Reckoning

by David Halberstam

  Many of Katayama’s dealers seemed to have been sent over by central casting for parts in a movie about how to fail at business. Katayama judged them on two things: how eager they were and whether they had enough automotive savvy to hold the trust of customers. For those he chose, he made the deal quite profitable, giving them between 18 and 20 percent of the gross profit. The American companies, by contrast, were paying dealers only 12 or 13 percent, which was one reason that they all preferred selling large cars, and why America both manufactured and sold more big cars than little cars. It was a habit based on the difference between 13 percent of $2000 and 13 percent of $5000. Katayama paid them considerably more partly because he had no alternative; good men were not knocking down doors to represent a company that no one had ever heard of from a country that most Americans distrusted. But it was also because he had analyzed American business and come to realize that the only way the company could prosper was if the dealers got rich. “If you make money,” he told them repeatedly, “we make money.” They were, he told them, his partners. He let them know he was grateful to be doing business in their country, and he readily acknowledged that they knew things about doing business in America that he did not. Tokyo, unhappy about the cut the dealers were getting, went along with Katayama, but reluctantly, never quite forgiving him for it, either for paying so much or for becoming so successful by paying so much.

  From the start, Nissan in Tokyo judged Katayama negatively. The managers remembered his old affronts, and, worse, they decided that he had gone American. That did not bother him. He was having too much fun. Even when business was awful, when the cars were bad and his prospects bleak, he had no regrets. He thought himself lucky. He had gotten his job largely because no one realized at the time how important a job it was going to be; it was for that reason he had evaded the veto power of his enemies within the company. He was lucky too, he thought, because, as it turned out, he was far better suited by temperament to do business in America than in Japan. Many Japanese, sampling the great personal freedoms of America, were unsettled, and they could not adapt to a country where decisions were usually made quickly. He, on the other hand, felt comfortable from his first day in America. In Japan, where he had always been perceived as incautious and somewhat aggressive, he made enemies; in America people responded to his openness and exuberance, and he made friends. Almost immediately, for the first time in years, he was enjoying his work. It was an odd definition of pleasure, perhaps, for sometimes he went house to house in the Japanese sections of Los Angeles trying to sell pickup trucks to Japanese gardeners. Many of them were among the city’s poorer citizens, but they were usually sympathetic and also alert to the possibility that the pickup truck was a good buy. If he was having a hard time himself in those difficult days, making only about $700 a month, he was nonetheless always aware that no one was impeding his way because he was a foreigner. His English was not very good; as one friend noted, he spoke a language of his own, a kind of Janglish. But he was so winning that many Americans reached out to help him. If the businessmen he approached could not do anything for him themselves, they found themselves trying to think of someone who could. He loved showing up at the opening of Datsun dealerships, loved the hoopla of these American ceremonies, a barbecue in Texas (he would inevitably show up in a ten-gallon Texas hat), a fish fry in Louisiana, or a Mexican dinner in San Diego. The Americans did not call him Katayama—that was too long and too foreign—but Mr. K, and he loved that too.

  Amid all the fun he was taking careful sights on the national market. Importers, he reasoned, would have to leave the center of the country alone for a while; it was a vast, underpopulated region of great distances where people needed big cars, and that was what the American companies did best. If the Japanese poured their energy and resources into every section of the country, they would surely fail. The Japanese should begin on the coasts, creating their beachheads there, slowly earning the money to spend on advertising, and only then expanding into selected areas of the heartland. “What we should do,” he told his American associates, “is get better and creep up slowly, so that we’ll be good—and the customers will think we’re good—before Detroit even knows about us.”

  He was absolutely convinced that the most important factor in gaining success was providing adequate service. The American market, he decided, was in some ways a prisoner of the country’s richness. The nation and the people were so rich that they simply did not really repair cars. That mentality governed Detroit, its dealers, and their more affluent customers, who might replace a part, but did not really want a car repaired. The system was designed to produce a car that would last about three or four years and then, when it began to deterioriate, would be shuttled off to a poorer segment of the population. This was marketing based on the premise of a steadily ascending middle class for whom a car must always reflect status. Because the companies and their dealers were doing so well, they had become casual about repairs and cavalier about service. They not only believed as an article of faith that they made the best cars in the world, they also believed that their customers had nowhere else to go. The companies and dealers did not make much of an effort to service cars, because they could just as easily sell a new car. Something new was always the answer in America. Katayama could not argue with that system. He knew the American numbers, and they were very good; clearly the system worked well. But he also knew that there were a good many less affluent Americans who were unhappy with it, resentful that they were not getting the service they needed. These Americans were potentially good customers. They included young people, elderly people, and some poorer people, all of whom badly needed durable, fuel-efficient cars. They were the victims of a dynamic that dumped the tired, broken-down, oil-burning vehicles—expensive to buy and even more expensive to maintain—on the very people who could least afford them.

