U.S. automakers have only themselves to blame for the fact that the Japanese have captured a 30 percent share of industry sales and that every major Japanese producer is building cars in this country, according to the executive vice president and chief operating officer of Mitsubishi Motor Sales of America.
”Initially, the domestic manufacturers weren`t too concerned with the trend of the Japanese capturing a larger share of the U.S. subcompact market, a segment the U.S. producers forfeited because it wasn`t that profitable,”
Richard Recchia told the Midwest Automotive Media Association last week.
”I was sales manager with Chrysler Corp. at the time and I said, `Give
(the Japanese) all the small cars they want,` because at the time they didn`t offer any competition in the larger and profitable end of the market,” said Recchia, who broke into the auto business with Chrysler in 1963.
He stayed with Chrysler until 1978, when he became president of Fiat Motors of North America and moved on to Mitsubishi in 1981.
”It was only natural that, as time progressed, the Japanese product lines were expanded beyond the subcompact and compact segments to larger cars, sporty cars and most recently luxury cars,” he said. ”Finally it began to dawn on the U.S. manufacturers and they realized the Japanese had gradually acquired a significant share of the U.S. market.”
To stem the rising competition, the U.S. automakers forced the Japanese to limit, ”voluntarily,” the number of cars shipped to this country. At the same time the quotas were imposed, the value of the Japanese yen dropped against the U.S. dollar, which forced the Japanese to boost prices sharply.
Those two actions, especially the price increases that in some cases totaled five in one year on many Japanese makes, were expected to result in an immediate decline in Japanese sales here.
But the U.S. automakers shot themselves in the foot instead, Recchia said.
”The dramatic increase in price provided an open door to the Big Three to increase their prices to improve their own profits. In fact, from 1982-1988, the U.S. automakers generated record profits, over $52 billion, despite lower volume. They lost the golden opportunity to increase their own market share from the rising Japanese prices when they could have held a tight line on prices at a time when the Japanese were vulnerable,” he said.
Recchia said U.S. automakers complain about an ”uneven playing field,”
but they were responsible for weighting the scales against themselves.
”Instead of holding the line on their own prices when the Japanese raised theirs, the U.S. automakers raised stickers and invested those profits in non-automotive ventures. They did nothing to correct their own problems of efficiency, productivity and product acceptability.
”But the biggest mistake was to force the Japanese automakers to build plants in the U.S. with the cry, `If the Japanese want to sell cars in the U.S., they should build plants in the U.S.` That was nine years ago, and now seven Japanese companies-Toyota, Honda, Nissan, Mazda, Mitsubishi, Subaru and Isuzu-have highly automated, very flexible U.S. plants with technology that exceeds the levels in the U.S. (automakers`) plants,” he said.
”Most of the U.S. domestic plants are operating at levels below the new standards established by the Japanese transplants,” Recchia charged. ”The Japanese transplants were designed to build up to four different automotive platforms using right- or left-hand drive, and versions for the U.S. as well as export markets. The average Big Three plant is limited to one platform family and generally builds vehicles only for the North American market.
”But gone are the days when a U.S. plant could churn out 400,000 or 500,000 Chevy Impalas or Ford Galaxies-one model for sale only in North America.”
Recchia said to compete effectively with the Japanese transplants, U.S automakers must adopt Japanese capabilities.
”U.S. plants must have the flexibility to build three or four different body models on the same assembly line for both the U.S. and export markets. The Big Three must accept the fact that products specifically developed for the North American consumer won`t fit the needs and tastes of consumers in Japan, other countries in the Far East, Eastern Europe or anywhere else in the world.”
As for the level playing field, Recchia disputed U.S. automakers`
complaints that they face restrictions in attempting to sell their vehicles in Japan, whereas Japanese automakers don`t face the same roadblocks here.
However, Recchia hedged when asked whether, assuming the Japanese market is wide open to U.S. automakers, he expects American cars to capture 30 percent of sales in the Japanese market, as the Japanese have here.
”I think U.S. automakers could get whatever they wanted,” he replied.
”But I`m not sure they have the products for the Japanese market. The Ford Explorer would go well in Japan, as would the Jeep Cherokee and Cadillac Seville, but those aren`t high-volume segments of the market in Japan. In Japan, half the cars sold have 1000cc (1 liter) or smaller engines.”
Recchia noted two other ominous statistics:
Based on production plans, by next year Toyota will build more passenger cars in the U.S. than Chrysler Corp.
And the largest importer of cars from Japan at present is GM, while the largest exporter of cars to Japan is Honda.
