Bloomberg Businessweek

 ECONOMICS Bloomberg Businessweek August 20, 2018

31

the companyive years ago. He added more software

and sensors to production lines to cut waste. He also

let some people go. But the big innovation was start-

ing a consulting business, ISmart Technologies, to

teach other manufacturers how to streamline.

ISmart Technologies’oice is just a short walk

away on the other side of the parking lot, but inside

it’s a diferent world. There’s a Silicon Valley-style

open-loor plan with exercise equipment in a corner

of the room. During a reporter’s visit, several of the

venture’s 12 employees were having a meeting while

doing pullups and playing around with a balance

ball. Kimura’s goal is to eventually book as much

revenue from consulting services as from auto

parts. If electric vehicles and ride-sharing really take

of, he says, “a lot of our business will disappear.”

Further down the supply chain, where most

companies have fewer than 30 employees, there’s

less money to invest in new businesses and technol-

ogies. In 2017, a year when Toyota made a record

proit, 40 percent of Toyota City’s small manufac-

turers reported falling incomes, according to a local

government survey. Only 15 percent said they had

any staf doing research and development.

“We don’t have any hands to spare,” says

Kunihiko Kondo, who until May was the top oicial

at Toyota City Tekko Kai, a local machinery mak-

ers association.

Even at Jtekt Corp., a giant manufacturer of

power-steering components and drive shafts

part-owned by Toyota, President Tetsuo Agata

is uneasy. “We don’t know how we’re going to

deal with the new kinds of demand,” he said in a

January interview. “Everyone is worried.”

No economist has conducted a formal study of

the possible efects of an EV revolution on Aichi. A

recent analysis of Germany’s car industry by the

Fraunhofer Institute for Industrial Engineering

showed that if just a quarter of all vehicles were

powered by electric motors, the country would lose

9 percent of its auto jobs—and that was after adding

all the employment EVs would create.

A separate study sponsored by carmakers last

year argued that a combustion-engine ban being

debated by Germany’s parliament would imperil

half the industry’s workforce. Lawmakers are con-

sidering a 2030 deadline but haven’t committed.

Martin Schulz, an economist at Tokyo’s Fujitsu

Research Institute, says the job losses in Aichi would

be substantial, though probably not as large as the

2017 study suggests. He says auto parts makers face

something like what hit the Swiss watch industry in

the 1970s and ’80s, when electronics replaced gears

and springs in most wristwatches, putting hundreds

of traditional companies out of business and tens of

thousands of people out of work.

Which is why, back in Aichi, Kimura is building

a new business to replace the old. It’s only a matter

of time before Toyota starts ordering fewer of his

engine parts. “Whether it’s three years or ive years

from now, I’m not sure,” he says, “but it’s coming.”

—Connor Cislo and Nao Sano, with Jason Clenield,

Kevin Buckland, and Masatsugu Horie

THE BOTTOM LINE The advent of electric vehicles, ride-sharing,

and driverless cars will lead to substantial job losses in Japan’s

Aichi prefecture, which is home to 310,000 auto industry jobs.

 A factory worker

at auto parts maker

Asahi Tekko

AKIO KON/BLOOMBERG