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Ford's Japanese Future is in the Cars

It's not clear in Japan whether sales of imported Ford Motor Co. cars are on a new leg or their last leg. 

Handicapped by a shoestring budget, Ford Japan Ltd.’s new president – the third in four years – is trying to create a new and improved image for vehicles that have never commanded much attention in the world's second-largest automotive market. 

The auto maker’s peak year here was 1990, when sales totaled 86,726 unit. However, only 6,307 of these were imported Ford models. The remainder were Mazda Motor Corp. vehicles made in Hiroshima but badged as Fords.  

Neither before nor since have import sales numbers been significant, topping out at 20,244 in 1996 and declining steadily since then. 

 "Many Japanese feel Ford means Mazda-made and we are trying to change their mindset," says President Katsuhiko Satoh in an interview with Wards. 

To squeeze maximum mileage from every yen spent, the veteran of 25 years with Nissan Motor Co. Ltd., who took charge in May, has begun aggressively house-cleaning and overhauling the Japanese subsidiary.  

Mazda-made vehicles, except for right-hand-drive Escapes, are being eliminated from the lineup.  Also on the chopping block: the slow-selling imported Lincoln Continental and Lincoln LS; Galaxy minivans supplied by VW AutoEuroa Automoveis Ldta., a Portuguese joint venture with Volkswagen AG; and Spanish-built Ka cars. 

This year, Ford Japan expects to sell 8,500 vehicles, down from 11,129 last year, which included 3,009 "sister cars" from Mazda.  Next year, if all goes according to plan, total sales will sink to 7,500. 

But almost all will be imports as the lineup shrinks to five main models: the European-made Focus and Mondeo, the Explorer and Mustang brought in from the U.S., and the RHD Escape made in Hiroshima alongside its twin, the Mazda Tribute. 

"Long-term, the Focus should become our core product, but currently the Escape and Explorer are our main drivers," Satoh says. 

Although the Japanese automotive market has matured and sales of both imports and domestic models have been flat for several years, Satoh is optimistic about prospects for a repositioned, rejuvenated Ford Japan. 

With per capita income around $30,000 and huge domestic savings, "Japanese buying power is still strong," he says. 

Targeted as prime Ford prospects are the sons and daughters of Japanese Baby Boomers, more than 20 million men and women from 25 to 35 years of age who are considered more independent and adventurous than their parents. 

But Satoh describes the Japanese car market as one of the world's toughest, with some of the pickiest buyers in the world and competition so cutthroat that domestic auto producers find it hard to make a profit. 

"Except for Toyota (Motor Corp.), Japanese auto makers have for many years offset huge domestic losses with profits in the U.S."  

Satoh is encouraged by surveys indicating the Ford image here has begun to change for the better and is determined to maintain the momentum in spite of orders from hard-pressed bean counters in Dearborn to economize. 

Although declining to reveal numbers, he admits the budget for advertising, sales promotion and marketing has been reduced "very substantially."

In an effort to remove dead wood, the distribution network has been slashed from 320 dealers a few years ago to 100 today. A campaign now is under way to encourage those in major centers to refurbish facilities with the emphasis on their Ford identity.  

"We have renovated 60 and have 10 more to go," he says. But the money does not stretch far enough to cover the remaining 40 dealers in smaller markets. 

“The productivity of Ford Japan salesmen, who averaged eight new vehicle sales each in 1999, should almost double this year to 15, and profit per vehicle is heading up as well. Profit, not volume, is our top priority."

Economizing has not dampened Satoh’s ambitions. With a selection of  “pure Ford models,” he foresees more ups than downs in the future. This year, he expects Ford Japan to reach the breakeven point and is aiming for sales of 12,500 in 2005. 

Yet even if this target is reached, few if any industry analysts in Tokyo are likely to notice or be impressed. One expert, who preferred to talk off the  record, says there are only two popular import brands in Japan's small car segment – Volkswagen and Peugeot – and says the Fiat brand has failed, Opel is in the process of failing and Saturn is gone.

He is unenthusiastic about Ford's chances. "Ford Europe cars are competent and utilitarian but not distinctive and without brio," he says. 

And with sales at levels more commonly associated with Third World countries, analysts here wonder why Ford bothers. "There might be grounds for a limited Ford presence in Japan if they sold differentiated models, but what does the Focus offer that Japanese buyers can't already get in a Japanese-made model?" says Chris Richter, senior analyst-HSBC Securities (Japan).  

"With such low sales volumes, Ford would be further ahead using a car importer like Yanase (& Co. Ltd.)." 

Agrees Steve Usher, senior analyst-J.P. Morgan Securities (Asia) in Tokyo: "I don't see a very exciting future in Japan for any U.S. auto maker, since they can't recast their product lineup to be more competitive.”

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