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Japanese mull success backlash

2007-01-09 10:12

Peter Bohan

Lexus LF-A

Can you have too much of a good thing?

Japan's top carmakers enter 2007 on what looks to be a march to world dominance.

But they are also worried and trying to stay humble, wary that their main obstacles may be governments rather than competitors.

"We're doing okay, but things are crumbling at the industry level," Honda Chief Executive Takeo Fukui said in a recent interview.

"I'm worried about this trend," said Fukui.

"We should always be aware that this could turn into a political issue," Nissan Chief Operating Officer Toshiyuki Shiga said in December.

What worries them, oddly, is success: growth of Japan's sales of cars - and soon, big trucks - in the US market.

Fears of a Japan-bashing backlash, as seen in the 1980's, still linger, although analysts say Japan's plants and jobs in the United States have now taken the edge off this "foreign" competition, especially when compared to China.

But the trends could not be clearer.

At the end of 2006, the share of the US car market held by Japanese companies was 35%, up from 20% in 1986.

The share held by Detroit's Big Three - General Motors, Ford Motor and DaimlerChrysler - was about 53%, down from 74% two decades ago.

Last year, GM's US sales fell about 9%, Ford's about 8% and Chrysler's about 7%.

Meanwhile, Japan's top carmaker, Toyota saw sales jump about 13% while Honda's rose about 4%.

More of the same

Those trends hung over the second day of the North American International Auto Show on Monday, with dozens of models spread across the massive Cobo Center on Detroit's riverfront.

From subcompacts to sedans to SUVs, trucks, and "concept" cars still mostly on the drawing board, the world's carmakers rolled out their best and brightest ideas.

Alternative fuels, especially electric power, was the talk of the show.

Toyota Motor America President Jim Press played down the company's surge in sales in 2006, calling it an "anomaly" and saying he expected Toyota's US market share gains would begin to slow in the longer term.

"We won't be taking share from others. There are not going to be a lot of holes we can fill," he said.

But Press also said Toyota would need a "super duty type of truck" to complete its pickups for the US truck market, the last stronghold for struggling giants GM and Ford.

Toyota's Lexus, the top-selling US luxury brand, also unveiled the LF-A sports car concept in Detroit.

Powered by a 500-plus horsepower V10 engine, it can probably hit a top speed of 325 km/h and help Toyota muscle its way into high-end, high-performance markets.

Toyota's Camry has been the best-selling US car nine of the last 10 years and its Prius hybrid is already a "green" icon.

We're number one

"We're not just going to give up No. 1 just because some people think it will happen," GM Chief Executive Rick Wagoner, told reporters.

"We'll see. We're going to be out every day, fighting for every sale," Wagoner said.

GM has generated some optimism among car buffs in the past year. On Sunday, it became the first US carmaker to sweep the North American Car and Truck of the Year awards with the new Aura from its Saturn division and the Silverado pickup.

In fact, Detroit carmakers have worked hard to get back in the game on style, quality, engineering and other factors buyers value. But they seem to be working in the long shadow of Japanese competitors who zoomed past some time ago.

Angus McKenzie, editor of Motor Trend magazine, said of GM's new Chevy Malibu, "This car is very much a positive step forward. They're thinking more like the Japanese."

Despite such progress, Detroit's Big Three face daunting challenges outside the product area - labour and health costs, punishing debt and a constant squeeze on margins.

GM's talks with the United Auto Workers on a new contract from September are being watched as a bellwether for GM's survival.

"It's a crucial year, but I haven't found one that's not crucial," Wagoner said.

Some on Wall Street are convinced that US car makers are only in the middle, not at the end, of a fundamental down-sizing driven by competition led by the Japanese.

"It is extremely important to recognise that even with more competitive products the Detroit Three's market share will decline for many years to come," Merrill Lynch analyst John Murphy said in a note to clients on Monday.

"A solution to successfully downsize to a defensible market share needs to be found," Murphy said.


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