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Daihatsu Is Off to a Rough Start in U.S. Market : Auto sales: The Los Alamitos-based distribution arm is hampered by difficulties in Japan and an identity problem here. But officials have faith that their strategy will pay off.


LOS ALAMITOS — The ship came in last week, but it was months late and didn't carry enough cargo to make much of an impact.

The ship docked at the Port of Long Beach with about 250 new Daihatsu automobiles on board. It was the first shipment of 1991 passenger cars from Daihatsu Motor Co. of Osaka, Japan, to reach American shores.

That is only enough cars for the Japanese auto maker's U.S. dealers to get about one new car apiece for their showrooms. And it comes five months after every other car company in the United States introduced its 1991 models.

In a fiercely competitive market where being first with the most is everything, tiny Daihatsu America Inc. in Los Alamitos is trying to keep its head above water while being last with the least.

Are we finally seeing a Japanese car company that isn't doing everything right?

To be sure, there are problems. But company officials and industry analysts say they are not unexpected for a Japanese upstart making its entry into the U.S. market. While it will be a rough road, the company says it will forge ahead.

Diahatsu's Charade, its only U.S. passenger car, and the Rocky, a sports truck, are considered to be well-built, high-quality vehicles. The Charade, with fuel-consumption ratings of up to 42 miles a gallon and prices that start at about $6,100 when it is available, should appeal to first-time and low-income buyers as well as families looking for commuter cars.

And recent surveys by J.D. Power & Associates, the Agoura Hills auto marketing consultants, show that Daihatsu buyers are more likely than just about any other car owners in the country to recommend the brand to others.

So Daihatsu American's problems aren't problems of ineptitude at the factory, industry observers say. Instead, the U.S. company has been held back by the timing of its debut in the midst of an economic slump, its small size and, most important, by economic and labor difficulties plaguing parent Daihatsu Motor Co. in Japan.

"All the small Japanese companies have the potential for problems" because of intense competition in Japan, said John Rettie, an analyst and editor of the California Report industry newsletter published by J.D. Power.

Japan is the only country left in the world that has nine manufacturers of mass-produced cars, he said, and all are vying for more market share at home and abroad. It is a competition that tends to weaken the smaller companies, Rettie said.

Internationally, Daihatsu is helped by its broad market strategy--it sells cars in 130 nations and is particularly strong in Africa and in the Japanese mini-car market, where it outsells Mazda, Subaru and Isuzu. The company is also strengthened in the world market by its links to Toyota, which owns a 14% stake in Daihatsu Motor.

But Daihatsu, which ranks seventh among the nine Japanese car companies in terms of sales volume in Japan, is having its own problems at home right now and has not been focusing on its U.S. unit, Rettie said.

C.R. Brown, Daihatsu America's executive vice president, chief operating officer and ranking non-Japanese official, acknowledges that his company, which made its U.S. debut in 1988, has had a lackluster three years. And while there is an expansion plan, it won't come into play at least until 1993, so the next two years won't be much better than the past three, Brown said.

At the top of the list of what Brown calls the "challenges" facing Daihatsu America is its lack of name recognition.

"People just don't know who we are," he said.

To help overcome the problems it faces in establishing something more than a tenuous toehold in the United States, Daihatsu America has launched a new ad campaign and is cutting prices on its 1991 cars when they start arriving en masse. The new prices are expected to be announced late this month or early in March. The company also plans to begin expanding its limited lineup by 1993 and strengthening its dealership network.

Daihatsu's immediate problems in the U.S. market have its roots in Japan. Daihatsu has been held back by a small annual import allocation and hurt by delays in delivery of new models from Japan for the U.S market.

The company's annual allocation of 17,000 cars was arbitrarily set by the Japanese Ministry of International Trade and Industry when the company announced in 1986 that it intended to break into the U.S. market. Other Japanese car companies' allotments were established based on actual sales figures, but because Daihatsu had no track record, it got a low total that wouldn't take anything away from the Toyotas and Hondas, Brown said.

Problems that Daihatsu's parent faces at home added to the shortage this year, he said.

Two new laws in Japan last year eliminated the tax incentive for purchasing mini-cars and wiped out an exemption that allowed mini-car owners to park their cars on the streets rather than in garages. The two measures destroyed the financial incentives that made mini-cars--which are measured by engine size--so popular in Japan.

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