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Sunday 25 September 2016
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Why Ford Left Japan & Indonesia

Why Ford Left Japan & Indonesia

Nobuyuki Takahashi speaks for many Japanese in voicing what he faults and favors in Ford Motor Co. automobiles.

“Most think they are too big and guzzle gas,” said Takahashi, 55, a liquor salesman testing the feel of an Explorer SUV at a Ford showroom bedecked with American flags.

Ironically, Takahashi has been a Ford owner for 15 years, driving a Focus first and now a Fiesta. He likes Fords precisely because they are different from everything else on the road.

“Japanese cars all look the same,” Takahashi said. “Ford is a minor player, but I like the styling.”

For Ford’s top brass, the brand is a little too minor.

Frustrated by paltry sales, we reported here that Ford pulled the plug last week on its businesses in Japan and in another giant Asian market, Indonesia. In both cases, it couldn’t crack a Japan Inc. stranglehold.

In Indonesia, the top 10 brands are all Japanese, locking up 97 percent of the market. In Japan, domestic brands in Japan account for 94 percent of sales.
Ford cut bait to focus elsewhere.

“It has become clear that there is no path to sustained profitability, nor will there be an acceptable return over time from our investments in Japan or Indonesia,” said Karen Hampton, vice president of communications for Ford Asia Pacific.

Ford will halt operations in both markets by year-end.

In Japan, the move is an embarrassing retreat by a Detroit manufacturer that once built cars there — before the government effectively confiscated its plant ahead of World War II — and later loomed large in the country as the parent company of Mazda Motor Corp. In fact, the man who signed off on the surrender, Ford CEO Mark Fields, is part of a whole generation of Ford executives who honed their skills while running Mazda in Hiroshima.

Ford entered Japan in 1925, went dormant during World War II and, as recently as 1996, aided by a favorable dollar-yen rate, was selling nearly 15,000 imports a year there, plus Ford-badged vehicles built for it by Mazda. Last year, Ford sold only 4,968 vehicles, according to the Japan Automobile Importers Association. Pride, not profits, kept Ford and other U.S. brands in Japan.

As Japanese brands steadily whittled away the Detroit 3’s U.S. market share, the Americans were loath to admit they couldn’t compete on Japan’s home turf.

General Motors has a thin lineup focusing mostly on image cars such as Chevrolet Camaros and Cadillacs. Chrysler hangs on, selling its 300 sedan; and Jeep is the most successful U.S. brand there, with sales of 7,132 vehicles last year, according to the importers association.

Prospects don’t look bright for the world’s No. 3 auto market. Total industry sales, reflecting an aging and shrinking population, will fall every year through 2020, IHS Automotive predicts.

Indonesia, like other emerging markets, has been in a slump lately, but long term, emerging markets are expected to dictate the auto industry’s future winners and losers.

Indeed, Indonesian demand will soar 32 percent through 2020, LMC forecasts. Even so, total sales then will be only 1.24 million vs. an estimated 942,000 in 2016.

Last year, Ford says, it sold more than 1 million vehicles in China alone, where it is seeing profits from its investments. The automaker says it sold about 6,000 in Indonesia.

In both Japan and Indonesia, Ford’s range of imports couldn’t match the locally built offerings, cars better tailored to local tastes and needs, from the Japanese makers.

“Relying solely on imports does not make them competitive,” LMC analyst Benjamin Asher said, adding that Ford lacks models in the key segments.

Ford loyalist Takahashi called word of the brand’s pullout “amazing.”