.7% year-on-year, to 3,720,000 units. In Japan, we launched the new Zest passenger minicar in March 2006. Going forward, we will target further sales increases by strengthening our line-up. For example, we will undertake full model changes for the Stream in mid-2006, followed by the CR-V in the latter half of calendar 2006. In the area of sales and service, too, we will continue striving to maximize lifetime customer satisfaction through various initiatives, including our strategy of integrating our domestic sales channels. As a result, we project unit sales in fiscal 2007 to increase 3.4%, to 720,000 units. In North America, we will launch the Acura RDX, an entry-premium SUV under the Acura brand, in mid-2006. Also within the Acura lineup, we will undertake a full model change of the Acura MDX, a premium SUV. The Honda CR-V, our compact SUV, will undergo a full model change. In the light truck segment, we will further strengthen and upgrade our lineup, with an emphasis on both performance and fuel efficiency. In the passenger car segment, too, we will continue broadening our offerings to meet growing demand for fuel efficient models. For example, in addition to the Civic, which underwent a full model change in September 2005, we began sales of the Fit in April 2006. In these ways, we will target further sales growth in North America by introducing highly attractive models in both the light truck and passenger car segments. This year marks the 20th anniversary since the birth of the Acura brand in the United States. In fiscal 2006, annual unit sales of Acura vehicles in the United States surpassed 200,000 units. To enhance the Acura brand, in mid-2007 we will complete construction of the new Acura Design Center in California to advance the brand identity. On the production side, we will upgrade our Marysville, Ohio, auto plant, which produces the Accord passenger car, making it more responsive to changes in demand. In the year ahead, we will begin production of the Acura RDX light truck in the same facility. In May 2006, we started operating a new transmission assembly plant in Georgia. We will continue to boost the local content of Honda vehicles made in North America. For fiscal 2007, we project unit sales in North America of 1,760,000 units, up 4.6%. In Europe, we plan to follow the five-door Civic by launching a three-door version in late 2006. In mid-2006, we will introduce the Legend sedan to the European market, and in late 2006, we will introduce a CR-V that has undergone a full model change. In July 2006, a new company in the Ukraine, a market which is expecting huge expansion will begin operations, further enhancing our sales capacity. To address increasing demand for diesel-powered vehicles in Europe, we will expand local production capabilities. We project a 10.0% rise in unit sales in Europe, to 320,000 units. In Asia, we expect unit sales in fiscal 2007 to jump 33.4%, to 695,000 units. In the Chinese passenger car market, we believe market demand could easily reach 3.5 to 3.7 million units. In fiscal 2007, we will respond to booming demand for the existing models made by affiliate Guangzhou Honda and Dongfeng Honda by further strengthening these companies' sales networks. We will also expand the annual production capacity of Guangzhou Honda from 240,000 to 360,000 units in the latter half of calendar 2006. This will bring our total annual production capacity in China to 530,000 units, after adding the annual production capacity of Dongfeng Honda and including the production at the consolidated subsidiary Honda Automobile China. In addition to boosting production of completed vehicles, we will strengthen our local manufacturing capabilities with respect to powertrains. For example, we expect to begin producing automobile powertrains at Honda Auto Parts in the first half of calendar 2007. We will also develop the Acura brand in China, with successive rollouts of the Acura RL and Acura TL scheduled from mid-2006. Elsewhere in Asia, we will increase production capacity to meet growing demand. In India, for example, we will begin making Civic models in July 2006 as a footboard for annual capacity of 100,000 units by 2010. In addition, annual production capacity in Pakistan will be doubled from 25,000 to 50,000 units during fiscal 2007, and in Vietnam we will start making automobiles at the rate of 10,000 units per year. These vehicles will go on sale from mid-2006. In other regions, we project unit sales of 225,000 units, up 11.9% from fiscal 2007. This takes into account rising sales of the Civic in Brazil and Australia. In Brazil, where gasoline prices are soaring, we will also start making and selling flex-fuel vehicles*2 in calendar 2006. *2: Flex-fuel vehicles Vehicles that are designed to operate on gasoline, ethanol or a mixture of the two fuels

