Chrysler Takes on GM In Small Cars, but Ford Has Yet to Move

David is taking on Goliath once more as Chrysler joins General Motors in a race to bring their small-car projects to fruition, but Ford Motor has not yet made its move.

The name of the game is to become competitive in the subcompact car market, something the domestic car makers have found increasingly hard to do. The White House’s recent decision to let the Japanese import quotas expire this month has not helped matters much.

GM’s ambitious Saturn project and Chrysler’s newly disclosed Liberty project are not just new car introductions. Both represent a quest to develop new manufacturing processes designed to trim the cost advantages that Japanese models currently hold over their domestic counterparts in the way of cheaper labor rates, better manufacturing efficiencies and the dollar-yen imbalance.

At an analysts meeting in Detroit, Chrysler Chairman Lee A. Iacocca said the Liberty project is not a response to Saturn because it existed first.

Under wraps for about two years, the car may not be in production until 1990, some two years later than Saturn. But for now Chrysler is way ahead of GM, Iacocca said.

Chrysler already has in place some of the sophisticated manufacturing processes, whereas GM has not even broken ground for its $3.5-billion manufacturing complex, Iacocca said.

Chrysler, he added, relies more on outside suppliers than GM does, allowing it to negotiate contracts without having to worry about the high wage rates of auto workers.

But he said plans to build the car in the United States may change if the dollar-yen imbalance is not resolved quickly.

While Iacocca’s goal for Liberty is to cut the Japanese cost advantage by $1,000 through manufacturing improvements, the remainder would have to be achieved through a more favorable balance between the dollar and yen.

Unless that balance is evened out, Iacocca said, Liberty may be produced offshore and assembled here.

Modular Construction

He called the car’s most important design feature its modular construction, which makes it possible to produce components elsewhere. He said the car will be plastic-bodied, have a three- or four-cylinder engine, and incorporate 12 microprocessors to control all functions.

GM says its Saturn project will produce a car by 1988. It has been basking in the glow of one of the greatest publicity campaigns in history--without spending one cent on advertising--as governors openly compete to have the plant located in their state and swell their employment rolls by about 6,000 workers.

But GM may be starting to worry that all the free publicity could backfire when a final decision is announced in May, because only one state will be the winner and all others losers.

The bad feelings could affect sales of the Saturn car itself, some analysts say. But regardless of nationwide contests or where they will be produced, the prospect of a small economical car is attractive to many.

“Saturn and Liberty are fascinating in the respect that they may finally offer the masses a well-made car at an affordable price,” said industry analyst Arvid Jouppi. “They could open up the export market to the United States,” said Jouppi, who predicts that by 1990 there will be closer parity between world currencies.

Korea may be the best nation to build cars in or to export cars to because of its low wages and high technology, Jouppi said.

“No one has been able to penetrate developing countries as far as cars are concerned.”