Japan No Threat to U.S. Truck Makers--Yet

America’s truck makers have plenty of worries these days.

But, surprisingly, the Japanese are not among them.

“Don’t worry about the Japanese,” insists Frank Prezelski, a leading truck industry analyst with Deutsche Bank Capital Corp. in New York. “You are not going to see them show up in the heavy truck market.”

Those sound like the proverbial famous last words from an industry that has yet to feel the lash of global competition.

But on closer inspection, there seems to be plenty of evidence to support the bold prediction that America’s heavy truck industry may turn out to be one of the few manufacturing sectors to escape an all-out assault from Japan.

“The fact that the Japanese aren’t here in a significant way proves that they are conscious of their strengths and weaknesses,” notes Ernst Stoeckl, president of Freightliner, a truck maker based in Portland, Ore. “And this is not one of their strengths.”

But just because the Japanese aren’t competing here doesn’t mean that American producers are having it easy.

Far from it. In fact, analysts say, truck sales are intimately tied to the fortunes of the general economy, and so the nation’s continuing slowdown has hit the truck makers particularly hard. Sales are plunging and losses are mounting. In the fourth quarter alone, orders for heavy-duty trucks fell 31% as customers, who had been stocking up on new models when times were better, stopped buying.

“This is not an attractive business,” complains Philip Benton, the newly named president of Ford Motor Co., which produces heavy-duty trucks at one of its Kentucky plants. “The profit margins are much better in passenger cars than in heavy trucks. Our profits are unsatisfactory, and if we weren’t already in the business, we wouldn’t get in.”

Despite the industry’s weakened state, it has curiously remained one of the few manufacturing sectors that the Japanese have failed to crack.

Although all four major Japanese manufacturers of big trucks--Isuzu, Hino, Nissan Diesel and Mitsubishi Fuso--operate in the United States, none have made real inroads.

In fact, the Japanese don’t sell trucks in the industry’s heaviest weight classification--33,000 pounds and up--a category encompassing the interstate behemoths that white-knuckled car drivers love to curse. Instead, the Japanese have concentrated on the market for lighter-weight, medium-duty trucks used primarily for local commercial deliveries.

Even there, the Japanese are hardly a threat; combined January medium-duty sales for all four Japanese producers totaled just 644 units, giving them only about 5% of the market.

As a result, both Isuzu and Nissan have been forced to sell many of their trucks through partnerships with American companies to gain a foothold here. Isuzu sells through General Motors dealerships, while Nissan relies on Chicago-based Navistar, the nation’s largest producer of medium- and heavy-duty trucks.

Why haven’t the Japanese done better in the truck market?

Many American industry executives believe that the answer to that question offers some clues about the way the Japanese approach global competition and may even provide a few insights into how American companies can hold their own.

Some industry officials argue that the Japanese have made a conscious decision not to try very hard--not to make trucks one of their targets for worldwide dominance.

“I don’t think it’s a priority for them, especially since it’s not a very profitable business,” argues Benton of Ford. “Just look at the fact that there have been plenty of American companies for sale in the industry, but the Japanese haven’t bought any of them.”

Of course, the nature of the Japanese domestic market for trucks has also played a key role in limiting the Japanese assault here. With congested, narrow roads and shorter distances between major urban areas, the market for big, heavy-duty trucks in Japan is much smaller than in the United States.

And many of the biggest Japanese trucks, which have cab-over-engine configurations to provide tighter maneuverability on crowded city streets, aren’t suited to the tastes of American truck drivers, who prefer the greater comfort of long-nosed, engine-forward trucks.

“You have to look at their home market,” observes Robert Stempel, president of General Motors, which produces heavy-duty trucks through a North Carolina joint venture with Volvo. “I think European trucks are much more like American trucks than are the Japanese.”

“The Japanese have generally had difficulty in going into a market in which they don’t have a large home base,” analyst Prezelski adds.

Truck industry executives say the formidable obstacles facing all foreigners in their business have kept the Japanese in check.

One such hurdle is the highly specialized nature of truck manufacturing in America. At many leading truck companies, virtually every truck is custom-made. With prices for heavy trucks--not including trailers--ranging from $55,000 to $110,000, customers demand, and get, the last word on how their trucks are put together.

At Navistar, for instance, customers can specify which kinds of engines and transmissions they want in their trucks--and even which outside suppliers Navistar will have build them. Buyers can ask for double bunks or single bunks in their cabs. The variations are so great that, on any given day, Navistar’s assembly plant in Springfield, Ohio, doesn’t build two trucks alike. Often, customers come to the plant to watch their trucks being assembled.

The Japanese, by contrast, are unable to match that flexibility with trucks built across the Pacific.

“The Japanese do very good planning, so they understand that our heavy truck market is driven largely by custom orders” from trucking fleets or individual drivers, Freightliner’s Stoeckl says. “That kind of customized market is the opposite of the kind of high-volume business in which the Japanese do so well.”

Navistar Chairman Neil Springer adds that truck makers have fended off imports better than other manufacturers because they have been forced, by the demands of truck customizing, to stay in touch with their buyers.

“I think it starts with the fact that U.S. producers have stayed closer in sync with customer needs than have, say, the American auto companies,” Springer says.

The absence of a significant parts distribution network for imports--critical to truck drivers who often face breakdowns in the middle of nowhere--has also locked out the Japanese.

After all, you can’t take an 80,000-pound colossus to Jiffy Lube or a Sears Auto Center when it breaks down; truckers have to rely on dealers and original-equipment distribution centers that have the parts they need in a hurry.

“The distribution and parts systems of the manufacturers play a bigger role in the truck business than in autos,” notes Springer.

As a result, the only foreign firms to enter this market in a big way have been European giants that have done so by buying American companies, not by setting up their own operations. Daimler-Benz of West Germany, for instance, owns Freightliner, while Renault of France controls Mack Trucks. Both acquisitions were driven by a desire to gain access to established American truck distribution networks.

Meanwhile, truck building may be one of the few industries in which the Japanese can’t rely on a quality gap to gain a share of the market. Springer concedes that the sheet metal fit and paint finish on Japanese trucks surpasses American levels. But American trucks still meet relatively high quality standards, and, perhaps more important, American truckers think they are very good.

“Go to a truck show and look at them; there isn’t much difference” between American and Japanese trucks, Prezelski notes.

Still, at least a few industry executives aren’t taking the Japanese for granted. Roy Roberts, Navistar’s vice president for truck operations, has seen the Japanese take over markets before; he came to the company from General Motors’ automotive operations. And he warns that the gradual Japanese move into trucks may be patterned after their slow ascent in the car business in the 1960s.

“I’m not going to be fooled by the slowness with which they enter the truck market,” Roberts says. “The last thing we want to do is get brash about the inroads they haven’t made.”