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Friday, May 12, 2006

Automakers' profits up on overseas sales

Industry experts worry strong growth in U.S. could cause a backlash


Staff writer

Japan's major carmakers got a boost in earnings and profits in fiscal 2005 but the figures show many are relying on overseas sales, mainly in the United States, as domestic sales stagnate.

Toyota Motor Corp. reported a record 21.04 trillion yen in earnings for fiscal 2005, closing in on General Motors Corp., whose revenue was $192.6 billion (21.38 trillion yen), in the business year through December.

Toyota and Nissan Motor Co., Japan's top two automakers, boosted their sales in the U.S., but domestic sales declined slightly in fiscal 2005.

Some observers are worried that the carmakers' increased presence in the U.S. market may trigger trade friction -- which in the 1980s caused "Japan bashing" and a U.S. threat of economic sanctions.

Nobuyoshi Yoshida, president of Automotive Business Practice Institute, discounted this concern, however, noting that Japanese carmakers have shifted production to the U.S. and are key employers there.

"Unlike in the '80s, Japanese companies have built factories (in the U.S.) and hired locals," Yoshida said. "They have contributed to local profits and welfare."

Japanese automakers produced 4.1 million vehicles in North America in 2005, a leap from 2.99 million in 2000, according to the Japan Automobile Manufacturers Association.

Their next target, Yoshida said, is the so-called BRICs emerging economies -- Brazil, Russia, India and China -- where small and cheap but less profitable cars are popular.

"Small cars require advanced technology, and Japanese companies currently have the upper hand," Yoshida said, noting Japanese automakers probably will dominate the market in developing countries.

Despite the brisk sales overseas, the flat trend in the fiercely competitive home market is a problem prompting carmakers to rethink their domestic strategies.

Honda Motor Co. and Nissan have reorganized their retail sales and streamlined outlets, which had been grouped to sell only certain models. All retail outlets now offer the entire range of vehicles.

But the strategy has not paid off yet -- at least not for Nissan.

"We think Nissan deserves a better performance in Japan," Nissan President Carlos Ghosn told reporters last month, commenting on company figures for fiscal 2005.

Nissan's sales slipped 0.7 percent to 842,000 units in Japan -- the first decline in four years.

While the two companies are moving into defensive positions, Toyota is going on the offense.

Toyota, which controls about 44 percent of the domestic market, announced in March it will maintain its five distinct retail sales channels, and give three of them new logos and colors.

"We believe it is important to reinforce the image of each channel," Toyota President Katsuaki Watanabe told a news conference Wednesday. "We do not intend to change Toyota's four sales channels or the Lexus" channel.



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