Japan’s Auto Makers Upbeat About Earnings, U.S. Market

With Nissan Motor Co. riding high on its return to profitability this year, Japan’s No. 4 and 5 auto makers say they too see black ink in their futures, with their U.S. operations playing increasingly important roles in their turnarounds despite the terrorist attacks and the American economic slowdown.

Mazda Motor Corp. expects to “return to profit at all levels of the company this year,” President Mark Fields told reporters this week at a preview of the 35th annual Tokyo Motor Show. And Mitsubishi Motors Corp.’s new chief operating officer, Rolf Eckrodt, said in an interview that the ailing firm should end its fiscal 2001 in March by breaking even, with profit possible by 2004.

The show highlights autos for the Asian and European markets, but also provides clues to what Japanese car companies are planning for the United States. Organizers expect to draw about 1 million spectators during a 12-day run that opens to the public Friday. That would be off slightly from last year, but still a healthy showing in a country with economic worries of its own.

Though the event showcases flashy sports models such as the Mazda RX-8 and a revived Nissan Z, both scheduled for U.S. introduction next year, most of the new production models and concepts at the show are small, lower-priced vehicles.

Toyota Motor Corp. and Honda Motor Co.--sandwiching Nissan at Nos. 1 and 3, respectively, among the Japanese firms--also have placed heavy emphasis on fuel-saving and alternative-energy technologies. Gasoline-electric hybrids remain a particularly promising segment, led by a new version of Honda’s five-passenger Civic that will arrive in the U.S. early next year.

“The big challenge now is in hybrid technology,” said Toyota President Fujio Cho. “We must make vehicles that have less impact on the environment but are still attractive.”

Veteran show-goers said the tone was a bit subdued in the wake of the Sept. 11 attacks and resulting concerns about American consumer confidence and the long-range economic effects.

But executives of most companies said they don’t expect the bottom to fall out of the U.S. market for new passenger cars and light trucks. In fact, Nissan Chief Executive Carlos Ghosn said in an interview that he expects sales to pick up in the second half of next year to keep the market stable at about 15.7 million units.

Ghosn has achieved near-cult status in Japan for his rescue of Nissan after French auto maker Renault acquired controlling interest in the nearly bankrupt company in 1999. His cost-cutting policies have returned Nissan to profitability and positioned the company to unleash a swarm of new products in the next five years, including nearly a dozen in the U.S.

Mazda and Mitsubishi, which also have turned to foreign auto makers for cash and leadership, echoed Ghosn’s call for product-based recovery.

They base their upbeat predictions on turnaround campaigns that include significant belt-tightening as well as a spate of new products they say should solidify their brand images and offset the effects of an expected continuing slump in the global economy through next year.

At Mazda, which has been controlled by Ford Motor Co. for almost a decade, that includes the long-awaited return of the unconventional rotary engine in the sleek RX-8 sedan. In all, Fields said, Mazda plans 29 new or redesigned vehicles--11 for the North American market--in the next three years.

Eckrodt, who joined Mitsubishi this year after German-U.S. giant DaimlerChrysler acquired a controlling 34% stake, said the company’s comeback will be neither quick nor easy. Cost-cutting goals include slashing materials costs by 15%, or $535 million, this year and trimming global employment by about 10,000 in the next few years.

Little of that will affect the Southern California-based U.S. operation, Eckrodt said, noting that “the story in the U.S. is a model for the rest of the company.”

He praised the three-year campaign by Mitsubishi Motor Sales of America to unify its marketing message and reestablish a strong image after years of being lost in a crowd of Japanese imports.

“We are a classic engineering-driven company,” he said, but “this doesn’t work today” when quality differences among auto makers are minimal and the big challenge is to get noticed. Following its U.S. subsidiary, Mitsubishi is “adding new functions like marketing” to augment the cost controls being implemented, Eckrodt said.

Even as Mitsubishi sales at home have plummeted in the wake of a series of scandals involving its past efforts to conceal product defects from Japanese customers, the Cypress-based U.S. subsidiary has seen sales soar.

In the last year, the company has overtaken Irvine-based Mazda North American Operations in U.S. sales. Mitsubishi plans to introduce seven new vehicles in the U.S. in the next five years, said Pierre Gagnon, president of the U.S. subsidiary.

Sales through September were off slightly in an overall down market, but Gagnon said he expects October to be a record month.

After staying home in the first weeks after the attacks, U.S. consumers have been flocking to new-car dealerships in response to the discount-financing programs instituted by General Motors Corp. and Ford to help prop up their sales and the general economy.

With the annualized pace running at nearly 20 million units through the first 20 days, many analysts project October to be one of the best months in history for U.S. new-vehicle sales.

Total sales for the year have been estimated at 15.5 million to 16 million units, which at the upper end would make it the fourth-best year ever.

Although the traditional U.S. Big Three--GM, Ford and Daimler’s Chrysler Group--have continued losing market share all year, most import brands have gained.

It’s a situation Ghosn, Fields and Eckrodt expect to exploit for the benefit of their companies in 2002.

“I’m quite optimistic,” Eckrodt said. “Growth will happen in the U.S.”