Exports in Overdrive : Suddenly U.S. Auto Sales Surge Overseas
Boxy Jeep Cherokees built by Chrysler in Toledo--Ohio, that is--zip down Germany’s autobahns from Bonn to Berlin. Right-hand-drive Ford Probes made in Flat Rock, Mich., draw stares on London streets. And wide-bodied Chevrolet Caprice sedans, assembled in Texas, are status symbols in Saudi Arabia.
Once shunned as shoddy, shameless models of excess, U.S. vehicles now carry a certain cache internationally. The surprising result is that the Big Three auto makers quietly have become a significant exporting force.
Together, Chrysler, Ford and General Motors exported nearly 350,000 vehicles from North American plants last year. That was up 18% from 1992--and a more than fourfold increase from 1986 levels. Exports easily could double again in the next five years, industry officials estimate.
While nowhere near the same league as Japan--which exported 5 million cars last year, including 1.6 million to the United States--the Big Three are showing that their newest products have global appeal.
“We’re selling more cars and trucks in a tougher global market because we’re building better products,” said Andrew Card, president of the American Automobile Manufacturers Assn.
That’s hardly the only reason for the export boom.
North America has become an efficient, low-cost manufacturing center. The weak dollar makes U.S. products cheaper abroad. Trade barriers are coming down. The telecommunications revolution is resulting in a growing convergence of consumer tastes worldwide. And Detroit companies are headed by a new generation of leaders with international experience and global vision.
These forces have resulted in some profound changes in the North American vehicle market.
The Big Three themselves were net vehicle importers through the 1980s and early ‘90s. Detroit sold as many as 400,000 Japanese-made vehicles under U.S. nameplates. That reversed in 1992. Last year, GM, Ford and Chrysler exported twice as many vehicles as they imported.
With the construction by Japanese car makers of U.S. assembly plants in recent years, total U.S. imports dropped from 4.6 million vehicles in 1986 to 2.2 million last year. The Japanese, too, are exporting vehicles from the United States. Together, Honda, Nissan and Toyota exported 93,700 vehicles from U.S. plants last year, mostly to Japan.
With a strong yen, Japanese production in the United States is expected to continue growing. So will the Japanese makers’ U.S. exports. And German auto makers also are gearing up U.S. production to take advantage of lower operating costs.
In September, BMW begins production in South Carolina of its 3-Series sedan. Operating costs will be a third less at its Greer, S.C., plant than in Germany. Mercedes-Benz is building a plant in Alabama, with plans to export half the sport-utility vehicles built there to Europe.
In terms of their total sales, Big Three exports are still quite small. The U.S. industry sold 13.9 million cars and trucks last year. Exports amounted to only about 2.5% of the total.
But the export growth came in the face of severely depressed markets in Europe and Japan. And looking forward, exports could provide an important hedge against an economic downturn in the United States, analysts say.
Yet there clearly are limits.
Both GM and Ford have extensive global manufacturing operations. Neither wants to compete for sales with their own foreign units. Instead, their focus is on finding underserved niches, such as the minivan or sport-utility markets.
Market differences also may hamper exports. Because of lower gas prices in America, the Big Three’s vehicles tend to be bigger and less fuel efficient than the popular-selling cars in Europe, Japan and Latin America.
“America is not going to be a great exporter of vehicles,” said Ford Vice Chairman Allan Gilmour.
But such thinking is no longer universal. Another school of thought holds that market differences are narrowing because of rapid changes in the global flow of information.
“We’re finding that as the world gets smaller and smaller through mass communications and transportation technology, automobile markets worldwide are becoming more and more similar,” said Thomas Gale, vice president of design and international operations for Chrysler.
If that’s correct, well-built, well-designed U.S. vehicles may have appeal in other countries with only minimal modifications.
As a case in point, consider Chrysler’s minivans and sport-utility vehicles.
With only minor changes from its U.S. cousin, the Voyager/Caravan minivan is finding eager buyers in Europe. Likewise, the Jeep Cherokee and upscale Grand Cherokee are in demand in Germany, Taiwan and Argentina. Chrysler also is producing right-hand-drive Cherokees for Japan, Great Britain and Australia at its plant in Ohio.
Altogether, the company exported 132,000 vehicles last year, up 26% from 1992. The sales abroad were more cars than Volkswagen, Volvo, BMW, Mercedes, Audi, Isuzu, Subaru and Hyundai sold, individually, in America during the same 12 months.
One reason for the export successes is that Detroit has learned a lot from these competitors and others. The Big Three have adapted Japanese production techniques to become more efficient and measured their cars against their rivals’ best to improve quality.
While the Big Three still trail the Japanese in quality surveys, the gap in defects has narrowed.
In fact, some say the differences are negligible.
“All three domestic manufacturers are better than the Japanese were when they established their reputation for bullet-proof quality,” said Chrysler President Robert Lutz. “The rankings distort reality.”
Chrysler may be emerging as the world’s most efficient and profitable car company. Many analysts say much of the reason is that it used Honda as a model for its corporate face-lift.
And Ford and GM, too, are using their ties to Japanese competitors to help boost exports. The sporty Probe, for example, was designed with Mazda’s assistance; Probes roll off the line right behind Mazda 626s and MX-6s at the companies’ joint Auto Alliance International assembly plant in Flat Rock.
