Japanese Intensify Competition In U.S. Auto Market

DETROIT, Jan 8, 2003; Chang-Ran Kim writing for Reuters reports that to perfect Toyota's Sienna minivan for the next generation, chief product engineer Yuji Yokoya drove 50,000 miles through every corner of North America.

When it comes to dedication and attention to detail, Japanese automakers are unmatched in the world.

That may be why they look poised to grab a bigger share of the U.S. market pie without so much as a peep from the U.S. government, while local brands are stuck in second gear.

That is a big turnaround from two decades ago, when U.S.-Japanese relations were colored by a fierce trade spat over cheap car imports. At the time, Japanese automakers were mostly building small, unprofitable models.

Now, after another successful year in the United States, Asia's auto giants are set to wrest yet more business from Detroit's Big Three, and in some of the most lucrative and quintessentially American segments of the market to boot.

The prospect is unsettling for General Motors Corp. <GM.N>, Ford Motor Co. <F.N> and the Chrysler arm of DaimlerChrysler AG <DCXGn.DE> <DCX.N>, which saw their combined share of the home market fall 1.5 percentage points to 61.7 percent in 2002.

Japanese and Korean makers, on the other hand, took a total of 31.2 percent, up 1 point from 2001.

BUILDING MORE PLANTS

Despite expectations of softer auto demand this year in the world's biggest car market, Asian carmakers expect to sell many more cars this year, armed with a wider range of new products.

They are blunting criticism of cheap imports by building plants in North America. Japan's top automakers plan to raise output capacity in North America by a combined 40 percent by 2005.

Korea's top carmaker, Hyundai Motor Co. <05380.KS>, plans to be making cars at its first U.S. assembly plant by 2005, and it aims to double U.S. sales by 2010.

The sensitivity to a potential political backlash is what Toyota Motor Corp. <7203.T> had in mind when it said 90 percent of the parts for the new Sienna, unveiled at the Detroit auto show this week, would be sourced from North American suppliers.

"We have 32,500 people working for us in North America, and our investment in the region has reached a cumulative $13 billion," Toshiaki Taguchi, head of Toyota Motor North America, told Reuters.

That is also why Japan's No. 2 automaker, Honda Motor Co. <7267.T>, is not entering the large pickup truck segment like rivals Toyota and Nissan Motor Co. <7201.T>.

"If we were entering that area, which has always been the baby of U.S. makers, we would have to build them locally, and we don't have the extra capacity for that right now," said Koichi Amemiya, the head of Honda's U.S. unit.

NO WEAK YEN GRIPE

U.S. automakers cannot fall back so easily on another old argument against Japan -- the weak yen.

This time last year, GM was blaming the Japanese government for deliberately pushing down the yen to help make their automakers' products cheaper.

But a more than 10-yen fall in the dollar since then to below 120 yen has made that complaint seem more like an excuse.

With many Americans now accustomed to sweet price deals on new vehicles, sales incentives only go so far, and Asian automakers are focusing on making new and better models.

To win the hearts of American drivers, Asian automakers have adapted new models to respond to the unique needs of the U.S. market.

Toyota touted its new Sienna as a "true born and bred American" thanks to the efforts of road warrior Yokoya, while Mitsubishi Motors Corp. <7211.T> introduced its new Endeavor SUV crossover as the first of the "Project America" series in which it will offer products exclusively for the North American market.

And in one of the highlights of this week's auto show, Nissan lifted the veil on its first full-size pickup truck, a segment that has always been dominated by local names like Chevrolet and Dodge.

TARGETING YOUNG BUYERS

The assault on U.S. makers' market share will be waged in other areas too.

Aware that its brand has generally been popular with the older generation, Toyota will launch its Scion youth brand this year as it aims to tap drivers hitting their 20s in one of the few developed countries with a growing population.

Mazda Motor Corp. <7261.T>, Mitsubishi Motors and Fuji Heavy Industries Ltd <7270.T> also unveiled competitively priced sports cars -- the RX-8, Lancer Evolution and the re-engineered Subaru Impreza WRX STi -- a segment where Japanese makers have so far had a relatively low profile.

One thing does not seem to have changed in the battle over the U.S. markets: the Japanese automakers still lead the pack in quality. That is one reason Japanese automakers have been able to sell their vehicles with fewer incentives than Detroit.

For the eighth year in a row, Toyota's luxury Lexus division recently topped an industry study that examines the durability of vehicles after four to five years of ownership.

All five of the top brands in the J.D. Power and Associates survey were Japanese, with Nissan's luxury brand Infiniti, Honda's Acura, Honda proper and Toyota following in that order.

"Japan's vehicle makers have established robust fundamentals by introducing competitive models, raising user loyalty and marketing at attractive prices," Takaki Nakanishi, an analyst at UBS Warburg, wrote in a recent report. "They've proven themselves capable of producing more economically and to a higher standard of quality than the U.S. Big Three."