Remade in Japan

TIMES STAFF WRITER

Auto dealer Toshio Nakano's idea of a Hawaiian vacation isn't the typical tour of white sandy beaches and lush green golf courses. When he took 20 salesmen to Honolulu earlier this month, he put them in rented Ford cars and gave them a map of the island.

Their assignment: to drive like Americans.

Nakano is making sure the sales staff at his two Ford showrooms in Tokyo knows more than just the fuel economy, engine size and upholstery options for the Ford Mondeo sedan and Taurus station wagon. He wants it to be able to sell Japanese motorists on a lifestyle in which the automobile represents freedom--as embodied by, say, a drive along the beach at Waikiki.

As the first Japanese auto dealer to jump ship and join the Ford Motor Co. team in Japan two years ago, Nakano has spent much of his energy trying to bridge gaps in culture and experience.

And the former Nissan executive remains convinced, even while his dealership loses money month after month, that Japanese consumers can be won over if they are given the right information about price, quality and the "Ford way of life."

"We should know about the American lifestyle," he said.

Dealers like Nakano are a key part of Ford's strategy to win back some of the market it virtually owned before World War II, when it was ordered to shut down its Yokohama plant and leave the country. Back then, Ford sold 75% of the cars in Japan.

Until recently, Ford and other U.S. auto makers were a lot more concerned about winning back customers in the United States than in cracking a country where bureaucratic barriers have held imported autos below 3% of the market for years.

The story of Ford's--and Detroit's--battle to establish itself in Japan illustrates dramatic changes on both sides of the Pacific. Boasting improved products, revitalized U.S. auto makers are shifting their focus to long-overlooked and historically protected markets abroad. And international pressure is forcing the Japanese to face competition--in autos and other products--on their home turf.

Last summer, Detroit got a boost when Japan--under threat from the U.S. government to impose $5.9 billion in sanctions on Japanese luxury car imports--agreed to take steps toward a more open domestic automobile market.

In the months since, the Big Three have stepped up what had been a halfhearted dabbling in the Japanese market. A trickle of right-hand-drive U.S. vehicles became a larger trickle: In February, Ford added a right-hand-drive version of its Taurus, America's top-selling auto. This month, Chrysler Corp. plans to add the spacious Neon small car to its Jeep and other right-hand-drive offerings, and General Motors Corp. has begun shipping right-hand-drive Cavaliers, to be followed next year by Saturn.

At Ford and GM, a key part of the strategy has been to draw on their big German subsidiaries. Ford's Mondeo, a German-built version of its "world car" sold in America as the Contour, quickly became its biggest single seller in Japan, while GM's German-based Opel unit accounts for about 80% of its fast-growing Japanese sales.

Detroit has few illusions about taking Japan by storm, but there is more at stake than that. Carving out a piece of this market should make it easier to compete in other, faster-growing Asian countries where the Japanese already rule the roost. For example, Japanese auto makers control 85% of the market in Thailand, Southeast Asia's fastest-growing market.

"This is a good test for all the auto makers, whether they can succeed in the Japanese market," said Chikao Masuzawa of Solomon Bros. Asia Ltd. in Tokyo.

Japanese auto makers, used to competing in a market with 11 domestic auto firms, don't exactly show signs of panic. They describe the stepped-up foreign competition as business as usual.

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Although Ford has historically been the most international-minded of the U.S. Big Three, it has been cautious recently in such wide-open areas as Asia and Eastern Europe.

Ford is belatedly expanding into other parts of Asia, establishing a joint-venture pickup truck factory with Mazda in Thailand (where it lags Chrysler in local production) and investing in Jiangling Motors Corp. in China (where GM and Chrysler are much better established).

Although Ford trails GM and several German auto makers in Japan, its low-ball prices, its control of Mazda and its nuts-and-bolts attention to building a dealer network have marked it as the most aggressive auto maker about the Japanese market--and perhaps the best positioned for the long haul.

"Ford is getting really serious about this market. I haven't seen the same spirit at GM or Chrysler," said Koji Endo, an auto analyst with Lehman Bros. Japan Inc.

Ford's pioneering days in Japan date to the early 1900s, when an entrepreneurial Japanese businessman persuaded a pharmaceutical company to begin importing Ford cars. After the devastating Kanto earthquake in 1923, the Japanese government used Ford vehicles for public transportation. The company began building Fords in Yokahama.

