The Quality Deficit Letters

Letters in response appeared in May 1992 (Vol.15 No.5)

Trade imbalances & high-end hi-fi

Editor: In light of the recent discussion about trade imbalance and the insult and counter-insult with Japan, I find that there is a parallel situation with regard to high-end audio. I don't mean to imply that Dan D'Agostino and Lew Johnson should go to Japan with President Bush to ask the Japanese to buy more amps, but if the American (high-end) audio industry as a whole doesn't watch it, they might be in the same predicament as the auto industry. It seemed like only a few years ago that GM (makers of Corvettes and Cadillac) were sniggering at the feeble attempts by a motorcycle manufacturer (Honda) to build cars. Seemingly overnight, they won the Formula 1 championship, and [now] sell the most compact sedans.

The whole high-end audio community, the manufacturers, and Stereophile should concentrate their efforts on popularizing the idea of "hi-fi" and "hi-fi" components (footnote 1). The High End shouldn't shut itself off and become a club community of the upper-class elite. For example, Stereophile shouldn't have a debate about which amps could drive the Apogee Divas. It should instead ask Apogee why their woofer inverts phase and is hard to drive by an average-to-good (ie, affordable) amp. Stereophile shouldn't applaud a company that could produce a $3000 D/A converter and consider it a good deal. Good deal for whom? Those wealthy customers in Taiwan won't be affected, but what about those laid-off yuppies back home? How many of us, for instance, have the discipline to brown-bag our lunches for three years just so we can buy a decent tube preamp?

I think that the survival of the high-end industry is in the widening of the market; so that, for instance, a 200W Mark Levinson could be sold for three to four times the Adcom counterpart instead of eight times. Also, more companies need to put more effort into R&D. It is refreshing to hear that Theta could produce cheaper and better product, for instance. It's also important that the (American) industry shouldn't feel so superior that "they" can never catch up. Remember, just a few years ago we thought that the Japanese couldn't produce a decent phono cartridge. Now where are Shure and ADC in comparison? (footnote 2)
Greg Juhadi
Honolulu, HI

The quality deficit

Editor: I want to concur in LA's opinion of The Quality Deficit as expressed in "The Final Word" in February 1992. LA's insights cut right to the heart of the matter. The Japanese have worked a major industrial revolution in the electronics and automobile industries. In electronics, they did it because we let them—and perhaps even helped.

The transistor was developed by Bell Laboratories here in the US. The Japanese took the idea, developed and expanded on it, and outdid us at our own game. Then, by their predatory pricing policies, orchestrated by their government, or perhaps with its tacit approval, they made it impossible to compete with them. The result: the American transistor industry was driven to near extinction (footnote 3).

The automobile is quite another matter. The pent-up demand for automobiles at the end of World War II allowed American automobile manufacturers to sell anything and everything they could turn out—and at a premium. They charged for the privilege of buying one of their pre-war–engineered cars! As a result, they got into bad habits. Because the consumer would accept anything, that's what the industry turned out. If they could sell it, why not? The law of supply and demand worked then, as it's working now. The only difference is that then, we liked the results. Now, we don't. But, the economic law is the same.

As LA correctly pointed out, the Japanese studied the American market and improved their product. Because of their commitment to quality, they captured the American consumer because the word got out that for a product to be made in Japan was no longer a derision, but rather an accolade. Quality shines wherever it is created or exists. It is its own attraction and justification.

Of course, the Japanese and the rest of the world buy American products. But only the best. There are a handful of names that come to mind, including the ones you mentioned in the high-end electronics business.

The laws of economics work on a world scale, and on us individually.
Irving Marmer
Boston, MA

Cancel my subscription!

Editor: I was very upset after reading LA's "Final Word" column entitled "The Quality Deficit" [February 1992]. I'm sure that a good deal of my sensitivity on the issue stems from my being a not so wealthy person employed in the American auto industry, but I thought his comments were callous and very untimely.

I, too, was embarrassed by President Bush's recent trip to the Far East. His motivation for the trip was purely political, and it was a complete waste of taxpayers' money. Taking along a herd of Detroit executives was like sending a herd of Stereophile reviewers to the AES convention.

It is time to let the public know that when they make a choice to purchase any imported product over a domestic equivalent, they are hurting our country. US industries generate over ten times the tax revenues than does the sale of an import. US industries also generate supplier- and service-industry ripples throughout the country that multiply the benefit. These revenues are the basis for our roads, health care, defense, social security, etc. I'll wager that one out of every five of your subscribers are, at least somewhat, dependent on the US auto industry and its employees.

You say that the Japanese didn't have a huge head start, but they have had many advantages. The US financed their recovery after World War II. You stated that Toyota had no automatic toehold in the US; but they did, and still do, have the total support of the Japanese government on both sides of the Pacific Ocean.

