Asian Deluxe

The East proved long ago that it could compete in the luxury car market. Now it's intent on setting the pace
| By Paul A. Eisenstein | From Alec Baldwin, May/June 2004

Were it not for the impossibly blue ocean lapping the distant shore, you might imagine yourself driving on the moon. This desolate, cratered landscape certainly doesn't resemble the travel brochures for "lush, tropical Hawaii," but a day of meandering around Maui will expose you to just about every possible climate and terrain.

It's always a challenge to find a site suitable for testing a new vehicle. Hawaii is normally not the first place that comes to mind, but it is hard to resist an offer to put the new Infiniti QX56 through its paces on this spit of volcanic rock. Over the course of a couple days, we wandered through lush tropical rain forests, foggy savannahs and barren lava fields. We even put the big ute through its paces along the hair-raising Hana Highway. "Highway" is a generous term, for this narrow, 45-mile ribbon of macadam is a true torture test, averaging two single-lane bridges, four blind turns and a dozen heart palpitations per mile.

Infiniti's interest in showing off the full-size sport-utility vehicle isn't surprising, for there's a lot riding on the QX56, the newest member in the automaker's quickly growing lineup. Recent additions, like the edgy FX45 crossover and sporty G35 sedan, helped kick-start a brand that once seemed the least likely to succeed. Indeed, it wasn't all that long ago that the pundits were predicting that the Infiniti nameplate would be abandoned by its troubled Japanese parent, Nissan Motor Co.

Then, again, if those same skeptics were right, we wouldn't be using the words "Japanese" and "luxury" in the same sentence. Yet the terms have proven to be anything but mutually exclusive. There are now three Japanese luxury car marques offered in the United States: Honda's Acura, Nissan's Infiniti and Toyota's Lexus, the division that has cruised past its U.S. and European rivals to top the high-line sales charts.

The Japanese luxury brands are no longer second-tier players. If anything, they're intent on setting the agenda for the premium market with an emphasis on comfort, quality, and customer service—as well as the environment, a green theme normally not part of the luxury automotive agenda.

Success was anything but assured when, in 1986, Honda unleashed Acura on a wary world. At the time, it was hard to tell whether the effort had more in common with Don Quixote or David and Goliath, for Acura was attempting to take on not only the well-established domestic luxury brands, Cadillac and Lincoln, but also the snooty European imports, Mercedes-Benz, BMW and Jaguar. It may have seemed impossible, yet the stylish and well-engineered Acura Legend quickly struck a responsive chord with a generation of Baby Boomers who "grew up with import brands like Honda and were willing to move upmarket with them," says Sue Jacobs, a luxury car specialist with automotive consulting firm Jacobs & Associates.

Acura's aspirations were reasonably modest. It targeted the mid- and so-called "entry-luxury" segments, rather than going head-to-head with the likes of Mercedes, formidable S-Class, the pinnacle of premium motoring. Within a few years, the Japanese marque had carved out a comfortable niche and, buoyed by Acura's success, other Japanese automakers soon set their sights on the profitable and prestigious luxury segment. That included Mazda, the maverick manufacturer whose own fortunes seemed to ebb and flow like the tides. Its most expensive model, the 929, had never been more than an asterisk on the luxury sales charts, yet Mazda officials convinced themselves of the need to establish their own luxury franchise. It was a near-fatal self-deception.

The automobile maker invested quite a bit of money in what was dubbed the Amati project, developing two high-line products and building a state-of-the-art factory to produce them. Then Japan's bubble economy burst. Sales collapsed, plunging the automaker deep into the red. Mazda's U.S. affiliate, Ford Motor Co. assumed control to ensure Mazda's survival. In the process, the project was canceled.

If Amati was a fool's errand, it wasn't clear whether Lexus and Infiniti would fare much better. Both brands took the unusual step of launching in the lion's den, debuting at the 1989 Detroit auto show. After all, even with the modest success of Acura, the American and European luxury brands seemed solidly entrenched, buoyed by the increasingly affluent Reagan-era Yuppies. Yet it quickly became obvious that the timing of the Asian wannabes couldn't have been better.

"We can't buy instant credibility," Dave Illingworth, the first general manager of Lexus, acknowledged at the time, but the Japanese discovered that brand loyalty was for sale. The Germans were blinded by their own arrogance. They simply couldn't conceive of the Japanese entering and succeeding in the luxury market. They also missed factors such as shifting exchange rates, which had steadily moved in favor of the Asians. With a growing number of luxury

buyers being priced out of the European market, Lexus launched the LS400, and Infiniti the Q45, at about $10,000 less than comparable European imports. They found an eager audience.

