Japanese Fret Over Quality of Manufacturing

(Financial Times)

Toyota’s recall of 8.5m cars , trucks and sports utility vehicles in recent months has shocked Japan, home of manufacturing innovations such as the kaizen philosophy of continuous improvement and “total quality management”. But while there is little evidence that Japan has got worse at making things - in spite of fretting triggered by Toyota’s recalls - quality has become a big problem for Japanese companies. Japan’s challenge is that, while its factories still work well, the nature of products, the scale on which they are sold and where they are made have all changed.

Cars and gadgets have become more complicated, with engineers forced to specialise. “There are fewer and fewer people who understand how all the parts work together,” said Yoshinori Iizuka, a professor at Tokyo University. Cars now use more electronics and digital electronics use more software. “For electronics, quality is largely determined at the design stage. If there’s a flaw, it doesn’t matter how good quality control is at the assembly plant,” said Yoshiki Matsui, a professor at Yokohama National University.

On Monday, Sony told millions of PlayStation 3 users not to use their games consoles as it rushed to fix a bug. The warning appeared to be another blow to one of the biggest names in the electronics industry. Sony, which yesterday said it had resolved the glitch, believes its PS3 problem was due to a bug in the clock system that led consoles to act as if 2010 was a leap year. Toyota answered complaints about the brakes in its Prius hybrid with a patch to the software that controls them.

The problems highlight how Japanese companies have had to accept imperfections as products become more complex and their lifespan shorter, and mass-market consumers have demanded lower prices. “It’s extremely costly to make products 100 per cent defect-free,” said Mr Matsui. Read more here.

Related: Senator Suggests Banning Japanese-made Cars (USA Today)

U.S. Auto Dealers Looking North of Border to Snap Up Used-Car Bargains

(Bruce Constantineau — Vancouver Sun)

Consumer confidence could hurt new-car sales in final quarter of fiscal year

Bargain-priced “slightly used” cars will become a hot commodity in Canada as price-conscious buyers scoop them up and U.S. car dealers — armed with a stronger currency — prowl the Canadian market for deals.

That's the prediction from Canadian car-pricing expert Paul Timeoto, who expects a falling dollar to stir the interest of U.S. dealers in Canadian vehicles.

“The prospect of U.S. dealers coming up here to buy is looming very strongly now,” said Timeoto, president of online car-pricing-data firm CarCostCanada.com. “The dollar has only been below 90 cents US for a few weeks so it may take a little while for them to pay attention to our market. But it won't take long.”

He noted that until recently, Canadian car dealers took advantage of a strong Canadian dollar to buy used cars — less than one year old — in the U.S. and resell them in Canada.

“Dealers went down there and literally brought them back by the truckload and Canadians saved a lot of money that way,” Timeoto said. “But that situation has dried up now and the reverse is likely to happen.” Read more.

Canadians Bought 25,000 Cars in U.S. in October

(Canadian Press)

A soaring loonie pushed the number of cars Canadians purchased south of the border in October to nearly 25,000 – an increase of more than 100 per cent over the same month last year.

"We have been seeing a steady increase throughout 2007 and it really reflects the fact that the Canadian dollar has been appreciating against the U.S. greenback, making it more attractive for Canadians to go down into the U.S. and pick up a vehicle," said Carlos Gomes, senior economist with Scotia Economics.

According to Transport Canada, 24,873 cars were imported from the United States in October, more than double the number of cars – 12,289 – imported in the same month last year.

Simultaneously, the number of new car sales in Canada has declined from 158,394 in August to 121,000 in October.

Some experts say the number of Canadians who are holding off making purchases hoping to see lower vehicle prices here in Canada has added to that decline, which has prompted warnings that a steady rise of the loonie is hurting the economy.

However, that argument does not seem to stop tens of thousands of Canadians who cross the U.S. border every week looking for bargains.

And savings can be nowhere more significant than when purchasing a car. Many motorists who have purchased a car south of the border say they've saved in some cases up to $20,000.

But not all car bargain hunters have been able to take their newly bought wheels for a drive.

A new regulation by Transport Canada that requires that all vehicles be equipped with an electronic immobilization system means about a thousand cars without the anti-theft device purchased by Canadians in the U.S. may never be licensed.

While Transport Canada says the new regulation is here to stay, it admits some of those cars may have been purchased between Sept. 1, when the new regulation came into effect, and the time when the agency posted it on its website.

"There was a delay before the website was updated," Patrick Charette, a spokesman for Transport Canada admitted in an interview with The Canadian Press.

"I know that people clicked on the website and the car wasn't listed as not admissible. They bought the car and by the time they came back they said `Oops, now it's listed as not admissible."

The confusion arises from the fact that not all cars and models can be equipped with the anti-theft device.

To avoid having those cars held at the border, Transport Canada has authorized Canada Border Service Agency agents to allow owners to drive their cars home with a form clearly marked "not admissible."

"There's no guarantee that this car will ever be admissible and will ever be allowed to stay in Canada with plate and license," said Charette.

However, he said authorities were working to find a temporary solution.

"We want to make sure that we can get a balance between our safety approach and the situation obviously consumers are facing," Charette said.

