Big Three Try to Crack Tough Japanese Market
US automakers have been slow to discover what Japanese consumers are looking for in a car
TOKYO — AT the Tokyo Auto Show in November, while other salespeople grumbled about falling sales and lackluster show attendance, there was a long line to get into Mitsuo Hosaka's stand. Mr. Hosaka, who works for Ford Japan, could hardly cope with all the interest, an indication that United States automakers are starting to see signs of success in Japan.
In the 1980s, when Japanese automakers such as Toyota, Nissan, and Honda were taking a big bite out of the US auto market, the American Big Three were making few inroads into the Japanese market.
The reason was not explicit protectionism, since automobile im-ports to Japan are not subject to tariffs. Recently, Tokyo has even put pressure on its automobile producers to cooperate with their US rivals. But Japanese consumers, though they buy 7 million cars a year, purchased few American cars.
Neither Chrysler, Ford, nor General Motors adapted quickly to the reality that, while they were offering big, left-hand drive cars, consumers actually were buying compact, right-hand drive models. Some cars came with English-language manuals, exacerbating Japanese concerns about reliability and after-sales service.
Invisible trade barriers have been an even greater obstacle for US car companies because most dealers have an exclusive relationship with one of the country's nine automakers.
Chrysler would like to set up its own distribution network, but it faces steep land prices and wage bills.
Only top-end manufacturers such as Germany's BMW have had high enough margins on solid turnover to set up distribution networks of their own.
``Our dealers would not be profitable with our current line-up and expected sales volume,'' says Osamu Nogata, general manager of Chrysler Sales Japan.
Even before reaching the showroom, imported cars must get through a wall of red tape. Safety regulations require all imported cars to undergo major remodeling - costing up to $4,000 - before they can be registered. GM Japan and Yanase, its exclusive retail arm in Japan, for example, must replace all the bright red turn signals on US cars with amber signals.
Japan is not the only country to maintain strict regulations. But Toyota, Nissan, Honda, and other Japanese automakers have invested in assembly lines to produce cars that satisfy overseas regulations. The investment has paid off because the large volume of cars exported by the Japanese lower the price of alteration per car.
But ``we just cannot make those kinds of changes when we only expect to sell around 5,000 cars in Japan,'' says Mitch Yamamori of GM Japan.
As a result, American cars remain overpriced. A ``souped up'' Grand-Am from GM, which sells for $15,000 to $20,000 in the US, costs the equivalent of $27,000 at Yanase Motors in Tokyo.
``The combined market share here for the Americans and the Europeans stands at just 2.2 percent,'' Chrysler Chairman Robert Lutz said at the opening of the Tokyo Auto Show. ``If that's a success, I'd hate to see a failure.''
Yet there have been some signs of success, and Chrysler's Jeep is leading the way.
In 1992, about 1,000 Jeeps were sold in Japan. Unit sales for 1993 may have reached 6,000, Mr. Nogata says. This pales in comparison with the 1.5 million units Japan shipped to the US in 1993, but any growth is significant given Japan's depressed market conditions.
Chrysler owes some of its success to the Jeep's worldwide reputation. ``People always say `I have a Jeep,' even if they own a [similar] car from a different maker,'' Nogata says.
The company also has had a successful association with Honda. In 1991, under pressure to assuage trade frictions with the US and fill out its own product line, Honda agreed to market the Jeep in Japan. Consequently, the cars are now sold at Honda outlets through-out the country.
Honda began by setting up a team to repackage Chrysler's car to Japanese tastes. Chrysler rose to the challenge and improved quality, cut costs, extended the warranty from one to three years, and produced a Japanese-language instruction manual. A fully loaded 1994 Jeep Cherokee with right-hand drive now sells for $35,000 in Japan, down 30 percent from its 1992 price. Chrysler will introduce ``a total of four additional right-hand drive products over the next two to three years,'' Mr. Lutz says. Likely candidates include the Vision passenger car and the Neon subcompact.
Ford Motor Co. plans to introduce a right-hand drive Probe sports car in 1994. Hosaka says that cars such as the Taurus and Explorer, already common in Tokyo, are being considered for the right-hand drive option.
GM may begin tailoring its Saturn line for Japanese customers in 1995, company sources say.