JAPAN'S BATTERED AUTOMAKERS Steep sales drop prompts change in operations

Stomach-churning corporate losses, exports at a 14-year low, involuntary "holidays" for workers -- all the agonies of the past two years seemed to rush together this week for the Japanese automakers who once were the terrors of the industry.

"What's going on in the Japanese auto industry is a revolution," David Cole, director of the University of Michigan Office for the Study of Automotive Transportation, said yesterday. "It is not going to be pretty."


Mr. Cole, just back from a week at the Tokyo Automobile Show, said executives there repeatedly used a phrase he hadn't heard in Japan in decades: "We have to learn from the Americans."

The week of this year's Tokyo show -- usually the one time of year when Japan's automakers basked in the promise of a new year's models -- seemed more suited to the pre-Halloween spirit that the week had in America.


Just as U.S. automakers began to report some upbeat news after years of reshaping their companies and their products, Japanese automakers said:

* Japan's automobile exports for the first half of fiscal 1993 -- April through September -- plunged 11.7 percent from the

year-earlier total to 2.4 million vehicles, the lowest since the oil-crisis year of 1979.

* Nissan Motor Co., Japan's second-biggest automaker, lost $306 million in the first half of the fiscal year. Japanese newspapers said the profits of several of Toyota's closest suppliers will be down next year by even more than the 25 percent that Toyota Motors, the No. 1 maker, reported for the year that ended May 31. Mazda Motor Co.'s president predicted a net loss for its fiscal year that ends in March 1995.

* Mazda and Nissan will shut down part or all of their manufacturing operations for two days next month to cut costs and become the first automakers to obtain government "employment adjustment subsidies" to help them avoid layoffs. Toyota asked union workers to accept deep cuts in year-end bonuses, which had been scheduled to average about $8,518 this year. Tiny Isuzu offered its 900 U.S. employees a buyout in an attempt to cut costs.

"We are seeing the culmination of seven years in a row of reduced production in Japan's own domestic auto plants," said Brian Rubens, who tracks the industry from New York for New Japan Securities International.

Restructuring of Japan's auto industry, he said, would be felt not only by Japanese workers and stockholders but also by auto shoppers. They will find that Japanese makers no longer offer either as many model variations or as many options to go with them -- and in many cases, perhaps not even "the overemphasis on quality that was costing makers so much money."

In an in-house analysis drafted this week, New Japan forecast that Japanese automakers "will likely continue to lose world market share due to fading quality and price advantages relative to the U.S. Big Three."


"They used to have scores of steering wheel choices for each car, and only a few years ago they were out to have so many lines and so many niche vehicles that the Americans couldn't compete with them," Mr. Rubens said. "But now they have to pull back from that."

The Japanese auto phenomenon of the past three decades was based on conditions that no longer exist, Michigan's Mr. Cole said.

"Japanese carmakers came on the scene in an era of constantly expanding auto markets, a very low cost for investment capital in Japan and a low relative value for their home currency, the yen," he said.

"Now they have saturated Japan's own highways to the point there's no place to park, they pay world market rates for capital, and the yen is very high -- and the entire Japanese automaking system has come unglued," he said.

Interviewed yesterday, Mr. Cole and New Japan's Mr. Rubens both referred to the recently introduced Honda Acura as a harbinger of things to come throughout the Japanese car business.

The new Acura, they said, was designed to be a single


mass-sales car, simplified both in design and in production methods, and with what Mr. Cole described as "a much more modest and manageable options book."

"Honda saw two years ago that by trying to fill every possible market niche, Japanese makers were heading for the cliff," Mr. Cole said.

"Look for other Japanese makers to do more of what Honda is doing with the Acura, still a very high-quality product but greatly simplified in every way, and not necessarily produced in Japan," Mr. Rubens said.

In Japan's domestic market, the chief bright spot is that Japanese law requires an estimated 7.8 million existing cars to undergo a draconian inspection in the next fiscal year, the New Japan analysis said.

The inspections cover details inspected nowhere else, such as body rust and exterior paint, and the cost of mandatory repairs annually forces hundreds of thousands of owners to replace cars that would remain in service in most of the world.