Japanese transplants - as American as apple pie

Berikut ini adalah versi HTML dari berkas http://www.jetro.org/documents/JETRO_Midwest_June07.pdf. G o o g l e membuat versi HTML dari dokumen tersebut secara otomatis pada saat menelusuri web. Untuk menautkan atau menandai situs ini, gunakan URL berikut: http://www.google.com/search?q=cache:pRC3t8xmf_sJ:www.jetro.org/documents/JETRO_Midwest_June07.pdf+monozukuri+non+japan&hl=id&ct=clnk&cd=8&gl=id&client=firefox-a Google tak ada kaitannya dengan pemilik/pembuat laman ini, dan juga tak bertanggung jawab atas kandungan materi yang terdapat di dalamnya. Kata kunci yang dipakai untuk penelusuran sudah distabilo monozukuri non japan

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Page 1

Newsletter

Vol. 17, No. 3, May-June 2007

Japan External Trade Organization

1 East Wacker Drive, Suite 600

Chicago, IL 60601

Phone: 312-832-6000

Fax: 312-832-6066

www.jetro.org

From the

Chief Executive

Director

Takashi “Taka”Tsuchiya,

Chief Executive Director,

JETRO Chicago

See “Chief Executive Director” page 3

See “Mission” on page 2

In this issue ...

• JETRO Around the Midwest ... page 2

• Sweet time at Tokyo trade show ... page 2

• Director’s Dialogue: Introduction to

Monozukuri... page 3

• Ask JETRO: ICT Partnering Japan ...

page 3

Japanese transplants - as American as

apple pie

One day in May I had an opportunity

to participate in a guided tour at the

Harley-Davidson Powertrain Operations in

Wauwatosa,Wisconsin. During the tour

I noticed signs using Japanese words,

including Kaizen (continuous improvement

in process and quality) and Kanban (a signal

for Just-In-Time Production). The factory was

clean and in order. The floor of the factory

was shining. So at the end of the tour I asked

our guide whether the factory practices

“5 S” or not. (“5 S” - Sort, Set-in-order,

Shine, Standardize, Self-discipline - is a lean

technique commonly practiced in Japan that

empowers employees to make their work

areas cleaner, better organized and more

productive.) Her answer was she did not

know, but I believed that Harley-Davidson

certainly practiced the 5S. (for further

information on these terms, check at http://

en.wikipedia.org/wiki/Main_Page)

This factory, illustrating many Japanese

management techniques, got me thinking

about Japanese affiliated factories in the

Midwest.

A little bit of history. Japanese overseas

investment in the manufacturing sector in

the US started to show a steady growth in

the latter half of 1970s. Its destinations were

mostly California and the Southeast states

and its industrial sector was centered around

electric and electronics products, including

color TVs.

It was not until the early 1980s that the

Midwest saw a gradual inflow of Japanese

manufacturing facilities, although by

then Kikkoman (soy-sauce production

started in 1972, in WI), Kawasaki Heavy

Industries (motorcycles, 1975, in NE), Honda

(motorcycles, 1979, in OH) and several

companies had started production there. A

huge growth of operations emerged after

September 1985, when the Yen steeply

appreciated against the US dollar after the

so-called Plaza Accord.

According to a JETRO survey as of March 1985,

Guest View

John R. Chalifoux

Vice President,

Business Development

Original Equipment

Suppliers Association

Automotive Industry

CollaborationYields

Innovative Solutions

See “Guest View” on page 4

JETRO names new Business

Advisor for Wisconsin

JETRO Chicago welcomes a new Business Advisor for the State of

Wisconsin. Kenji Higashi will assist companies in developing plans

to work with Japanese companies, and to explore opportunities for

expansion in Japan. He succeeds Takahiro Hagisako in that position.

Higashi has been working in the United States with American and

Japanese companies for 24 years, most recently as President of

Busitech Corp. in Hanover Park, IL, a management consulting, sales

and market research company.

Kenji Higashi continues to serve as an investment advisor for JETRO Chicago and a business

consultant to many American companies on their Japanese business. He is a native of

Japan who became an American citizen in 2000. His Wisconsin office phone number is

608-266-9487, and his email is kenji.higashi@wisconsin.gov.

This material is edited,issued and circulated by JETRO Chicago,One East Wacker Drive,Suite 600,Chicago IL 6060,which is registered under the Foreign Agents Registration Act of 1938,as amended.This material is filed with the Department of Justice

where the required registration statement is available for public inspection.Registration does not indicate approval of this material by the United States Government.