  Already Volkswagen was doing well with these customers, the ones ignored by Detroit, providing a reasonably priced alternative source of good transportation, good mileage, and good service. Katayama, listening carefully to American voices in the early years, realized that Volkswagen customers believed that they were treated better, respected more, than they would be if they were trying to buy at the lower end of the American lines. (Generally the first thing that happened when they tried that was that some salesmen tried to talk them into buying something grander.) VW became the model for Katayama. At that time, 1961, when Katayama was just starting out, Volkswagen seemed invincible. It was at the height of its success (it would be another decade before it began to slip), and it was doing everything right, selling 177,000 cars a year, a remarkable 46.8 percent of the import market. The fact that the essential car remained unchanged for years meant that the repair and parts people developed great expertise. (What was eventually to become a burden was then still an asset.) The other imports he thought more vulnerable. The Renault was a good car, and it should have been doing well in America, but the dealer network was weak, and Katayama had a feeling that many of the Renault dealers were eating their advertising money—that is, not spending it, keeping it for themselves. The British had once been formidable competitors in the small-car market, and Katayama was surprised by their decline; but they were endlessly burdened by labor problems. His eye was on Volkswagen—if not to beat it, then at least to emulate it. The other European imports were ready to be taken.

  His problem, of course, was that the first Datsun in America was a disaster. It sold for $1616, and both Katayama and Kawazoe often wondered why anyone bothered to buy it. Kawazoe later recalled that he sometimes looked on as a young couple was deciding whether or not to buy the car, and part of him, knowing the troubles they would have with it, wanted to warn them off. Katayama and Kawazoe had direct personal knowledge of the car’s problems, for in the beginning theirs was truly a shoestring operation; if a Datsun broke down—and one often did—and everyone else was busy, the sales manager himself might have to drive the repair truck to pull it off the road. Katayama an
d Kawazoe, in fact, sometimes ended up doing the repair themselves. If worse came to worse and the car could not be fixed, they might even lend the enraged owner their own cars. Nor was it just the Datsun that was terrible; the first Toyota to enter the American market, at about the same time, was such a bomb that Toyota took it off the market, went back to work on it, and did not come back into the U.S. market until 1964. There were those who worked for Nissan in America who believed that Tokyo, realizing how bad its car was, had declined to put the company’s name on it, calling it not the Nissan but the Datsun, so that if the car failed, there would be less loss of face. Only twenty years later, when their cars were demonstrated successes, did the company go through the clumsy and expensive process of changing its American name. The worst thing about the Datsun was that its engine was simply too small. Its displacement was only 1000cc. Even the VW’s was 1300, and the smaller American cars in those heady pre-oil-crunch days were coming in with engines of 5000 and 6000cc displacement. With the Datsun’s little engine, its acceleration was poor, a real problem on the entrance ramps of the California freeways. Also, the brakes were weak. That was not all. The Datsun was designed for Japanese winters, which by and large were milder than American ones, and the car was very difficult to start in the winter, in part because the battery was too small. For the Datsuns in the northern sections on each coast, this morning sluggishness was a major problem. In the East, the Datsuns were selling mainly to blue-collar people who could not afford better cars. Generally, these were people who got up early, when the engines were coldest and the batteries weakest. Masataka Usami, one of the Nissan executives, who lived in Greenwood Lake, New Jersey, and whose own car would not start in cold weather, reported back to his support team in Tokyo that Nissan could not have a car that started only two out of ten times. Tokyo was not very helpful. The alleged starting problems were impossible, they insisted, since they had checked and Hokkaido—the northernmost of the Japanese home islands, where Datsuns started without difficulty—was just as cold as New Jersey. Usami replied that in Hokkaido those few Japanese who were privileged to own cars lovingly put blankets over the hoods every night. Tokyo asked why Americans didn’t do the same thing. Usami explained that whereas to the Japanese a car was a privilege, to Americans cars were an appliance, and they expected them to work without pampering. Soon a study team of engineers arrived, and Usami led them to Greenwood Lake, New Jersey. There, starting at four every morning, everyone freezing cold, they would check the effect of the temperature on the battery, the voltage levels, and the viscosity of the oil. They did this day after day for an entire week. The engine almost never started. Finally one of the Tokyo engineers turned to Usami and said, “You know, Usami-san, I think you may be right.”

