YOU ARE HERE: LAT HomeCollections

Nissan Maneuvers to Regain Inside Track on Its Rivals

August 30, 1987|DONALD WOUTAT | Times Staff Writer

The crunch had to come sooner or later for Japanese auto makers in this country, and the first to feel the squeeze was Nissan Motor Corp. USA. It had quality problems and a muddled image, which put it in a weak position to combat the falling dollar, South Korean competitors and a rally by Detroit auto firms.

This month, Nissan is completing a shake-up that has left its U.S. sales and marketing arm with a completely new management face and its employees wondering who they'll report to next. It is the latest in a series of actions that dealers and others hope are positioning Nissan for a turnaround in its fortunes.

"The class of the Japanese are Toyota and Honda. Nissan has really fallen out of that first tier and into a second category with Mazda and the rest in terms in market presence, new product coming, and so forth," says a market researcher who specializes in Japanese firms.

Nissan's executive shuffle took place quietly over 18 months, which was a lot faster than Nissan was able to effect the change of its name from Datsun a few years back. To many, that was the start of the trouble.

After Toyota, Nissan had long been the No. 2 Japanese marketer of cars in the United States, which until lately was a rather pleasant and rewarding market to be in. Japanese vehicles boasted high quality, low manufacturing costs and spectacular profit margins in North America that accounted for some Japanese firms' entire worldwide earnings. The main task of the sales force was keeping all those customers straight.

Not even the 25% tariff that the United States slapped on Japanese trucks in 1980 or the "voluntary" ceiling on auto imports set by the Japanese government in 1981 did much harm. The quotas drove up prices without deterring customers, who bought every vehicle the Japanese could ship here.

For the Japanese, it was the sort of easy market that their Detroit counterparts enjoyed until the 1970s. Critics say Nissan borrowed a page from the Detroit story and allowed its quality to slip and its cars to get stodgy--even as it was trying to clear up customer confusion that stemmed from its puzzling 1981 decision to change its name.

At the time, the United States was the only nation where the vehicles made by Nissan Motor Co. Ltd. were called Datsuns instead of Nissans. Japanese management insisted on dropping the Datsun name here, over the protest of Senior Vice President Charles P. King and other U.S. managers who had spent two decades making Datsun a household name.

Profit Margins Shrink

Today, the step is widely recognized as a marketing blunder that is undermining sales six years later. Some customers still think that Datsun and Nissan are two different companies. One dealer says he occasionally slips up in conversation by referring to his Datsun franchises.

Honda shot past Nissan in U.S. sales, buoyed by its own reputation for quality and innovation and its early ability to skirt import quotas as the first Japanese auto firm to build cars in the United States beginning in 1982. Back home in the Japanese market, Toyota likewise increased its dominance.

Meanwhile, Japan's "Big Three"--Toyota, Nissan and Honda--found themselves competing with improved Detroit cars, an ever-lengthening roster of Japanese manufacturers and an influx of cheap South Korean autos unrestrained by import ceilings. Soon, even cheaper cars will be arriving from Malaysia.

And the fall of the dollar to a postwar low against the Japanese yen has eroded much of the cost advantage long enjoyed by auto companies from Japan. They have repeatedly raised U.S. prices because the dollars they collect are worth less, but competition prevented them from charging what they needed to maintain their customary profit margins.

"About $2,000 a car was typical profit. Now they might be getting $500," says Donald Descenza, auto analyst at Nomura Securities International in New York, a branch of the Japanese brokerage house.

Earnings shrank at all the Japanese firms, but Nissan's performance raised eyebrows in Tokyo. After four decades of phenomenal postwar success, the parent firm last September reported its first operating loss of $122 million for the first six months of its fiscal year.

Wanted to Leave Earlier

It was perhaps inevitable that control from Tokyo headquarters would be tightened, and the first step was the recycling of several Japanese executives back home last year. In January, Sales Vice President Charles LaBelle and his top assistant were replaced. Then Nissan dropped its U.S. advertising agency and hired Chiat/Day of Los Angeles. On Aug. 6, the company announced the early retirement of King, 58, a one-time Chrysler executive who had headed Nissan's U.S. sales and marketing operations for 15 years.

Los Angeles Times Articles