Daihatsu signals the phase out of the Japanese “keiretsu” system image

Japan’s Daihatsu Motor Co is well known for two things – it’s a Toyota Motor, the world’s largest carmaker, affiliate and has strong expertise in the field of small, affordable and economic cars.

Little is known, according to Kosuke Shiramizu, formerly Daihatsu’s chairman and now a company advisor that the business model of the automaker has changed over the years – signaling a departure from the “Toyota way” – known as keiretsu. The latter is an informal but very close business relationship between the carmaker and its suppliers, with frequent sharing of shares and personnel. The strategy was pioneered by Toyota and was swiftly adapted and adopted by its competitors, being seen as largely responsible across the world in the 1980s and 1990s for Japan Inc’s success. But today, decades later, the Japanese market is stagnating and the automotive industry sees dramatic shifts towards emerging markets, coupled with transformative revolutions – towards more eco-conscious cars, technologically driven models and the advent of the autonomous era.

According to Shiramizu companies now used tried and tested market mechanisms instead of relationship-based systems to compete for the shrinking profits. And analysts have also predicted the system’s death for years, but so far only Daihatsu and the French-led Nissan have gone off the beaten track. “The Toyota way is the high-cost way,” says Shiramizu, 74, as he even envisions the possible demise of both Daihatsu and later on Toyota if keiretsu is not succeeded by a new business model, as the global leader is struggling to cope with the dramatic shift towards emerging markets, including China.

Via Reuters