ince the end of the recession, they continued to see their market share erode through 1989, at which time it began to stabilize.6 By 1989, the foreign manufacturers' share of the American new car market had reached 32 percent. In 1990, the foreign market share increased to 34 percent; however, in 1991, it has fallen back to 32 percent. The most intense foreign competition is provided by the Japanese manufacturers, which hold a combined share of the American market approximating 25 percent.7 With data for the luxury segment of the market omitted (the Japanese did not begin competing in this segment until 1989), the Japanese share of the American new car market reached 28 percent by 1988.8
In the mid 1960s, the foreign share of the American new car market was low, and the share of the Japanese manufacturers was minuscule. Japanese products of all kinds, not just automobiles, did not enjoy a high level of confidence among American consumers with respect to either product quality or design innovation. The Japanese, in all industries, set out to change their images among American consumers. Strict attention to quality control, high quality/price ratios, and a can do philosophy brought success for the Japanese automobile manufacturers in the American market. When the energy crises struck in the 1970s, American manufacturers said that they needed years to meet tough fuel efficiency standards. The Japanese manufacturers, by contrast, said that they could meet the standards, and proceeded to do so in record time. When air pollution standards were toughened in the late 1970s, the Japanese manufacturers met them within a year. The American manufacturers asked for delay after delay, pleading the compliance would result in bankruptcy.
In effect, the American automobile manufacturers told the American consumer to buy what they built. By contrast, the Japanese automobile manufacturers attempted to build what the American consumer w...