Raw Japan

Yes, there is a difference between American and Japanese cars

By Bob Lutz The opinions expressed are his own.

A lot of words have been written in the past few post-tsunami weeks about the negative impact of the disastrous tragedy on the short-term future of Japanese cars in the U.S. market. In parallel, many articles proclaim this to be a “historical window of opportunity” for the “Detroit Three,” now able to deliver to waiting customers an abundant supply of new vehicles while, at Toyota, Honda and Nissan, the cupboard is bare.

It’s telling that we’re *not* hearing the Japanese-brands inspired propaganda offensive of a few years back, when the media duly repeated that “there is no longer such a thing as an American car or a Japanese car.” The Japanese, it was stated, now all have plants in the U.S., whereas most U..S companies import components from the Far East, or Latin America,  thus compromising the promise of saving U.S. jobs. For buyers with a patriotic streak, it was all-American-apple-pie-OK to buy a Japanese brand, these being “just as American” as a Ford, Chevrolet, Dodge or Jeep. The (then) World’s Smartest and Finest Car Company, Toyota, even placed ads asking who’s more American? Toyota USA, adding manufacturing jobs and plants in the U.S., or the Detroit Three, busily, at that time, laying off workers and shuttering plants?

Fast-forward to the earthquake and tidal wave of 2011: the allegedly red-white-and blue Japanese brands suddenly find their supply lines dried up, while the supposedly import-component laden domestic cars, (albeit with some minor work-around shortages) continue to deliver a river of new vehicles, unabated. And, thus, another popular myth bites the dust.

In the past months the Detroit Three have, in fact, come roaring back. The Chevrolet Malibu, the 2007 “Car of the Year,” has shouldered past the Japanese brands and is now the number one car in the mid-size segment. Even more astonishing is the Chevrolet “Cruze,” a best seller around the world, and now America’s number one compact car, relegating the perennial favorites, Honda Civic and Toyota Corolla, to the runner-up spots.

Will all this Detroit resurgence be reversed when Japanese car supplies build up again? I predict it will not.

The current weakness of the Japanese brands goes beyond the natural catastrophe that slowed output. The roots of the end of the nation’s infatuation with Japanese cars go way deeper; more profound, underlying factors are at work. The manifest ineptness on the part of Toyota in dealing with the unintended acceleration crisis has permanently taken that company from “God-like” to “just another good car company.” They, and other Japanese brands, have also suddenly developed a curious inability to produce winning designs. Gone are the Hondas that scream “buy me” thanks to their lovely proportions and superb interior: evidence of the cost-cutting now abounds.

Car Wars: Hyundai climbs with Toyota’s model

As a child in the early ’80s, I remember spending a summer in Seoul and taking a trip with relatives to the countryside in a Hyundai Pony, South Korea’s first homegrown car. I spoke no Korean, but learned one word quickly enough: “lemon”.

Hyundai Motor has certainly come a long way since then.

Thirty-four years after introducing the Pony hatchback at the Turin Motor Show, Hyundai is the world’s fourth-largest carmaker, surpassing Ford Motor in the first half of this year. With the rest of the industry reeling from slumping sales, Hyundai’s charge has been especially conspicuous this year as it grabbed market share across the world and even made record profits in the latest quarter.

As my colleague Cheon Jong-woo and I wrote last week, Hyundai’s rise is making Japanese rivals nervous.

While Hyundai’s mounting success, founded on offering quality products at cheaper prices, has been in the cards for a while now, there are two new factors that worry the Japanese: a strong yen, coupled with the new government’s apparent indifference towards it, and South Korea’s progress in sealing free trade pacts.

Where did all the cool cars go?

It was like a dream come true. I’d always wanted a Ford Mustang and there I was, cruising around Tokyo in the latest version of the iconic sports car with the 4.0 litre, V6 engine producing a powerful roar every time I accelerated.

I was able to adjust pretty quickly to the left-side steering wheel — Japanese steering wheels are always on the right — though I had a few embarrassing mix-ups between the directionals and the windshield wipers.

The last time I’d driven such a car was about 20 years ago, when I had a ’78 Chevy Camaro in my senior year of high school in Massachusetts.