Wisconsin Governor James

Doyle welcomes Kenji

Higashi

The Original Equipment Suppliers Association

was honored to be a supporting partner for

“The Mindset of Monozukuri,” an advanced

manufacturing seminar hosted by JETRO

Chicago in metro-Detroit,April 25, 2007. A

strong line-up of speakers addressed the

audience, which included representatives from

more than 40 OESA member companies.

The creation of OESA in 1998 by founding

president and CEO Neil De Koker embodies

the spirit of monozukuri (process of making or

creating things;see Director’s Dialogue on p.3

for more information). As a trade group with

390 member companies,OESA serves the North

American automotive supplier community.

The majority of members are suppliers of

automotive components,systems and modules,

as well as providers of engineering services,

tooling and raw materials.

Global annual automotive sales of OESA

manufacturing companies exceed $300 billion;

however, 60 percent of these companies have

sales of less than $150 million.The important

distinction is that OESA represents the

Midwest

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Page 2

May-June 2007, Page 2

Midwest Newsletter

See MOBAC ... page 4

JETRO Around the

Midwest

Seminars, Meetings and

Events

In this issue ...

• JETRO Around the Midwest ... page 2

• Sweet time at Tokyo trade show ... page 2

• Director’s Dialogue: Introduction to

Monozukuri... page 3

• Ask JETRO: ICT Partnering Japan ... page 3

Back to Page 1

Chicago and Plymouth (MI) learn of “The Mindset of Monozukuri”

MOBAC Show was a Sweet Time in Tokyo

by Stephen R.Vullo,

Researcher, Industrial

Machinery Department, JETRO

Chicago

Recently I had the

pleasure of visiting Tokyo

on business for a week.

My primary purpose was

to attend MOBAC Show 2007 (2007

Machinery, Materials, Marketing of Bakery

and Confectionery Show) from February

21-24 at Makuhari Messe in Chiba (www.

mobacshow.com).This was the 20th

anniversary of MOBAC Show, typically

held every other year alternating between

Tokyo and Osaka.The stated goal of the

show is to promote the development

of new products and technologies in

bakery and confectionery machinery,

raw materials, packaging machinery, and

other food processing machinery and

equipment relevant to that market. It is

the largest show in Japan dedicated to

the food industry. JETRO was a sponsor

of the show, along with many other

Japanese government agencies and

industrial associations. Public attendance

is encouraged.

MOBAC Show is not a typical “all-business”

trade show.In order to capture the attention

of the visiting public,exhibitors have very

39thAnnual Joint Meeting ofThe

Midwest U.S.- JapanAssociation set

for September in Tokyo

“Japan and Midwest U.S.: Innovation and

Sustainable Growth,” is the theme of the 39th

Annual Joint Meeting of The Midwest U.S. - Japan

Association.The event will take place in Tokyo at

the Imperial Hotel, from September 9-11, 2007.

For four decades, business leaders from the

Midwest region of the United States and Japan

have met on an annual basis to discuss the

growth and progress of economic relations of

the American Midwest and Japan.Typically the

meetings alternate locations between Japan and

the U.S.

The Midwest U.S.-Japan Association is comprised

of ten member States including Illinois, Indiana,

Iowa, Kansas, Michigan, Minnesota, Missouri,

Nebraska, Ohio and Wisconsin.

More information will be featured in the next issue

of JETRO Chicago Midwest Newsletter.Additional

information is also available at www.midwest-

japan.org. Or contact Marie Gaudette, Executive

Director,The Midwest U.S.-Japan Association, 312-

464-0115; e-mail mgaudette@mlgassoc.com .

On April 23 (Chicago) and April

25 (Plymouth, MI), crowds of

business people learned how

Monozukuri concepts are

integrated into a number of

Japanese-owned and American

companies. (See related story

on Monozukuri on page 3.) The

Chicago event drew more than

200, while the Detroit-area

session attracted more than

200 attendees.

Above: Mitsuo Matsushita,

Chief Executive Officer of

Denso International America

provided the keynote address.

Above: Session speakers included

(from left) Jack Lavin of the

Illinois Department of Commerce

and Economic Opportunity;

Mitsuo Matsushita of Denso;Ted

Kawashima, of the JAPIA North

America Office; and Gary W. Klotz

of Butzel Long.

At left: Shinjiro Yamada, Chief Executive

Officer of INCS Inc. provided a session address.

