Poor Reputation Hurting U.S. Car Makers in Japan : Trade: A shrinking market and a perception of poor quality and style stand in the way of efforts to sell more cars there.
Masayoshi Ohmura made his mark in Japan’s auto industry selling Nissans door to door--sometimes visiting more than a hundred homes a day. Now general manager of Nissan sales in a wealthy Tokyo district, he is a true believer in the quality of the products he sells.
But because of a recent Japanese agreement to buy 20,000 more cars from America to ease trade friction, Ohmura may be forced to put Fords in his lineup.
He doesn’t like it one bit.
“If the company orders us to do it, we will,” he says from a comfortable office in a dazzling three-car showroom of polished chrome and floor-to-ceiling curved, tinted-glass windows.
He doubts that the Fords will sell. “Most cars in Japan are still sold by our salesmen door to door,” Ohmura says. “The salesmen won’t try to sell them (Fords), because they won’t have confidence in the product.”
A defective product means that the salesman must spend his time picking up the car at the customer’s home, taking it to the shop and returning it. In the case of a Ford, that could be lost time, lost face and one fewer customer who could be happily driving a Nissan. “The personal relationship with the customer is very important,” Ohmura says.
The barriers to selling autos in Japan have fallen steadily in recent years. Tariffs on auto imports are gone--the United States still has them--and certification requirements have been eased.
Now American companies, which sold a paltry 16,000 cars in Japan last year--not even 1% of the market--are belatedly making a more serious effort to boost sales. It is probably a case of too little too late.
If there was a window of opportunity in getting into the intensely competitive Japanese market, it was six years ago, when overall auto sales began growing at a steady 6% rate. Now the window is fast closing. Last year, sales fell 6.5%, and few believe that Japan’s crowded roads will be able to handle many more vehicles.
American auto companies blame their failure on unofficial roadblocks to the Japanese market.
“When all of the auto makers in the world can’t get more than 3% of this market, then it’s not a free market,” Harold A. Poling, Ford Motor Co.’s chief executive, said during a recent visit to Tokyo with President Bush’s trade delegation.
Despite improvements in certification procedures, it still takes months to get new models approved, “breaking momentum” after new-model introductions, says Richard Johnson, president of General Motors Japan. He hopes that Bush’s visit will be a catalyst in eliminating remaining barriers.
Despite past problems, Johnson is optimistic about GM’s chances for growth in Japan. He sees good news in the 57% growth last year in the big-car market and the 60% growth in the market for recreation vehicles, both areas where U.S. makers are strong.
American auto makers plan for the first time to build cars with the steering wheel on the right-hand side to match Japanese roads, where people drive on the left.
Chrysler hopes to build 10,000 to 15,000 right-hand-drive Jeep Cherokee utility vehicles in Toledo, Ohio, and China for export this year to right-hand-drive markets such as England and Japan. GM and Ford have similar plans.
But few believe that U.S. makers will make much of a dent in Japan.
“There’s not going to be an export boom of American cars to Japan,” said Allan Gilmour, executive vice president of Ford Motor Co. “There are not many holes in the Japanese product lineup.”
American auto makers also lack dealer networks and must contend with a reputation as providers of expensive, poor-quality cars ill-suited to Japan.
Japanese executives sneer at American contentions that their decision to build cars with right-hand drive shows that they are committed to responding to Japanese consumer needs. One Japanese company reportedly went so far as to take clay samples of cobblestone roads in Europe to help build cars to better match those roads.
U.S. makers insist that their quality has improved to the point that it is virtually on a par with Japanese products. “The image of American cars seems to be recovering,” says a spokesman for Yanase, a GM dealer. “The cars are getting smaller, and gas consumption is improving.”
That may be wishful thinking. The Japanese press is filled with articles chronicling American auto failings. Buicks used to be a mainstay of the Japanese luxury market. Car rental companies say they dumped them because they break down too often. Many Japanese gangsters, who have a well-advertised love for large, conspicuous foreign cars, have traded in their Lincoln Continentals for Mercedes.
Susumu Nikkaido, a high-ranking Japanese politician who has had American cars for 40 years, says his Buick is in the shop an average of three times a year.
The reputation for poor quality, even if it is no longer deserved, will long haunt American efforts. Ohmura, the Nissan dealer, suggests that to sell more cars in Japan, U.S. auto firms will have to launch a comprehensive effort to persuade Japanese salespeople that American cars are quality products. “The salesman won’t be able to sell the car unless they really love it, unless they really believe it is a good product,” he says.
It hasn’t always been so hard to sell American autos in Japan. Ford and General Motors had extensive manufacturing facilities and sales networks in the country before Japan’s auto industry was born. GM built a plant in Osaka in 1926 and assembled more than 100,000 autos. In 1939, however, militarist Japan ordered the companies out and handed their facilities to such fledgling Japanese companies as Nissan and Toyota.
By the time Japan allowed imports again in the late 1960s, each Japanese company had built a network of affiliated dealers that would sell its cars only. That made it difficult for foreign manufacturers to crack the market.
BMW (Germany’s Bayerische Motoren Werke) got around the problem by investing nearly $100 million in its own nationwide dealer network. It now sells 36,500 cars a year in Japan. “I don’t think the BMW is a great car,” Ohmura says, “but the company has successfully built up a good reputation.”
By comparison, America’s recent efforts to sell in Japan have bordered on the pathetic. Although Ford built a joint venture dealership with Mazda called Autorama that has more than 300 showrooms, most of the Fords that the dealers sell are manufactured by Mazda in Japan. The number of made-in-America Fords sold through the organization actually plunged to 1,700 last year from 4,000 in 1990.
The styling of American cars is a sore point with Japanese consumers. Junichi Wakabayashi, a salesman at a Tokyo Autorama dealer, admits that the Taurus station wagon is one of the more popular models in Japan, however. That’s because “it looks like a European car” but, at $32,000, costs about half as much, he said.
Sales of Chrysler’s Jeep Cherokee have been a dismal failure, though. “We used to have a Jeep on the showroom floor, but after a year we only sold five or six cars,” says Akira Honzawa, a Honda dealer. The Jeeps had to be recalled twice and customers complained about engine noise and carburetor problems.
“Maybe it is a cultural thing, but most Japanese really want to buy Japanese cars,” Honzawa says. “We trust them more.”
Honda has nonetheless agreed to establish a separate distribution network to handle imported vehicles, including the Jeep. And Honda executives say they are looking at ways to improve sales. They had planned to discuss ways to improve Jeep sales when Chrysler chief Lee A. Iacocca visited Japan with President Bush. But Iacocca canceled the meetings.
“We’ve gone as far as we can go in agreeing to these targets,” Honda President Nobuhiko Kawamoto said. Now it is “up to the American companies” to develop products that match the needs of Japanese consumers.