Last year, Ford shipped 11,000 Probes abroad, mostly to Europe. Exports should grow now that the plant has been expanded and modified to build right-hand-drive Probes. The first such models, destined for Great Britain, were driven off the line in December. The cars eventually will be sold in Japan and Australia, as well. Ford, with total exports of 71,000 vehicles last year, also is planning right-hand-drive versions of its Explorer and Taurus for sale in Japan later in the decade. The redesigned 1994 Mustang will go on sale in Japan in mid-May.
“We have a shot at exporting 100,000 (vehicles) next year,” said Alexander Trotman, Ford’s chairman and chief executive. “Our aspiration is to go for 250,000 by 1998.”
GM also is seeking to bolster its exports from last year’s 139,000 cars and trucks. It recently signed an agreement with Toyota for the sale of 20,000 right-hand-drive Chevrolet Cavaliers in Japan. The cars will be built in Lordstown, Ohio.
But GM’s most aggressive export move is production of a minivan at its Doraville, Ga., plant for sale in Europe under its Opel badge. Up to 30% of the plant’s output may be dedicated to vehicles for sale abroad.
Some analysts attribute the Big Three’s newfound interest in exporting to the new leaders who have assumed the top operating posts in the last 15 months. John F. Smith, GM’s chief executive officer, established his reputation as head of GM’s European and international operations. Trotman ran Ford of Europe. And Chrysler’s CEO, Robert Eaton, was recruited from GM-Europe. They all have a broad understanding of global competition and consumer demands in different markets.
“Because they have international experience, they bring a totally new personality to the American auto companies,” said Maryann Keller, analyst with Furman Selz, a New York brokerage. “It makes them more flexible.”
Flexible, perhaps, but still tough--particularly when it comes to Japan. The main reason is the stubborn U.S. trade deficit, estimated at a record $59 billion for 1993. Sixty percent of the imbalance is related to autos and auto parts.
So even as the Big Three have rebounded, they have pressed their fair-trade case against Japan with renewed vigor. Detroit notes that while exports are up strongly, the gains have little to do with Japan, where U.S. car makers sold just 17,093 North American-built vehicles last year.
The auto makers say it is nearly impossible to sell cars in Japan because of difficult certification rules and lack of access to dealer networks. The Japanese argue that U.S. auto makers have not built cars for the Japanese market and that product quality is poor.
In the current “framework trade talks” between the two countries, the Administration wants Japan to accept numerical targets for vehicle sales and auto parts purchases.
But such quotas are difficult for Japan to swallow. Its market has been shrinking for three years, and it is under pressure to limit exports to Europe. More competition at home from Detroit could only hurt Japanese manufacturers.
Still, the Big Three last month dispatched Card, their chief lobbyist and former U.S. transportation secretary, to take Detroit’s case to the Japanese consumer. His message: The average Japanese is paying higher prices because GM, Ford and Chrysler are being kept out.
“American auto makers and Japanese consumers will both benefit,” Card preached, “from the same open access to Japan’s market that Japanese auto makers have enjoyed in the United States for decades.”
Big Three Exports Are Booming...
Beyond recent gains, industry officials estimate that exports will at least double in the next five years.
Auto maker 1992 exports 1993 exports Percent change Chrysler* 104,723 132,123 +26% Ford 50,090 70,999 +42% General Motors* 134,506 139,435 +6% Total 289,319 342,557 +18%
*Includes sales of knock-down kits for assembly of vehicles abroad and sales to U.S. military personnel overseas.
Exports from Japanese plants in the United States dipped in 1993, largely due to a drop in exports of Honda Accords because of a model changeover. Honda expects to export 75,000 vehicles this year.
Auto maker 1992 exports 1993 exports Percent change Honda 55,850 41,694 -25% Nissan* 829 3,457 +317% Toyota 43,536 48,549 +12% Total 100,215 93,700 -7%
*Mainly represents exports of new Altima sedan.
Still, Japan Remains Wary of U.S.-Made Cars
Only a small percentage of Japanese consumers say they would be willing to purchase a car manufactured by the Big Three.
Don’t want to purchase at all: 68% Definitely want to purchase: 2% May purchase: 9% Not likely to purchase: 21%
And Japanese car dealers say the Big Three need to improve almost every part of their operations if they hope to boost sales in Japan, including: Parts supply system: Percent of import-brand dealers citing need to improve: 46.8% Percent of Japanese-brand dealers citing need to improve: 78.8
Service system: Percent of import-brand dealers citing need to improve: 49.4 Percent of Japanese-brand dealers citing need to improve: 73.9
Suitability to Japanese conditions: Percent of import-brand dealers citing need to improve: 56.2 Percent of Japanese-brand dealers citing need to improve: 67.3
Trade-In market: Percent of import-brand dealers citing need to improve: 45.1 Percent of Japanese-brand dealers citing need to improve: 53.5
Price: Percent of import-brand dealers citing need to improve: 47.7 Percent of Japanese-brand dealers citing need to improve: 42.9
Fuel economy: Percent of import-brand dealers citing need to improve: 25.5 Percent of Japanese-brand dealers citing need to improve: 38.0
Sources: Car companies; Japanese Consumer Research Institute; Japanese Fair Trade Commission; Japanese Automobile Manufacturers Assn.
