Success of Ford’s Return to Japan Rides on Taurus : Industry Watching Effort to Market a U.S.-Built Car
If Japanese consumers have not been getting excited about the appearance of a fleet of American-made cars on a Tokyo loading dock, it is not the fault of Friday, a glossy gossip magazine and scandal sheet.
“An attack by Taurus means a total war,” the magazine thundered beneath a photograph of the first shipment of 71 new Fords. “Japanese auto makers will probably suffer many more headaches.”
In his auto showroom in Shonan-Dai, a suburban community about 60 miles south of Tokyo, Shigeharu Mitsubori can only hope so. He is one of 100 Autorama dealers affiliated with Mazda, of which Ford owns 25%, who is scheduled to receive a consignment of Taurus models this month.
“My customers would like to have a new and different kind of automobile, because while Nissans and Toyotas all look very similar, people’s tastes are becoming more diversified,” he remarked in an interview. “If Ford can establish a reputation for quality like BMW and Mercedes-Benz, the Taurus will be a hit.”
Few marketing efforts around the world will be as closely watched as Ford’s attempt to sell 1,000 American-built Tauruses a year in Japan. Partially inspired by the dollar’s fall of 50% against the yen in the past three years, which makes American products more price competitive here, the effort will be the first concerted campaign to market an American-built car here in close to a decade. U.S. imports peaked in 1979 at 16,000 vehicles, when all imports accounted for a bare 2% of the Japanese auto market.
The American auto makers abandoned Japan under a large cloud. During the oil shocks of the 1970s, American cars won an enduring reputation among the Japanese for being high-priced, poorly made gas guzzlers. In the years that followed, the cars may have become better made and their fuel efficiency has been improved, but Detroit’s nonexistent marketing efforts left the reputation intact.
In retreating, the Americans also missed a chance to keep on top of changes in Japanese buying habits and, of course, to remain close to Japanese-led changes in auto technology. Many trade experts argue that these were compelling reasons to remain in this market even if profits alone did not justify the effort.
“If you’re not here watching things, you could lose more in the United States,” said William H. Brown, an executive here with the Boston-based money management company of Scudder, Stevens & Clark who until last year was senior commercial counsel at the U.S. Embassy in Tokyo.
Detroit abandoned Japan for several reasons, chiefly because of the strength of the dollar, which stood at almost 250 yen in 1983, when imports bottomed out at 35,286 vehicles. The Japanese government also imposed harsh import penalties on automobiles, some of which persist as especially high commodity taxes for the big-car categories. Big cars have the best profit potential and consequently are the ones to which foreign car makers devote the most marketing effort here.
Germans Build Market
As the dollar began sliding in 1984 and Japan began to reduce tariffs, the foreign companies that had retained even a token presence benefited sharply. Imports started rising in 1984, but the American share dropped for two more years, hitting bottom at 1,816 vehicles in 1985.
By then, such West German companies as BMW and Volkswagen were selling a combined 24,500 vehicles in Japan. Having taken the wise step of establishing its own dealer network, rather than relying on Japanese dealers owing first allegiance to domestic manufacturers, BMW’s share has grown the fastest of any foreign company, ranking now just behind Volkswagen at 21.5% of the import market. (Volkswagen’s share of the import market here has remained steady, at 24.2%.)
Now Ford plans to take on a market that is the world’s second largest, with annual sales of about 3 million vehicles, but is also perhaps the most competitive, quirky and brand loyal.
“I’ve worked in nine countries in 37 years,” said Henry V. Leonard Jr., general manager of the Japan branch of General Motors, “and this is the toughest market I’ve ever seen.” (GM’s sales of more than 2,000 cars last year, marketed through Yanase & Co., a Japanese distribution network, gave it 70% of the North American market share in Japan, but only 2% of the import total of 97,750 vehicles.)
For one thing, the Japanese are not fanatic car buyers. The famous congestion and confinement of Japan’s cities, especially Tokyo, make cars almost impossible to park and big cars difficult to maneuver. Only two-thirds of Japanese households own a car and only 16% own two or more.
Weekend Drivers
In the United States, according to the U.S. Statistical Abstract published last year by the U.S. Census Bureau, 87.3% of the households owned at least one vehicle in 1984 and 51.7% owned two or more.
Foreign car makers must also negotiate the fine complex of associations and distinctions that the Japanese apply to automobiles.
In many circles the gaisha , or foreign car, still suggests “a vulgar display of wealth or eccentricity,” said Kenji Kawai, director of external and technical affairs for Ford Motor Co. (Japan).
And when Lueder Paysen, president of BMW Japan, remarks, “We are not selling a car but a life style--if you want to get from A to B, you should buy a Toyota,” he is talking about a distinction that, unlike in the United States, tends to limit rather than expand his clientele.
“In Japan, a middle manager couldn’t buy a BMW,” he said. “It would simply not be acceptable.”
So it is not surprising that Ford will try to market the Taurus by suggesting that it is different from the average Japanese car, but not too different. The Taurus steering wheel will be on the left, as in America, although the Japanese drive on the left side of the road, because Ford’s expectations of selling about 1,000 units a year do not warrant spending the money to move the steering mechanism.
