A Tokyo Head Twister: Look Who's Buying U.S. Cars!

By Edward W. Desmond/Tokyo

Not long ago, selling American cars in Japan was downright quixotic. The U.S. vehicles were known for lousy quality, high prices and crummy service. But no longer. Hisashi Honma, a 22-year-old salesman at a Ford dealership near Tokyo, can't get enough Mustangs, Tauruses and Mondeos for all the customers who want to buy them. One ordered a European-made Ford Mondeo wagon last month, even though he will have to wait three months for delivery. In May, Ford imported 2,500 of its muscular new Mustangs; they sold out in two months.

By the end of this year, Detroit's Big Three expect to sell 37,000 imported cars in Japan, almost double last year's total. That still represents less than 1% of the 4 million cars sold in Japan annually, but Detroit's modest progress belies the traditional view of negotiators in Washington. The Clinton Administration had based its trade policy on the idea that the only way to open up Japan's auto market was to intervene forcefully. Now it is becoming clear that Detroit can make headway on its own, helped by some good economic luck and a little prodding by U.S. trade officials.

The Big Three's old defeatist philosophy about selling cars in Japan was to keep the prices high and market the cars as novelties. But last year, when the yen rose sharply against the U.S. dollar, Chrysler and Ford could afford to cut prices sharply. To their surprise, sales of the popular Taurus doubled, and last month the Jeep Cherokee became the first U.S.-made model in Japan to rack up more than 10,000 sales in a year. Clearly the fussy Japanese buyer who demanded a museum-quality body finish is in retreat; in his place is a worker whose income has stagnated during the country's recession and who wants good value for his yen. "What we have done," says Hiroo Tanabe, a senior Ford executive, "is to introduce a price revolution."

But even the best value on wheels doesn't sell in Japan without a lot of legwork. Toyota, the top domestic automaker, fields about 50,000 door-to-door car salesmen outside of its 5,574 showrooms. In the face of such competition, the Big Three now have plans to do some marketing of their own. Ford is the most ambitious, aiming to capture 5% of the Japanese market by the end of the decade by importing 100,000 cars and manufacturing 100,000 more in Mazda's factories in Japan. (Ford is Mazda's main shareholder, with a 24.5% stake.) Konen Suzuki, who became president of Ford Japan after spending 29 years at Toyota, has launched Detroit's first TV campaign in Japan, in which local Ford owners proudly tell the camera, "This is my first Ford." Most of the ads show right-hand-drive models such as the Probe and the European-made Mondeo, which conform to Japan's drive-on-the-left standard. Until last year, Detroit did not offer a single U.S.-made right-hand-drive car in Japan.

But the key to success is signing up showrooms. Ford's Suzuki says he needs 700, an increase of 400, to reach his sales goal. Two years ago, he took control of a 284-outlet chain called Autorama, which he renamed Ford in May. The economy has helped him find more. Most of Japan's 17,423 dealer showrooms have exclusive ties to a sole Japanese carmaker. But the recession has put an unprecedented 41% of Japan's dealerships into the red. Some of the dealers believe adding foreign cars to their lineup can help bail them out. Says Atsushi Horigome, a Nissan dealer who now also sells Fords: "We'll never sell Toyotas, but there is definitely a move to diversify. Consumers want variety."

The pressure of U.S.-Japan trade talks, even without any sanctions being imposed, has helped open the door. Merely the threat of them has persuaded the Japanese to simplify the costly car-inspection procedures for importers and ease the industry's grip on the dealership system. Too much pushing on this front, however, could spoil a good thing. Unresolved trade talks help keep the Japanese concessions coming and the yen strong because the largest source of its trade surplus with the U.S. remains untouched. That is one reason U.S. Trade Representative Mickey Kantor did not impose broad sanctions when Washington and Tokyo failed Sept. 30 to reach a market-opening agreement on autos and assembly parts. Another is that Detroit is now selling cars the Japanese way -- on the ground, one by one.

With reporting by Irene M. Kunii/Tokyo