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Porsche, Ferrari, Lotus And Honda? (Int'l Edition)


International -- Asian Business: Japan

Porsche, Ferrari, Lotus--and Honda? (int'l edition)

Japan's carmakers aim to boost sales with a racier image

Hidehisa Hirata has the speed bug. The 25-year-old Tokyoite saved $800 working for three months at a local bar and is blowing it all on a weekend course in race-car driving offered by Honda Motor Co. Now, Hirata is throwing a 1.3-liter Honda Logo subcompact into the curves at nearly 160 km per hour. To Hirata, the modest machine matters not at all. "I like cars," he says simply.

And Japan's carmakers like potential customers such as Hirata. They know these young racing buffs and middle-aged enthusiasts crave sportier models, and whoever captures their loyalty will dominate a key segment of the market. So carmakers are getting racy themselves. They are running racing clinics at company tracks. They are rolling out new roadsters, luxury sports sedans, and coupes. And off the street, they are spending big on competitive racing programs. After winning the 1998 CART FedEx Championship Series, a major event on the international circuit, Honda wants to develop a Formula One car by 2000. Toyota Motor Corp., which hasn't won a big race in years, plans to spend $250 million a year to build an F-1 machine by 2003.

Japanese auto makers see big rewards across the finish line. Plagued by overcapacity and stymied by the sluggish home market, they are desperate for new territory. They hope a racier image will attract young Japanese buyers tired of the recreational vehicles that now clog the showrooms. Carmakers would also like F-1's technical challenges to inspire their engineers to begin innovating in a market segment where they have so far failed to shine.

To build that segment, they plan a wave of sporty, competitively priced cars with front-mounted engines and rear-wheel drive--cars that are easier to handle at higher speeds. After home-market launches, these models will enter the fray overseas. Says Kunihiko Shiohara, automotive analyst at ING Baring Securities (Japan) Ltd.: "Japan's carmakers need to cultivate unrealized demand in Japan and Europe."

The real race starts this spring. In April, Honda will launch a sports car that will compete with the Mercedes SLK 230, the BMW Z3, the Porsche Boxster, and the Mazda MX5. U.S. and European debuts are set for the fall. Called the S2000, it's a sleek, 240-horsepower roadster powered by a four-cylinder, two-liter engine that will go from zero to 100 kmph in six seconds. Price? Honda isn't saying, but industry analysts expect it to sell for $32,000.MIXED SUCCESS. In May, Toyota will go head to head with BMW's 3 Series and the Mercedes Benz C200 luxury sedan when it introduces its $21,000 Altezza sports sedan in Europe. Then it intends to launch its own MR-Spyder roadster--possibly as early as next year. Nissan Motor Co. is further back in the pack. But it is considering taking its Skyline GTR sports coupe to Europe. It may also reintroduce its Z sports coupe in the U.S.

Toyota already has one success to boast about. The Altezza has consistently exceeded monthly sales targets since its launch in Japan last October. But European auto makers are unfazed--mostly. In the past, Toyota and other Japanese producers have had mixed success in the sportier end of the market. "It's stupid to underestimate the Japanese," says Dieter Zetsche, a DaimlerChrysler board member and head of sales and marketing. "But the move to premium racy cars? This is not giving me sleepless nights."

The threat in competitive racing may prove more daunting. Honda has not designed an F-1 race car in more than 30 years. But before declining profits forced it to pull out of racing in 1992, Honda supplied engines to six consecutive F-1 winners. While Toyota has never done well in major racing events, it is shifting gears quickly--chiefly by tapping foreign talent to organize winning teams.

It will be tough for the carmakers to maintain speed if Japan's recession drags on. The number of races in Japan is already dwindling: There will be 143 this year, down from 150 in 1993. Toyota's F-1 commitment may force it to pull out of other races. But if F-1 nets technological advances and its glamour draws more young men into showrooms, the new racing strategy will be worth the effort and expense. Carmakers of Japan, start your engines.By Emily Thornton in Tokyo, with Karen Lowry Miller in Frankfurt


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