CAR SHOPPERS NOW WARY OF TARIFF THREAT

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The May flood of buyers rushing to buy Japanese luxury cars is drying up, as marketers, dealers and potential buyers keep a wary eye on the clock counting down to the June 28 deadline to avert a U.S.-Japan trade war.

"We're down considerably from last month," said Robert Glandon, general manager, Lexus of Oakland in California, which has been using "Beat the tariff" print ads in local newspapers, each displaying a countdown calendar.

May business also increased dramatically at South Motors Infiniti in Miami. But June has seen business halt, with buyers wanting answers before they buy.

"The public is wondering if the tariff will affect the service [and] loaner cars. Our answer is, we don't have an answer," said Steele Green, general manager.

At Acura of Brookfield in Wisconsin, General Manager Mike Baker said more than 25% of prospective customers have been asking about a tariff's impact on their car purchase.

If negotiators in Geneva can't reach a compromise in the dispute over autos and auto parts, the U.S. will impose 100% import tariffs on 13 of the luxury car models.

Toyota Motor Corp. USA's Lexus division tried to reassure owners in a June 22 ad that ran in USA Today and The Wall Street Journal that they will be able to get service and parts for their cars, no matter what.

The ad from Team One, El Segundo, Calif., also tried to straighten out a misconception that individual customers who bought a luxury model before June 28 might be hit with a retroactive tariff bill.

The Japan Automobile Manufacturers Association also continued ad efforts aimed at persuading government officials and others that the Japanese auto market is more open than portrayed by the Clinton administration. The association last week ran a 30-second TV spot in the Washington market and print ads in The New York Times, Los Angeles Times, The Washington Post and The Wall Street Journal, and put out a video news release to media, all created by Porter Novelli, Washington.

Despite the concerted public relations effort, a national survey found 70% of Americans familiar with the issue said they agreed with the proposed tariffs. The phone poll of 1,000 adults was conducted June 14-18 by Chilton Research Services, Radnor, Pa. Margin of error was 3 percentage points.

Amid the saber rattling from both sides was talk of a possible compromise.

A sign that Japanese marketers remain hopeful is that they haven't begun scaling back ad budgets. Toyota Motor Sales USA's Lexus, Nissan Motor Corp. USA's Infiniti and American Honda Motor Co.'s Acura combined spent $345 million on U.S. advertising last year.

"I don't think it's going into effect," said Tom Druzik, sales manager for McGrath Lexus in Westmont, Ill. "I've talked to some higher up people and the feeling is that it's not going to happen."

If the tariffs are imposed, Japanese automakers will probably subsidize the tariff costs, said Jesse Snyder, president of Snyder Research, a Moorpark, Calif.-based auto research and consulting company.

But in three to six months, at least two of the three luxury brands could disappear, Mr. Snyder said. "Nissan and Honda have both taken more than casual looks at dismantling their luxury brands," he said.

That sort of speculation seems to have given potential buyers pause, after a first rush to buy cars that could disappear from the U.S. market.

Potential buyers "are worried about their warranty," said Wayne Carpenter, general manager, Infiniti of Memphis. "They want to know if this actually happens will Nissan take care of the warranty and back the cars?'

Contributing to this story: Alice Z. Cuneo, Kemba Johnson, Jeffery D. Zbar, Alan Salomon, Laurie Freeman, Peg Masterson, Tammy Parker and Lauren Drinkard.

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