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#68 – The Luxury Car Wars

by | Jan 2, 2017



The automotive press sensed a market war was about to erupt when Lexus went on sale in September of 1989.


The WardsAuto Dealer headline read, “Charge of the Luxury Brigade.” It noted that the “upscale luxury market is fast becoming as packed as a New York subway on a Friday evening”


John White of the Boston Globe wrote, “The auto business has turned into a gunfight. The problem is the age-old matter of survival: too many companies are vying for a limited market.”


The Business Week headline read, “The Coming Traffic Jam in the Luxury Market.” Wendy Zellmer wrote, “A sense of urgency is beginning to set in…the genteel world of luxury cars will strip off their driving gloves and slug it out with bare knuckles.”


A worrisome Fortune magazine study of 790 of its subscribers found that only 9 percent of the respondents could name any Japanese luxury car, let alone Lexus.  Yet, 76 percent could name the European and 71 percent the American luxury cars.


General Motors was responding to the Lexus challenge. GM bought the Swedish car company Saab to compete in the low-end luxury market for $600 million and was praised by an analyst at Prudential-Bache Securities for its “sweet deal.” Buick announced it was building a two-seater image sports car, Reatta.


Cadillac engaged the Italian firm Pininfarina to design and build an image sports car called Allanté. The cars were to be built in Italy and air-freighted to the U.S. on 747s three times a week. Cadillac General Manger John Grettenberger announced a newly proposed Cadillac LSS to compete directly against the LS400. Grettenberger said, “I love it. It’s a great project.” He warned competitors this was only the beginning, stating, “Cadillac is going to develop new models with entirely different appeal to a different type of luxury buyer.”


Ford bought Jaguar for $2.5 billion to compete against Lexus.  Jaguar executive, Michael Dale, was quoted by Fortune magazine, “One thing the Japanese can’t make is a Jaguar.” Lincoln introduced a new Continental with European styling and the  Lincoln Town Car was updated to compete with the LS400. Ross Roberts, head of Ford’s Lincoln/Mercury Division bragged to Forbes magazine writer Jerry Flint, “We’ve got the only plant in the country right now producing at maximum capacity.” Flint commented, “This is one fight the boys in Detroit won’t walk away from.”


Chrysler was introducing a sleek new two-seater TC Coupe developed by Maserati. Gerald Greenwald, vice chairman of Chrysler, was quoted saying, “Toyota is fighting in awfully thin air. There’re only so many people who can spend in that bracket.”


Richard Recchia, executive vice president of Mitsubishi North America, announced that Mitsubishi would “take on Lexus with a new Sigma sedan in 1991.”


Not to be left out, Adweek reported that Mazda was approaching potential agencies to launch a soon-to-be-announced upscale division with a new V-8 or 4-rotor engine luxury sedan. The car would be sold through its existing dealer body rather than standalone new facilities with an annual advertising budget of $50 million.


Chris Cedergen, an auto analyst for J. D Power & Associates, stated emphatically, “The Japanese are not going to get the traditional European car buyers.”


Alex Taylor of Fortune magazine wrote, “Getting the Lexus out of Toyota, whose forte is rolling out wheels for the millions of the world, is like producing beef Wellington at McDonald’s.”


Hans Jordan of Mercedes-Benz of North America confidently agreed with Chris Cedergen and Alex Taylor. He questioned the Japanese entry into the luxury market saying, “People don’t only buy hardware, but image, name, and intangibles.”


BMW CEO Eberhard von Kuenheim was even more belligerent. In an interview with Financial World Magazine he angrily snapped, “The Japanese think they can rule the world markets.” He went on to accuse both the Japanese and Americans of cheating. “It makes me sad to see the Americans and Japanese imitate European design,” he scoffed. “The Japanese don’t have the courage to show Lexus and Infiniti in Geneva or Frankfort auto shows.” He also berated the U.S. government for weakening the U.S. companies by protecting them with import restraints thereby forcing the Japanese up-market to compete with BMW. Kuenheim concluded, “Nobody wins forever. Even Napoleon and Caesar lost.” Interestingly, the magazine included a picture of Hitler admiring a BMW during WWII in the article.


“A prudent person foresees danger and takes precautions.” Proverbs 27:12 (NLT) The level of competition in the luxury market was intimidating—but I knew God had called me to this job. I trusted in Him and His plan, because I knew it was greater than mine. Read more about what God’s purpose means for our lives.


It was in this charged atmosphere that Lexus held its first national dealer meeting in Monterey, CA. Here the Lexus dealers would get their first chance to drive the LS400 at Laguna Seca Raceway. The air was electric.
(To be continued in “The First Lexus National Dealer Meeting”)