Japanese Cars Face Trade War Collision

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Last week, Infiniti unveiled an outdoor board in West Hollywood plastered with $30,000 in $1, $5 and $100 bills to promote the $30,000 price tag on its new I30 sedan.

But with the U.S. and Japanese governments playing brinkmanship on trade issues, the luxury division of Nissan Motor Corp. USA and agency Chiat/Day, Venice, Calif., might need larger bills or a much bigger board next time.

The Clinton administration was expected to slap punitive tariffs on a range of Japanese imports, starting with luxury cars such as those marketed by Infiniti, American Honda Motor Co.'s Acura and Toyota Motor Corp. USA's Lexus. Predictions are that the tariffs will be in the 20% range. The U.S. trade deficit with Japan hit $66 billion last year; autos and auto parts accounted for almost $37 billion.

"If nobody blinks, this will turn out to be the first shot in a real trade war that will have serious repercussions for both economies," said Jesse Snyder, president of Snyder Research, a Moorpark, Calif.-based auto research and consulting company.

One of the first effects will be an upheaval in car marketing.

Acura, Infiniti and Lexus will find it hard to keep sales from collapsing, Mr. Snyder said.

The Japanese luxury marques last year sold 251,000 cars in the U.S., totaling less than 3% of the U.S. car market. But it's a heavily advertised segment. According to Competitive Media Reporting, 1994 ad spending was about $149 million for Lexus, $117 million for Acura and $79 million for Infiniti.

Auto companies on both sides traded barbs last week. The Japan Automobile Manufacturers Association, a Washington trade group, ran a page ad in the May 11 Washington Post denouncing the administration's plans, saying the losers would be U.S. consumers and workers and the world trading system. The ad was produced in-house.

The trade conflict arises at a sensitive time in U.S.-Japanese relations, with August marking the 50th anniversary of the end of World War II in the Pacific.

Also, starting Oct. 1 new vehicles sold in the U.S. will have to carry a label detailing "domestic content," a factor likely to increase consumer awareness of the import issues.

Some of the "Buy American" sentiment that peaked after the Persian Gulf War is still around, said Steve Lyons, general marketing manager for Ford Motor Co.'s Ford Division.

Companies such as Honda, Toyota, Nissan and Mazda Motor of America have run corporate ads touting their U.S. operations.

For now, Japanese brand marketers are sticking with their ad plans. Infiniti is going full speed ahead on its estimated $30 million to $40 million TV, magazine and newspaper blitz starting this week for the I30.

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The rich get poorer

The majority of the biggest-selling Japanese cars are assembled in North America and would escape expected U.S. tariffs. That's not true, however, for luxury marques like Lexus (above).

1994 SALES North

American*

Auto marketer assembled Import

ACURA 0 112,137

HONDA 464,622 185,483

MAZDA 109,165 173,634

MITSUBISHI 117,498 83,519

INFINITI 0 51,449

NISSAN 312,991 172,719

SUBARU 56,018 44,601

SUZUKI 2,907 4,229

LEXUS 0 87,419

TOYOTA 384,048 293,677

Source: Automotive News

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