At right: a session panel included speakers

(from left) Shigeru Kawada, Director, Business

Unit, Fluid System Div., N. America, Cooper

Standard Automotive in Novi, MI; Gary

Klotz, Attorney at Law, Butzel Long, Detroit,

MI; and John Winzeler, President,Winzeler

Gear, in Harwood Heights, IL

Ohio Lieutenant Governor,Lee Fisher visited Chief

Executive DirectorTakaTsuchiya at the JETRO Chicago

offices on May 14.From left,Debra Scherer,Assistant

Deputy Director,

Ohio Department

of Development;

Taka Tsuchiya;Lt.

Governor Fisher,and

Scott Kuehn,Special

Assistant for Economic

Development,Ohio

Department of

Development.

JETRO Chicago’s

Chief Executive

Director Takashi

Tsuchiya recently

visited Wisconsin

Governor James

Doyle, Jr.

At BIO 2007 in Boston, JETRO Chicago helped organize

the Japan Night reception on May 7. At the event,The

Honorable Kenneth Reeves, Mayor of Cambridge, Mark

Robinson, Acting President and COO, Massachusetts

Biotechnology

Council, and

Peter Grilli,

President of the

Japan Society of

Boston enjoy some

cold sake. JETRO

President Hiroshi

Tsukamoto is in

the background.

At a Japan Lecture Series event at Kansas

University, JETRO Chicago presented a well-

attended session on Anime. Below, from left,

Kelly Denewellis, JETRO Chicago; Elaine

Gerbert, KU Center for Asian Studies; David

Peterson, JETRO Chicago, KU Chancellor

Robert Hemenway; and program speakers Ken

Duer and Grant Moran.

---

Page 3

Contact JETRO Chicago

JETRO Chicago

is located at 1 East Wacker

Drive, Suite 600, Chicago 60601. Phone: 312-832-

6000; Fax: 312-832-6066; website: www.jetro.org

For general information, call the number above,

or for a specific inquiry, use the form at www.

jetro.org (select “Contact JETRO” from the menu

bar at left).

For Invest-in-Japan

information contact Kevin

Kalb, at kevin_kalb@jetro.go.jp.

For biotech information, contact David Peterson

at David_Peterson@jetro.go.jp

the oldest data available at JETRO Chicago,

there were 348 Japanese factories in the

US,out of which 55 were in the 12 Midwest

states (45 in MI,OH,IN and IL combined).

The Midwest’s share was 16% then.JETRO’s

most current data provides the following

corresponding figures as ofAugust 2006:2,077

in the US and 548 in the Midwest (467 in the 4

states),with a 26% share in the Midwest.

This shows the increasing attraction to the

Midwest during the last 20 years or so. In

particular,in the transportation machinery

parts sector the weight is as high as 43%.The

increment of inflow of Japanese factories in the

Midwest in the 1980s was actually triggered

by the start of the automobile production

by Japanese car companies.In 1981,the

Japanese government imposed voluntary

numerical restraints on automobile exports to

the US,after considering claims from the US

government and the Big 3 that the surge of

Japanese car imports caused damage to the US

industry. Therefore,Japanese car companies

needed to build assembly plants in the US,

Chief Executive Director

...from page 1

May-June 2007, Page 3

Midwest Newsletter

In this issue ...

• JETRO Around the Midwest ... page 2

• Sweet time at Tokyo trade show ...

page 2

• Director’s Dialogue: Introduction to

Monozukuri... page 3

• Ask JETRO: ICT Partnering Japan ...

page 3

Back to Page 1

An introduction to Monozukuri

How does JETRO’s ICT

Partnering Japan program

work?

The following is adapted from an article to be

published in the summer of issue of Innovation,

the quarterly design publication of the Industrial

Designers Society of America.

The early 21st century has brought a new

Japanese management methodology,the

practice of monozukuri,to the NorthAmerican

manufacturing community. In the 1990’s,

the terms kaizen,meaning“continuous

improvement,”and gemba,meaning “the place

where the truth is found,”jumped the Pacific

and entered into the daily production activities

among North American businesses. Beginning

with primarily Japanese automotive parts

suppliers in NorthAmerica,the introduction of

monozukuri is just beginning to ripple through

the domestic manufacturing base.

Monozukuri possesses an almost spiritual

meaning to Japanese manufacturers.In

Japanese,the words mono (thing) and zukuri

(process of making),when taken together

literally mean the process of making or creating

things.However,the literal translation does not

convey the true meaning.Monozukuri conveys

an intensity of commitment to improve product

quality and to the development of human

skills.These commitments cross a company’s

numerous divisions,even reaching a firm’s

alliance partners and supplier base.It can impact

the entire industrial process from research and

design to distribution.