In the years leading up to the war, however, both Ford and GM became the target of a campaign by Japan to reduce the power of foreigners in its market. In 1939, the two auto makers were evicted and their plants padlocked.

During Japan's postwar reconstruction, the government continued to protect its domestic auto makers through high import taxes and other trade barriers, vestiges of which remain.

Ford likes to say it is still making history of sorts here. In 1992, it directly challenged the Japanese by slashing the price of the Ford Taurus sedan to the level of Japanese domestic cars. It has continued this tough marketing strategy, a posture that has helped attract dealers such as Nakano, a crucial part of its strategy to get its vehicles to the market.

In 1994, Ford was the first to import a U.S.-made right-hand-drive passenger car, the Michigan-built, Mazda-designed Ford Probe.

And last month, Ford became the first foreign firm to take management control of a Japanese auto maker when it expanded its stake in ailing longtime partner Mazda Motors. This month, veteran Ford executive Henry Wallace becomes president of Mazda, the first foreigner to serve as president of a Japanese firm.

Ford's takeover of the management of Mazda has created great anxiety in Mazda's home base of Hiroshima, where workers and suppliers fear Ford's management takeover will lead to cutbacks in the payroll and a shift to lower-cost suppliers.

It is too soon to judge how this stepped-up Ford-Mazda partnership might affect Ford's operations in Japan, although Wallace has discussed further consolidation of manufacturing and distribution networks. Many expect Ford to take over more Mazda dealerships, and Mazda's factories give Ford a clear step up in establishing itself as a local producer. Already, it sells more Mazda-built cars here under the Ford nameplate than it imports from U.S. and German plants.

Wallace's counterpart at Ford Motor Co. Japan could give him some tips on navigating rough waters.

Five years ago, Konen Suzuki shocked the Japanese automobile industry by abandoning a successful career at Toyota Motor Corp. for the top position at Ford Japan, an unheard-of career move that also signaled Ford's seriousness about Japan's long-ignored market.

Even before being named president of Ford's Japanese affiliate, Suzuki had developed a reputation as a nonconformist, eschewing the dark-suited conservatism of corporate Japan for a pipe-smoking, feet-on-the-desk image. Many skeptics became supporters, however, when he moved to the United States in 1972 and helped turn the stodgy Toyota Corolla into a market leader.

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Since joining Ford, Suzuki has been a cause celebre on American shores because of his willingness to criticize traditional Japanese auto practices. Other Japanese auto executives grew particularly testy last summer when he supported the U.S. charges that the domestic market was closed to foreigners.

Suzuki, interviewed recently at his Tokyo office, disputes the renegade image. Rather, he chooses to think of himself as someone who, by virtue of his early overseas experience, was ahead of his time--by perhaps a decade or so.

"I'm a very ordinary person," said the 58-year-old executive, whose office walls are decorated with photos of race cars. "I simply had a little bit different experience because I worked in the United States and Japan."

Suzuki applauds the United States for focusing a harsh light on restrictive trade practices. But he believes economic factors, not trade politics, are the primary reason for Ford's recent gains in Japan.

Japanese consumers, who are traveling abroad in record numbers, are becoming more value-conscious and knowledgeable about foreign goods. The stronger yen has lessened the cost advantage of Japanese versus foreign-made products. And the country's worst recession since World War II has driven sales down and made Japanese consumers more discriminating--just as they have more and more foreign-built autos to choose from.

Meanwhile, there is turmoil within the all-important dealership network in Japan, creating openings for foreign-based auto firms.

Because of the high cost of establishing a dealership in Japan, Japanese auto dealers have traditionally been tied financially to the major auto makers. U.S. auto makers, in turn, were forced to depend on Japanese dealers who also sold the competition.

Now many of those dealers, who expanded wildly during the "bubble era," are scrambling for new business to cover their high rents and labor costs. As many as 50% of those dealerships are reportedly operating in the red.

For years, Ford marketed its cars through the 300-dealer Autorama chain, which it shares with Mazda. But those showrooms now bear the Ford name, and the U.S. auto maker is working hard to recruit other Japanese dealers to its team.

Of the 63 Ford outlets opened here since May 1994, 36 were formerly Japanese domestic dealers. The company's goal is to add 400 more dealerships by 2000. Ford had hoped to expand even more quickly, but Suzuki said many of the interested Japanese dealers have been rejected as financially unsound.

