Many realized the issue, but turning the bean counting culture around was too large a task. Consumers fled and decreasing domestic market share made the fringe benefit and retirement parts of the business model an anchor.
You make another great point. I bet many US citizens are unaware of the profound impact Deming and others had on the quality process improvement capabilities of the Japanese manufactures.
That's the sad irony. Japan used American innovation and engineering to beat American companies that weren't in a big hurry to adopt some of the same measures.