Why now? The monozukuri concept is by no

means new,and has been utilized in Japan

since the 16th century. However,modern

day Japan is experiencing a demographic

decline that is accelerating the retirement of

manufacturing and design engineers.This is

creating an especially adverse impact on Japan’s

skilled workers,often referred to by many

Japanese companies as the “Meister”group.

These Meisters are very highly skilled workers

who have implicit knowledge accumulated

over the years to solve production issues and

improve product quality. The Meister workers

are considered most precious by a Japanese

company and are considered extremely valuable

See “Director’s Dialogue” on page 4

Ask

JETRO

?

Director’s

Dialogue

Hideki Sho, Director,

Business Development,

JETRO Chicago

Companies in the Information/

Communications Technology (ICT) industries

are invited to participate in the ICT

Partnering Japan Program, a free business

matching program designed to give you

direct access to leaders and innovators in

Japan’s technology industry.

Here’s how it works: JETRO will submit

your company’s information to Japanese

companies who are seeking new technology.

The Japanese companies will notify JETRO

of their interest, after which your nearest

JETRO office will contact you with the

Japanese companies’ responses and contact

information where appropriate.

Any (non-Japanese) ICT related company

who does not already have an exclusive

partner in Japan, is eligible to apply. Product

sectors may include but are not limited to

the following: software;WiMax; encryption;

home networks; broadband; next generation

mobile devices; RFID; MEMS; Biometrics;

advanced materials/nanotechnology.

To apply, you can obtain a program

application from JETRO Chicago. Contact

Kevin Kalb at 312-832-6000, or e-mail

kevin_kalb@jetro.go.jp.There is no

application deadline, as this program is

offered on an ongoing basis.

especially if they wanted to keep up with US

consumer demand.

Honda was the first Japanese company that

started car production in the US. It chose a site

in Ohio where it had built motorcycles and

started production in 1982. In the Midwest,

it was followed by Mazda in Michigan in

1987; Mitsubishi in Illinois in 1988; Subaru

in Indiana in 1989, and Toyota in Indiana in

1999.As you know, a car consists of more

than 20,000 parts and building a car requires

many layered supporting industries, including

die and mold, plastic injection, electronics,

etc. Japanese car assemblers procured parts

from US indigenous suppliers, but at the same

time they wanted their suppliers in Japan

to come close to their operations in the US.

Consequently, many Japanese auto parts

manufacturers came to the Midwest to supply

their products to Japanese car assemblers.

Japanese automobile related factories are

integrated and indispensable parts of the

Midwest states’ economies.They are as

American as apple pie.

---

Page 4

May-June 2007, Page 4

Midwest Newsletter

In this issue ...

• JETRO Around the Midwest ... page 2

• Sweet time at Tokyo trade show ... page 2

• Director’s Dialogue: Introduction to

Monozukuri... page 3

• Ask JETRO: ICT Partnering Japan ... page 3

Back to Page 1

Director’s Dialogue

...from page 3

in terms of creating improvements to manufacturing

processes and ensuring product quality.

The most important challenge facing monozukuri is

this:how the skills of the Meister group can be passed

to the next generation of a company’s workers,while

the company is continually adopting highly automated

production systems to compensate for their departure

from the company? After all,productivity and product

improvement are generated from human input,

not only from an efficient manufacturing system.

Equally important,how are the problems of inherited

production and design skills being addressed by a

company’s numerous suppliers?

In the 21st century,a manufacturer is only as

competitive as its suppliers,whether they are located

in NorthAmerica,China,Europe,or Japan. It is

this precise inflection point that many Japanese

manufacturers have realized,causing them to develop

“MonozukuriTeams”within the company to work

through these issues with their suppliers. All must

collaborate to obtain the mindset of monozukuri,and

in this light,the concept seems to be enabling closer

collaboration throughout the manufacturing supply

chain.

Guest View

...from page 1

MOBAC Show

... from page 2

colorful,lively,and fun display areas.

Of course,the name of the game here

(and,I suspect,the real draw for many

of the attendees) is samples,samples,

samples.Nearly every exhibitor,down

to the smallest booth,had some kind

of free bread,Japanese or Western

pastry,chocolate or other sweets

for the taking.The largest exhibitor areas were akin to professional

kitchen sets for television cooking shows,with many foreign bakers and

patissiers on hand to show their skills.

