Recession? Japanese Carmakers Hardly Have A Scratch Yet

Not even a rare cloudburst deterred opening-day crowds at the annual Los Angeles auto show, where a record number of showgoers showed up on Jan. 5 to ogle the models and kick the tires of more than 600 new cars. Trouble is, faced with a tinderbox in the Middle East and a faltering economy at home, most won't get past the looking stage.

That caution has already sent the industry into a slump. Car and truck sales last year tumbled more than 5%, to 13.8 million, their lowest level since 1983, and carmakers are bracing for a similar slide this year. Yet despite the gloom and doom, Japanese manufacturers continued to rack up gains in 1990 in the U. S., selling 3.5% more vehicles and ratcheting up their market share two percentage points, to nearly 24%. And they expect to do at least that well this year.

"It's simple. If the industry drops, the Japanese gain share," explains Thomas D. Mignanelli, president of Nissan Motor Corp.'s U. S. marketing arm. "We feel pretty optimistic this year," he says, figuring that at worst, Nissan will hold its own and probably show increases, thanks to its luxury Infiniti division. And Nissan has been the laggard among the big Japanese carmakers: Its sales were off 6% last year, while Toyota Motor Corp. set a new record, selling more than a million cars and trucks, an increase of 12%. Honda Motor Corp., led by its Accord, the best-selling car in the U. S., boosted sales 9%.

Even General Motors Corp. benefited from its Japanese connections. While sales fell 3.3%, GM managed to eke out a half-point share gain, the only U. S. manufacturer to do so. That advance came almost entirely from increased sales of its Chevrolet Geo cars. GM uses the Geo badge exclusively for cars made by or with GM partners Isuzu, Suzuki, and Toyota.

'BUSINESS AS USUAL.' The Japanese advantage is no secret: They make attractive, frequently updated products that consistently outscore their U. S. counterparts in quality polls. And they invest heavily during downturns, most recently evidenced by the November Toyota announcement that it will double the capacity of its Georgetown (Ky.) factory.

This year is no different. "It's business as usual, because everything for the Japanese is going as planned," says Neal Doying, auto analyst for Baring Securities (Japan) Ltd. In the first 10 days of the year, both Toyota and Nissan introduced brand-new, entry-level coupes, the Toyota Paseo and the Nissan NX2000. Honda will revamp its Acura Legend coupe next month and add a new Acura model that will be priced midway between the Legend and Integra in April. Toyota is planning to roll out a third, sportier Lexus model on June 1, and Nissan's Infiniti convertible will debut next month. And that's just to keep sales up in the first half of the year.

Indeed, for the Japanese, much of 1991's growth will come at the luxury end. "The luxury-car market, for the Japanese at least, is not much affected by either the recession or the luxury tax" on new cars costing $30,000 and up, says Thomas G. Elliott, executive vice-president of American Honda Motor Co. That's because most upscale Japanese cars weigh in on the low end of the luxury-car price range. Other Japanese companies have noticed: Mitsubishi Motors Corp. is introducing its $27,000 Diamante this month, and Mazda Motor Corp. is widely expected to launch a new, upscale car line, named Pegasus, later this year.

STRONG ACTION. Japanese carmakers are not universally unscathed by the plunge in car sales. The bottom tier--Isuzu, Subaru, Suzuki, and Daihatsu--saw their already small sales wither in the face of the better-known and better-funded competition. And even the giants occasionally stumble. Honda's sales, for example, dropped a hefty 20% in December.

That means the big Japanese brands may have to resort to what for them are extraordinary measures to meet their bullish projections. Honda's Elliott forecasts that Honda and Acura sales will be up 6% to 8% this year and hints that it may take unusual financial incentives to dealers to make it. "We want to start the year with a strong first quarter," he says, "so we have to do something."

If anything holds the Japanese growth in check this year, it will be politics. The carmakers know that if their sales gains come largely at the expense of Detroit's Big Three, trade hawks in the Administration and Congress will call loudly and often for retaliation. "A major challenge this year will be American protectionism," says Akira Imai, general manager of North American sales and marketing at Toyota. "We can't control it." Put another way, the car buffs in import-friendly Southern California were just kicking tires. But if the Japanese don't watch their step, Washington may want to bash the entire car.

                         1990        Percent
                     U.S. market  change from
                         share *   previous year
      TOYOTA         7.64 %       17.5%
      HONDA          6.12         14.3
      NISSAN         4.49         -1.5
      MAZDA          2.52          7.2
      MITSUBISHI     1.38         34.0
      SUBARU         0.80        -14.9
      ISUZU          0.80         -2.4
      SUZUKI         0.15        -28.6
      DAIHATSU       0.11          --
      *Vehicles sold under Japanese nameplates, including cars and light trucks