Automotive Role Reversal : Ford will allow its Bronco II to be sold under the Mazda name. The move is a graphic example of Detroit’s new dominance in the light truck market.
In a dramatic shift, Ford Vice Chairman Harold (Red) Poling said Wednesday that Ford plans to let Mazda sell Ford’s popular Bronco II sports utility vehicle--under Mazda’s nameplate and through its own U.S. dealerships.
The agreement marks the first time that a Japanese auto maker has agreed to sell vehicles in the United States that are designed and built by one Detroit’s Big Three auto makers.
Ford will continue to sell the Bronco II through its Ford dealerships but will expand its U.S. production in order to supply its longtime Japanese affiliate as well. Ford officials declined to say how soon Mazda will get the trucks, but industry analysts believe that Ford will start supplying Mazda in the 1991 model year, when a redesigned Bronco II is scheduled to be introduced.
For Poling, the Bronco II deal represents a breakthrough, an opportunity to reverse a pattern that has developed over the past decade. “We have a partner in Mazda, and so far it’s been mostly them providing products for us,” Poling told reporters on Wednesday. “It’s good to see a turnaround.”
Mazda, which is 25% owned by Ford, has built a wide range of products for U.S. auto makers over the years including the new Ford Probe being built at Mazda’s Michigan assembly plant.
Indeed, Mazda’s decision to turn to Ford for help provides a graphic example of the new dominance Detroit now enjoys in the light truck market.
After effectively creating the market in the late 1970s, the Japanese are now getting trounced in light trucks by the Big Three.
“The import market share in trucks is plunging,” concedes William Hackett, Mazda’s vice president for marketing. “Right now, light trucks is basically a Ford-Chevy battle, with Dodge thrown in, and everyone else is getting blown away.”
In a rare setback, the Japanese have been watching in dismay as their market share in light trucks has plummeted to just 11.6%; two years ago, it was 18.3%. Meanwhile, the domestic’s share has soared to 88.4% from 81.7%.
Such a severe reversal in trucks is worrisome to the Japanese; the light truck market is one of the most dynamic and fastest growing segments of the entire auto industry. Increasingly, consumers are switching from traditional cars to “car-like” vans and utility vehicles, and the Japanese now find themselves behind on one of the most important trends in the industry.
Even Honda, which doesn’t sell any trucks in the American market, knows it must compete in the truck industry. “We want to sell a million vehicles in this market, and we know it will be hard to do that if we’re not in trucks in some way,” says Honda Executive Vice President Tom Elliott.
Industry executives and analysts agree that the main reason the Japanese are getting killed is that they can no longer compete with the domestics on price in the truck market, which they say is far more price-sensitive than the car business.
“I think the biggest single factor is price, and the domestics have the advantage,” says Nissan Executive Vice President Thomas D. Mignanelli.
The rapid rise in the value of the Japanese yen since 1985, coupled with a 25% tariff on imported trucks dating back to 1980, have combined to force the Japanese to slap massive price hikes on their imported light trucks.
In fact, Japanese executives argue that the truck tariff is now acting as a more stringent form of trade protection than the numerical quotas in effect on Japanese passenger car imports.
Thus, since the 1986 model year, base prices on Japanese mini-pickups have risen 38%, according to Chrysler estimates.
Meanwhile, the domestics have held down their truck price hikes in order to gain market share--something they have generally refused to do on cars. As a result, Nissan estimates that the domestics have a $700 advantage over the Japanese on base-model compact pickups.
So, unlike the passenger car side of the business, where the Japanese have maintained their market share despite massive price hikes, the imports are losing truck customers to sticker shock.
“Absolutely, it’s becoming increasingly difficult for the Japanese to remain competitive,” while selling Japanese-built trucks, notes George McCabe, Mazda’s deputy general manager.
At the same time, new, cheap mini-cars from South Korea and other Third World nations have flooded into the market; taking away customers who previously bought Japanese trucks because they were cheaper than the cheapest cars on the market.
“These trucks were basic transportation, and then Hyundai came along, and that hit the Japanese part of the truck market real hard,” observes Hackett. Under such pressure, other Japanese companies are also turning to their longtime domestic partners for help.
Mitsubishi, which supplies Chrysler with a wide range of imported products, has asked Chrysler for the rights to sell the Dodge Dakota pickup. Chrysler has refused. “We never responded to that request,” says Larry Baker, Dodge’s general marketing manager for trucks.
Some Awkward Designs
Most of the major Japanese companies are also considering producing pickups in the United States on their own, thus averting tariffs and exchange rate problems. Nissan has already shifted the production of all its pickup trucks earmarked for the American market from Japan to its Tennessee assembly plant. Toyota, meanwhile, is close to announcing a site for a new American truck plant, while Mazda also has one under study.
But the inexpensive pickup business is not the only segment of the light truck market in which the Japanese have taken a pasting. Even in the upscale mini-van and sports utility markets, where price is not much of a factor, analysts say the domestics are providing better products.
With awkward designs that don’t fit the needs of most families, the Japanese have found it nearly impossible to crack the huge mini-van market.
That seems likely to change soon; Mazda’s new MPV mini-van has been well-received. But other Japanese companies have so far not shown much ability to transfer their keen sense of American tastes in cars over to mini-vans.
“Sales of Japanese compact vans have just stopped, completely stopped,” notes Chris Cedergren, an automotive analyst with J. D. Power & Associates, an Agoura Hills automotive market research firm. “Their vehicles aren’t competitive, they are tall and narrow, and aren’t suited to the (American) market.”
In the sports utility market, the Japanese have fared better, with products like the Nissan Pathfinder and Isuzu Trooper. But Ford, GM and Chrysler still dominate the segment. Just three domestic models--the Chevy S-10 Blazer, Jeep Cherokee, and Bronco II--account for roughly 60% of sales. “We’ve got the vehicles priced and positioned very well,” says Beryl Stajich, Ford’s compact truck marketing plans manager.
But Detroit’s truck advantage may not last long. “I think in trucks, the Japanese are where they were 10 years ago with cars, in terms of understanding what consumers want,” says Cedergren. “In the next few years, they should do much better.”