GM, Chrysler to Get at Least One-Third of Increased Exports : Japan Reported Near Decision on Auto Quotas
Japan plans to allocate to General Motors and Chrysler at least one-third of the 450,000 cars by which this country’s automobile exports to the United State will rise in fiscal 1985, the Asahi newspaper reported Sunday.
The Ministry of International Trade and Industry will finish its consultations with all eight Japanese exporting firms and inform each of them this week of its share of the total quota of 2.3 million cars that Japan will export to the United States during the 12 months beginning April 1, 1985, the newspaper said. The quota for the 12 months ended March 31 was 1.85 million vehicles.
Although the Asahi said the final quota distribution plan had not yet been finally approved, it nevertheless reported detailed quotas that it said MITI is planning to allocate to each firm.
According to Asahi’s figures, GM and Chrysler will be able to increase procurement from their three Japanese affiliates by at least 150,000 to a total of 284,100 cars, or 12.4% of the new overall export limit of 2.3 million cars. The combined quota for the two U.S. firms will be more than double the 134,100 cars that they procured from their Japanese affiliates last year.
GM and Chrysler together had sought a total of 364,000 cars this year, and Asahi said that the possibility of raising the limits to be assigned to the two firms is one point yet to be finally settled in MITI’s plan.
Under the MITI plan as reported by the newspaper, “captive exports” from Isuzu and Suzuki to GM were to more than triple to 143,610, up from 46,500 in the last 12 months, while Chrysler’s imports from Mitsubishi will be allowed to grow 60.4% to 140,490 units from the previous 87,600.
Prime Minister Yasuhiro Nakasone and Makoto Kuroda, director of MITI’s trade policy bureau, have both said publicly that Japan planned to allocate a large share of the increase in the fiscal 1985 quota to GM and Chrysler.
When MITI announced March 28 its plan to impose new quotas for a fifth year, Roger B. Smith, GM chairman, sent cables of protest to Prime Minister Yasuhiro Nakasone and three other Japanese officials, declaring that Japan should place no limits at all on exports to the United States and calling the increase of 450,000 units, a rise of 24.3%, unfair to GM’s Japanese affiliates.
Congress, however, erupted in anger, condemning the increase as too large and charging that the new limit amounted to no real restraint because American dealers selling the imports were believed to be incapable of handling more than an additional 450,000 cars.
The plan that MITI reportedly has drawn up would send 299,810 additional cars (with another 190 cars yet to be allocated) to American salesrooms of seven Japanese auto firms. The eighth firm, Suzuki, has no American dealerships and sells all of its cars to GM.
MITI reportedly drew up the plan with the idea of holding down increases for the top three exporters--Toyota, Nissan and Honda-- while allocating disproportionately large increases to the smaller exporters. Those firms have complained that quotas fixed under the fiscal 1981-84 period of “voluntary restraints,” set up after consultations with the United States, unfairly curtailed their opportunity for growth in U.S. sales.
Toyota and Nissan each will be given an increase of 12.5% over its fiscal 1984 quota, enabling Toyota to boost exports by 68,970 cars and Nissan by 60,880, Asahi said.
MITI officials reportedly calculated the increases for Toyota and Nissan to be only large enough to let the top two exporters raise inventories from abnormally low levels of about 20 days’ worth of sales to 56 days’ worth of sales.
Honda, which is now manufacturing 300,000 cars at its plant in Ohio, was to get a 15% boost of 56,250 cars, the newspaper reported.
Mazda was to receive a 32.4% increase--56,250 cars--while Fuji Heavy Industries, which manufactures Subaru cars and vans, was to obtain a 53.4% boost, or 40,950 cars, Asahi said.
Average Unit Profit of $2,200
Mitsubishi, in which Chrysler owns a 15% share of equity, was to receive a 51.7% boost in its overall quota but only a 30% increase, or 10,510 additional cars, for its own dealer network in the United States.
Isuzu, in which GM owns 34% of the stock, was to be allowed to more than double its overall exports but was to receive an increase of only 30%, or 6,000 cars, for its American dealers.
Suzuki was to more than triple its exports, with all 35,500 of its increase going to GM, which holds 5.6% of its stock.
Asahi reported that the average profit that Japanese auto makers receive on each car sold to the United States amounts to $2,200--far more than they get from sales at home--and predicted that the large quota increases would enable the smaller firms to plow some of their American profits into their domestic sales networks in an attempt to enlarge their market shares in Japan.
MITI’s Kuroda said on March 28 that the 450,000-car increase in the overall fiscal 1985 quota will add about $2.5 billion to $2.6 billion to the U.S.-Japan trade imbalance, which last year reached $36.9 billion.
Asahi, however, reported that the average price of Japanese cars f.o.b. (loaded on the dock in Japan) was $4,300 in 1980, the last year before export restraints began. That figure had risen to $6,800 last year, it said.
