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Japan carmakers nervously continue U.S. charge
Reuters |
Jan 8, 2007
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DETROIT (Reuters) - Two years ago, almost to the day, two top Japanese auto executives downplayed the chances of Japan dominating U.S. auto sales coming off a milestone year that saw them take 30 percent of the world's biggest market.
Visiting Detroit for the annual auto show, Honda Motor Co. chief executive Takeo Fukui called it inappropriate for Japan's share to rise to 40 percent, citing concerns about a political or consumer backlash that could result.
His then-counterpart at Toyota Motor Corp., Fujio Cho, also predicted a 40 percent share would never happen.
There would always be a portion of the U.S. population, he mused, who were unwilling to part from American brands.
How empty those words sound now.
In the 24 months since, Japanese brands gained another 4.5 percentage points for a 35.0 percent share -- a record for the 11th straight year -- and mostly thanks to Toyota and Honda.
Macquarie Securities predicts the Japanese Big 3, adding in Nissan Motor Co. <7201.T>, alone will gain another 2.5 points this year as Nissan rebounds from a product-deprived 2006.
At that pace, Japan could near the 40 percent mark as early as 2008. By contrast, the combined share of American icons General Motors Corp. , Ford Motor Co. and Chrysler Group fell to 53.6 percent in 2006 from 57 percent in 2005.
But in stark contrast to the days of widespread -- and literal -- "bashing" of Japanese cars by American workers and politicians in the 1980s, Japan's creeping dominance of the U.S. market today has hardly raised a peep of protest.
"Lobbyists haven't been making any noise. How could they, when GM imports cars from Korea?" said Ashvin Chotai, a research director at Global Insight.
U.S. political attention was now focused more on China due to the vast trade imbalances there, Chotai added.
Another winning strategy for Japan has been local content. As Japanese auto executives like to point out, most of their cars now sold in the United States are built in North America using local -- non-union -- labor and components, unlike the situation during the import-only era of the 1980s.
The effect on U.S. automakers -- and their unions -- has been profound. GM and Ford have slashed tens of thousands of jobs as more and more consumers migrate to "foreign" brands.
DANGER ZONE?
Still, some concern over a U.S. backlash remains -- mostly from the Japanese themselves.
Last year, Toyota and Honda shipped a record number of vehicles from Japan to the United States as their North American factories failed to keep up with demand. For the first 11 months of 2006, both brands jacked up their imports by more than 40 percent from the same period in 2005.
For Toyota, that meant Japan-made cars made up just half of its U.S. sales, compared with around 60 percent two years ago -- a level former president Cho had already deemed too low.
"The growing notion is that things are different now because Japanese automakers are increasing their local production ratio," said Tatsuo Yoshida, a Tokyo-based auto analyst at UBS Securities. "But if this keeps up for Toyota, they won't be able to use that excuse any more."
Yoshida noted that much of Toyota's U.S. growth was being driven by models built only or mainly in Japan, such as the Yaris subcompact, Lexus line of luxury cars and its hybrid vehicles, meaning imports could remain high again this year.
But in an apparent departure from former Toyota president Cho's stance, Jim Press, head of Toyota Motor America, said the ratio of local production was irrelevant in itself; absolute volumes of added output must be taken into consideration too.
"Heck, we're adding more capacity here than some auto makers have total," Press said on Sunday at the North American International Auto Show, noting that Toyota was adding 480,000 units of capacity over the next two years in Texas, Indiana and Canada. An eighth production plant is also now under study.
Press also said nationalities mattered little in the global auto market. GM was now selling more vehicles outside the U.S. than in its home market, he noted, while Chinese brands were looking to enter the United States.
For Honda, CEO Fukui said his company's situation was excusable since, despite last year's rise in imports, Honda stayed near its target of 80 percent localization.
"We're doing okay, but things are crumbling at the industry level," he told Reuters in a recent interview. "I'm worried about this trend."
Nissan Chief Operating Officer Toshiyuki Shiga echoed that view, saying it would be prudent to be prepared for a backlash. Nissan, which had a 6.2 percent market share last year, has a local production rate above 70 percent in the United States.
"We should always be aware that this could turn into a political issue," he told Reuters last month. "The key is to be armed with evidence to justify your position."
That could be crucial for Japan's market leader Toyota.
Having grabbed headlines last week by toppling Chrysler as the No. 3 U.S. brand in 2006, Toyota is going straight for Detroit's jugular with the recent launch of its Tundra truck.
The full-sized pickup is Toyota's third attempt at the U.S. customer segment where many of the "buy-American" loyalists whom Cho referred to reside.
In a year GM could lose its crown as the world's biggest automaker to Toyota, ceding ground in its most lucrative domestic segment could prove one insult too many.
Source: Reuters
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