Japan: Weak economy remains

Japanese automakers must be watching the new economic downturn in the U.S. with a weary, been-there, done-that eye.

While the North American market just now is approaching its day of reckoning, the Japanese auto climate long has been grappling with its own high-stakes game of Survivor, which began about a decade ago when the bubble popped in its seemingly unstoppable economy.

Japan's economy — second only to the U.S — still is weak to its foundation, recently compounded by political tumult. Although last year it seemed Japan was on the mend, the U.S. downturn was enough to ensure that progress was fleeting, sending Japan's economy into a deflationary spiral, compounded by a weakening yen.

The downward spiral has forced a good number of automakers to venture off the island in pursuit of new, stronger alliances.

For Nissan Motor Co. Ltd., which sold a controlling interest to Renault SA, the unlikely alliance means immunity. Renault's financial bailout, coupled with a mandated recovery plan, has Nissan paying out dividends for the first time in three years.

Others, such as scandal-ridden Mitsubishi Motors Corp., may not be so safe. MMC sought survival through an alliance with DaimlerChrysler AG — a company not without its own problems.

And one potentially winning alliance has Suzuki Motor Corp., Isuzu Motors Ltd. and Fuji Heavy Industries Ltd. seeking shelter under General Motors Corp.'s gigantic umbrella.

Only Toyota Motor Corp. and Honda Motor Co. Ltd. have managed to survive the shakeout unscathed, but these automakers — successful because of their efficiency expertise — are feeling pressure to eke out even more cost savings.

Despite an uncertain economic outlook both at home and abroad, the Japanese Automobile Manufacturers Assn. is bullish about 2001, forecasting a 2.2% rise in sales on the home front. More significantly, there is a shift in the segments of cars that Japan is buying. The vehicles may be modest, but they're still a step up from last year's favorites, the 0.66L minivehicles.

Small-car offerings in Japan's B-segment are leading the way, with Honda sales up 48% in the first two months of the year on strong Civic sales, and Toyota sales are up 10.3%, led by the base-model Bb and the new Corolla. And small-car specialists Suzuki and Toyota's Daihatsu continue to prosper from the country's hard times, with sales up 60.7% and 69.5%, respectively, over like-2000.

The Japanese economy does provide automakers with one up side: The rapidly falling yen works in their favor when it comes to offshore sales. Even with a shrinking North American market, the dollar still stretches further than the yen — and that may be just the advantage necessary to stay in the game.