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Like 1950s Detroit, Boeing Is Underestimating Emerging Japanese Competition
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At a welcoming banquet in Japan in the 1980s, Ford Motor chairman Philip Caldwell received a memorably double-edged compliment. “There is no secret about how we learned to do what we do, Mr. Caldwell,” said the head of Toyota Motor , Eiji Toyoda. “We learned it at the Rouge.”

Toyoda was referring to Ford’s fabled River Rouge plant in Dearborn, Michigan. In the early days of Japan’s rise, the Detroit auto companies had been famously complacent in helping information-gathering Japanese engineers. Nowhere did the Japanese learn more than at the River Rouge complex.

Now history seems to be repeating itself – this time in America’s ultimate manufacturing stronghold, aerospace. The politico-economic dynamics are déjà vu all over again. The industry is officially “targeted” by the Japanese government. And U.S. corporations seem to be playing their allotted role to a T – as condescending, complacent buffoons.

Specifically Boeing has been transferring key technology to Mitsubishi Heavy Industries (MHI). The “heavy” in MHI’s name reflects the company’s nineteenth century origins in shipbuilding but is a misnomer these days in that the company is one of the most formidable behind-the-scenes players in aerospace.

MHI’s hitherto most important claim to fame is as supplier of the wings for the Boeing 787. The 787 is the most sophisticated passenger jet ever flown and its made-in-Japan wings are its unique selling proposition: they are among the world’s strongest and lightest and thus ensure that the plane achieves almost unheard of fuel efficiency. Much of the basic technology was transferred to Mitsubishi by Boeing. Now that that technology has been improved on by Mitsubishi, the Japanese will almost certainly outclass Boeing going forward.

This weekend brought further news of Boeing’s folly. Mitsubishi has launched its long awaited regional jet, which is available in both 70- and 90-seater versions. If press reports are to be believed, Boeing has helped Mitsubishi develop the plane. Certainly the new plane poses immediate, potentially lethal competition for existing leaders in regional jets such as Bombardier of Canada and Embraer of Brazil. Mitsubishi is claiming a 20 percent advantage in fuel economy and its planes will also provide passengers with more legroom thanks to better seat design. Longer term it can be assumed that just as the Toyota Lexus emerged to challenge the Cadillac, full-size Mitsubishi jets will emerge to challenge even Boeing’s super-advanced 787.

Why would Boeing transfer technology to a potentially formidable future competitor? It is a good question. After all this is not the 1950s anymore, and American manufacturers have long since learned not to underestimate the Japanese. In fact I am not aware of a single U.S. industry targeted by the Japanese that did not in the end succumb to Japanese competition.

The question is even more pertinent given that much of the technology being transferred is not really Boeing’s to dispose of. Rather it belongs to the American nation. The fact is that its development was funded by the U.S. taxpayer.

Eamonn Fingleton is the author of In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key To Future Prosperity (Boston: Houghton Mifflin, 1999).

(Republished from Forbes by permission of author or representative)
• Category: Economics • Tags: Boeing, Japan 
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