Manufacturing is a commercial venture, and the business climate certainly shapes the extent of advancements in manufacturing processes. Although research and development may place a technology on the shelf, there must be an economic impetus to convert it to production reality.
In general, the business climate in Japan has not been good. During 1995, vehicle production in Japan fell 3.4% to just under 10.2 million units. It was the fifth straight year of lower production at home. Exports of the big five automakers also dropped 15% to about 3.8 million units. The fact that the auto industry consumes approximately 80% of Japanese casting output helps explain the current low level of casting capacity utilization. At the time of the WTEC visit Japanese foundries were running at between 60% and 75% of rated output.
As in the United States, particularly in difficult times, the original equipment manufacturer turns to his supplier for cost reductions. Many of the firms visited in this study characterized "unreasonable price reduction" demands as being the norm rather than the exception.
Japan's casting industry report a nearly 100% growth of aluminum usage was between 1985 and 1990. It was during this period that Japan voluntarily converted to lightweight engines, well before the United States. They consider their conversion to lightweight materials essentially complete and are no longer willing to pay a premium for weight reduction. Hence, little additional aluminum foundry capacity is being added, and there is less opportunity to install innovative technology concurrent with the new capacity. Therefore current progress in Japan is limited to their more traditional internally driven continuous improvement process.
Conversely, the U.S. casting industry still is riding a wave of conversions from iron and steel to aluminum, mainly driven by projected future CAFE (Corporate Average Fuel Economy) requirements by the government. These conversions have necessitated that new capacity be built and have created an opportunity to test new processes for light metal applications.
The ferrous sector of the Japanese industry is also suffering mainly from under-utilization of existing capacity and the realization that unused capacity will probably not be needed in the future since high labor and energy costs will drive more automotive assembly operations offshore. The trend is to transfer technology and produce vehicles in the served market locations and lower cost countries. The domestic casting producers are expected to follow the offshore migration of their customers.
Japan will however utilize its existing capacity to produce different products; a number of these thrusts are discussed in Chapter 5 of this report. Japan will continue to be competitive, and the United States has much to learn from the Japanese approach.