Japanese auto makers have long seen keiretsu as a way to ensure quality over the long term by building trusted relationships with suppliers. The brand-name companies often own significant stakes in keiretsu parts makers and enjoy the right of first refusal for newly developed technology. Typically, they work closely from the design stage onward, sharing proprietary technology.
Those relationships began to change more than a decade ago when France’s Renault took a controlling stake in struggling Nissan and sent a Brazilian executive known as “Le Cost Killer,” Carlos Ghosn, to run it. Nissan disbanded its keiretsu and shifted to open-source bidding among suppliers, many based outside Japan. There has been some quiet pushback from industry officials in Japan who assert that any collusion was more of a bid for survival than for outsize profits. “Different suppliers work hand-in-hand and divide up large lot orders in a way that assures a steady flow of parts,” says one Japanese auto exec. Adds Toyota’s VP, “We feel a duty to protect our keiretsu. We are trying to incorporate more outside suppliers, but won’t give up on our own way of doing business in Japan.”
Discussion questions:
1. Why do the Japanese believe in the use of keiretsu?
2. Is a keiretsu “collusion,” or “a bid for survival?”