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.

Small is beautiful

It’s been over two weeks since the final puck was walloped and the last skin-tight lycra suit was hung up at the Vancouver Olympics. 

And while Japan’s poor performance still rankles, the passage of time has given me the chance to find some bright spots in the country’s measly haul of three silver and two bronze medals.

Not least of which is the role played by small Japanese companies in supporting our athletes at a time when corporate behemoths, such as carmaker Nissan Motor and Seibu Holdings, an operator of hotel chains and train systems, have severed ties with teams including baseball and ice hockey squads.

Two of the three women in the team that won silver in the ladies’ pursuit speed skating belong to a skating club formed by tiny surveyor Daichi Corp in Toyama Prefecture, northwest of Tokyo.

Daichi, which employs only 40 people and posted $11 million in sales in the last financial year, spends about $220,000 annually on its skaters. Its president and its founder even took a pay cut to make more funds available for the club, a company spokeswoman said.

Meanwhile, Keiichiro Nagashima and Joji Kato, who won silver and bronze medals, respectively, in the men’s 500m speed skating, are members of a team at Nidec Sankyo, a maker of ATM card readers.

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.

Tokyo’s shrinking motor show

Before the Tokyo Motor Show kicked off this week, I wrote about how subdued the biennial event was likely to be this year, in the absence of any foreign automakers or even domestic truck makers.

But I’m not sure I was quite prepared for what I witnessed here on the second day of the media preview days.

Sitting here in the press centre where there are nearly 200 work spaces set up, you could almost hear a pin drop. Most of the seats are empty, and there’s only the low hum of hard drive motors escaping from the laptops of the few of us left here.

As a car industry reporter, I’ve been to dozens of motor shows on three continents over the past seven years. At the media centres, it’s usually a mad rush to grab a spot or a LAN cable connection; and there’s no guarantee someone wouldn’t pull the cord anyway, if you leave your PC unattended for more than half an hour.

Down on the show floor, the mood was similar, if not worse.

Despite spanning just half of the floor space as the last Tokyo Motor Show two years ago, the first thing you noticed was how much the organisers must have tried — rather unsuccessfully — to fill the gaping holes left on the red carpet by the would-be exhibitors that pulled out over the preceding months.

This, despite the fact that Nissan Motor and Mitsubishi Motors, for example, share the east wing of the convention hall with Takara Tomy, a toymaker known for its miniature car models. Or a stretch of panels displaying children’s drawings of futuristic cars.

Electric dreams

The Tokyo Motor Show later this month is expected to be a very understated event, with foreign carmaker participation almost nil and outlays by Japanese firms reflecting hard times in the industry.

But Electric Vehicles, or EVs, and hybrids will be on display in force, with Toyota, Honda and Nissan giving previews ahead of the late October show.

Nissan’s hybrid conundrum

If Carlos Ghosn were a politician, pundits might be accusing him of flip-flopping right about now.

After spending the last few years playing up the merits of zero-emission electric vehicles and knocking down the hybrid hype, the CEO of Nissan Motor appears to be back-pedalling, ever so slightly, on that stance.

The reason? Hybrids have become just too popular to ignore.

The trouble started when the Nikkei, Japan’s premier business daily, reported last month that Nissan was aiming to develop a hybrid system for small and mid-sized mass-market cars, with plans to roll one out in Japan in 2011.

If true, that would signal a change in course for Nissan, which has only announced plans so far to mount its in-house-developed hybrid system on high-end, rear-wheel-drive vehicles. The company declined to confirm or deny the report.

But investors took it as good news, sending Nissan’s shares up 2.5 percent that day. After all, Toyota’s Prius and Honda’s Insight hybrid cars alone accounted for 13 percent of domestic sales in July, excluding the unique 660cc minivehicle segment. As long as the government’s generous incentives last, hybrids appear to be a sure winner.

The problem is, Nissan is loath to publicise that it’s taking that road. That’s probably because, coming a full 13 to 14 years after Toyota launched its first Prius, it’s questionable how competitive Nissan’s hybrid vehicles could be. The company would rather keep the attention squarely focused on its electric car business, which it expects to lead the industry in the zero-emission field when sales of the first model, christened the Leaf, start next year.

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.

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.

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.

Carmaker to reporters: “Sorry, no water; we’re cutting costs”

If only Extreme Cost-Cutting were a sport.

Japan’s Mitsubishi Motors today joined a growing string of automakers pulling out of cash-draining motorsports activities with an exit from the Dakar Rally. It’s part of the company’s attempt to squeeze out any cost savings it can, and it seems no effort is too small for consideration.

At today’s news conference to announce third-quarter financial results, the master of ceremonies opened with the following remark: “You may have noticed there are no refreshments at your seats today. This is part of our effort to reduce spending.”

Sound silly? Mitsubishi Motors is certainly not alone.

Japanese manufacturers are known for their fanatical cost-cutting ways – low ceilings to reduce air-conditioning bills, turning off the lights during lunch hours and double-sided printing with two pages to a side, to name just a few. These endeavours reach extremes when times are tough, and the anecdotes are endless.

I almost fell off my chair once when an employee at one automaker told me that back in the loss-making days of the 90’s, office workers had access to only two or three lead refills at a time for their mechanical pencils. It was meant to prevent waste. (Not to mention the odd case of internal stationery theft.) Another former worker at the company told me they used to cut erasers in half.