Tapping Honda's Talent PoolGM, Ford land Honda-trained execs in Asia

TOKYO - General Motors Corp. and Ford Motor Co. are following the same strategy in efforts toward making a bigger dent in the Japanese market: Hire a former Honda Motor Co. Ltd. executive to lead the way.

In the past 14 months, each of the U.S. automakers has tapped ex-Honda officials to head up their Japanese import operations. Both admit there's a lot of work to be done.

"I regret Ford is such a minor player in Japan. Our market share of only 0.5% is mortifying," says Eiji Iwakuni, a man determined to see far more Fords in Japan's future.

Such blunt talk is unusual here, but Mr. Iwakuni, who was appointed president of Ford Motor Co. (Japan) Ltd. last March, is taking decisive actions to back up his sharp words.

Japan's sales of imported Fords, never significant, plummeted 50% last year to 6,997. Even when Ford-badged cars made by Mazda Motor Corp. are lumped in, as Mr. Iwakuni does to reach his 0.5% share, the total is only 21,995, a decline of 37.5% from 1997.

Whatever numbers are used, Ford is obviously in trouble in Japan, and Mr. Iwakuni faces an uphill climb with his revive-and-restructure plans for the company. But he has Dearborn's blessing.

Mr. Iwakuni has met with Jac Nasser no less than 10 times in 10 months, enlisting support of Ford's chief for his proposal to revamp the product lineup, reorganize distribution and capture a bigger share of the world's second largest automotive market.

"I am trying to restructure Ford Japan," Mr. Iwakuni says. "We should not seek short-term returns but must look far ahead and educate Ford headquarters about the Japanese market."

Like Ford, GM wants to pick up the sales pace in Japan. After treating the market virtually with indifference for decades, the world's largest vehicle maker recently appointed an experienced Japanese car man as president of General Motors Japan Ltd.

"My job is to make a firm imprint in Japan for General Motors," says Mitsuru Sato, who spent 20 years with Honda and four as president of Volkswagen Audi Nippon KK before assuming his current position last September.

Although responsible for promoting sales of all five GM Japan brands - Opel, Cadillac, Chevrolet, Saab and Saturn, Mr. Sato believes Opel, with its German reputation for quality, has the most potential.

"Opel has attractive models and is beginning to be recognized by Japanese buyers. By 2005, sales can easily reach 50,000 a year. Then we aim for 75,000 and eventually 100,000," says Mr. Sato.

The battle will be uphill because Opel sales peaked in Japan, at least temporarily, in 1996 at 38,339 units and fell to 34,397 in 1997 as Japan's market slumped. Only 24,223 Opels were sold in Japan last year.

Mr. Sato knows from experience how tough the competition is in Japan and recognizes that rebuilding won't be easy. He explains, for example, that "If Opel is to be a major player in Japan, we must work with our distributor to shift from multi-brand outlets to exclusive Opel outlets."

But rather than establish an independent channel, GM is sticking with Yanase & Co. Ltd., its Japan distributor since 1915.

Because Yanase handles Mercedes-Benz cars as well and has agreed to open 100 exclusive Mercedes dealerships in Japan, Mr. Sato expects the same consideration for Opel.

With the tight focus on Opel, no great expectations are entertained at GM Japan for the other four brands that will play what amounts to supporting sales roles, important but modest.

"We can't expect large volumes, but Cadillac is a good product at a good price that appeals to those 40 and over," explains Mr. Sato, who is aiming at annual sales of 5,000 to 6,000 units compared with 4,000 today.

He considers Cadillac and Saab a good team, with appeal mainly to big-city residents in Tokyo, Osaka and Nagoya, and says Saab sales in Japan should rise from about 2,328 in 1998 to 10% of annual Saab production, which currently totals 120,000.

Mr. Sato is counting on Chevrolet sales to rise from about 7,000 a year at present to 10,000 by 2000. Saturn, introduced in April 1997 when the sales tax here was hiked from 3% to 5% and auto sales slumped, was a victim of bad timing, and Mr. Sato pleads for patience, noting that it took Toyota and Honda years to establish their brands in the U.S.

