Japan's keiretsu network of parts suppliers - which was once seen as a corporate wall shutting out American manufacturers - has grown porous.
Earlier in this decade, frustrated U.S. companies sat by and saw hundreds of thousands of new Japanese-nameplate vehicles going into production in this country. But many suppliers found themselves left out of the new business while the new automakers relied on parts either imported from Japan or assembled at one of 300-plus new Japanese-owned parts factories here.
There were cries of unfair business practices. There were demands for congressional investigations. And the historical, financially interlocking relationships between Japan's automakers and suppliers became the target of trade quarrels between Washington and Tokyo.
But talk of the keiretsu system does not evoke the same response today. In North America, Japanese 'transplant' automakers are earmarking more contracts for U.S. manufacturers. Traditional U.S. suppliers now account for 14 to 16 percent of Japanese automakers' component purchases in North America, according to the Motor Equipment Manufacturers Association, a trade group for the U.S. industry. That is more than twice the market share the U.S. suppliers claimed just four years ago.
Now the association aims at a share of 25 to 30 percent - an ambitious target, given the ongoing global consolidation of suppliers.
'Some (American) companies are making significant progress, while others have tapered off,' says Chris Bates, MEMA's vice president of international affairs. 'We don't feel we are being stonewalled. We want to make sure that (sales) continue to grow.'
Although recent international currency fluctuations helped Japanese suppliers, long-term trends now appear to favor North American manufacturers.
Japanese automakers like Toyota and Honda have begun to design vehicles in the United States. For example, the Toyota Avalon was designed largely in the United States. That means much of the engineering is done here, giving American suppliers a better shot at contracts.
'On the Avalon, an awful lot of design input came from North America,' Bates says. 'We tend to do better in those situations.'
BUT NOW WHAT?
The next step, Bates says, is for American manufacturers to supply Japanese automakers outside North America. Realistically, only the larger global suppliers are likely to win much of that business.
One hopeful supplier is Tenneco Automotive, the Lake Forest, Ill., maker of exhausts, shock absorbers and other chassis components. In the early 1980s, Tenneco was sharply - and publicly - critical of the Japanese automakers' record in signing up U.S. suppliers. Tenneco's president during the late 1980s and early 1990s was John Reilly. Reilly headed up a parts industry executive committee charged with advising the U.S. Trade Representative on how to deal with the Japanese on automotive trade negotiations.
But over the past five years, Tenneco has achieved a fourfold increase in sales of its struts and exhausts to Japanese automakers. The Japanese automakers now account for about 15 percent of Tenneco's total sales of struts and exhausts, up from virtually nothing in 1990.
In the end, breaking into that once-closed market took more than complaining. To do so, Tenneco had to find some Japanese allies.
Tenneco signed a technical agreement with Unisia-Jecs Corp., a keiretsu supplier to Nissan, to make shock absorbers for that automaker. Tenneco's Walker division signed an agreement with Futaba, a supplier in Toyota's keiretsu family.
In both cases, the agreements gave Tenneco the ability to manufacture components designed by its Japanese partners. The arrangement gave Toyota and Nissan more confidence in Tenneco's expertise.
Now Tenneco hopes to win contracts to supply Japanese automakers in Japan. That's a tougher nut to crack, admits Mark Frissora, Tenneco's senior vice president of North American original equipment. Tenneco probably will try to form a joint venture with a Japanese supplier, perhaps with Futaba, Frissora says.
'If you penetrate the market in Japan, you can do that only through a joint venture with a keiretsu partner,' Frissora says. 'If we help them in Europe, they can help us in Japan. It's tit for tat. We are hoping for a deal this year.'
To break into Honda's business, Tenneco took a different approach: It relied on hard work and research. Before it had a relationship, Tenneco performed, at its own cost, an engineering analysis of the 1991 Accord's exhaust system. The U.S. company then approached Honda with suggestions - offered without charge - on how to cut the system's costs and improve its performance.
Honda rewarded Tenneco with a contract to supply an exhaust pipe.
Yet Honda was somewhat easier to approach than other Japanese automakers, Frissora says. Honda's North American manufacturing operations have considerable autonomy, giving its U.S.-based engineers 'a more powerful voice,' Frissora says.
But more important, Honda does not have the comprehensive keiretsu network of suppliers that bigger Japanese automakers have. That is partly because Honda is a relative newcomer to the auto industry. Honda, originally a motorcycle manufacturer, only added cars to its product lineup in the 1960s. And as a late arrival to the industry, Honda had to rely on existing suppliers rather than establishing its own network.
In the United States, Honda resolved to create a network of local suppliers, but it moved deliberately. First, Honda concentrated on raw materials, looking for U.S. suppliers that could meet its quality goals. Then it began purchasing finished components from U.S. suppliers.
NOT SO FAST
It's a slow process, but suppliers like Tenneco are beginning to win business.
'We are pursuing a regional strategy,' says Honda spokesman Tak Sonoda, referring to the automaker's world regions: Asia, the Americas and Europe. 'Each region is self-reliant, so we need good relations with local suppliers.'
All automakers, Japanese or American, need access to the best technology available. If a keiretsu supplier does not have that technology, it may lose contracts to American competitors, says Greg Janicke, an analyst with CSM Corp., a consulting firm in Lansing, Mich.
But there may be limits to the amount of business American suppliers can hope to win.
At the request of the Japanese automakers, keiretsu suppliers spent heavily to set up production in North America. Companies like Toyota and Nissan are mindful of the risk their suppliers took.
Japanese automakers 'are not going to open all contracts to the lowest bidder,' Janicke predicts. 'There is a considerable amount of loyalty. They will not abandon their suppliers.'