Will Japan’s Auto Industry Recover?

Will Japan’s Auto Industry Recover?

One of the biggest challenges now facing companies in coping with the global economic recovery is the damage done to one of the world’s most major economies.  The full extent of the economic impact of the earthquake, tsunami and ongoing nuclear crisis in Japan is only now becoming apparent, with hundreds of factories shut, rolling blackouts planned and predictions from economists that the country is about to nose dive into recession.

Japanese tsunami damaged car yard

Japanese tsunami – damaged car yard
Major companies including Toyota, Nissan and Honda shut down all domestic production for several days in to assess death tolls, damage to plant and equipment, and conduct emergency safety reviews.  The rolling impact this shutdown many have on those companies’ plants overseas is said to be minimal, but only time will tell if any effect will be felt in Nissan Sunderland for example.

The Kobe earthquake had a larger immediate impact because the epicentre was at confluence of the country’s rail and road transportation networks.  The Sendai quake may not have impacted urban Japan very much, but it has affected a far larger area and potentially has far wider implications.  Japan’s economy is export-led and with such a large budget deficit and very little room for manoeuvre by the central bank as interest rates are already pretty close to zero, it will be imperative to get the factories and ports open again.  Perversely, the required amount of government spending on restoring infrastructure may well be good economic news in the long run for Japan although patriotic Japanese will repatriate their savings and investments to fund it so it may be bad news for the west.  One of the biggest losers as far as the UK is concerned could be the insurance industry which has a high exposure in Japanese markets as the claims start to roll in.

Despite the dire situation at present, many Japanese auto firms are planning for the future and recovery by taking the opportunity to completely re-assess their management strategies.  It’s as if the tsunami has swept away outmoded or inefficient management practices as well as plant and infrastructure.   Cultural diversity training and a working knowledge of the language (the two are not the same) has assumed an increasing importance in recovery plans.  Trading agreements, the lifeblood of the Japanese economy, involve a need to understand trading partners’ cultures and overcome communication barriers to negotiate those agreements.   This sea of information has an impact on what many now call “matrix management”.

This matrix organization is often imposed through circumstance rather than design as an unplanned consequence of business complexity, multiple reporting lines and global working practices. The Japanese people in general already have a feel for the ambiguity and ever changing impermanent nature of their physical environment.   Aesthetically, fragility is treasured in Japanese art because of its ephemeral nature.    If Japanese managers know just how uncertain and unpredictable the very ground under their feet can be, they are equally well placed to understand and cope with the change and ambiguity that characterise today’s global trading environment.   No set of managers in the world can have a better understanding of change and uncertainty than the Japanese.  Harnessing that awareness and knowledge will be as important to the recovery of the Japanese auto industry as infrastructure investment.

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