GM agrees to sell cars in Japan as 'Toyotas' Vehicles to feature right-hand drive

November 20, 1993|By Bloomberg Business News

SAN FRANCISCO -- General Motors Corp. agreed yesterday to build right-hand-drive cars for sale in Japan as Toyotas. The agreement with Toyota Motor Corp. marks the first time that a U.S. automaker has agreed to sell cars in Japan under a Japanese nameplate.

The agreement was also significant because GM for the first time would provide a car whose compact size and low price make it suitable for the Japanese market. In addition, the car's steering wheel would be on the right side, where most Japanese buyers want it.

Under the agreement, Toyota will begin selling Chevrolet Cavaliers in early 1996. Japanese automakers and trade associations have said that American cars sell poorly in Japan because they have steering wheels on the left side and are too big and expensive.

The Cavalier coupe and sedan are being redesigned for the 1995 model year and will offer dual front air bags and anti-lock brakes as standard, the two automakers said in signing the agreement in San Francisco.

Sales are expected to average about 20,000 cars a year, a figure that, based on the Cavalier's current price, could be worth about $200 million a year to GM. GM sold only 9,089 U.S.-built vehicles in Japan last year.

GM and Toyota cautioned that the joint project would depend on GM's manufacturing the vehicle to meet the high standards of Japanese customers and Toyota's putting forth its best efforts to sell the car.

A manufacturing site, to be selected later, will come from among the U.S. facilities that produce Chevrolet Cavaliers.

Those include factories in Lordstown, Ohio, and Lansing, Mich., according to Tom Davis, general manager of GM's Lansing Automotive Division.

"The positive working relationship that developed between GM and Toyota at New United Motor Manufacturing Inc. and the joint venture in Australia has made this possible," John F. Smith, GM's president and chief executive officer, said in signing the agreement.

GM and Toyota have had an auto-building venture -- the United Australian Automotive Industries Ltd. -- in Australia since 1988. "Clearly, this agreement is evidence that the U.S. has closed the competitive gap with Japan and is now in a position to build these global vehicles that can compete any place in the world," Mr. Smith said.

"We are very pleased to have another opportunity to do business with GM," said Toyota's president, Tatsuro Toyoda.

"We appreciate the deep understanding and positive leadership demonstrated by Mr. Smith in promoting the project."

The agreement was signed in the same hotel where the two companies 10 years ago signed the agreement to jointly produce cars in a former GM plant in Fremont, Calif.

The possibility of the joint venture was first reported in April. At the time, a GM spokesman said Mr. Smith and Mr. Toyoda had "agreed conceptually to pursue an arrangement whereby GM would build a Toyota-badged right-hand-drive vehicle in the U.S. for sale by Toyota in Japan."

American automakers now sell American-built cars in Japan under American names, and they import Japanese-built cars for sale under Big Three nameplates. But GM will become the first American automaker to sell cars in Japan under a Japanese name.

The right-hand-drive Chevrolet Cavaliers will be sold through Toyota's dealer network.

Yanase will continue as the primary distributor of GM-badged vehicles in Japan.

The agreement follows 18 months of negotiations between Toyota and GM.

Bargaining began shortly after President George Bush's visit to Tokyo in January 1992 with the Big Three chairmen at the time -- Robert Stempel of GM, Lee A. Iacocca of Chrysler Corp. and Harold Poling of Ford.

During that visit, several Japanese companies pledged to market a total of 20,000 U.S.-made vehicles a year in Japan to help reduce Japan's $50-billion-a-year trade surplus with the United States.

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