The End Of Japanese Guitars Was Also The End Of Japanese Cars, Sorta

Alert readers will notice that I now have two examples of the 1985-build Westone Spectrum FX. The new one is sort of showing its best side; the back's beat to all hell, the frets will need replacing, and at some point in the guitar's life it was vandalized with the addition of a Fender-style five-way swich. I have a fourth one waiting for me the next time I can get to Chicago, so this new one will probably be the subject of a resto-mod of sorts. The phrase "Porsche Lime Green" has been thrown about.

But speaking of Porsches, I've written before about how the Japanese guitar builders went from unbeatable to irrelevant within the space of two short years. It might be reasonable to ask why that collapse affected Japanese guitars but not Japanese cars. Why didn't the market for imported-from-Japan automobiles collapse the way the music-instrument market did?

The answer is simple: It did.

This chart shows the relevant numbers for the yen/dollar relationship in the Eighties. The Spectrum FX was a casualty of that relationship, skyrocketing from a solid-value $499 to a rather frightening $699 over the course of a year. But Matsumoku and SLM weren't the only casualties of the dollar's free-fall. It's often papered-over by modern admirers of the brand, but there were a few years in the Eighties when Fender guitars weren't manufactured in the United States. The entire production was sourced from Japan, and the company continues to get certain models (like the Marcus Miller Jazz Bass) from "Fender Japan" although the yen is now in the hundred-to-the-dollar range.

But that's guitars again --- and I promised to discuss cars. What was happening to Japanese automobile prices during that same time? Well, they went up:

In October the `86 cars were introduced with prices up an average of $420, or 4.3 percent, bringing the average base price up to $10,032 from $9,612 on the `85 models. With the latest increases, prices now have risen an average of $819, or 8.5 percent, on the `86s.

Among the six major Japanese producers, an analysis of prices shows that the average base price of a Toyota is at $10,240, up $270 from $9,970 last fall; Nissan is $11,233, up $574 from $10,659; Honda is $9,702, up $381 from $9,321; Mazda is $11,010, up $483 from $10,527; Subaru is $10,530, up $384 from $10,146; and Mitsubishi is $10,050, up $340 from $9,710.

And that wasn't the end of the price increases, which continued to outstrip inflation for the next couple years. By the time the official Golden Era Of The Japanese Sports Car started with the introduction of the Z32 300ZX in 1989, Japanese-assembled cars cost serious money. The FD-gen RX-7 sold for $50K in today's dollars and its competitors rang the register for the same or more --- the Supra Turbo was over forty thousand dollars in the same year that the Porsche 911 base-priced under sixty. The Corvette, which was lucky enough to gain some serious LT1-related mojo around that same time, found itself the fastest and cheapest offering in the showrooms and managed to do enough business to justify the money spent on the upcoming C5.

Of course, the Supras and RX-7s of the world did not the Japanese-car market make. The real action, as always, happened in the volume segments, and in those segments there was no American renaissance. Or was there?

This is where the law of unintended consequences comes in. The United States Government, through its previous actions, ensured that the Japanese automakers would survive the crash of the dollar. The Voluntary Restraint Agreement (VRA), that fabled bit of Reagan-era realpolitik that the Detroit makers felt was absolutely necessary to prevent a Japanese "takeover", had two major unintended effects on the car biz. The first was to send real-world transaction prices for Japanese cars into the stratosphere. Hondas, Nissans, and even Subarus carried twenty-percent additional dealer markup stickers for years. This bump in transaction prices boiled the frog, if you will, when it came to American expectations for Japanese-car pricing. It seems impossible to believe now, but once upon a time people bought Accords on price. They were cheaper than the Chevrolet Citation. But once people started paying more, that combined with the quality reputation of the cars to make them aspirational.

Some of the initial price shocks of the yen surge were borne simply by reduction in ADP stickers, which were all but gone by the late Eighties. The reason they were gone, of course, was the fact that the majority of high-volume "Japanese" cars no longer came from Japan.

The VRA created the transplant market from whole cloth and ensured that the Japanese had a solid manufacturing pied a terre in the United States when things got bad. This meant that volume models like the Accord and Stanza were minimally affected by the yen. The Japanese automakers by that time had firm control of their importers, so they were hedging their currency anyway and were braced in the short term for shocks. (St. Louis Music and Fender, of course, were doing no such thing. At the time, Fender wasn't much bigger than a major auto dealership, and SLM wasn't even that big.) They used that short-term cushion to expand manufacturing in the United States further.

By the middle of the Nineties, most of the Japanese manufacturers were in a position where only specialty models and low-volume range-fillers were coming directly from Japan. Those cars suffered from price shocks, but it was within the power of the OEMs to adjust pricing of those cars using the profits from American-built vehicles. (Or did you really think it costs less to build a Fit in Japan and ship it here than it does to build a Civic in Ohio?)

Which brings us to the world of today, in which "Japanese" sedans and SUVs and CUVs dominate their segments despite being nearly entirely American. My Accord Coupe was largely designed in this country. It uses an Ohio-designed V-6. Only the transmission is sourced from Japan, and that's only because I chose a manual shift. Meanwhile, Ford's building most of the Fusions in Mexico and General Motors is selling Korean cars at the low end, with the lowest of the low actually being built in Korea.

The VRA made it happen. Instead of protecting the American industry, it acted like a poor antibiotic, strengthening the very thing it was intended to destroy. But dream with me if you will, for a moment. Imagine that Japanese cars had been as politically unimportant and as unimpeded as Japanese guitars. Imagine that we entered the year 1985 with every single Japanese car in this country being, you know, actually Japanese.

Then double the price of bringing them in, across twelve months.

Honda, Nissan, and the others might have been hedged for a year, but you can't build a factory in a year. At the end of that year, they would have been faced with a situation where they needed to effectively double the prices of their products. Faced with that same sagging dollar, Porsche got away with doing that, although they took slightly more than a year, but they were operating in a market where people don't count every dime. But what happened to Volkswagen? Mexican assembly and crickets in the showrooms, that's what happened.

It could have happened to the Japanese as well. They could have simply disappeared, the way Peugeot and Renault disappeared. The way British Leyland disappeared. The way Matsumoku disappeared. And we could live in a world where the Big Three continued to hold sway over the most important automotive market in the world. Would they have responded to the challenge the way Fender and Gibson responded to the renaissance of the market for American guitars --- with quality, aggressive pricing, and customer focus?

Isn't it pretty to think so?