Japanese carmakers in a slump, but one sees smooth road ahead
Detroit — The rising value of the yen, continuing quotas, and increasing pressures from new competitors in countries such as South Korea and Yugoslavia have been taking their toll on the sales and profits of Japanese carmakers. Only one Japanese auto manufacturer posted a sales gain during the first five months of 1987. That lone stand-out is not one of the Japanese Big 3: Toyota, Nissan, or Honda, but one of Japan's lesser-known nameplates, Mitsubishi.
And while many analysts are predicting further sales problems for some of the Japanese carmakers, Mitsubishi executives are planning for near exponential growth into the early 1990s. Until recently, Mitsubishi was known primarily as the supplier of the Chrysler's captive imports - cars built in Japan and then sold under the Dodge and Plymouth nameplates.
In 1986, Chrysler sold 135,528 Mitsubishi-made cars, primarily the subcompact Colt, as well as 83,474 trucks. Though the Chrysler connection has been a profitable one, in 1983 the Japanese manufacturer established its own, competitive dealer network in the United States, Mitsubishi Motor Sales of America.
The big problem has been the agreement that has set strict quotas on Japanese auto exports to the US last year. Mitsubishi's own import volume was limited to about 85,000, including 50,000 cars and 35,000 trucks.
This year, however, that total is expected to jump by at least 50 percent. And by 1990, says Mitsubishi-America executive vice-president Richard Recchia, sales should reach 287,000 cars and trucks a year. That's not the result of any change in the voluntary export restraint agreement, Mr. Recchia says, but rather, ``It's the result of changing our [solely] Japanese product line into an [international] three-tiered product strategy.''
With the value of the yen rising rapidly, Recchia says it is harder and harder for Mitsubishi to compete in the lowest end of the new car market by relying on Japanese-made products. Instead, it has taken a tip from long-time partner, Chrysler, and has begun marketing its own captive import. Mitsubishi has turned to South Korean carmaker, Hyundai, to produce an entry-level product, dubbed the Precis, which is essentially the same as the Hyundai Excel. Mitsubishi plans to market approximately 30,000 Precis (pronounced Pree'-sis) a year at a base price of $5,195.
``There's no way we could do that with our Mirage,'' the low-priced Mitsubishi version of the Dodge and Plymouth Colt, says Recchia.
In turn, Recchia says, the Mirage and all Mitsubishi's other Japanese-made vehicles are being ``upscaled,'' with higher levels of standard and optional features, such as multi-valve four-cylinder and V-6 engines and electronic suspension systems - and higher price tags.
One of the most significant examples of this move upscale will be unveiled this fall in the form of the new Galant Sigma, a $20,000-plus sedan meant to compete with the BMW 325 and Honda's Acura Legend.
Mitsubishi plans to introduce another new car an average of every six months for the next four years.
That includes its first US-made model. In the spring of 1985, Mitsubishi announced it was entering a joint venture with Chrysler to build an assembly plant in the cornfields outside Bloomington-Normal, Ill. That factory, operated as Diamond-Star Motors Corporation, will go on line in late 1988, producing a sporty coupe.
It also is expected to account for approximately 120,000 sales a year, or 40 percent of Mitsubishi-America's volume in the early 1990s. (Chrysler will receive an equal number of vehicles built by Diamond-Star.)
Bringing that many cars into the currently undersized Mitsubishi sales network all at once is a potential problem for the US subsidiary. There are now only about 160 dealers in 39 American markets. By 1991, the company expects to need 328 in at least 150 different cities and suburbs. To keep that growth on a fairly smooth curve, Recchia says Mitsubishi is about to ``appoint 50 limited production dealers who will only sell six truck, wagon, van, and sports utility vehicles,'' until Diamond-Star goes into production.