BRUSSELS - Nissan and Toyota are racing to grow in Europe.
They see each other as their biggest competitors, although their race to be the biggest Japanese company in Europe is likely to cut the market share of European rivals.
Both companies plan sales of 600,000 units by 2000. Only by boosting sales and capacity in Europe can they make significant profits.
Nissan would like to keep its lead in Europe, but Toyota's financial strength will make it the winner after 2001. That is when Toyota's second European car plant starts building the Funtime supermini.
In the meantime, their growth strategies are similar. They are:
Adding Europeans at the top and in key management positions
Taking over key distributors
Manufacturing more in Europe
Tuning in to European tastes.
Nissan started earlier in each area. Europe is the only market where Nissan leads its rival, and it would hate to lose that honor.
Although a Japanese citizen remains at the helm of each company's European operations, both companies have at least two western executives in top management. Nissan brought Earl Hesterberg over from its US operations more than a year ago to be vice president of sales and marketing. Toyota recently poached Juan Jose Diaz Ruiz from Audi to do the same job.
Europeanizing also means controlling sales. Nissan owns distribution in most of its big markets, and Toyota has started the process, buying controlling interest in its UK distributor last month. Hesterberg has replaced six of the executives heading the seven Nissan-owned European distributors with new European bosses. Recently Nissan poached Hartmut W. Kieven, a 33-year Ford and Jaguar veteran in Germany, to be head of Nissan Germany.
'Toyota will become even more Europeanized,' said Tatsuo Takahashi, the 33-year Toyota veteran who heads Toyota Motor Europe in Brussels and has lived abroad for many years.
'A global player has the duty to be multicultural,' said Ruiz. 'The number of Europeans will be a growing proportion in five to six years.'
Nissan came first
Nissan was the first Japanese carmaker to build a greenfield factory in Europe. In 1986 it located a complete facility, including press, body, paint, assembly and plastics shops, an aluminum foundry and an engine plant in Sunderland, UK.
Earlier, it had a joint venture in Spain, building light commercial vehicles. Nissan Motor Iberica SA is now 100 percent owned by Nissan.
It builds several commercial vehicles, the Serena minivan and the Terrano II and Ford Maverick sport-utilities. The Ford will cease production in April.
Nissan's large European capacity of 345,000 units caused it some problems when sales declined in the mid-1990s. Nissan lost money in Europe for several years, said Hesterberg, but last year it made a small profit.
'Our real goal is to make our high-volume products that are important here in Europe, in Europe,' said Hesterberg. 'We have a sport-utility, B- and D-segment cars (Micra and Primera), and now we'll add C (Almera).' At Nissan, B segment is supermini, D is upper-medium, and C is lower-medium.
To bring production in Spain closer to its 120,000-unit capacity, Nissan plans to add two minivans in 1999 and 2000. One would compete with the Toyota Picnic, and the other with the Toyota Previa. Combined minivan volume is projected at 65,000-70,000 units annually.
By 2000, Nissan plans to build in Europe 90 percent of the vehicles it sells in Europe, which would be 525,000 units annually. European sales were 489,952 units last year, including light commercial vehicles and sales in eastern Europe.
Nissan needs to give all of its products in Europe a family resemblance, said Hesterberg. 'For instance, today the Almera is shared with Japan and other markets. It's more difficult for us to totally drive the styling to European tastes.'
The Primera station wagon, which debuted at the Frankfurt auto show last autumn, is evidence of the desire to Europeanize its cars. Sales start in March. Dealer reception has been extremely good, said Hesterberg.
A facelift of the Micra, Nissan's six-year-old small car, goes into production at the end of February. It will have a new front end, cosmetic changes to seats supplied by Ikeda Hoover, and an optional passenger airbag. The big change is the optional 1.5-liter diesel engine and transmission from the Peugeot 106. The diesel will give the Micra new strength in France, Belgium and Spain.
Nissan's new strategy to reduce the number of platforms from 24 to five by 2005 will also result in more niche vehicles, said Hesterberg.
In the 1980s and 1990s, Nissan imported niche vehicles from Japan because of the weak yen. But the market changed. Today, said Hesterberg, the yen isn't as important as the styling.
'There has never been a company in the history of the world with as much cash as Toyota,' said Hesterberg. 'Of course we'll compete with them, we won't give up without a fight. But we have to compete with the resources we have: two factories and a design center.'
Toyota closes the gap
Toyota trails in Europe for two reasons, says Tatsuo Takahashi:
Toyota doesn't have a modern supermini to compete against the Nissan Micra in Europe's second-largest segment.
Toyota was behind in key markets like France in 1991 when voluntary export quotas were imposed.
Toyota's new small car, resembling the Funtime shown at Frankfurt, will go into production in 2001 in a new factory in France. The plant will push local production from today's 105,000 to nearly 350,000 vehicles by mid-2000.
Toyota has focused on product before plants, says Takahashi. The strategy has been successful. Toyota sales hit a record of 470,000 in 1997, up 14 percent in a market that only rose 5 percent.
A European Corolla is being added this year to the UK plant, alongside the new Avensis. UK capacity is now 220,000 cars. Engines for cars built in Burnaston and Valenciennes will come from a plant in Deeside, UK, with a capacity of 400,000 engines annually.
'For our sales goals to be reached, it is essential that our products are perceived as European cars,' said Takahashi.
This effort is clearly seen on the Avensis. Its predecessor, the Carina, received a lukewarm reception in Europe because of styling. To Toyota's horror, the body formed a banana shape when crashed by German safety experts. Toyota learned well. The Avensis rated a top score in the same off-set crash test.
The European-built Avensis has been styled exclusively for Europe, and now has a wagon derivative.
At the Geneva motor show next month, Toyota will introduce a new smaller Lexus luxury car for Europe. With a three-car range in Europe, Toyota hopes to increase its Lexus brand to the point where a separate franchise can be established, as in the USA. The smaller car is expected to provide that volume, taking sales from 3,700 units last year to 20,000-plus by 2000.
Toyota's major problem in Europe is the same as Nissan's - it needs more sales to make money. Currently, Toyota is only breaking even in Europe, said Takahashi, although all of the distributors in Europe are profitable.
'The key is if we can achieve volume to survive the Japanese yen,' said Takahashi. 'Without it, we cannot make a profit.'How Nissan & Toyota have improved
Percent change in Western Europe unit sales from year beforeSeen and heardWITH SALES OF 600,000 a year, Nissan and Toyota would be almost a third as big as Europe's volume carmakers. Such a volume will let the companies be seen and heard more clearly in the market.
'We will never be able to outshout VW, Ford and Opel,' said Nissan's Earl Hesterberg, 'but we are working with our sales companies for a more cohesive approach.'
'Unless we achieve a certain volume, we cannot be seen by the consumer,' said Toyota's Tatsuo Takahashi. 'That means it is very difficult for us to establish a corporate image in the marketplace.'