Japanese Auto Firms Find Cue in GM’s Past

General Motors once again is using easy credit to sell cars that people weren’t otherwise eager to buy.

But while customers will cheer the 1.9% financing, it’s worrisome for U.S. industry that the largest auto maker seems to be in disarray even as its Japanese competitors reach for another piece of the market.

Toyota is expected to announce this month that it is setting up a separate dealer network for a line of luxury cars that will include the opulent Toyota Crown. Nissan recently announced that it would ship a luxury line from Japan beginning in 1989 and sell it through a new dealer network, as Honda has been doing for over a year with Acura--a line topped by the $29,000 Acura Legend.

Almost $30,000 for a Japanese car? Is that a distortion caused by the rising yen? Only partly. Yes, the strong yen has made it unprofitable to make small cars in Japan for sale in the U.S. market. That’s one reason--along with quota restrictions--that Honda, Nissan and Toyota have been importing higher-priced models while planning or expanding production in Ohio, Tennessee and Kentucky.

But in another sense the luxury cars are part of a well thought out strategy. Japan’s car makers, having followed their customers from the low-priced Corollas and Datsuns they started with 20 years ago to the mid-priced Camrys, Maximas and Accords, are going on to high-priced models that are sold in different showrooms so as not to distract the customer with thoughts of economy.

It’s a strategy that aims to take business from BMW and Mercedes. Even more, it aims at taking away some of Cadillac’s sales of more than 300,000 cars a year. And that’s a serious threat to General Motors.

For one thing, there’s proportionately more profit in luxury cars. According to estimates by analyst Charles Brady of Oppenheimer & Co., GM may make more than 40% profit (before corporate overhead expenses) on a Cadillac, compared to 25%-26% on a compact Chevy or Pontiac. Sure, a company sells more low-priced than expensive models and each brand contributes to company totals. But if a competitor cuts GM’s profit on top models, it restricts its flexibility and makes it vulnerable on other lines as well. It takes the cream, in other words, and leaves the skim milk.

Luxury cars also allow a Toyota to keep a customer for life, to offer a car for “every purse and purpose,” as GM’s longtime chairman, Alfred P. Sloan Jr., put it.

Sloan, who died in 1966, built GM into what was once the world’s premier car maker. He would recognize what Honda is doing with the Acura. In his book “My Years with General Motors,” Sloan recalled how GM in 1921 set its prices to range from the Chevrolet at $450 to $600 up to the Cadillac at $2,500 to $3,500.

Sloan called this an “intricate” strategy, which he summarized as follows: “We propose that General Motors should place its cars at the top of each price range and make them of such a quality that they would attract sales from below that price, selling to those customers who might be willing to pay a little more for the additional quality, and attract sales also from above that price, selling to those customers who would see the price advantage in a car of close to the quality of higher-priced competition.”

So Honda, in pricing the Acura Legend at $29,000, is placing it below the BMW but above the Cadillac and depending on a reputation for quality to draw customers.

Clearly, they’re reading Sloan in Tokyo. But is anybody doing so in Detroit?

At some companies, the answer is yes. Ford has regained such a reputation for quality that this year it could sell every car it could make. And its new Scorpio gives it a hot car in the luxury market.

As for GM--on which thousands of suppliers, dealers, employees and shareholders depend--most experts say it is trying and that, yes, it will come back.

We’ll soon know for sure. In the model year beginning in September, GM will introduce some sporty, up-market cars--a new Buick and a top-of-the-line Oldsmobile. A lot of U.S. industry hopes it doesn’t need 1.9% financing to sell them.