This year, MOBAC Show had 261 exhibitors, and over 60,000

attendees, 2,000 of which were international attendees. It seemed

that about half of the attendees were business people, and half were

members of the general public.

Though MOBAC Show is geared toward the domestic Japanese

audience, one could find some international exhibitors doing business.

For example, the Wild Blueberry Association of North America (WBANA)

promoted the health benefits and tasty flavor of wild blueberries,

grown only in the northeast U.S. and Canada.

I assisted with the exhibition booth of JPMA, the Japan Packaging

Machinery Manufacturers Association. JPMA is the only packaging

machinery-focused association in Japan, with 253 member

companies, including 155 packaging machinery manufacturers along

with 98 packaging material manufacturers, trading companies and

packaging-related equipment manufacturers. JPMA also organizes

the Japan International Packaging Machinery Show, called JAPAN

PACK, held every other year at Tokyo Big Sight.The next JAPAN PACK

will be held from October 16-20 of this year (www.japanpack.jp).

While in Tokyo, I also had the opportunity to visit JETRO’s new

headquarters, and to tour its state-of-the-art business library and

IBSC (Invest Japan Business Support Center). I encourage any of you

with plans to visit Tokyo on business in the future to please take

advantage of the fine offices and facilities available to use for free.

I recommend anyone interested in the Japanese food industry to

consider MOBAC Show a valuable experience.As a vertically integrated

show, it is an excellent opportunity to observe the various business

relationships in that market. It is also a great venue for test marketing

to the Japanese buying public.The next show will be in Osaka in 2009.

complete supply chain, from Tier 1 through

“n.” To assist executives from member

companies in this complex value chain,

OESA operates 12 peer group councils and

conducts 24 events per year. These council

meetings and events deliver value to the

membership, because OESA achieves its

mission by providing a forum for members

to address issues of common concern.

From the original equipment supplier

perspective,the automotive industry is

undergoing fundamental restructuring.This

is not just an economic cycle where everyone

is affected the same way. Many of the issues

facing the industry are common,where many

constituencies can work together to find

resolution.As an example,vehicle warranty

costs the industry $12 - 13 billion annually,

equivalent to approximately 2 percent of

sales. As the industry continues to globalize

its vehicle production and component

sourcing footprint,vehicles become more

complex and warranty terms become more

comprehensive and long term. It also

becomes increasingly important to have the

ability to prevent – or quickly and effectively

resolve – warranty issues so there is no

recurrence in same or future models.

Suppliers and vehicle manufacturers must

focus on consumer satisfaction,because an

emphasis on warranty cost reduction alone

will not achieve the objective. This different

focus or change in mindset will inevitably

address the issues of vehicle manufacturers,

dealers and suppliers,while at the same

time yielding consumer satisfaction – the

key to mutual success. A joint effort of the

Original Equipment SuppliersAssociation

and the Automotive Industry Action

Group is,in fact,addressing this important

quality issue. Leading the way are team

members fromToyota Motor Engineering &

Manufacturing NorthAmerica,Inc.,General

Motors Corporation,Ford Motor Company

and 15 OESA member companies.

At the seminar in April,JETRO Chicago

helped all participants to learn more about

monozukuri,including how NorthAmerican

and Japanese enterprises can better enhance

collaboration and sustain a culture of

manufacturing talent. Also in the mindset

of monozukuri,OESA is initiating two

new activities. First,OESA is planning an

event where NorthAmerican suppliers can

develop closer collaboration with Japanese

companies. This OESA event on July 24,

2007 will address how NorthAmerican

suppliers of excellence can work more

effectively to sell their innovative products

to new domestic vehicle manufacturers

via theTier 1 supplier. In addition,OESA is

launching a Product Development Council

where members will meet quarterly to share

their insights and experiences associated

with effective innovation and product

development.

Activities such as these are critically

important to sustain the competitiveness

of the global automotive industry, because

collaboration – a core principle of OESA

– cannot be realized without an active,

collaborative environment. That is why

OESA is so pleased to have opportunities

to work with JETRO Chicago to bring North

American and Japanese firms together.

For collaboration to be effective, it must

occur throughout the entire supply chain.

OESA, through its own activities and in

support of organizations such as JETRO

Chicago, is positioned to help members

in the automotive industry. This thinking,

truly, is in the mindset of monozukuri.