Japan takes fresh aim at Detroit

DETROIT (Reuters) - Struggling U.S. automakers had enough to worry about heading into 2008, as American consumers were shell-shocked into a spending freeze by a credit crisis, recession fears and $100-a-barrel oil.

Toyota executives Bob Carter (L), Michihiko Sato and Greg Bernas (R) pose with Toyota's new 2009 Venza crossover sedan during the media preview at the 2008 North American International Auto Show in Detroit January 14, 2008. REUTERS/ Mike Cassese

The last thing they needed was a resurgent Japan, whose automakers have slowly but steadily loosened the once-mighty hold of the "Big Three" -- General Motors Corp GM.N, Ford Motor Co F.N and Chrysler LLC -- on the American auto market.

An invigorated Japan emerged this week at the North American International Auto Show, the industry’s biggest annual showcase of hot wheels and cool concepts.

"We welcome competition because that is how new technology is developed for consumers," Toyota Motor Corp 7203.TTM.N President Katsuaki Watanabe said, the carmaker announced a host of moves from plug-in electric cars to clean diesel. "But we don't want to lose," he said.

“We still have the strength to beat the market,” Shigeru Hayakawa, chief executive of Toyota’s North American unit, said when asked about a weaker U.S. economy.

Last year, Japanese brands collectively took a record U.S. market share of 37 percent, and Toyota passed Ford as the second-biggest brand in America. When final 2007 global sales are announced, Toyota is likely to pass GM for the first time to become the world’s biggest automaker.

Growth outlooks were the same at other Japanese carmakers like Honda Motor Co 7267.THMC.N and Nissan Motor Co 7201.TNSANY.O and at South Korea's Hyundai Motor Co 005380.KS.

"We hope to leverage the perception of fuel efficiency that Japanese automakers have," said Ikuo Mori, CEO of Fuji Heavy Industries Ltd 7270.T, maker of Subaru cars.


As for the U.S. automakers, the outlook is daunting.

The circus-like event in cavernous Cobo Arena in downtown Detroit this week featured hundreds of car salesmen and dozens of shiny new models -- from giant trucks and sport utility vehicles to mini-cars, “concept cars,” sports cars, vans and luxury rides.

Music, rock stars, giant videos, Hollywood headliners, cocktail receptions, walk-throughs by three Republican presidential candidates and even a cattle drive to highlight a new pickup truck kept the glitz in overdrive.

But the world outside was far more sober. Economic hardship has gripped Michigan, which has the highest unemployment in the nation. Candidates in the state’s Republican presidential primary have promised to help Motown and the state recover.

Sales of cars and light trucks in the United States slipped to 16.15 million vehicles in 2007, its lowest level in a decade and down 2.5 percent from 2006.

U.S. auto executives have been hoping 2008 sales will hold steady, but those forecasts have weakened in recent weeks, with most analysts now pegging sales at around 15.5 million.

Economists for U.S. automakers began to agree on Tuesday.

“There is a pretty significant risk that we will have a down year” in the industry, Ted Chu, lead economist at GM’s Global Market and Industry Analysis unit, told a roundtable.

Ford Chief Economist Ellen Hughes-Cromwick said U.S. industry sales are now likely to fall to 15.7 million units.

On Tuesday, the government said U.S. retail sales fell unexpectedly in December to close out the weakest year since 2002 -- the strongest signal yet that the economy may be sliding into recession under the weight of the housing and credit crises.

Sales of new cars and parts fell 0.4 percent last month on top of a 1.4 percent drop in November.

GM North American sales chief Mark LaNeve said the automaker would match incentives and lower prices to move vehicles, especially trucks -- the top source of profits for U.S. automakers.

“Housing woes have a much bigger impact on pickups,” LaNeve said. “Not only is there less home equity and less purchases of big-ticket items, but no one really buys pickups when there is not a lot of housing activity.”

“We think it’s quite likely the Fed will ease further,” Ford’s Hughes-Cromwick said of U.S. Federal Reserve interest rates.

Fuel efficiency will be an added burden.

“We’ve done the research and it’s going to cost us $4,000 on some vehicles and $10,000 on others, with an average of about $6,000,” GM vice chairman Bob Lutz told reporters of the cost of meeting new U.S. regulations to boost gas mileage.

“That cost will have to be passed on to consumers.”

Additional reporting by Jui Chakravorty, Chang-Ran Kim, Nick Carey, James Kelleher and Ben Klayman; Writing by Peter Bohan; Editing by Jeffrey Benkoe