Ford officials say they see this as an initial virtue stemming from necessity, because it will distinguish the Taurus from its closest competitors among Japanese domestic models.
“If the wheel were on the right, my customers might just choose Toyota Crowns or Nissan Cedrics,” dealer Mitsubori said. But Kawai said that to appeal to the mass market, the Taurus would have to shed that oddity.
“To make a major sales breakthrough it will have to be right-hand drive,” he said.
Steering wheel placement is one of those delicate marketing issues that foreign firms have been grappling with for years. BMW’s Paysen prevailed upon his home office some years ago to ship a right-hand drive model to the Japanese market.
“You know what?” he asked. “It was our biggest flop.” It was another case of the car being just not different enough, he said.
In any event, auto executives say, the advent of power windows has eliminated the one big disadvantage of left-hand steering for Japanese drivers: The difficulty of reaching over to crank the right-side window down to pay expressway toll collectors.
Still, BMW this year will again try marketing several models with right-side steering, on the theory that more conservative buyers may be ready to step up to a German car.
The British auto maker Jaguar offers its customers in Japan a choice of right- and left-hand steering--and sells more of the left-hand steering models.
Another burden for Ford is a certain skepticism at large about American companies’ resilience in a tough market. If the Japanese believe that Ford is only seizing the opportunity of a temporary dollar-yen advantage and will not stick around to service and maintain its products, they are unlikely to take to the Taurus.
“This is not a market where you can make a fast buck,” said BMW’s Paysen. “The Japanese consumer expects you to establish a commitment. You need a long-term strategy and have to wait patiently for profits.”
“If American companies are going to change their minds when the dollar goes up versus the yen, they should forget about the Japanese market,” remarked Shinsaku Sogo, executive director of JETRO, the Japan External Trade Organization, a government agency charged with promoting imports.
As it happens, Ford has the longest history in Japan among U.S. auto makers. It dates to 1929, when Ford started assembling Model Ts in Yokohama, outside Tokyo. The company was evicted in 1939, when the Japanese decided that they wanted no more foreign manufacturing in the country.
In 1974, Japan lifted customs duties on autos and Ford returned to its Yokohama property, shoveling out more than three decades’ worth of pigeon droppings to convert the site to a distribution center. Eventually it sold the compound, using the proceeds to acquire its 25% share of Mazda.
Ford has also been the most successful American car maker in terms of keeping its name before the Japanese public. It accomplished this by slapping its own nameplate on a full line of cars designed and built here by Mazda. Of course, most informed buyers know the difference.
“So far, the reputation of American cars hasn’t hurt us,” said Mitsubori, the Autorama dealer, “because the customer knows that all the cars are manufactured in Japan.”
The prospect that the Ford nameplate will appear on genuine American-made Fords, and that the strong yen will attract more aggressive foreign marketing in general, has been greeted politely by the domestic manufacturers so far.
“Considering the fact that Japanese cars represent a 10 to 20% share of many foreign markets, we are not in a position to complain should foreign cars come to account for 10% of our domestic market,” said Takashi Ishihara, chairman of Nissan Motor, at his firm’s New Year’s reception.
Ishihara could be forgiven a little complacency, because foreign firms have a long way to go before reaching 10%. In 1987, a record year for imports here, the import share of 3% was by far the lowest penetration of imports into any industrialized nation’s market.
Moreover, no one can fairly accuse Ford of buying market share, as the Japanese companies have been accused of doing in the United States. The Taurus will be fully priced, listed in the Autorama showrooms for about 4.4 million yen, or roughly $35,000. The Japanese commodity tax will add another 23%, or about another $8,000. (The car sells for $16,000 in the United States.)
At that price, the Taurus is competing with mid-range BMWs and will be more expensive than the sedan-sized Toyota Crown and Nissan Gloria. The Taurus, a distinctively streamlined car that Ford has tried hard to strip of shoddy workmanship, was the second-best-selling American car in 1987.
Targets Bigger Cars
Its reputation has already reached Japan.
“The Taurus name is already well known,” said Kawai, Ford Japan’s director of external and technical affairs.
Kawai and Ford Japan’s director of domestic market representation, Masao Kawae, said they hope through advertising to position the Taurus to compete with the largest domestic automobiles, such as the Crown and Gloria.
At his Autorama showroom, Mitsubori also hopes to attract Mercedes and BMW drivers, who may not harbor as much brand loyalty as Nissan and Toyota customers. They are also older and more staid than the young drivers who come into Autorama showrooms to buy mag wheels and other sporty accouterments.
“I am still too young to buy a Taurus,” remarked Shigeyoshi Takizawa, 30, an employee of an automobile transport company, at the Shonan-Dai Autorama. Wearing a leather jacket studded with cloth automobile patches, Takizawa completed a sales form for a Telstar--a Mazda 626 with a Ford nameplate--and remarked: “I would more recommend the Taurus to my father, who drives a Mercedes-Benz.”