But experts are looking for a long-term solution, which would be same vehicle standards in the U.S. and Canada.

"Most of the cars that we produce here in Canada are sent to the United States, so it would make sense that we would have a uniform standard . . . so that when you are assembling a vehicle you don't have to be putting in certain technical requirements for the Canadian markets as opposed to the U.S.," said Gomes.

"You would be able to produce the same vehicle for both markets."

Pitfalls in Shopping for Car Deals in U.S.

(Derrick Penner – CanWest News/Vancouver Sun)

Canadian Gerry Pyke is being stymied in his efforts to engage in a bit of freelance “free trade” by buying a new Toyota Tacoma pickup truck in Washington state and saving himself, in his estimation, about $6,000.

It’s not because there is a ban on purchasing and importing autos from the United States - with the Canadian dollar hitting par with U.S. currency, the number of Canadians car shopping across the border is skyrocketing.

The roadblock is Toyota’s regional distribution agreements, which forbid dealers in one region from selling to customers who are going to register their cars in another dealer’s territory.

That policy doesn’t sit well with Pyke, of Delta, B.C.. He said that Toyota enjoys the benefits of the North American Free Trade Agreement, which allows it to manufacture cars in Canada and the U.S. and ship them across the border in either direction without tariffs, “while not giving us the benefits of an equalizing dollar.”

It may be “unfair,” as Pyke puts it - but it’s not unique to Toyota.

Manufacturers can’t stop Canadians from buying used cars and importing them. But several manufacturers ban dealers from selling to customers who plan on registering their vehicles in Canada, preventing Canadians from taking advantage of lower list prices in the U.S..

Glen Ringdal, CEO of the New Car Dealers Association of B.C., said while cross-border sales may look attractive in price, they aren’t always easy to pursue, and come with their own pitfalls.

For new sales, he said, Canadians who buy in the U.S. often run into problems getting warranties honoured. Also, if they run into difficulties that require going back to the dealer, “they have a long way to go to see him.”

When buyers import cars, he said, they also have to spend money making modifications to ensure they comply with Canadian vehicle safety laws.

Along with Toyota, both GM and Acura refuse to let new cars sold in the U.S. cross the border into Canada. But Canadians should have no problems buying Fords, Subarus or Nissans for import.

At Skagit Subaru in Burlington, Wash., Canadian sales “have been a lot more active recently,” according to Joe Thurmond, the dealership’s sales manager. “We’ve seen a few (Canadians) each week.”

Randy Carlton, sales manager at Lynwood Acura, said he sees a lot of Canadians too, but directs their attention to the used-car side of his lot. Selling new vehicles across the border has always been a violation of his dealership’s sales agreement.

“We didn’t realize it until it was brought to our attention,” Carlton said.

The cross-border market is growing as the value of the Canadian dollar remains high against U.S. dollar. Canadians bought a record 112,826 cars in the U.S. during 2006, according to the North American Automobile Trade Association, and the trend is still on the upswing.

However, brokers in the business of importing vehicles for Canadians report that the manufacturers are getting more strict about clamping down on sales to Canadians.

“It is getting harder for people to buy new (cars to import),” Randal Reid, owner of Kelowna-based PNT Registered Importers Inc. “The manufacturers are stepping up to the program a little more, making sure there’s not a carte blanche influx (of cars into Canada).”

Reid said for Canadians, finding an American dealer can be hit or miss, and depends on whether they find a “friendly dealer.” He added that his company used to work with a friendly Toyota dealer in Montana until a while ago, when Toyota stepped in and stopped the practice.

Toyota U.S.A. spokesman Xavier Dominicis said the border ban has been a long-standing company policy.

“This isn’t a Canada-specific directive,” Dominicis said. “This is the way our distributorships work throughout the world.”

“The purpose... is the efficiency of allocation of product. Each distributorship has its own territory that it services, and you have to maintain the integrity of the territory, or distributorship.”

Toyota Canada spokeswoman Nicole Grant added that on pricing, “in the long run, it’s always our goal to be as competitive as we can in the marketplace.”

She added that often “unseen differences” between components in Canadian and U.S. models will influence some of the difference in price.

GM Canada spokeswoman Patty Faith said GM doesn’t encourage people to buy vehicles in the U.S. and take them north. GM won’t honour a vehicle’s warranty for six months after it crosses the border.

“We price to the Canadian marketplace,” she added.

While GM does monitor the exchange rate, “it’s not something we would look at in determining prices. Exchange rates are volatile. They go up and down on a regular basis. You wouldn’t have seen prices change the other way when the Canadian dollar was low.”

NAATA president Brian Osler said that, generally, manufacturers will tell their dealers in the U.S. not to sell new cars to Canadians.

There is a way for Canadian buyers to get around that rule. Osler said that there are brokers, or independent auto dealers, with operations based in the U.S. that will buy new cars from American dealers. Those cars are registered in the U.S., Osler said, effectively making them used cars that the broker or dealer can pass on to a Canadian buyer.

But Ringdal said many states “don’t have anywhere near the used-vehicle history reporting that we have here,” which can cause buyers difficulties.