Auto Import Quotas

I have read your editorial (Dec. 13) on auto import quotas and U.S. car prices, and I think you have given Ford a bad rap.

You compare an average car sold during the midst of the recession with the upscale cars purchased during a record economic expansion. You also claim that our support of Japanese auto export restraints was calculated to keep car prices high. Since 1985 we have held price increases on small cars to less than 5%, while Japanese producers have increased prices by 23% as exchange rate misalignments were corrected. As a result, today’s base Ford Escort is priced about $1,500 below comparable Japanese models.

You further state that since 1980 car prices have “soared” nearly 80%. Our own internal estimates, which are adjusted to exclude pricing for equipment made standard as well as for major new features such as fuel injection, show that Ford car prices have increased about 34% since 1980. The Bureau of Labor Statistics index of new car prices, which also adjust for quality changes, indicates that auto price tags have increased by about 30% since 1980. The CPI during this same period went up 41%.

The bloated inventories you mention aren’t happening at Ford. Our plants have been building at or near capacity and on overtime for more than three years. Our first quarter production will be down from a year ago but will be at normal levels. The industry yardstick of days’ supply--65 days’ supply considered ideal--measures 66 days for cars and 58 days for trucks at Ford.

Our call for Japanese restraint may sound self-serving. But in fact, Ford has been selling at capacity. Among U.S. auto producers Ford has the least to gain from restraints. What we are concerned about is the $60 billion U.S. trade deficit with Japan, which has yet to show improvement. Automotive trade accounts for 60% of that deficit. The trade deficit cannot be reduced if the Japanese assemble 1.2 million units in the United States and ship another 3 million units from Japan.

We hope that a lower dollar will solve the trade deficit over the longer term. But the rate of adjustment has been painfully slow and regularly interrupted by central bank currency intervention. In such an environment, interim measures such as automotive restraints can help. Let’s not give up auto export restraints until we see a real turnaround in the U.S.-Japan trade balance.

HAROLD A. POLING

Vice Chairman, Ford

Dearborn, Michigan