How the Other Half Lives

The “Big Three” is giving way to the “Big Six” as Japanese manufacturers keep gaining ground here.

Last month, Big Three executives gave their takes on the U.S. car market. This month is the other half's turn as Toyota, Honda and Nissan executives say where they've been and where they're going.

Tracking a Still-Hot U.S. Market

Toyota sets its sights on a 2-million unit sales year here.

BY MACK CHRYSLER

NEW YORK — North America, an over-the-hill, mature market for cars and trucks?

Don't believe it, says Toshiaki Taguchi, president of Toyota Motor North America Inc., convinced that such conventional wisdom is unwise.

“We see significant market growth continuing,” says Taguchi, a confirmed census watcher who finds recent data heartening.

In the 20 years ending 2000, the U.S. population has expanded 24% to 281.4 million, per capita gross national product is up nearly 4-fold to $29,451, and the total number of motor vehicles in use has increased 53% to 213.3 million.

Cars are more affordable, too. Taguchi reports the average 30 weeks' salary needed to buy a new car in 1992 has shrunk to 20 weeks today.

The inescapable conclusion reached by Toyota strategists: More customers with bigger incomes will raise the U.S. sales plateau higher, and an 18 million-unit year will be just another milestone on the road to increasing demand.

Taguchi estimates Toyota will sell about 1.8 million units in the U.S., about a 4% increase.

He sees most future growth spurred by SUVs, cross/utility vehicles and pickups and is impressed by the diversity of new models being offered as auto makers broaden their lineups.

“Even though we all talk about reducing costs by having fewer platforms, we still are producing more and diverse models,” says Taguchi in an exclusive interview with Ward's.

He adds that the Tundra, introduced in 1999, now has 4.5% of the fullsize pickup market and has become an important Toyota model, but it's competing with established U.S. brands in a loyalty-strong segment.

“Pickup customer loyalty is very strong, which makes things more challenging for us,” he says.

Luxury buyers are becoming more discerning. “Baby Boomers are more prosperous than previous generations and are looking for higher-end products,” says Taguchi. Toyota's Lexus continues to be the top-selling luxury brand in the U.S.

He anticipates growing demand for navigation systems, priced from $1,830 to $3,000.

Taguchi says the main problem for Toyota in the U.S. will be maintaining quality and competitiveness in a market where brand loyalty is strong and the nationality of a vehicle has less meaning.

The North American market now is crowded by more foreign auto makers than ever, with market shares in October of 61.9% for the U.S. Big Three, 27.8% for the Japanese makers, 6.8% for the Europeans and 3.5% for the Koreans.

He doesn't minimize the threat from Big Three rivals. “They are formidable contenders with a big customer base.”

Keep On Truckin'

Honda does that — without pickups.

BY MACK CHRYSLER

TORRANCE, CA — Honda is on a record-setting roll in the U.S. that shows no sign of ending.

“Our goal this year is sales of 1.23 million, divided 1.06 million for Honda and 175,000 for Acura, both all-time records,” says Tom Elliott, executive vice president of American Honda Motor Co. Inc..

This would follow nine all-time sales records set last year by American Honda, and a possible third set in 2003 when sales are expected to climb about 4%.

“For us, the growth opportunities are in light trucks,” says Elliott, referring to Honda's truck-based SUVs. “Ten years ago we didn't sell any. This year our light truck sales will be up 30% to 400,000 and next year will be close to 450,000.”

Honda set a new record in launches this year as well with the introduction of five new models: the Civic Si, Civic hybrid, Pilot, Accord and Element.

The company's sales mix still favors passenger cars two-to-one over trucks compared with the overall U.S. market, which is roughly 50-50. Elliott sees Honda's truck share hitting 40% in a few years.

No pickups are in the lineup. Asked whether Honda will join Toyota and Nissan in the fullsize pickup market, Elliott cautions that it would require a new plant, plus a huge financial commitment for a product basically salable only in the U.S. and Canada.

“It's not in any near-term plans, but at some point in the future it has to be looked at,” he says.

Meanwhile Honda and Acura dealerships across the country being upgraded and expanded as part of a company program, says Honda Executive Vice President Richard G. Colliver. “The facilities were adequate in the mid-'80s when we were selling 500,000 units a year,” says Colliver.

He says new stores from company designs will be customer friendly, warm and have signage that readily identify them as Honda dealerships.

Nissan Ends “Vicious Cycle”

Comeback kid hopes to move a record 850,000 vehicles out of U.S. showrooms.

BY MACK CHRYSLER

GARDENA, CA — Rebuilding a corporate and brand image, expanding sales and boosting market share is never easy, but its especially hard now in the U.S., with consumers intimidated by war fears and a sluggish economy.

Even so, Nissan North American Inc. President Norio Matsumura feels a good start has been made. He is confident that, after operating more than four decades in North America, Nissan is now on track again and poised for nothing less than a successful comeback and then some.

Gone is the “vicious cycle” of the past, described by Matsumura as “wrong products and lower residual values.” The turnaround, fueled by what he calls “people, product and President (Carlos Ghosn),” began in 1999.

U.S. sales this year are expected to reach 760,000 vehicles, up 8% from last year and closing in on the 1994 peak of 774,405. Next year, Nissan expects to move a record 850,000 cars and trucks out of showrooms in the U.S., which customarily provides around 75% of total North American sales.

Sights have been raised above the peak 5.2% market share reached in the U.S. in 1995. Matsumura foresees a 6% share for Nissan no later than 2005.

North America is vital to Nissan's recovery, providing 40% of the auto maker's global sales in fiscal 2001, up from 25.8% in 1998. In each of the last three fiscal years, sales in North America have exceeded those in Japan and nearly doubled those in Europe.

Industry analysts say North America supplied about 75% of Nissan's total corporate profits in fiscal 2000 and record earnings in fiscal 2001.

Matsumura gives much credit to “the clear direction and strategy provided by Carlos Ghosn. Everyone now knows where we are and where we are going.”

But the comeback has been rough. He deplores the “deformation” of the U.S. market by high sales incentives.