Ford's makeover started with what Mr. Iwakuni calls a "back to basics" move involving an intensive analysis of Japanese specs, researching road widths, housing sizes, parking problems and vehicle use - who drives where, how far and how often.

He attributes the success of Japanese automakers in the U.S. and other countries to their painstaking studies of what foreign car buyers want and need, and intends to do the same for Ford in Japan.

"The Japanese market is quite different from the U.S. market," says Mr. Iwakuni, an engineer who spent 32 years with Honda in marketing, sales planning and production control. He notes, for example, that "the (Ford) Galaxy was a failure here because it was not positioned properly and was overpriced by 1 million (US$870).

"What's most important is the right product," he says with a smile, adding that he will use hidden weapons in his assault on the Japanese market. "Ford makes 100 different vehicles around the world, so I will choose attractive products for sale in Japan no matter where they are made."

Leading the new product lineup starting this spring is his first choice, the Ka, a 1.3L 3-door compact hatchback produced in Valencia, Spain, which has won several awards since its European intro in 1996.

Earlier attempts to introduce the Ka in Japan were thwarted by Ford headquarters marketers convinced that a car without an automatic transmission would not sell in Japan. Mr. Iwakuni persuaded Mr. Nasser to give the Ka a chance. He projects annual sales of 5,000 units to Japanese motorists looking for a sporty compact that's fun to drive.

Next to arrive will be 1.6L Ford Focus sedans and wagons, with a tentative launch date of spring 2000. Mr. Iwakuni declines to identify other models on his wish list, but makes it clear there will be more.

"With nine or 10 attractive Ford models, we can sell 60,000 to 100,000 vehicles a year in Japan within five years," he says. To reach that goal, his second priority is an overhaul of the dealer network in which possibly 10% of Ford Japan's 248 outlets will have to close.

A rival foreign car executive, pointing out that some of these outlets sell only four or five vehicles a month, says scornfully: "They're a hobby, not a business." Mr. Iwakuni is embarrassed that Ford Japan sales people currently average fewer than 20 cars a year each, not even half that of competitors.

Too many of them, he says, are "ignorant about product, don't keep proper records, forget who they sold to and treat new car customers like used car customers."

New training is planned to change attitudes and improve performance, and "students" will have to shape up or ship out. The break-even point for Ford Japan's 107 dealers is 250 to 300 sales per outlet per year. Although most are losing money, Mr. Iwakuni is confident that new products, properly marketed, will turn them into profitable businesses. In time, he aims for 300 outlets.

The most popular Ford vehicles sold in Japan have been Mazda derivatives, built in Hiroshima by Mazda, in which Ford has a 33.4% share. Mazda input is a critical element of Mr. Iwakuni's ambition. When Ford Japan sales peaked in 1990 at 88,064, with 1.7% of the car market, nine out of every 10 of these vehicles were made in Japan.

Since then, as a result of model changes and a weak Japanese economy, sales of these quasi-Ford products have plummeted. Yet the current five - the Festiva wagon, Laser Lidea, Telstar, Freda and Spectrum lines - still outsell imported Fords more than 2:1.

GM's Mr. Sato certainly believes sales can be increased, not quickly but carefully. Because only 45,285 units - a bit more than 0.5% of GM's worldwide production - were sold here in 1997, he figures doubling sales to 1% is doable. Beyond this, he feels a reasonable number would be 2% - three-and-a-half times 1997 levels.

Ironically, the main challenge facing Ford Japan's new president is simply to regain lost ground. This year he aims to boost sales more than 50% over 1998 to 35,000 to 38,000, most of them vehicles made in Hiroshima. Five years from now, he is targeting sales of 100,000 units.

Whether new models and restructuring can underpin such a rapid increase in such a short period is debatable. But as far as Mr. Iwakuni is concerned, if the target is not reached it won't be for lack of trying.