Aq Winter 99

Light vehicle sales of JAMA Canada members in 1998 attained a new peak,
topping out at almost 330,000 units, an increase of 10.9% over 1997. The previous peak was
in 1991 when Japanese automakers sold 325,000 vehicles in Canada. The key difference
between then and now is the fact that in 1998, 54% of all vehicles sold were models built
in North America, compared to only 20% in 1991.

In 1998, although the total market in Canada was flat, Canadian
consumers continued to be attracted to Japanese brand cars, light trucks, minivans and
sport utility vehicles. A combination of new models, high quality and reliability, as well
as competitive prices were likely factors in establishing this record performance. The
top-selling passenger car in Canada for 1998 was the Honda Civic at 54,065 units, the
first time that a Japanese brand has topped the field in Canada. The Toyota Camry took the
top sales honours in the US for 1998 for the second year in a row. This is the third
consecutive year of sales and market share growth since JAMA Canada members hit an overall
low of 204,000 vehicle sales in 1995. While figures differ for individual companies,
Toyota is leading in total unit sales at over 128,000 in 1998, and Subaru enjoyed the
highest growth rate at 27.5% in 1998. Details are contained in the accompanying table.
Made-in-Canada production also reached new record levels in 1998, up 3.4% overall to over
396,000 units as both Honda (HCM) in Alliston and Toyota (TMMC) in Cambridge opened new
plants in 1998.

Honda started to produce the new Odyssey minivan and Toyota began to build the new
Camry Solara in the second half of 1998. Both of these models are exclusively made in
Canada and will be exported to the US and other markets. Honda is expected to begin
exporting up to 5,000 Odyssey minivans to Japan annually beginning in 1999. CAMI, the
50/50 Suzuki/General Motors of Canada joint venture, began production of the new
Vitara/Tracker last September in Ingersoll.

Light vehicle sales gained 10.9% in calendar year 1998 to 329,459 units
for all JAMA Canada members. Passenger car sales rose 9.0% to 246,336 units, while light
truck sales almost doubled that rate, up 17.0% to 83,123 units. While the majority of
sales were North American built models, production shortages and strong demand for some
models required imports from Japan to meet customer demand. However, the volume of
shipments from Japan in 1998 rose a modest 3.4% over the previous year.

Market share among all Japanese automakers rose to 23.7% from 21.4% in 1997. Passenger
car share was up to 33.3% and light truck share reached 12.8% from 10.9% last year.

Japanese-affiliated vehicle production in Canada grew by 3.4% in 1998 to
over 396,000 units. Behind this modest increase, however significant changes are evident.
Output at Honda (HCM) in Alliston rose 8.8% over 1997 to just under 180,000 units and
Toyota (TMMC) in Cambridge increased production 58.6% to almost 172,000 units. Both HCM
and TMMC opened new or renewed plants in 1998 for the Odyssey minivan and the Camry Solara
coupe, respectively.

While production of the Odyssey is still on one shift, the second shift is expected to
start in the spring, with full capacity likely to be reached later in the fall. Total
output for the model year is estimated at 75,000 units, with 60,000 units exported (most
to the US, some to Japan including right hand drive) and 15,000 for the Canadian market.

TMMC has recently announced the addition of a Camry Solara convertible for manufacture
in Cambridge. The new model is slated to go on sale in the spring of 2000 and Toyota is
expecting to sell 6,000 Solara convertibles per year. TMMC has teamed up with American
Sunroof Corporation (ASC) Inc. of Michigan for production of the convertible. ASC will
establish a facility to integrate the production of the Solara convertible in Cambridge,
and is expected to create over 50 new jobs.

Finished vehicle shipments from Japan to Canada changed direction in the
course of 1998. While strong in the first quarter, since April last year, shipments have
been in decline. Through the end of December 1998, shipments to Canada totaled 145,755
units compared to 140,960 units in 1997, a gain of 3.4%. For the fiscal year beginning in
April, vehicles exported from Japan have fallen 12.8% overall, from 115,000 to 100,000
units to the end of December.

The following article was originally published in the March 1999
edition of "Japan Auto Trends" and is reprinted here with the permission from
JAMA. Other articles, reports and industry statistic are available on the internet at www.japanauto.com.

Selling cars in Japan has usually begun with a knock on the customer’s door. Now
increasingly it’s through the windows of the Internet or the shopping malls.