  Katayama’s attempt to get Tokyo to upgrade and Americanize the car was a constant struggle. Even on the small matter of the floor carpets there was a problem. The Japanese tended to clean their cars incessantly and exhaustively and thus preferred to take the floor mat out, the better to pursue every last speck; the Americans were more casual about cleaning their cars, at best giving the floors a quick vacuuming, and they wanted the mats permanently attached, an attitude the home office found inexplicable. Whatever Katayama asked for, whether it was a more powerful motor, better acceleration, or better brakes, Tokyo resisted. What the Americans wanted above all, power and particularly styling, the Japanese were not yet ready for. Americans liked styled, hot-looking cars, while for the Japanese, to whom transportation was an end in itself, something more functional, a simple piece of machinery, was quite adequate. Katayama knew Tokyo had to change, that Nissan would never be successful in America until it understood the importance of styling. Virtually everything, in fact, had to be changed, and changing anything was going to be a fight. This meant Katayama was constantly assailing the bureaucracy. He knew that every time he asked for something new he was making enemies. He was not, however, without allies. Mostly they were engineers, who understood what he wanted, liked the challenge, and wanted to improve the cars. But even with their support, he was going against the grain. In 1961, the year after he arrived in America, he estimated that it would take until 1970 to get the right car for the American market, one with at least a 1600cc engine, real performance, and some style. He was off by a year. The first really viable Datsun arrived in 1969.

  What saved the company in the meantime, though Tokyo was loath to admit it, was Nissan’s little pickup truck. It was small, it was inexpensive, and, unaffected by the Japanese weaknesses at the time such as lack of style, it exploited the singular Japanese strength—durability. Even more significant was the fact that, as Katayama soon learned, in Western America and especially California the pickup truck had a function different from the one it had elsewhere. Here it was both truck and passenger vehicle. Many Americans worked their small patches of farmland for an hour or two in the morning before driving off to a factory job. Some who no longer worked on the farm kept a pickup nonetheless as if to sustain their sense of self; rural they had entered this world, and though they might no longer work the land, rural they could believe they had remained, if they owned a pickup. Some older Americans preferred pickup trucks because they held up well; some younger ones liked them because of the image of ruggedness they projected. (Unlike most Americans, whose car conveyed their status and for whom the biggest and fanciest car signaled the greatest prestige, there were those who enjoyed the antistatus in having a little pickup truck parked in front of the house.) People who owned small companies, maybe just one or two employees or maybe just themselves, needed a pickup for work and liked the Datsuns because they were cheap and tough. Many of Datsun’s best dealers signed up in the early days not because they wanted that ugly little car or because they were so prescient that they knew that this odd Japanese company previously unknown to them would do everything right and produce an increasingly sophisticated auto, but because they knew that the pickup truck was a winner in California.

  The pickups sold right from the start. They sold without advertising. They sold because the men and women who came in to look at them could sense that they were well made. They sold because the word-of-mouth was phenomenal. These funny little trucks, owners told their friends, lasted forever, and nothing ever went wrong—they were a real buy. The sales were so good that Nissan’s West Coast office soon had twice the total sales of the East Coast. In 1963, for example, a critical year, when Datsun was just beginning to get a foothold in the American market (late that year it moved into the top ten importers in terms of monthly sales), the western division outsold the eastern 2781 vehicles to 1151. Of the western division’s total, 1597 were small trucks.

  Tokyo was ambivalent about this desperately needed success. Tokyo had wanted to arrive in America and be classy and sell cars and make a reputation; it had not wanted to come and sell trucks. Yet here were the trucks doing better than the cars. So when Katayama kept talking about the need to improve the trucks, management refused to listen. Katayama was trying to tell the home office that more than half of these Datsun trucks were used for commuting, that they were in effect being used as cars, and that the market would explode if Nissan would simply upgrade them a little. But Tokyo would not budge. A truck was a truck. Katayama was relentless. If only, he asked, they would add some decent upholstery, better springs, perhaps even an air conditioner. The answer was always the same: A truck was a truck, and Americans had no right to use them to drive to work, particularly to offices. It was wrong of them. The trucks should be used for carting heavy goods around. Katayama suggested certain changes that would permit owners to convert them rather readily for family use, and again Tokyo vetoed him. Families had no business riding around in pickup trucks. Japanese families that could afford cars would never be seen in a truck. Katayama sometimes wondered how many more pickups might have sold if Tokyo had listened. Even so they carried Nissan in America from the beginning.

  What also helped carry the company in those days was Takashi Ishihara. He
too, like Katayama, was in a form of genteel exile, although he was a far more senior and powerful figure in the company, the heir apparent at one time to Kawamata himself. Until very recently he had been the rising star of Nissan, the best of the new generation of management, the most promising young executive in the company. He had been made a director at an exceptionally young age, and he was considered a sure future president of Nissan. The younger managers in the company especially admired him; to them, he was a modern, confident executive, quick to make decisions, and not a creature, as Kawamata was, of the bank. His generation considered itself the first auto generation in the company—as opposed to those whose experience was primarily elsewhere and who were never entirely comfortable in their decision-making, since they made decisions according to lessons learned elsewhere. “This company,” Asahara once told his son, “will not be a real business until Ishihara and his generation take over.”