Japanese Auto Giants Accelerate Shift to U.S.
As Their Home Market Continues to Shrink,
Japan's Car Makers Look to American Drivers
By NORIHIKO SHIROUZU and TODD ZAUN
Staff Reporters of THE WALL STREET JOURNAL

The latest sport-utility vehicle to hit the American market is bigger than its predecessor on the outside, bigger on legroom, bigger in the cargo area and beefier under the hood. In short, it's American in every imaginable way but one: It's the new Lexus RX330 SUV, from Toyota Motor Corp. Making the old RX300 more American and less Japanese is exactly the point. For Toyota, as well as Honda Motor Co. and Nissan Motor Co., what American consumers want is becoming more important than the wishlists of consumers in Japan's shrinking market. Vehicles such as the new Lexus SUV, a hulking Mississippi-made pickup truck Nissan plans to launch later this year, and Honda's new Ohio-built Element SUV, mark an important turn in the long-running battle between the auto titans of Japan and Detroit. The Japanese are accelerating their shift away from their home market, which they see headed for long-term decline. Flush with cash earned largely in America, Toyota, Honda and Nissan are boosting investment in new factories, engineering labs and vehicles. They plan to storm the American car-and-truck market with an intensity that will rival their early-1980s assaults.

The RX300, the first high-volume midsize SUV to be developed on a passenger-car platform, was a sensation when it was launched in 1998. With a smoother ride and higher fuel efficiency than many of Detroit's SUVs, which are based on pickup truck designs, it ignited the fastest-growing new automotive segment since the mass-market SUV emerged in the early 1990s. It helped boost Toyota's Lexus brand to the No. 1 spot in luxury-brand sales, past GM's Cadillac and Ford's Lincoln.

The idea to develop such an SUV came out of Toyota's success in Japan with the youth-oriented RAV4, a compact SUV based on the Corolla. Hideaki Miyahara, the father of the RAV4 and a product-planning chief at Toyota in Japan in the early-1990s, subsequently noted how many women in American suburbs were climbing into Ford Broncos and Chevrolet Suburbans to taxi kids to soccer practice or go grocery shopping. Toyota decided to create another crossover based on the Camry, which went on to become a smash hit, selling more than 75,000 vehicles each year, even though some U.S. executives felt the new vehicle, dubbed the RX300, would be handicapped by its smaller size, weaker engine and skimpier legroom than what Detroit was offering.

With the RX330, the U.S. executives got the bigger, beefier vehicle they were looking for. They fought to boost room for second-row passengers and the vehicle's cargo space. It was a battle since the time when Toyota designed the original RX300, says Chris Hostetter, vice president of advanced product strategy, because the Japanese designers, with their smaller physiques, generally aren't sympathetic to many Americans' need for leg and elbow room. When Japanese product planners and designers came to the U.S., Mr. Hostetter always tried to pair them up with "people who are 6'7" and weigh about 250 pounds."

The new RX, when it arrives at Lexus dealers this spring with a base price of about $35,000, will be six inches longer, giving more room for both its driver and four passengers. The vehicle's cargo space with its second-row seats folded down will grow to 85 cubic feet from 75 cubic feet. With the stretched body length, the RX330 will likely be too big for the Japanese market. But company executives say its greater potential in a much bigger American auto market outweighs any loss of sales at home.