Japan is taking off the kid-leather driving gloves. Already tops in the family-car business, the Japanese are now unabashedly making a grab for Detroit’s last stronghold: the lucrative market for SUVs, minivans and pickups. And they’re coming on strong. Analysts say Toyota could become America’s No. 3 automaker this year, overtaking Chrysler, which suffered a 10 percent skid in car sales in 2001. Toyota and Honda have become the world’s most profitable automakers thanks to record U.S. sales last year. And now they’re rolling out hot models like the Honda Pilot and Lexus GX 470 SUVs. The Japanese automakers are also cranking up production in North America. By 2005 they’ll have more than a dozen factories here, pumping out 4.5 million vehicles a year, up nearly 50 percent from 1996.
Detroit insists it can fend off the challenge. It had better: U.S. car companies make most of their profits from those big wheels. And the domestic automakers have been reeling lately, as the weak U.S. economy slowed sales and foreign competition increased. In the past 14 months the Big Three have announced plans to eliminate an astounding 73,000 jobs, with the latest bloodletting coming at Ford, whose 2001 losses topped $5.4 billion. “Another kick in the butt is about to happen,’’ warns former Nissan design chief Jerry Hirshberg, who started out in GM’s styling studios. “There’s nowhere the Big Three can look now without dealing with fresh new models from the Japanese.''
But confident U.S. execs say the Japanese automakers are just playing catch-up in SUVs and trucks. “The Japanese are not changing the game; they’re getting in the game,’’ says General Motors chief designer Wayne Cherry. “The Big Three are still setting the rules of the game.’’ GM contends it can fight off the Japanese with brawny offerings like the new Hummer H2 and the popular Chevy TrailBlazer SUV. Next year Ford will give its top-selling F-series pickup an overhaul that will make its model look like a super-size Tonka truck. Plenty of U.S. execs attribute the Japanese’s surge to the weakness of the yen, which lowers prices and fattens profits on imports.
That sounds like denial to Japanese auto execs. “The currency is just an excuse for them,’’ says Koichi Amemiya, president of American Honda. But the Japanese are used to being underestimated, which marketers say gives them a competitive advantage. Exhibit A is the stealthy success of the Honda Odyssey. When Honda introduced that minivan three years ago, it planned to build just 60,000 a year–a fraction of Chrysler’s annual sales. But the Odyssey comes with some features Chrysler couldn’t match–superior quality and an ingenious third-row seat that folded flat into the floor to increase cargo space. The result: Chrysler’s minivan sales plummeted, while Odyssey buyers pay full sticker price and wait for months to take delivery. Now Honda is opening a new Odyssey factory in Alabama capable of churning out 160,000 minivans a year. “With the Odyssey, Honda hit the sweet spot,’’ says GM vice chairman Bob Lutz, Chrysler’s former president. “They did Chrysler one better.’’ That’s the formula that made the Honda Accord and Toyota Camry America’s favorite family cars. And it’s the reason the Japanese have gained 4 points of U.S. market share in the past five years while the Big Three have lost 8.7 points.
Now the Japanese companies expect history to repeat itself in the truck market. The eight-passenger Honda Pilot coming this summer will take on the best-selling Ford Explorer. Analysts expect a fast takeoff for the $28,000 Pilot because of its pedigree–it’s built on the same high-quality chassis as the hot-selling Acura MDX. The smooth-riding Toyota Highlander, a budget-priced version of the popular Lexus RX 300, was a runaway hit when it was introduced last year. And now the commodious new Lexus GX 470 gives Toyota’s luxury line more SUVs than any other high-end nameplate and signals that the Japanese no longer produce puny, underpowered trucks. Indeed, a roomy redesign of the Nissan Quest early next year will provide fresh competition to Chrysler’s minivans. And by mid-decade, Detroit’s biggest franchise–beefy pickups–will be under siege from Honda, Toyota and Nissan, which will introduce a model next year called the “Alpha truck” (think testosterone). Nissan will build that truck in a new American factory, just as Honda and Toyota are doing with many of their new models. That way, the Japanese can respond faster to American tastes and overcome the stigma of import trucks’ not matching the mettle of Detroit’s big boys.
Ultimately, this showdown will be settled by consumers like Cleveland landscaper Rick Vincent. Vincent’s Dodge Ram pickup was in the repair shop too much. So last year he bought a black Toyota Tundra, which J.D. Power ranks tops in quality. “With the Tundra, I know I’m going to be able to get in it and actually go someplace,” Vincent says. “This should be a wake-up call to the Big Three.” The question now is whether Detroit will heed that call.
