Japan's economic ties to the Midwest

March 17, 2011

by Niala Boodhoo

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(AP File Photo/Toyota Motor)
Toyota's technical center in Ann Arbor, Mich., in an undated photo.

There are billions of dollars of business that flow every day between the Midwest and Japan.

As Japan tries to recover from the devastating natural disaster there, companies located in the Midwest are starting to assess how it will affect business here.

Here, this report on how deep the economic ties are between our region and the island nation.

Think of economic ties between the Midwest and Japan and household names like Toyota or Honda immediately come to mind.

In all, there are more than 160,000 people across the Great Lake states that directly work for Japanese businesses. To give you an idea, that’s almost two and half times the entire U.S. labor force for General Motors.

And there are many large American corporations – think Caterpillar in Peoria – that in turn are employing Japanese workers there.

Now that’s it’s been a week since the earthquake and tsunami, those companies are trying to figure out where they stand.

“We Toyota people here in North America, we have a lot of friends in Japan,” said Mike Goss, a general manager with Toyota North America.

Toyota has 10 plants in the United States and another four in Canada and Mexico. Every year those facilities buy about $25 billion from suppliers –  many of those based in the region, Goss pointed out:

“In Michigan, Indiana, Ohio, Illinois and Kentucky – we do have a huge impact. What we’re hoping we can is minimize any kind of shutdowns but really the only way we can take a first step on that is the truly assess the situation in Japan,” he said.

In Toyota’s case, even as they’ve just started those assessments, some operations on the U.S. side have already been curtailed.

About 15 to 20 percent of the parts needed to build Toyota cars here in the U.S. come from Japan.

Goss said there were some parts already in the pipeline built and shipped before the earthquake. But, for now, the company plans to stop overtime work to enable those parts coming in to last longer.

Caterpillar Inc. is based in Peoria, Illinois, but about a quarter of its annual $40 billion of sales and revenue comes from its Asia-Pacific region.

Caterpillar has 5,000 employees at a two big manufacturing facilities in southern Japan and an office in Tokyo that serves as country headquarters.

Spokesman Jim Dugan say initial reports are that Caterpillar’s Japanese workers and facilties are ok – and now, Caterpillar is focused most on helping with the relief effort.

“Corporately, as well as our dealers, we’ll provide a range of assistance in the form of equipment, sometimes expert operators,” Dugan said. “Equipment and those operators are often used in the rescue and recovery efforts after a natural disaster.”

Dugan says the company already donated more than $1 million worth of equipment, generators and its employees’ time to helping Japan recover.

Takeda is Japan’s biggest drug company. Its North American operations are based in Deerfield, just outside of Chicago – more than 1600 people work there. The company has been able to account for all its Japanese workers. Business operations at its manufacturing facilities and research and development labs in Western Japan are continuing. And its US employees say clinical trials here and regular sales and marketing works is going fine.

Michael Moskow is a senior fellow at the Chicago Council for Global Affairs. He says it’s important to take a longer view.

“When you look at natural disasters like this,  they tend to not change the longer term trend of economic development, whether it would be in Japan or the Midwestern part of the United States,” said Moskow, who is also the chairman of the Japan-American Society of Chicago.

Moskow says it’s hard to predict how long Japan’s  business sector will take to recover from this. As it does, there will be business opportunities in construction and other rebuilding efforts. Eventually, he sees business there stabilizing.

So, that means even the slowdown in production at American plants like Toyota’s could be made up later on.

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