Experts Doubt U.S. Will Rescue Auto Industry : Cars: The Big Three get a cool reception at the White House when they complain of proposed new regulations and tough Japanese competition.
A rare White House meeting with the leaders of the beleaguered U.S. auto industry recalled the days of the Chrysler bailout, the import truck tariff and Democratic initiatives for an “industrial policy.”
But industry and political observers see more differences than parallels to 1980, and there seems to be no great groundswell on behalf of major policy initiatives aimed specifically at helping the troubled auto firms and workers.
Even some traditional supporters of government-industry-labor initiatives to improve the nation’s competitiveness doubt that Detroit’s latest troubles warrant any new intervention by Uncle Sam.
“I don’t think there’s a compelling rationale for any steps beyond what the government has already done,” said Stuart Eizenstadt, domestic policy adviser to President Jimmy Carter and now a Washington consultant.
The leaders of the domestic auto industry, hard hit by the recession and ongoing competitive inroads by the Japanese, pleaded their case in a meeting last week with President Bush. Participants included General Motors Chairman Robert C. Stempel, Ford Motor Chairman Harold A. Poling and Chrysler Chairman Lee A. Iacocca.
They talked about the burdens of new environmental and proposed fuel-economy regulation, the recession and Japanese cars. Press secretary Marlin Fitzwater said Bush made no commitments at the unpublicized meeting.
The session was apparently triggered by what Chrysler officials called a sudden funneling of Japanese-built cars to U.S. shores this winter, the result of a weakening auto market in Japan and rising political barriers in Europe.
In a letter to Bush before the meeting, Iacocca portrayed the spurt in imports as “another market-share grab” that would lead to fire-sale prices in the depressed U.S. car market. He proposed a temporary freeze in Japan’s U.S. market share, now about 31%. Without restraint, their market share will reach 40% or more, he said.
“I can tell you, Mr. President, at a Japanese share of 40% in a depressed industry, Chrysler is gone and Ford could be mortally wounded,” Iacocca wrote.
Eizenstadt rates the chances of establishing a European-style ceiling on Japanese market share at “between zero and nil.” Not even Iacocca’s peers at GM and Ford advocate it, but they are sympathetic. The U.S. industry is headed for a $3-billion loss this quarter as foreign competition, plummeting sales and excess capacity force manufacturers into rebates averaging $1,100 per car.
However, Detroit’s biggest competitive problem is not imported cars but those built in the U.S. auto assembly plants erected by the Japanese during the 1980s. In general, sales of imports have been declining as sales of “transplant” cars have climbed.
Japan’s $6-billion-plus U.S. automotive investment has won important political allies from the states--notably Ohio, Illinois, Indiana, Kentucky and Tennessee--where they erected plants and hired workers. Some past auto labor supporters now shy away from efforts to limit imports.
“Normally we see eye to eye with Al Gore, but not on this,” says Douglas Fraser, retired president of the United Auto Workers union, referring to the Democratic Tennessee senator whose constituents include auto maker Nissan.
Moreover, the success of the transplants is increasingly seen as a competitive failure by U.S. auto companies and less a result of unfair trade policies or other inequities. Japan’s U.S. auto plants went up after the Japanese government was persuaded to limit car shipments here.
“Past efforts indicate that to a large extent, domestic companies simply take advantage of reduced imports to improve profit margins rather than improve efficiency,” said a Treasury Department background paper triggered by Iacocca’s letter.
The Treasury commentary knocks down many of Iacocca’s complaints, suggesting that a lot of the industry’s problems are of its own making.
But the Bush Administration is already in the auto industry’s camp on some key issues raised by the auto bosses, notably its opposition to fuel-economy legislation from Sen. Richard H. Bryan (D-Nev.) requiring a 40% gain in fuel efficiency by 2001. The White House has indicated that it would veto such a bill.
Bush’s Transportation Department has consistently opposed what it views as excessive safety regulation of the auto industry. And compared to early versions of the Clean Air Act, the final legislation was viewed as a victory for auto manufacturers.
Auto makers hope that Bush’s political pragmatism will ultimately pry him from the free-market ethic that would seem to rule out such Carter-vintage steps as another Chrysler bailout, although that particular step is seen as neither necessary nor politically possible.
Bush is encouraging joint government-industry research and development, routine in Japan and Germany and urged by many Democrats. And while Bush would have trouble advocating auto import barriers when the United States is trying to discourage them in Europe and elsewhere, major automotive job losses could quickly turn into a 1992 election issue.
“I think there’s a growing feeling in the country in hard times like this that we’re foolish to tolerate a one-way street in trade,” says Sen. Carl Levin (D-Mich.). “I don’t know that the White House shares this feeling.”