Big Three Put Pressure on Japan

YOSHIO IKEDA likes to be different.

That's why he bought an American car. The Tokyo office worker says he likes his Ford Thunderbird "because they make a strong body. Very strong."

Even three years ago, a Thunderbird, or practically any foreign car, for that matter, would have turned lots of heads in Japan. These days, imported cars are becoming less unusual, but by no means a common site.

Imports account for barely 3 percent of Japan's new-car market. And American automobiles are barely an asterisk on the chart. The Big Three shipped only 15,000 vehicles to Japan, the world's third-largest car market, last year.

So, while rice, computer chips, and glass may all contribute to mounting trade tensions with Japan, automobiles are the single biggest problem. Motor vehicles and parts account for roughly 75 percent of the United States trade deficit with the Japanese.

Why are sales so small? You'll get very different answers depending on who you ask.

According to American industry officials, it is the result of myriad trade barriers. A variety of often subtle changes must be made in the headlights and bumpers of US-made cars so they conform to Japanese standards.

And Big Three executives complain a costly and torturous inspection process can tie an import up at the docks for up to eight months.

When American-made vehicles finally make it into Japan, these roadblocks mean that a Japanese consumer will pay "$12,000 more than US sticker [price] for a Jeep," notes Chrysler chairman Lee Iacocca.

And even then, the Big Three don't have many places to sell their products. It can cost tens of millions of dollars to buy the land needed for even a small Tokyo dealership. That's simply too much of an investment, the Big Three claim, if they aren't going to get free access and big sales.

When the Japanese first entered the US market, they found a less expensive alternative. Many Big Three dealers added import lines. But "dualing" was, until recently, barred in Japan.

As the result of last week's trade mission by President Bush, the Japanese agreed to ease some inspection standards and boost the sale of American vehicles by 20,000 units a year. The ban on dual dealerships has been pulled back a bit. Honda, for example, promised to distribute 1,200 Jeep Cherokees a year through 300 of its Japanese dealerships, notes Mr. Iacocca. "That means by 1994, each of those dealers will sell one Jeep every three months. Wow. How did we get so lucky?"

But while US automakers gripe about their limited export sales, Japanese officials grumble that the fault really lies the other side of the Pacific.

"They've got to start building cars ... that Japanese buyers will want to buy," says Robert McCurry, senior vice president of Toyota Motor Sales, USA Inc.

The most obvious mismatch is the fact that US cars sold in Japan have their steering wheels on the left side, just as they do in the US. But the Japanese, like the British, drive on the left side of the road, so their steering wheels are placed on the right.

And in Japan, minicars with engines smaller than 1 liter hold 25 percent of the market. Most of the rest are small cars designed for Japan's narrow roads.

"The basic lesson of Economics 101 is that you find a market and fill the need," says Richard Recchia, executive vice president of Mitsubishi Motor Sales of America. "They've found the market, but they haven't filled the need." In their bid for more US market share, Japanese executives note that their companies have spent millions establishing American-based design and research facilities and have developed products for the US market.

"They're putting up a smokescreen," counters Jack Telnack, Ford Motor Company's top designer. "Their claim that we don't build cars for their roads is a lot of hooey. Their roads aren't all that different from ours."

Big Three officials do not deny the need for right-hand drive. Indeed, Ford has announced that it will offer both right- and left-drive versions of the 1993 Probe. Chrysler will begin building a Japanese version of the Jeep Cherokee this summer and General Motors Corporation has promised a right-hand-drive version of the Saturn subcompact.

Mr. Telnack and other officials say they would convert more vehicles for the Japanese market if they could overcome the "chicken-and-egg" problem. The move won't pay unless the Big Three are guaranteed better access.

If both sides take the appropriate steps, industry experts say Japan's market for American cars could open up. But will it ever reach the 27 percent share Japanese carmakers hold in the US?

"Not in my lifetime," says Toyota's McCurry.

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