The Big Three seemed equally ripe for the picking. The domestic brands were paralyzed from the neck up, unwilling to take risks and unable to accept the changing definition of luxury that led to a steady exodus of once-loyal owners. Lexus and Infiniti wisely put an emphasis on service and "it made a world of difference," recalls Arthur Rose, a Detroit physician and longtime Cadillac buyer who traded in on a Lexus LS400 after his dealer failed to fix the never-ending problems with his old Seville.

Fifteen years later, Lexus and Infiniti continue to top the quality and customer satisfaction charts published by the widely respected California research firm J.D. Power & Associates. If anything, suggests J.D. Power analyst Joe Ivers, the Japanese could continue to gain ground on the Europeans, Mercedes in particular. The German marque's quality has been steadily slipping in recent years, and that's beginning to tarnish the Teutonic brand's own credibility.

Regular auto show-goers might experience a pang of recognition when they spot the latest update of the Lexus GS sedan. It's all new—but not. Decidedly different from its predecessor, the 2006 model is sleeker and softer-edged, with the gracefully sporty lines of a coupe, yet the functionality of a 4-door. Yet the redesigned GS made its first, thinly disguised appearance last year in the form of the LF-S concept car. The name was a giveaway—short for Lexus Future Sedan—as the new GS will debut with only a few subtle changes from that prototype.

The folks at Lexus talk about the future a lot these days, and probably for good reason, since it seems blindingly bright. In a development unimaginable just a decade ago, Toyota's upscale marque has captured luxury sales leadership in the United States four years running, with volume up 11 percent in 2003 alone.

Not bad for a brand many observers—even a few of its own executives—would describe as dull. Lexus engineers typically focus more on lowering passenger compartment noise levels than on cutting 0-60 times. Products like the flagship LS430 are certainly pleasing to the eye, but over the years, they've had a derivative look to them, a Japanese reinterpretation of last generation's Mercedes.

The new GS suggests that's about to change. "We're never going to be a horsepower company," cautions Dennis Clements, the division's general manager and group vice president, though performance is definitely rising on the engineering priority list.

You might also get a sense of déjà vu when you spot the brand's newest crossover/ute. At first glance, you might confuse it with the RX330, but the badge reads RX400H, Lexus shorthand for hybrid. The crossover integrates both a gasoline engine and an electric motor. By recapturing energy normally lost during braking and coasting, Toyota's synergy drive helps make the Prius hybrid one of the most fuel-efficient cars on the road. In the RX400H, the system has been recalibrated, and though it still enhances mileage, it also acts like an electric supercharger, making the crossover one of the fastest vehicles

in its class. Eventually, hybrid drives will be offered in most, if not all, Lexus vehicles, according to Clements, who suggested the technology is the equivalent of "having a soufflé without the calories."

Lackluster design is another issue Lexus intends to address. "We must be bold, confident and dynamic but at the same time unpretentious and sophisticated," Hideichi Misono, the senior general manager of Toyota's Global Design Center, said during a Detroit speech this January. That served as an explanation of the new Lexus styling theme, dubbed L-Finesse.

Until now, it has been difficult for Lexus to have much of a styling theme—or indeed even much of a family resemblance among its many models. There is no Lexus brand in Japan, or at least there hasn't been until now. Its products were culled from various home-market Toyota sales channels. Now Lexus has its own board of directors, design and engineering centers, and a new Lexus sales channel is gearing up in Japan. Under L-Finesse, future Lexus products will share design cues, such as their grilles, heads and taillights—the sort of things that make a BMW instantly distinguishable from a Mercedes or Jaguar.

It's easy to miss the mark when you're aiming for Infiniti—and indeed, Nissan's luxury marque has consistently fallen short of the lofty expectations that accompanied its launch back in 1989.

The products might have been more refined had Nissan waited a bit longer before bringing the brand to market. Its early vehicles were a little rough around the edges, the result of rushing them to market so Infiniti could launch at the same time as Lexus. Nissan's financial problems compounded matters. As debt mounted product development was routinely shortchanged—something savvy luxury buyers are quick to recognize.

When chief executive officer Carlos Ghosn joined the company nearly five years ago, he proclaimed Infiniti one of his top priorities, loosening up the resources that the luxury division needed to come up with new and distinctive products. The payoff has been apparent, with Infiniti winning widespread praise for recent products such as the G35 and FX45. And that's translating into record sales. Last year, for the first time in its 14-year history, Infiniti broke through the 100,000-unit sales barrier. Though it's still moving barely half the metal of top-tier luxury nameplates, the six-figure sales figure was a psychologically significant achievement for the Asian automaker.

