The opening day of the Frankfurt Motor Show was a subdued affair for the Japanese. European Community negotiators had just persuaded the Japanese to slash their auto exports to Europe by an additional 9.1% this year, to 980,000 vehicles. The cut came on top of a 9.4% drop the Japanese had already agreed to in April. "Our necks are being squeezed tighter," says a glum-faced Takeomi Miyoshi, executive vice-president at Honda Motor Europe. "This is a fragile and dangerous time."
Like their European rivals, the Japanese are definitely feeling the effects of a disastrous auto market. Total sales in the EC should drop 15.9% this year, to 11.73 million cars. And the pressure from Europe's carmakers for tighter restrictions on Japanese imports is bound to continue. On Sept. 8, Peugeot Chief Executive Jacques Calvet attacked EC negotiators for not winning big enough concessions in their latest talks with the Japanese, saying the accord should be renegotiated or Japanese market share frozen.
Even the Japanese plants in Europe, which are exempt from the restrictions, are operating below forecasts. Nissan, the biggest Japanese player with a 3.7% market share, won't make its targeted 270,000 units this year at Sunderland, its British facility, which has a capacity of 300,000. At its new Burnaston plant, also in Britain, Toyota says it probably won't meet targeted production of 100,000 units of the midsize Carina E in 1994. More plant construction is unlikely. "Now is not the time to invest in new [European] factories," says Nissan Motor Co. President Yoshifumi Tsuji. "People tell me the decline is bottoming out, but I'm not convinced." So the Japanese are turning to growth markets elsewhere. "Right now the focus is on Asia," says Toyota Motor Europe Chairman Eiichi Kumabe.
TAILORED DESIGN. Despite the problems, plenty of Europeans still want Japanese cars. This year, the Japanese could win 12.8% of the market, up from 11.3% in 1992. That's creeping beyond the 10% share the Japanese feel is now politically acceptable in Europe. The Japanese are also boosting imports from Japanese plants in other countries that are not included in the EC restrictions. Next year, Honda will ship 10,000 Civic Coupes made in Ohio to Europe.
And even in the middle of Europe's car slump, the Japanese plan to attract more European buyers by broadening the model mix. Most Japanese sales in Europe are concentrated now in the midsize range. Yet Honda, to cite one example, may develop a small car for Europe. And on the other end, Mazda just introduced its luxury Xedos 9, with a 2.5-liter engine that makes it more powerful than the 626 sedan's 2-liter engine.
The Japanese are sharpening their understanding of Europeans' differing tastes by setting up local design studios, mostly in Germany. Toyota has figured out that red cars sell well in Britain, but Belgian motorists prefer other colors. Like Nissan's Primera, designed with Europe in mind, Honda's British-built Accord is narrower and sportier than the latest American Accord. The Japanese are beefing up their sales networks, including those in Poland, Hungary, and Russia.
This go-slow approach could put the Japanese in an even better position. "It's a philosophy of moderation," says Toyota's Kumabe. No one is mistaking this moderation for surrender.