Talking about the high quality of the Japanese auto is like talking about the high quality of Japanese mid-fi stereo components. They start most of the time, are inexpensive, are efficient, and require little maintenance. But would you say that a Toyota is a high-end car, especially when compared to Jaguar, Mercedes, or even Lincoln and Cadillac? That hasn't been my experience.

J. Gordon Holt would never have published anything like this article when he was in control of Stereophile. I hope he isn't too disappointed as he watches Larry Archibald, John Atkinson, and the rest of your crew destroy the integrity that he worked so long and hard to establish. There is a much larger issue at stake than LA's little article would imply, especially at such a time of recession. I can't believe that you actually published such drivel. Please cancel my subscription immediately, and refund any unused portion of my subscription cost.
Greg Salatin
Anderson, IN

Inaccuracies & oversimplifications?

Editor: I have just finished reading LA's column in the February issue, and I am stunned at the number of inaccuracies and oversimplifications in this column. In an effort to set the record straight on the American auto industry, I offer the following arguments.

First, the reason that US cars hardly sell in Japan has more to do with Japanese industrial politics than with the inherent value of the products. In a recent Detroit News article (copy enclosed), L.R. Windecker discussed restrictive trade practices dating back to 1936, when the dominant auto producers in Japan were Ford and GM. The Japanese government tried to tax the US producers out of the country in 1936, then forced them out in 1939 by refusing to grant them production allocations. In 1952, when foreign producers attempted to enter the postwar Japanese market, the government refused to grant them market access, stating that the domestic industry had to be protected from superior imported products.

Although the government relented in 1955, the Ministry of International Trade and Industry (MITI) continued to limit imports and restrict foreign production in Japan. This pattern of MITI-inspired protectionism persisted into the late 1970s, long after the Japanese industry had matured. Faced with such poor prospects in Japan, the Big Three concentrated on the American and European markets, where the legal barriers to producing and selling cars were less daunting. Had Ford and GM been allowed to resume Japanese production in 1952, they would probably be fully competitive in Japan, as they are in Europe.

Second, LA's perception of the quality difference between US and Japanese cars is at least five years out of date. Although Japanese cars enjoyed a large quality advantage over US brands in the early 1980s, domestic producers have since narrowed the gap significantly. The industry's internal quality surveys still show a slight quality gap between US vehicles and their Japanese counterparts, but they also show that American quality is improving at a faster rate. Third-party surveys such as J.D. Power's confirm the industry data. LA's statement that US cars "break much more often" is simply wrong, and betrays a lack of familiarity with today's American cars.

Finally, his suggestion that US auto executives look to high-end audio producers for tips on selling in Japan is ludicrous. Unlike US automakers, the producers of high-end audio were not forced by Japanese law to set up their own retail distribution networks, but were allowed to market their products through stores that also handled Japanese brands. There are also fewer serious Japanese competitors in high-end audio than in the automotive mass market; with few exceptions, the best Japanese equipment cannot match the sound quality of Krell, Mark Levinson, or Audio Research. If Sony (or any other Japanese supplier) were to design and build a true high-end product line at a lower price than imported equipment commands, the American High End would have a far tougher time selling in Japan.

I suggest that LA confine his future comments to audio equipment and recordings, which he discusses with wit and authority, and leave auto-industry commentary to Car and Driver.
Donald P. Bilger
Livonia, MI

Well done, Larry!

Editor: Very well done "Final Word" in February. We need this kind of thing said more often.
John Chancellor
New York, NY

Thank you, Mr. Chancellor, but I also appreciate the critical letters. Frankly, I'm surprised there wasn't more of an outraged response—certainly, had Stereo Sound (Japan's leading hi-fi magazine) published an article sharply critical of the sound of Japanese electronics, there would have been a lot of angry letters in their pages.

I am sympathetic with Mr. Salatin. If Stereophile's sales were sharply down due to competition from a foreign competitor, I would take none too kindly to praise of that competitor. Nevertheless, my response would be a radical attempt at improving Stereophile; I wouldn't shoot the messenger who brought the bad news, as Mr. Salatin has done in canceling his Stereophile subscription. And his tactic of comparing Japanese cars, most of which are humble Toyotas, Hondas, and Nissans, to Cadillac and Lincoln, is unworthy. Compare them with cheap GM and Chrysler cars and they come out very well. Compare Cadillac and Lincoln with Mercedes and Lexus; the American vehicles don't look that great (though I personally like Lincolns for carrying a lot of people).

And please understand that, unlike some foolish Japanese politicians, I don't blame American workers, who are certainly not lazy. Recent articles published in The Economist and local newspapers make it clear that Americans are the most productive workers in the world, and that Americans work quite a lot more now than they did in 1970. (The Europeans think we're nuts.) America's auto industry suffers not from lazy workers but from unimaginative, cowardly, irresponsible, and overpaid leadership.