As with Lexus, Infiniti's challenge is to find its own raison d,être. "Infiniti has to stand for something," Mark Igo, the automaker's vice president and general manager, conceded during the preview of the QX56 in Maui. "We're in a very different place from where we were a couple years ago. Our brand has evolved…and our plan is not to copy what others are doing."

The company's true test will come with the replacement of Infiniti's flagship Q45 sedan. It's easy to lose the current model in a crowded parking lot, acknowledges Patrick Pelata, an executive vice president and the Nissan board member in charge of corporate planning and strategy. What comes next "has to be distinctive and expressive…a dream car" that potential buyers will aspire to.

For the first time in years, that seems entirely possible, but it's clear there's a lot of work ahead if Infiniti hopes to play in the same league as its high-volume rivals, Lexus, Mercedes-Benz and BMW.

It's been nearly two decades since Acura proved the Japanese could build a luxury car. But during the ,90s, the Honda division lost much of its sizzle. Though it outsold Infiniti last year, Acura is mired in fifth place in the luxury sales sweepstakes. Other metrics are equally grim. The Acura badge slipped from fourth to tenth last year in the Total Value Index compiled by the market research firm Strategic Vision. That's a measure of the value owners place on their vehicles.

"We lost our way, quite honestly," acknowledges Robert Bienenfeld, Acura's senior manager for product planning. There are plenty of examples of where it went off course. The automaker ignored market trends and was slow to move its original Legend model upscale. When Honda finally responded, it abandoned the well-known nameplate, adopting a series of alpha designations, such as CL, TL and RL, that were essentially impossible to decipher without a press kit.

"They muddied things…and just don't have a clear identity," says Daniel Gorrell, a vice president at Strategic Vision. The situation only worsened, added Gorrell, when models that followed the Legend were little more than rebadged Hondas. The TSX, for example, is a clone of the Honda Accord—though in this case, it's based on a European version not sold in the United States.

Signs indicate that Acura is finally back on track. The new TL sedan is stylish, sporty and loaded with innovative features, including the automotive world's first DVD-Audio system. (See story, page 121.) Honda has always billed itself as an engine manufacturer, first, and as a carmaker, second. The newest TL justifies that claim. The car now pumps out 270 horsepower, compared with 225 from the old TL.

Acura is hoping the new TL will attract a younger, better-

educated and more affluent buyer. Of course, that's similar to what most automakers seem to be seeking these days. So, as with Infiniti, Acura is in desperate need of a new halo car. It might have found one in the audaciously edgy form of the HSC, a 2-seat supercar concept unveiled at last October's Tokyo Motor Show. It's expected to serve as the replacement for the aging NSX sports car. A new version of the flagship RL sedan also is under development.

Acura has already shown it can beat the odds. But now the

challenge is to overcome its own negative momentum.

If Japanese brands like Lexus, Acura and Infiniti represent the third wave of automotive luxury, how do you describe the new Amanti? Not to be confused with Amati—Mazda's failed luxury nameplate—Amanti is one of the newest offerings from Kia, the South Korean carmaker.

South Korea is the Rodney Dangerfield of auto-making nations: it just doesn't get much respect, and for obvious reasons when you recall some of the early junk peddled by manufacturers such as Hyundai and Daewoo until relatively recently. Lately, though, the country's automotive quality's been sharply on the rise. And vehicles like the Amanti and Hyundai's comparably sized XG350 deliver many of the features you'd expect from a luxury car at mainstream prices. Amanti is quick, roomy and well equipped. And it doesn't disguise the automaker's long-term aspirations.

There's a serious case of Japan-envy here. Hyundai Motor Group—which also owns Kia—obsesses over the idea of becoming the globe's fifth largest automaker by decade's end. In the United States, sales of Hyundai vehicles should tip 500,000 by 2006 and Hyundai's "stretch" goal would double that number by 2010. To get there, it's entering an array of new niches, and it likely won't be long before there's a true Hyundai or Kia luxury car. Perhaps even a separate luxury brand, as a few Korean executives have quietly suggested, though currently there are no such plans.

There was a time when the luxury car market was orderly and predictable—much like the folks who bought those automobiles. The definition of luxury—and luxury buyers—has gone through a rapid revolution in recent years, and the old order doesn't exist anymore. Don't write off the classic brands—Cadillac is staging a dramatic and unexpected comeback. But the Japanese have certainly rewritten the rules of the game. v

Paul A. Eisenstein publishes an auto magazine on the Internet at