Back then most kids in school wanted a car, and saved up from part-time jobs and went to driving school so they could get their license as soon as they were eligible – in my case the day I turned 16 and a half.

These days, however, a lot of young people seem to be more into electronics than cars, with vehicles just a tool to get them from point A to point B. It’s tough competing with all the PCs, cellphones and iPods out there. And money, of course, is a big factor as people cut spending in these low-octane economic times.

But I also wonder if cars nowadays are missing a bit of the cool factor.

from Summit Notebook:

Gassing about electric cars

Would you buy a car that only goes 100 miles (160 km) on a tank of fuel?

That's the range of Nissan's 5-seater electric car planned for sale in the U.S. and Japan in 2010 -- a similar size to Nissan's Primera or VW's Golf.

A full tank in a petrol-driven car will take you around twice that distance so the new technology that Nissan hopes will leapfrog current hybrids won't be for those who disappear up the mountains each weekend.

But 90 percent of car users drive less than 100 miles each day, says Andy Palmer, Nissan's senior vice president and head of product planning.  So if you're OK with a town or city run-around, you can plug it in to recharge once you get home.

And future generations will have more range, Palmer told the Reuters Japan Investment Summit, as battery technology improves.

Nissan has the car under wraps until it unveils a final prototype on August 2. Palmer says driving it is quite a surprise -- with torque akin to a 2-litre gasoline engine and acceleration with zero noise.

Mercedes? No thanks, I’ll take a hybrid

“I hope the next three months will be better for you than the last three,” Czech ambassador Jaromir Novotny told a gathering of Japanese car importers last month.

The way things are going, he’ll be hoping against hope.

In April, Japan introduced an “eco-car” tax incentive that has left all foreign car brands such as Volkswagen, Mercedes-Benz and BMW, neatly outside the fence of eligibility.

It’s the last thing they need in a market that’s already full of quirks that make life difficult for non-Japanese car brands: the existence of a huge and unique 660cc microcar segment, convoluted recycling laws and stringent regulations against what type of materials can be used in fuel tanks, to name just a few.

No one is complaining about incentivising low-emission cars. But what rankles outsiders is that the perks are based on an outdated fuel economy testing method that critics say is a poor reflection of real-life driving.

Cars, stars, and TV commercials

In these hard times, you know a car is important when the maker hires Robert de Niro to promote it.

That honour goes to Subaru’s new flagship Legacy touring wagon, which went on sale in Japan today. Fuji Heavy Industries (which owns the Subaru brand) even put out a press release last week just to say the two-time Oscar winner would appear in its TV commercials in Japan.

“It’s the first time he’s appearing in a commercial for a Japanese company – ever,” a Fuji Heavy spokesman told me proudly the other day. He guessed that Hollywood actors are “twice, three times, or four times more expensive” to hire than a local celebrity.

It is well-known that international movie and rock stars get lucrative work moonlighting in Japanese TV commercials - witness the famous gadzillion-dollar Mitsubishi Electric VCR commercials in the late 80s starring Madonna. This tradition was even parodied in the film “Lost in Translation”, in which Bill Murray plays a Hollywood has-been actor filming a whiskey commercial in Tokyo.

A sampling from my late-night YouTube-ing yesterday offered the following roster, for cars alone:

Wanted: a hit Nissan product

Toyota is drowning in losses. Fiat is desperately seeking partners. Chrysler is bankrupt, and General Motors looks like it might be next.

In this environment, Nissan CEO Carlos Ghosn can’t be blamed for warning today of a second straight year of loss. Still, there’s no denying that Japan’s third-biggest automaker could be doing better if it weren’t missing one key ingredient: home-run products.

Data released yesterday offered a sobering reminder of that.

Last month, Nissan’s name disappeared from the list of Japan’s 10 best-selling cars as Honda’s new Insight hybrid snatched up fuel-conscious consumers in an ever-shrinking pie. The month before, Nissan had two models on the list — the Serena minivan and Note compact, ranked fifth and eighth. Now, the Serena has dropped seven places, behind, even, cars from smaller rivals Suzuki and Mazda.

Things are not much better in the United States, Nissan’s single-biggest market. Among passenger cars, its Altima ranks fifth. It’s above any offering from Detroit, but that’s little consolation when Toyota and Honda each have two cars outselling the Altima by miles.