Mr. Bilger makes some interesting, fact-filled arguments. Although he may like better the opinions I express about recordings and audio equipment, I'm actually better qualified to comment about cars: my professional years in the auto industry number 16 (with an additional nine spent as a consumer who rents about 50 cars a year), while I've only professionally been in audio for 10. And I don't disagree that the Japanese erect formidable trade barriers to foreign competitors. Along with his letter, Mr. Bilger enclosed an article written by L.R. Windecker that appeared in a Detroit newspaper detailing the charges Bilger makes in his letter. Certainly Japan, if it hopes to continue exporting at its current rate, will have to open its domestic markets to foreign competitors or simply face an all-out trade boycott (which, by the way, would have a disastrous effect on all other industrial economies).

Some companies overcome these trade obstacles, though. BMW and Mercedes are status symbols in Japan, and sell very well among the wealthy (they cost about twice as much there as they do here) for a simple reason: they outperform, on one level or another, most or all Japanese cars. Their standard of fit, finish, and reliability, though not up to the Japanese standard, is excellent—clearly better than their American counterparts. They even go to the trouble of manufacturing cars with right-hand drive! Have you ever noticed how many Swedish, Japanese, and British vehicles were sold in the US with right-hand drive? Virtually none, because those countries knew that, no matter how good their cars, it was unreasonable to expect foreigners to accept cars where the driver had to sit on the wrong side. Ford, GM, and Chrysler have yet to attempt this advanced strategy (footnote 4).

And Mr. Bilger's own facts condemn his argument. He concedes that American cars deserved the reputation they acquired in the 1970s and '80s for poor reliability, just as I proclaim that Japanese cars started out with a deserved poor reputation in this country. They're better than that now—why don't the Japanese realize that and buy our cars? But you can't make headway in a foreign market selling more expensive cars which only come close to the native product in terms of reliability. No, you have to beat out the native product, and not for just a year or two—you have to do it for long enough that the general market perception changes. (Three-and-a-half years after Stereophile became a monthly publication in mid–1987, people would ask us just when we were going monthly!)

But American cars, though much better than they used to be, still don't match most Japanese cars for reliability. According to a newspaper article I read recently, the best American cars used to have twice as many reliability problems as the average Japanese car; now the margin has been narrowed to 30%. THIRTY PERCENT IS STILL A LOT! When the Americans are plus or minus 5% for several years in a row, they'll have something to crow about to not only the Japanese, but to Americans as well. (I still feel that American car companies are only dragged kicking and screaming into making reliable, high-quality cars, just as they were reluctant to raise fuel efficiency, provide practical, space-efficient vehicles, or install airbags—but I guess we can expect the leopard only to mind its manners, not change its spots.)

Which all distracts from my original argument: George Bush should have sent the US car manufacturers to visit high-end audio companies to find out why the former have such a hard time selling cars to both Americans and foreigners. Mr. Bilger says it best: "If Sony...were to design and build a true high-end product line at a lower price than imported equipment commands, the American High End would have a far tougher time selling in Japan." That's a tactic US auto manufacturers haven't tried, because they've lost any vision of excellence. They're unwilling to try to make something to a world-class standard, apparently because the risk would be too great.

America's industries became world-famous because of people willing to "bet the company" on a new and excellent product. High-end audio companies do this routinely and, because the products they make are truly great, they're successful at it.—Larry Archibald

Footnote 1: This involves, to a large extent, "name-brand" recognition. I don't mean that we should have highway billboards showing MartinLogan speakers, but we need to instill more awareness in the public that there are other stereo components besides Pioneer and Yamaha. A case in point: Someone decided to upgrade his B&K amps to a Krell, but the potential buyers for his (used) amp had never heard of B&K. Hence he decided to keep what he has and spend his money buying more Sony/Columbia CDs instead. Back to the trade imbalance.—Greg Juhadi

Footnote 2: It is a well-known fact that Rotel (UK) and Harman/Kardon (Japan-made) make excellent, affordable CD players. So it's entirely possible for companies like these to come up with near–state-of-the-art CD players for around $1000 in the near future. I wonder how the likes of Proceed, Krell, and CAL Labs meet this challenge. It sure is an enigmatic time for high-end consumers. On one hand, better and cheaper things are around the corner, but things that we love (such as Marantz and MacIntosh tube amps) may fall by the wayside. Don't say I didn't warn you.—Greg Juhadi

Footnote 3: Actually, the notion that US companies have been driven out of the semiconductor market is a myth. While it may be true in the area of DRAM chips, I believe that US companies like Intel totally outscore the Oriental competition when it comes to advanced chips such as microprocessors. In fact, my impression is that the US specialized chip industry seems to be doing very well.—John Atkinson

Footnote 4: Apparently the only American automobile manufacturer to export right-hand drive cars to Japan is Honda! Accord Coupes for the Japanese market are made in their Marysville, Ohio plant.—John Atkinson

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