Malaysian Auto Is Latest to Join the Flood of Third World Exports
American auto workers, welcome to your nightmare: Japanese-designed cars built in Malaysia by workers making just over $1 an hour will soon be on their way to the United States.
Malaysia’s Proton Saga, the first car to be imported from Southeast Asia, is scheduled to go on sale in the United States in February, 1988, joining a rising tide of cheap Third World cars now threatening to take over the American small car market from higher-cost producers--and more highly paid workers--in the United States and Japan.
Industry analysts now expect that by 1990, underdeveloped nations will earmark at least 1.2 million small cars each year for export to the United States, providing low-cost substitutes for increasingly expensive Japanese subcompacts.
The Proton Saga is a Japanese-designed small car now produced in a new plant outside Kuala Lampur by a joint venture between the Malaysian government and Mitsubishi Motors Corp. of Japan. It will be distributed by Bricklin Industries, the same company that now imports the Yugo, the inexpensive Yugoslavian subcompact introduced here in 1985.
On Monday, Bricklin said it is forming a company, Global Motors Inc., which will become the parent corporation for both the Proton and Yugo distribution operations.
Bricklin is just starting to solicit applications from dealers interested in selling the Proton, but company spokesman Jonas Halperin says that the best Yugo dealers will receive priority in obtaining Proton franchises.
The Yugo, which was the first Third World car to enter the U.S market, has suffered from its reputation for poor quality, and has not been very successful in the United States.
But since the Proton is based on Japanese technology, industry analysts believe it will be of much higher quality than the Yugo, which is based on an outdated Fiat design, and which is now widely considered to be the worst-built car for sale in America.
Still, with both the Proton and Yugo, Bricklin, owned by flamboyant Malcolm Bricklin, who failed in his brief attempt to manufacture his own Bricklin sports car in Nova Scotia in the early 1970s, may soon become a dominant force in the distribution of Third World cars in the United States.
Claims Healthy Profit
“We would like to be considered the only company in the U.S. that will handle Third World cars in cases where it isn’t necessary to sell 400,000 units in order to make money,” says Halperin. He claims that privately held Bricklin made a healthy profit from the Yugo last year, despite sales of only 35,989 cars.
In fact, Halperin says that five other Third World countries, which do not yet sell cars in the United States, have opened talks with Bricklin about establishing U.S. sales operations.
“Some of these Third World nations realize that Bricklin is becoming quite aggressive in merchandising off-brand cars, and they are attracted by that,” notes Chris Cedergren, an analyst with J. D. Power & Associates, an automotive market research firm.
With prices for the front-wheel-drive Proton starting at about $5,000, Bricklin expects to sell between 80,000 and 100,000 units in its first year in the United States, according to Halperin.
To be assembled by a Malaysian work force of 1,400 from parts kits sent from Japan, the Proton will basically be a copy of Mitsubishi’s Mirage subcompact, which has already proven its worth as a solid, yet simple car for Third World nations to produce when they are just getting started in the international auto market.
The Hyundai Excel, the South Korean small car which took the United States by storm in 1986, was also based on the Mirage, through an agreement which gave Mitsubishi a 15% stake in Hyundai.
Ironically, Mitsubishi itself is starting to import into the United States the Korean-built Precis, which is made by Hyundai and patterned after the Excel. In turn, Mitsubishi is dropping its original Mirage from its American car lineup.
Caused by Quotas, Yen
Quotas, which continue to limit auto imports into the United States directly from Japan, as well as the rising value of the Japanese yen, which makes Japanese products more expensive in export markets, have combined to force Mitsubishi to become the first Japanese auto maker to sell cheap Third World cars in the United States.
But Mitsubishi is not the only major auto company sponsoring the rapid development of car making in the Third World. Indeed, most of the Third World cars that will be flooding the U.S. market over the next year will be sold under brand names of the major industrial nations.
Beginning this year, General Motors will import the Pontiac LeMans from its South Korean joint venture with Daewoo Motor Co.; Volkswagen will import the VW Fox from its Brazilian operations, and Ford will import the Ford Festiva from Kia Motors of South Korea, and the Japanese-designed Mercury Tracer from its own plant in Hermosillo, Mexico.
Chrysler, which briefly negotiated with the Malaysian government about importing the Proton under Chrysler’s nameplate, is now the only Big Three auto maker without a supply of Third World cars.
THE THIRD WORLD INFLUX Cars entering the U.S. market
Car Origin Entry Yugo Yugoslavia 1985 Hyundai Excel South Korea 1986 Hyundai Stellar South Korea 1987 Volkswagen Fox Brazil 1987 Pontiac LeMans South Korea 1987 Mitsubishi Precis South Korea 1987 Ford Festiva South Korea 1987 Ford Tracer Mexico 1987 Proton Saga Malaysia 1988
