New Kid on The Dock

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Most Europeans believe a "transition" period is necessary to give their automakers time to improve their productivity, but the countries disagree over how long this should go on. France's Minister of European Affairs, Edith Cresson, says liberal policies will result in the "murder of the European car industry" and argues that the Community should impose a 10-year transition period, starting in 1993, during which Japanese imports would be kept at current levels. The European Commission, which is negotiating a deal with the Japanese, is pushing for a five-year transition.

For the Japanese, the venture into luxury cars is a long-term experiment that will determine the industry's direction in the 1990s. Lexus' success is the product of a lengthy exercise in product development, even by Japanese standards. Toyota spent six years and more than $1 billion developing the auto, and built 450 prototypes -- three times the usual number -- to get the product right. The firm spent two years just deciding on the type of leather interior to use, and top management pondered for three years before approving the car's styling.

One question that Toyota management might be pondering now is whether, with prices up at the pump because of the gulf crisis and consumers about to give more thought to automobile fuel efficiency, Lexus' gas-hungry V-8 (18 m.p.g. in the city, 23 on the highway) may soon prove a sales liability. So far, that has not been a problem, and Lexus meanwhile is preparing yet another challenge to the world's luxury carmakers: a $30,000 luxury coupe that will roll into dealerships next spring to compete with the Acura Legend, Cadillac Eldorado coupe and Lincoln Mark VII.

CHART: NOT AVAILABLE

CREDIT: TIME Chart by Steve Hart

CAPTION: NUMBER OF CARS SOLD IN U.S.

Jan.-Aug. 1990