GM Chief Foresees Fewer Japan Rivals

Regardless of its government’s decision to hold down exports for a sixth year, the Japanese auto industry is headed “into the swamp” thanks to the decline in the exchange rate of the dollar and the sharp drop in oil prices, General Motors Chairman Roger Smith said Thursday in Los Angeles.

Smith said the Japanese auto industry is facing a painful consolidation in which some manufacturers may “fall on the field of battle.”

“I don’t know if they (Japanese auto makers) are going to hit a brick wall, but they are certainly going to go into the swamp pretty deep,” he said in an interview before addressing the Los Angeles World Affairs Council.

Smith’s remarks contained his strongest language yet that the competitive advantage of the Japanese has begun to recede, according to auto industry observers. The Japanese are being forced to raise prices sharply because of the yen’s recent 17% surge in value against the dollar.

Smith predicted that the U.S. auto industry, meanwhile, will continue to regain its strength.

“The world is starting to move our way a little as the dollar drops and oil prices come down,” he said. “I see a great prosperity for the United States.”

Smith’s comments came as the Japanese government announced that it will maintain its limit on car exports to the United States at 2.3 million units for the year beginning April 1. GM has lobbied for lifting of the restraints so that it may import more Isuzu and Suzuki cars, which are built by Japanese firms in which GM owns a minority interest. Under the quotas, GM will be allotted only about half as many cars as it wanted to import.

Smith discounted the effect of the quotas on overall Japanese exports to this country, saying it is not clear that the Japanese could sell more cars in the U.S. market. “They are going to price themselves out of the market,” Smith said. “They haven’t reflected the current value of the yen yet. In theory . . . their prices would go up 17%. If you start talking about even a 10% increase in Japanese car prices in the United States, they are going to find out they are way overpriced on the market.”

In addition, the 50% decline in crude oil prices should mitigate the advantage that Japanese cars have often enjoyed in fuel efficiency. Smith said American car buyers are turning their attention to higher performance cars.