Japanese Carmakers Face Tough Times in the US

THE heat is on.

Under mounting pressure at home and abroad, Japanese automakers are finding two decades of steady growth could come to a screeching halt.

Their latest setback came when the United States Commerce Department ruled Tuesday that Mazda and Toyota have been "dumping" minivans on the American market - that is, selling them here for less than it costs to build them back in Japan - in an effort to take market share away from the Big Three.

"We are mystified at the Department's reasoning," a Mazda news release said.

The US International Trade Commission has 45 days to decide whether to uphold its earlier, preliminary ruling that this dumping injures or threatens injury to the US minivan producers. If so, punitive tariffs will be imposed.

On top of that, Washington rulemakers may reclassify all import minivans and sport-utility vehicles as trucks, making them subject to a 25 percent duty rather than the 2.5 percent passenger-car rate.

The Japanese have already begun to see an erosion of their share of the combined US new car and light truck market. For the first four months of the year, that share slipped to 24.35 percent from 25.19 percent in 1991.

In the first four months of this year, sales of the Honda Accord, the bestselling car in the country in 1990 and 1991, fell nearly 10 percent to 119,029. Sales of the No. 2 car, the Ford Taurus, rose nearly 11 percent to 111,049. If the trend continues, the Taurus may outpace the Accord this year.

"A lot of Honda dealers will tell you they're not hurting. Believe me, they are," says Earl Mecham, general manager of Bryant Honda in Covina, Calif.

The situation could get even worse if federal lawmakers pass any of several protectionist bills now under debate. Last week, Rep. Dan Rostenkowski (D) of Illinois introduced a bill that would not only limit Japanese auto imports, but also restrict production at Japanese assembly plants in the US.

This bill was an underlying theme at an automotive summit Monday in suburban Chicago that brought together the chief executives of America's Big Three and Japan's five largest carmakers. It was their first face-to-face meeting since President Bush's trade mission to Tokyo in January. At that contentious session, the Japanese announced plans to boost imports of US-made cars to 19,700 units a year - barely 1 percent of their market - and buy $19 billion worth of US-made auto parts a year by 1994.

While there was no rancor at the latest session, there was also no breakthrough in efforts to narrow the vast automotive trade gap, which accounts for about two-thirds of the overall US-Japan trade deficit. The executives simply agreed to form several "working groups" to develop specific solutions aimed at increasing Japanese purchases of American cars and car parts.

As if the pressures in the US weren't enough, Japanese carmakers are facing a sales slump at home after nearly a decade of explosive growth. At least four of that country's nine automakers face losses this year, including Nissan, Mazda, Fuji, and Isuzu.

Compounding the problem is the rising cost of capital. During the 1980s, Japanese carmakers could borrow money at as little as 1 or 2 percent interest, fueling their aggressive growth. Capital costs now are roughly on par with those in the US.

"I don't think any company can continue to spend money" as freely as they did in the '80s, says Richard Recchia, executive vice president of Mitsubishi Motor Sales of America. "There's going to have to be a slowing down in product cycles."

Where the Japanese now update products, on average, every four years, that will likely slow to five or even six years.

That will ease some of the pressure on the Big Three, who are already scoring with some better, well-received products such as the Ford Taurus and the Pontiac Grand Am, recently named a "Best Buy" by Consumer Reports magazine.

You've read  of  free articles. Subscribe to continue.
QR Code to Japanese Carmakers Face Tough Times in the US
Read this article in
QR Code to Subscription page
Start your subscription today