Consider the old ways and imagine having your own personal car-care practitioner, one
who makes house calls. He provides complete car care from the moment of purchase until
trade-in, all from the home. Popularly called "door-to-door selling," this has
been the traditional way of selling cars and maintaining loyal customers in Japan.

As with many of the unique characteristics of Japan’s auto markets, the door-to-door
practice evolved at least in part because Japan is a crowded country with limited space
for many large show rooms. Salesmen had to make extra efforts to persuade customers into
the car market given the ready access to mass transportation and the vast array of local
shops within walking distance of most neighbourhoods.

However, a combination of new technology, prolonged recession and changing lifestyles
appears to be eroding the role of the door-to-door salesman as the point of first and last
call in the car-owning experience. While on-line sales do not yet appear to be a
significant factor, customers can now peruse the windows of the Internet for pictures and
information about new car models. Meanwhile, manufacturers facing falling volume and
stiffer competition seek new ways to attract consumers, among them being large auto malls
and auto theme parks. These new methods of promoting and selling cars have already taken
their toll and predictions are that the days of the door-to-door salesmen will fade away,
though perhaps not completely.

However, with the decline of door-to-door selling, don’t expect a decline in service to
the customer. High standards of service have and will continue to dominate Japan’s retail
business. In Japan, for example, seldom does the customer do the tipping. Often it is the
other way around, with the establishment providing small gifts and other benefits to the
customer. The Japanese word for this is "sabisu," an adaptation of the English
word "service". While door-to-door selling may be the ultimate
"sabisu," new consumer-friendly methods are taking place. In the future, selling
cars in Japan will move from doors to windows.

The mission was led by APMA President Gerry Fedchun who said, "The purpose of the
mission is to give APMA members the opportunity to hear first-hand about future plans and
products at Honda, and to introduce their company, products and technical capabilities to
key purchasing personnel at Honda in North America."

According to Ballard, both companies will evaluate the Ballard fuel cell in the
development of their own fuel cell powered electric vehicle programs. The Nissan contract
is C$3.5 million, and C$2.1 million with Honda R&D. Ballard Power Systems is one of
the leaders in zero-emission proton exchange membrane (PEM) fuel cells for use in
transportation, electricity generation and portable products. The fuel cell combines
hydrogen (which can be obtained from petroleum, methanol or natural gas) and oxygen (from
air) without combustion to generate electricity.

Canadian Car of the Year & Best New Sports Sedan – Acura
3.2 TL

Canadian Truck of the Year & Best New Van – Honda Odyssey

Best New Family Sedan Under $25,000 – Mazda Proteg�

While the warehouse operation will start at the end of 1999, the first phase of
manufacturing will begin in June 2000, with phase two slated for June 2002. At start-up,
about 100 people will be employed, rising to 160 by 2002. Initial investment in the 15,000
m2 Ontario plant will be C$10 million. The building will be designed to allow expansions
when necessary.

Less than a year from start-up of their operation in the Village of Elora, JEC is now
planning its first expansion which will add a stamping operation starting in November,
1999. An addition to the plant is now under construction to accommodate a 600 tonne
blanking press and a 2500 tonne progressive press.

Initial capitalization for JEC of US$12 million primarily came from Jefferson
Industries Corp. in Ohio, which is a joint venture of Takao Kinzoku Kogyo Co. Ltd.,
Kikuchi Metal Stamping Co. Ltd. of Japan and American Honda Co. Inc.

Currently, JEC has 108 employees working on 2 shifts, with an engineering staff of six.
The stamping operation is expected to boost employment by about 20 when fully operational.
According to JEC officials, sales in their first year of operation are expected to be
about US$22 million. With an expansion under way, JEC plans to achieve QS9000 designation
in the near future.

Sales have risen rapidly from C$7.3 million in 1988 to a projected C$140 million in
1998. Sales growth has also required QSS to expand both investment and employment.
Currently, cumulative investment in the Tecumseh plant stands at C$48 million. Plant
expansions added 30,000 sq. ft. in 1988, and 17,000 sq. ft. in 1993, along with a new
warehouse. Localization has brought NAFTA content in QSS products to approximately 70%.

A major development occurred in May 1997 when QSS introduced new pretensioner/force
limiter technology to their seat belt systems for vehicles in North America. Pretensioner
technology, which is seen primarily in luxury vehicles in Europe, works in concert with
front seat air bag sensors to improve the performance of the restraint system by taking up
slack in the seat belt during a crash. One of only a few companies in North America to
make this advanced safety product, this new technology required QSS to expand production
lines and related engineering operations.