‘Transplant’ Car Firms May Be Detroit’s Biggest Threat : Industry: As Big 3 report huge losses, Japanese plants in the Midwest are selling all the autos they can make.

It won’t make much difference to Don Coleman whether this week’s spate of grim-sounding news from the automobile industry means the worst is over--or just heralds another era of hard times.

Coleman’s plant in Kansas City, Mo., is closed for good, he learned Wednesday. The 26-year veteran of General Motors had been hanging around town for three years collecting jobless pay and betting that GM would reopen the place.

It was a poor bet.

Still, U.S. auto makers will need all they can get of Coleman’s brand of optimism as the industry digs in for another recession. Even its end, perhaps next year, promises little relief.

The question then will be whether the light at the end of the tunnel represents a domestic auto industry that has finally turned the corner or is merely the glow of the headlights of the latest Japanese car built in America.

Far and away the worst crisis facing Detroit is the fast-growing auto industry concentrated in the Midwest that is Japanese-owned--and is selling to the American consumer just about whatever it can make.

“The American auto companies will be hard-pressed to hold on to what they’ve got,” concluded analyst and GM expert Maryanne Keller of Furman Selz Mager Dietz & Birney, a New York brokerage firm.

Throughout the economic turmoil triggered by Iraq’s Aug. 2 invasion of Kuwait, automobile executives have maintained a stiff upper lip, arguing that car sales have held up pretty well and insisting that the skyrocketing price of gasoline had not changed the public’s buying habits.

In and out of the U.S. industry, the uncertain post-invasion economic climate was seen as merely delaying an expected recovery from a two-year sales slump.

But this week’s quarterly financial reports from the three U.S. car companies sent a different signal, prompting a reassessment by Wall Street of the outlook for car sales and raising doubts about some of the steps the U.S. industry has taken--notably diversifying into other businesses--to try to rejuvenate itself.

“Apart from the expected economic cycle, developments in recent months have heightened concerns about the prospects of the three U.S.-based auto makers,” Standard & Poors Corp., a key bond-rating firm, warned this week. “Events in the Middle East and higher oil prices raise the likelihood that the auto industry could face a severe downturn. Even now, none of the Big Three are profitable in their core North American automotive operations.”

The sensational news came from GM, which took a record $2-billion loss to cover the costs of permanently closing up to nine assembly plants. But that was viewed as addressing a well-known problem: the fact that the nation’s biggest company had too many factories.

Chrysler Corp. said it lost $214 million, but that was less than expected. Its vulnerability, due to its nearly total reliance on the U.S. market and particularly on trucks, has eased little since its recovery from near extinction in the early 1980s.

Perhaps the most worrisome report came from Ford Motor Co. Ford, said to be the only domestic auto company that worries the Japanese competition, lost money in the third quarter throughout its worldwide automotive operations. It managed a small profit only because of its finance subsidiaries and some accounting handiwork.

Ford won plaudits throughout the 1980s for the design and quality of its cars, the efficiency of its plants and the joint problem-solving approach it implemented between labor and management. It began to make more money than much bigger GM.

“The surprise of the week, frankly, was Ford,” Keller said. “All of a sudden, we find out they’re barely profitable but for accounting changes. What happened? I thought this was the wunderkind of the auto industry.”

Ford began to draw criticism for what Standard & Poors politely described as a “lull” in new-vehicle introductions in this country and Europe after its string of successes. The hiatus was blamed for a slippage in market share here and overseas in 1990.

Meanwhile, the company reported that its debt, driven by this year’s $2.5-billion purchase of British car-maker Jaguar and investments in future cars and trucks, had more than doubled.

David N. McCammon, treasurer and vice president for finance, conceded that “there were deteriorating profits everyplace,” but he said that Ford’s debt is well below the danger point.

The sales downturn so far is not dramatic. But the poor earnings reports for the July-September period unmasked how hard the manufacturers have had to work to sell those cars.

The cost of rebates, high for months, jumped by an average of $200 a car at Ford in the third quarter, compared to a year earlier--an extra penalty of about $85 million in the U.S. car market alone. Such sales incentives now exceed $1,000 a car, the Big Three says.

Meanwhile, dealers have slowed their orders for cars from the factories--a step that sales analyst Joel Pitcoff at Ford says is inevitable amid all the talk of a recession.

Sales are weakest in the Northeast, dealers report.

A British investment house, Barclays de Zoete Wedd, judges the car sales downturn to be modest and takes encouragement from a reduction in the amount of debt Americans have taken on to buy cars in the last year.

The Barclays report is sanguine about the short-term threats to GM, Ford and Chrysler, declaring that the three will have no life-threatening financial problems even in the case of a sharp recession that increases unemployment next year to 7.5%.

And, although the job loss so far has been great, its impact has dissipated with time.

The industry’s massive cutbacks since 1979 have eliminated about 410,000 jobs, compared to about 100,000 jobs created by the eight Japanese assembly plants and more than 200 component plants established here in the 1980s.

At the Kansas City GM plant, 4,200 workers lost their jobs when it was closed in 1988. About 1,800 are still in the area, including 42-year-old Dario Lopez, who continues to collect about 65% of his pay through a GM-funded layoff reserve.

He now has a chance to go back to work, this time at a GM foundry in Defiance, Ohio--a better prospect than several hundred former Kansas City workers without as much United Auto Workers union seniority.

“I might go there, but it’s kind of hard to start all over,” Lopez said. “I got my family here and everything I got is here. It’s not so easy to start a new life again.”

What happens as the 1990s unfold is more problematic, analysts agree. Unless the U.S. companies make dramatic competitive improvements, the growth in capacity and relentless onslaught of new products from the Japanese-owned plants in this country are forecast to cut ever more deeply into Detroit’s sales.

These so-called “transplant” cars captured 8.5% of sales last year, and, as new plants come on line, the penetration should exceed 19% by 1993, according to the Industrial Technology Institute in Ann Arbor, Mich. Adding in conventional imported cars, autos from foreign firms would then have 41% of U.S. sales.

Can Detroit halt the erosion?

Martin L. McInerney, a prominent Detroit-based car dealer with Chrysler, Ford, GM and Toyota outlets around the country, doesn’t think that the school of hard knocks has taught the U.S. auto companies much.

Disgusted by the poor financial showings by “our three wonderful domestic auto companies,” McInerney rattles off such recent actions as GM’s investing $3.5 billion in a new Saturn factory in Tennessee while it is closing nine other plants, Ford’s Jaguar purchase and Chrysler’s building a new billion-dollar technical center north of Detroit.

Naming the board chairmen who made those decisions, McInerney says, “A fool and his money soon are parted, and they are all fools.”

Times researcher Amy Harmon contributed to this story.