Chrysler Will Buy Japanese Auto Network : Access: Car maker to spend $100 million on dealership chain in bid to boost sales in the country nearly eightfold by 1999.

By DAVID HOLLEY

June 28, 1995 12 AM PT

TIMES STAFF WRITER

TOKYO —

As U.S. and Japanese negotiators argued over foreign access to Japan’s auto market, Chrysler Corp. announced Tuesday that it will spend $100 million to buy control of a dealer network here in a bid to boost its Japanese sales nearly eightfold by 1999.

Chrysler’s move will make it the first U.S. auto firm with majority ownership of a dealership chain in Japan.

Chrysler will buy control of Seibu Motor Sales Co., which currently has 118 directly owned or contracted showrooms that sell Chrysler vehicles and European cars. The move will help it boost annual sales to 100,000 by the turn of the century, Chrysler said.

A key U.S. demand in the contentious auto talks now under way in Geneva is that Japan make it easier for Japanese dealers to carry foreign cars. Tokyo, while expressing willingness to take some steps in this direction, has primarily responded that Detroit’s Big Three auto makers need to try harder to build their own dealerships in Japan.

“This is an important deal,” said David Cole, executive director of the University of Michigan’s Office for the Study of Automotive Transportation. “It says they will be more aggressive in trying to sell vehicles in Japan.”

Chrysler’s action Tuesday should help defuse some of the criticism aimed at Detroit, although the auto maker said it has been working on the deal for a year and that the timing of the announcement, though “auspicious,” was coincidental.

Washington has threatened to impose $5.9 billion in tariffs on 13 models of Japanese luxury cars if an agreement is not reached by today.

In a similar vein, Ford Motor Co. said Tuesday that it is cutting the Japanese prices of about 27,000 service parts for imported Fords by about 15%, making Ford’s pricing structure for almost all service parts competitive with those for Japanese domestic vehicles. Access for foreign replacement parts in the Japanese market is another issue in the trade dispute.

Ford has also recently lowered the price of some vehicles it sells in Japan. In recent months, aided by the rise of the yen against the dollar, the auto maker dropped the price of right-hand-drive Probe sport cars by 9% and those of its Explorer sport-utility vehicle by 3%.

“We have been working hard to expand our sales in Japan,” Denis Root, general manager of Chrysler’s Asia Pacific operations, told a Tokyo news conference. “This $100-million-plus investment is a clear commitment that Chrysler is serious about the Japanese market.”

The trade talks in Geneva are still important to Chrysler’s plans because they “aim at encouraging Japanese dealers to be available” to carry foreign models, Root said. Chrysler’s target is “500 dealers by the end of the decade,” with many to be recruited from dealers currently associated only with Japanese auto makers, he added.

Chrysler currently sells only one U.S.-made right-hand-drive vehicle in Japan, the Jeep Cherokee. But the company has said it will add right-hand-drive versions of the Chrysler Neon and Jeep Grand Cherokee next year and its new minivan in 1997.

The right-hand-drive Grand Cherokee will be introduced to Japan early next year, followed by the Neon in the spring and the minivan in 1997, the company said in a news release.

Chrysler Chairman Robert J. Eaton, speaking Tuesday at the National Press Club in Washington, said distribution networks in Japan are still marked by “a confusing web of interlocking relationships, governmental intervention and inbred biases that make doing business there difficult and expensive.”

“This action is a leap of faith, but we wouldn’t be making it if we weren’t convinced we will eventually have the kind of market access to allow our investment to pay off,” Eaton said. “In light of our government efforts in Geneva to open this market, we think that optimism is justified.”

Peter Boardman, an auto industry analyst at UBS Securities Ltd. in Tokyo, said that despite what currently is a huge imbalance in auto trade between the United States and Japan, there is “great potential” for U.S. auto makers here.

Chrysler, which also sells its Jeeps through Honda Motor Co.’s dealers, sold 13,601 vehicles in Japan last year. Purchase of Seibu Motor Sales will not affect this relationship with Honda, Chrysler said.

In the complicated deal announced Tuesday, Chrysler will boost its equity interest in Chrysler Japan Sales Ltd. to 70% from 15%, reducing the interest of its partner, Japanese trading company J. Osawa & Co., to 30%. Japan’s Saison Group, which owns an interest in J. Osawa, will sell 100% of Seibu Motor Sales to Chrysler Japan Sales. The two transactions will be completed within 45 days, Chrysler said.

Seibu Motor Sales currently sells Peugeot and Citroen vehicles in addition to Chrysler models. Those distribution operations will be sold back to the Saison Group, Chrysler said.

Until now, Ford has been the only U.S. manufacturer with an equity stake in a Japanese dealership network.