Toyota’s losses a cautionary tale for Fiat?

Sergio Marchionne, prick up your ears.

Toyota Motor, the once-mighty money machine that grabbed the crown of world’s biggest automaker from General Motors last year, gave a shocking loss forecast today for a staggering $8.6 billion for this year. Culprits are aplenty, but one of them is the company’s mammoth size.

Until the economic crisis slammed the brakes on car sales last year, Toyota couldn’t build them fast enough. To catch up with demand, Toyota put up more factories, from China to the Czech Republic. Reaching annual sales of 10 million vehicles – a feat never achieved by any automaker to date – looked imminent for the 70-year-old carmaker.

Now that rapid expansion has come back to haunt it. With consumers holding back on car purchases the world over, Toyota’s sprawling manufacturing facilities are a liability. Tumbling sales are forcing dozens of its factories to work half-days, costing the company billions. This year, it expects to build 6.3 million vehicles — 800,000 fewer than it did in the year that ended on March 31.

Size is a tricky business. Economics says that scale breeds savings, but at the same time, it makes carmakers less nimble. Striking a balance can be tough even for a company like Toyota, which has grown organically as an independent carmaker. Rivals such as General Motors and Volkswagen, meanwhile, have become bigger partly by scooping up brands, often outside their home markets, so achieving synergies is even more difficult.

In the late 1990s, former Daimler-Benz Chairman Juergen Schrempp had a vision of creating an auto empire and took over Chrysler to form DaimlerChrysler, which went on to buy stakes in Japan’s Mitsubishi Motors and South Korea’s Hyundai Motor. Now, all of those ties have effectively been severed. The moral of Schrempp’s failure was: Size isn’t the formula for success.

Nissan and Renault: 10 years to celebrate?

Ten years ago today, French carmaker Renault bought a 37 percent stake in Nissan Motor for $5 billion, making a big bet in the debt-riddled Japanese company with the goal of one day becoming a major player in the global auto industry.

Ever since Nissan staged a spectacular turnaround in just two years, the Franco-Japanese union has been lauded as the only alliance that worked after many failed attempts by other automakers. The success story turned Carlos Ghosn, who has served as CEO of both companies since 2005, into one of the most celebrated and visible auto executives.

Ironic, then, that this was the year that Mr Ghosn, who has held a dual-CEO role at both companies since 2005, admitted that cooperation to date had not gone far enough.

As my colleague and I wrote last month, the optimism surrounding the alliance has faded of late. Nissan and Renault, much like the rest of the industry, face a dearth of cash that has forced them to cancel some joint projects over the next few years. And a closer look revealed that the two companies hadn’t really been optimising the synergies that could have been, having faced the same problems that companies face when they try to remain independent: a clash of interests and people hailing from old, traditional entities with a rich history.

Toyota Prius: Will it live up to its name?

When Honda‘s new Insight hybrid debuted in Japan last month, many journalists referred to it as the “Prius fighter”. Less than two months later, we’re talking about Toyota’s battle to come up with the “Insight fighter”. What gives?

In a word, it’s because Toyota has suddenly begun behaving like a follower — not a leader –in the hybrid field that it has owned for the last 12 years.

Toyota is reportedly planning to knock about $3,000 off the price of the next Prius, a name that means “to go before” in Latin, to 2.05 million yen in Japan to bring it closer to the Insight’s price range.

Toyota President Katsuaki Watanabe declined to confirm that at a news conference today, although his roundabout response about having lowered costs and the fierce competition it faces from the Insight seemed like a tacit acknowledgement that the reports were true.

What he did confirm beyond doubt was that Toyota would keep selling the current, 6-year-old Prius in Japan even after the new version comes out. Media reports say that one would be priced right smack in line with the Insight’s 1.89 million yen.

Selling two versions of the same car is rare. When I asked executives in the United States and Europe a few months back, they said they had considered doing it but decided against it because it would be too confusing for the consumer. Watanabe wouldn’t comment on Toyota’s intention outside Japan.

In any case, the reported pricing strategy, if true, would signify a complete reversal of Toyota’s initial plans. High-ranking executives had told me over the months preceding the Insight’s early-February launch that the next Prius would cost more, not less, than the current variant.