Stuck In The Slow Lane In Japan

Selling American cars to Americans has never been harder. Even so, not many U.S. auto executives would want to switch places with Antonio Zara. In April, the 40-year-old Philippine native took over one of General Motors Corp.'s toughest jobs: president of vehicle sales for Japan, a country where U.S. nameplates have less than 1% of the market.

The challenge can't be overstated. GM peaked in Japan in 1996, when it sold 71,495 cars. Through September of this year, America's No. 1 carmaker sold just 9,762 Cadillacs, Saabs, Chevrolets, and Hummers in Japan--15 models in all. Toyota Motor Corp.'s Japanese sales during the same period? More than 1.3 million. "I knew Japan was tough," says Zara, who left a job at Toyota in 1999 to join GM because he thought he would have an easier time climbing the ranks at the U.S. company.

Stand outside foreign car importer Yanase's flagship GM dealership in Tokyo's Shibaura district, and the size of the task is quickly apparent. Traffic inside the GM showroom is noticeably sparser than at the Mercedes-Benz dealership, which Yanase operates next door. Yet GM's heavy metal once turned heads on the streets of Tokyo. In the 1950s, Emperor Hirohito was chauffeured around in a Cadillac Series 75 limo. GM brands "were once a symbol of the American dream and the heartthrob car for the Japanese," says Hiroyuki Furuichi, CEO of Yanase. And in the late '90s, Toyota sold about 20,000 Chevy Cavaliers in Japan in a deal that was put in place to ease trade frictions, before the venture fizzled out. "Even with our stronger dealer network, we weren't able to sell the cars," says Mitsuo Kinoshita, a Toyota executive vice-president.

GM isn't alone in finding the Japanese tough to please. Detroit's share of import car sales in Japan dropped to 6.4% in the six months to September, down from 15.8% a decade ago, once you factor out acquired foreign brands like Land Rover. Chrysler Group sales slumped to 6,990 cars last year. And a full three-quarters of the 26,000 cars Ford Motor Co. unloaded were European brands such as Jaguar and Volvo.

It doesn't help that the market is shrinking as Japan's population declines and drivers hold on to their cars longer. But U.S. automakers have also been dented by the perception of poor gas mileage and lingering questions about quality, despite surveys that show U.S. brands catching up to the likes of Toyota. "Sins of years past continue to dog them," says Christopher Richter, an analyst at brokerage CLSA Asia Pacific Markets.

Some of GM's woes are self-inflicted. To raise cash, it has sold or scaled back stakes in local manufacturers Suzuki, Isuzu, and Subaru parent Fuji Heavy Industries--a move that has further battered morale at GM's 59 Japanese dealers. It also has stopped importing low-margin Opels from Europe this year, which will hurt sales. And GM might suffer from its decision not to adapt the revamped Chevy Camaro muscle car, once popular in Japan, because meeting local safety standards is so expensive.

Despite GM's puny sales, Zara says the market is worth fighting for. One reason is that GM can charge premium prices. The Cadillac XLR luxury roadster, the most expensive model in GM's Japanese lineup, goes for $100,000, about 25% more than in the U.S. Indeed, GM's Japan operation continues to turn a profit--enough to keep Zara looking on the bright side. "We are capable of surprising people," he says.

By Ian Rowley, with Hiroko Tashiro in Tokyo

    Before it's here, it's on the Bloomberg Terminal.