Strategy Questioned as GM Gears Up in Japan : Autos: Analysts say the same approach it used to sell the Saturn in the U.S. may not work overseas.
It’s probably No. 1 on the list of common mistakes by foreign firms in Japan: “Our strategy worked wonders with the folks back home, so it’s sure to work with the Japanese too.”
Now, many analysts say, another American firm could be on the way to making that mistake here. And this is no inexperienced mom-and-pop operation: It is the world’s biggest car maker, General Motors Corp.
After years of lackluster efforts in Japan, GM appears to be preparing its first major sales push here, concentrating on the Saturn model that has been highly popular in the United States.
The Saturn campaign is likely to be touted as GM’s answer to the critics who blame the company--rather than Japanese trade barriers--for GM’s dismal 0.26% share of Japan’s auto market.
Instead of relying on Yanase & Co., an import agent that also sells the cars of competitors, GM is now looking at forming its own network of dealers for the Saturn.
And for the first time on one of its American-made cars, GM plans to build Saturns by the 1997 model year with the steering wheel on the right to accommodate the Japanese, who drive on the left side of the street.
Whether the Saturn succeeds in Japan will have an impact far beyond GM alone. After concluding two years of tough negotiations with Tokyo in June, the Clinton Administration put forward a detailed program earlier this month to monitor how well American cars are doing in Japan.
The implied threat was clear: If sales don’t show a significant increase, the trade warriors in Washington and Tokyo could be headed back into battle.
Still, it is Japanese consumers, not trade negotiators, who decide a car’s success.
That’s where observers see a problem: GM is so satisfied with its marketing of the Saturn in the United States that it may have failed to examine closely whether the same tactics will work in Japan.
In the United States, Saturn dealers do not sell any other make of car, a strategy to distinguish the car from the old GM image. Asked whether he thought the system of dealers selling Saturns exclusively would work in Japan, GM Japan President J. Michael Durrie said: “It sure has worked well in the States.”
But many doubt that Japanese dealers will be willing to sell just the Saturn.
“When they create a new dealership, dealers like to have a full line of cars, from small to RVs,” says Hiroshi Sato, an auto analyst at the Fuji Research Institute, an affiliate of Fuji Bank.
“GM is taking a high-risk gamble trying to do the same thing here that it did in America,” Sato says. “It’ll be quite difficult.”
In Japan, dealers go to great lengths to keep old customers by visiting their homes and pushing them to move up to a higher-priced model. However, that would not be possible for a Saturn dealer if he only sold Saturns.
Even if GM is able to put together a solid dealer network, it is not clear whether the Saturn can carve out a niche for itself like it did in the United States, where 286,000 Saturns were sold last year.
American buyers were attracted by the attentive service at Saturn dealers, and many of them were eager to buy an American car that offered the same quality as Japanese models.
But conditions are tougher in Japan. Competition in the Saturn’s class is severe, and the market is not growing. And unlike the United States, American cars here start out with a disadvantage because many Japanese worry about availability of parts.
Tsuyoshi Mochimaru, a car market watcher at Nikko Securities’ research center, says the only way to make the Saturn stand out in Japan is to slash prices. But a GM spokesman said last month that it would sell for about $20,000--about the same as Japanese competitors.
Should the predictions of doom for the Saturn come true it would be a major blow for GM, which is already behind the other two major American car makers, Ford Motor Co. and Chrysler Corp., in the world’s second-largest car market.
Ford has put together a national network of 127 dealerships under its direct control that sell a full range of models. It nearly tripled its sales of American-made cars in 1994 with an aggressive advertising campaign, and expects an increase of more than 30% this year.
Chrysler also has control of its own dealer network in the Tokyo area after purchasing control of Seibu Motor Sales Co., with 120 dealers, for about $100 million in June. The popularity of Jeep models, which account for 90% of its sales in Japan, has helped sales more than double in two years, and the company plans to introduce the Neon compact next spring.
GM Japan’s Durrie admits to keeping a nervous eye on Chrysler and Ford, but he says GM is not about to buy a dealer network because “as a corporate policy . . . that’s just not the way we do business.”
