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Foreign Automakers Go After Trucks

August 29, 1999

DETROIT (AP) _ Detroit’s sales cliche of the ’90s sums it up: Trucks are hot, cars are not.

Oh, Detroit automakers still sell plenty of coupes and sedans. But the big bucks are in sport utility vehicles, pickups and minivans.

That’s why General Motors Corp., Ford Motor Co. and the Chrysler unit of DaimlerChrysler AG have quietly tolerated the way Asian and European automakers have steadily increased their share of the car market in the last few years. When it comes to high-profit trucks, Detroit still rules _ for now.

But with light truck sales approaching half of the U.S. market, Asian and European automakers are aggressively going after a larger piece of that profit pie.

Toyota Motor Corp., having learned some lessons from its underpowered and overpriced T100 pickup, replaced it in June with the larger, V8-powered Tundra. Toyota also plans to begin producing a full-size SUV late next year at its new plant near Princeton, Ind.

Honda Motor Co. announced plans in May for a new plant in Alabama to build SUVs, minivans or both. The Japanese automaker can’t produce enough of its new Odyssey minivans to meet demand.

Nissan Motor Co.’s new Xterra SUV is selling well. Nissan’s expected to produce a sport utility-pickup combo and is thinking about a full-size pickup, too. Mitsubishi Motors Corp. and Hyundai Motor Co. have plans to export new SUVs to the U.S. market.

Among European automakers, Volkswagen has said it may build a big pickup for the U.S. market, probably from the SUV it’s developing with Porsche. BMW plans to start production of its first SUV next year.

Consumers already are benefitting from the increased competition by way of rebates and discount financing from some U.S. manufacturers.

The Tundra is generating the most attention in Detroit because it represents the first credible challenge to the only segment that Chevrolet, GMC, Ford and Dodge still own outright: full-size pickups. Reviewers have praised the American-built Tundra for its car-like ride and Toyota-level attention to detail.

Toyota sold 11,818 Tundras in June and July, the fastest U.S. start of any new Toyota. That compares with only 7,959 T100s sold in all of 1998. Nevertheless, Tundra’s initial splash generated but a ripple in the pickup market.

During those same two months, Ford sold 151,649 F-series pickups _ the nation’s top-selling vehicle _ and GM unloaded 133,862 of its big pickups.

But based on Toyota’s track record in cars, Detroit has reason to be nervous.

``Each of the domestics is taking a good, hard look at the Tundra to determine if it really does represent a big threat,″ said George Peterson, who heads the industry consulting firm AutoPacific Inc. ``It could almost be a Trojan horse, because Princeton is only starting off with 100,000-unit capacity but it could go up to 600,000 over the decade.″

Japan’s big automakers have a history of starting out modestly and ratcheting up the pressure. When Toyota built its Camry plant in Georgetown, Ky., a decade ago, its initial capacity was 150,000 cars. Today it churns out about 500,000, and the Camry has become nation’s best-selling car.

Donald Esmond, general manager of Toyota Motor Sales USA Inc.’s Toyota division, said Toyota needed a strong entry in the big truck market to retain customers who have been trading in their cars for ``personal use″ pickups.

``With our current lineup, only about 38 percent of our products are in trucks,″ he said. ``We’re just adjusting to where the market is going.″

So is Detroit worried? Not especially.

GM still sells fewer trucks than cars in the United States, but is boosting capacity to meet the demand for its new full-size pickups and SUVs. President G. Richard Wagoner Jr. said the shift of foreign automakers into the big truck market hasn’t been felt yet.

``But it puts more of an edge on what we need to do,″ Wagoner said. ``We’ve got to innovate more with product, we’ve got to make sure we’ve got enough capacity, we’ve got to keep working the cost and quality side. We’re doing all that.″

Another threat from overseas is in the minivan market, now dominated by DaimlerChrysler. All three Detroit automakers have been forced to offer sizable discounts on their minivans, in part because of Honda’s fast-selling Odyssey.

``The Odyssey’s a real threat,″ Peterson said. ``Honda doesn’t have enough capacity at the moment, but they’re adding it very quickly.″

Kevin Tourneur, senior product planner for DaimlerChrysler’s minivan operations, notes that Chrysler, Dodge and Plymouth minivans are selling at about the same rate as last year, before the Odyssey hit the market.

``We outsell them 10 to 1,″ Tourneur said. ``We don’t focus on them.″

But as other foreign makes jump into the market, DaimlerChrysler may have to shift its focus.

``Where they’re at risk is when you get maybe three or four competitors that are only taking 30,000 to 50,000 units away annually,″ Andrea said. ``Then, all of a sudden (DaimlerChrysler’s) volume’s down to where they can no longer support two full assembly plants for minivans. That’s a problem.″

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