The blend isn't a natural one. The average Japanese car salesperson is salaried and sells just four cars a month. In the United States, where salespeople are typically on a commission, the sales average is more than twice that.

It isn't laziness. Here in Japan, salespeople spend much of their day knocking on doors of potential customers with catalogs and a pitch. Countless hours are also spent processing the inordinate amount of paperwork related to each automobile, including financing documents, owner's proof of parking space and at least a dozen different registration certifications.

U.S. auto makers have pressured the Japanese government to reduce this time-consuming paperwork. But domestic auto makers, which have built up huge sales staffs to handle the system, fear they would lose their competitive advantage if the path to auto ownership were made much easier.

In the United States, you can drive away from the dealership in a new car in a matter of hours if the financial paperwork is in order. In Japan, even customers carrying a wad of cash must wait at least a week to pick up their new wheels.

"Deregulation of this type probably helps the weaker guys and doesn't help the stronger guys," Suzuki said. "If Japanese customers begin going to the dealer and can buy a car on the spot, it will change the whole way of building an [automobile sales] operation in this country."

For the Big Three to succeed in Japan, they must convince people to trade in their Japanese cars for American-made vehicles. And they aren't likely to do that by going door to door, since people aren't going to buy an unfamiliar product out of a catalog.

That means getting customers into Ford's showrooms, where they can sit behind the wheel, pop the hood, kick the tires. To do that, the company has launched an aggressive marketing blitz that includes a television campaign and weekly advertisements in the major national and regional newspapers.

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Indeed, Ford sparked fireworks with some American-style attack ads, running a multimillion-dollar campaign in January that accused Volkswagen of gouging Japanese consumers.

While comparison advertising is common in the United States, it has not been used much in Japanese society, where direct confrontation tends to be avoided. The Ford advertisement riled not only VW but Japanese auto executives, who figured they might be the next target.

Ford targeted VW, the leading importer, because it believes its most likely customers are foreign-car owners. Yet while German vehicles are highly respected here, American-made cars still run up against strong consumer prejudice, Ford officials admit.

Suzuki is particularly peeved that Volkswagen is treated as a high-class import.

"Our product is definitely better than many Japanese products and definitely much, much better than the Europeans," Suzuki said. "But consumer perception is not changing as quickly as we expected."

Dealer Nakano, who is president of Ford Tohnichi Co., runs into those prejudices every day. His main Tokyo dealership, which boasts a huge American-style showroom and large service center, used to sell more than 20 Nissan cars a month. Now his six salesmen are lucky to sell 15 Ford cars.

In some instances, Ford might need to go back to the drawing board.

Nakano praises Ford for being the first U.S. auto maker to provide U.S.-made right-hand-drive vehicles in Japan. But the Taurus is too big to fit into the automated parking garages that are so popular in Tokyo.

"I think it's a wonderful car, but it's too big," he complained.

The future of Ford in Japan ultimately depends on the satisfaction of people like Takayoshi Amemiya, the 57-year-old owner of a small sign-making business in Tokyo. A loyal customer of Nakano's from his Nissan days, he agreed to buy a Ford Mondeo last year.

His son, Toshiyuki, said the American car is far more comfortable than their Nissan. But there have been some problems. Last week, they had to bring the Mondeo into the dealership to get a small switch repaired.

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While the Amemiyas waited for their car to be fixed, they took turns sitting in a shiny Mustang convertible. And the dream apparently has legs. To the elder Amemiya, who came of age after World War II, the Mustang still symbolizes everything war-ravaged Japan aspired to be: rich, powerful and carefree.

"For his next car, my father wants to buy a Mustang to go golfing," Toshiyuki explained.

Even if the steering wheel is still on the wrong side.

Makiko Inoue of The Times' Tokyo bureau contributed to this report.

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It's a Start

Detroit's Big Three are finally making headway in Japan, but imports account for only about 5% of the Japanese market. The top importer last year: Honda, which ships cars to Japan from its U.S. and British plants.

Big Three Sales in Japan

In thousands

General Motors: 41.7

Ford: 20.8

Chrysler: 14.5

Auto Sales in Japan

In millions

All cars: 6.9

Imports: 0.36

Sources: Japan Automobile Manufacturers Assn., Japan Automobile Importers Assn., Lehman Bros.Japan

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