Tokyo Motor Show Exposes Wide Gap Between Bullish Japan and Bearish U.S. car Makers

CHIBA October 21, 2005; The Asahi Shimbun today reported that the gap between bullish Japanese automakers and their bearish U.S. counterparts was a study in extremes at the Tokyo Motor Show, with the Japan side exhibiting a tour de force and the presidents of the U.S. majors skipping the event.

The show in Makuhari Messe convention center in Chiba had a media preview on Wednesday and will open to the public on Saturday.

Japanese manufacturers that are reporting strong business performances drew heavy attendance.

Toyota's prototype Lexus LS was one of the most popular exhibits. It was the first showing of company's next entry into Japan's luxury market.

The car will go on sale next summer.

Toyota President Katsuaki Watanabe said, "It was appropriate that we decided to make inroads into the luxury car sector."

Nissan Motor Co. showed for the first time the successor to the Skyline GT-R sports car, which is scheduled to debut in 2007. President Carlos Ghosn said the model shows that Nissan is thriving.

The no-shows of the presidents GM, Ford and DaimlerChrysler Corp. (DC), was rare for the Tokyo exhibit.

Industry sources said they did not attend because of poor business conditions.

However, GM did exhibit fuel cell cars. A GM vice president Larry Burns said that by 2010, GM will establish technologies that can be put into practical use.

However, industry sources said it will take many years for next-generation technologies to have a positive impact on earnings.

In the North American market, which is the world's largest, GM sold 5.46 million cars in 2004, down five percent from 2000. Ford sold 3.62 million cars in 2004, a sharp 26 percent drop over the same period.

In contrast, Toyota saw a 30 percent rise with sales of 2.27 million cars.

John Mendel, a senior vice president of American Honda Motor Co., who had worked for Ford for many years, said the causes of the business slump of Ford and GM are structural.

The causes are heavy costs for their employees' medical expenses and pension programs, and the small number of cars that have wide popularity, he said. It will take two or three years to develop a new hit model, and the slump could continue until they roll out a big seller, he said.

Meanwhile, Mark Hogan, president of Canada-based car part manufacturer Magna International Inc., said that about 30 years ago, 30 models were sold in the U.S. Now, there are 600. Therefore, the competition is harder, he said.

Hogan, who was a senior vice president of GM, said that because of the increased competition it was inevitable for GM's share to decline. However, the company should have changed its structure to enable it to produce profits even in a harsher competitive environment, he added.

The two U.S. manufacturers' slump is worsened by rising crude oil prices. In the North American market, sales of fuel-efficient hybrid-cars are accelerating. The development of those cars is led by Japanese manufacturers such as Toyota and Honda Motor Co.

The sales of large pickup trucks that supported the business performances of GM and Ford in the late 1990s are now in a slump.

The research and development costs of Japanese and U.S. car manufactures both accounted for three to four percent of their total sales on a consolidated basis.

In spite of the similar percentage figures, a performance gap emerged between Japanese makers and American manufacturers. GM's Burns said the automaker made a mistake.

GM marketed electric cars in the middle of the 1990s. However, they did not sell well mainly because the time required for charging was long.

At that time, GM should have changed its strategy to develop hybrid cars, Burns said.

Although the U.S. manufacturers have been developing fuel-cell cars, it will take many years before they are ready for market.

GM is now developing hybrid cars with DC. This autumn, it will also begin joint development with German car maker BMW AG.

GM expects the cooperative arrangements to enable it to market hybrid cars sooner.

Joe Eberhardt, an executive vice president of DC, said that GM had thought that hybrid was not the best technology environmentally. But the U.S. public's impression of the technology has improved, he said.

GM said it expects to market a new hybrid model in 2007.