Detroit Calls the Cut in Japan’s Auto Export Quota a Charade : * Vehicles: Big Three say quota will have little effect on the trade imbalance in cars. The Japanese disagree.
To hear Detroit’s Big Three auto makers tell it, Japan’s planned reduction in its self-imposed quota on auto exports to the United States represents a token gesture too small to matter.
But analysts and Japanese auto producers say the new restrictions will increase pressure on Japanese auto producers to build more cars in North America in order to hang on to their share of the car market.
Already a Japanese newspaper has reported a raft of new production plans that Japanese auto makers may be considering--including new U.S. plants and exports from other countries--to get around the restraints.
The Japanese Ministry of International Trade and Industry said Wednesday that the nation would lower its ceiling on car exports to the United States from 2.3 million vehicles to 1.65 million in the coming fiscal year. Japanese government officials sought to portray the move as an effort to aid America’s auto industry and help restore the trade balance that has been a source of friction between the countries.
But General Motors Corp., Ford Motor Co. and Chrysler Corp., which have repeatedly called for various forms of trade relief from Japan in recent months, Thursday derided the move as insincere and meaningless. And trade experts said it would have virtually no effect on the U.S. trade deficit with Japan.
“All that has happened is that the Japanese government has proposed a voluntary level for 1992 at about the same volume their auto makers imported into the United States from Japan in 1991,” said Harold A. Poling, Ford chairman. “So, where’s the reduction?”
In Washington, a White House spokesman said the Bush Administration had not requested the lower export ceiling. “This was a Japanese decision, a unilateral decision,” White House deputy press secretary Gary Foster said. “This is a voluntary action.”
Japan’s auto exports to the United States have fallen steadily since 1986, as Japanese auto makers transferred much of their production for the U.S. market to U.S. assembly plants. This year, Japan is expected to export 1.75 million cars to America, which makes the new quota just a 5% cut.
If Japan’s share of the U.S. car market is curtailed, analysts warn, consumers may be the losers unless Detroit decides to hold the line on prices. With Japan seeking more profits from fewer vehicles, the Big Three may boost prices again as they did in the 1980s when the initial import quotas provided them with some relief from Japanese competition.
Except for Daihatsu, which recently announced plans to pull out of the North American market, all of the Japanese auto makers selling cars in the United States and Canada also produce cars in assembly plants here. These plants, which were built partly in response to Japan’s first voluntary export limit set in 1981, will likely be able to make up for the 5% reduction in imports if they run at full capacity.
But since many of the parts in the cars built by Japanese “transplants” are imported, analysts say the transfer of production to U.S. plants will have little effect on the trade deficit, of which autos and auto parts account for two-thirds.
And, although the Japanese may export fewer cars, they are expected to fill their smaller quotas with the more expensive and upscale cars that they do not build in the United States, thereby maintaining the dollar value of the deficit.
“The numbers will go down, but the value will go up, so the deficit will stay the same,” said Thomas O’Grady, president of Integrated Automotive Resources, a consulting firm in Wayne, Pa.
In spite of U.S. skepticism over the importance of the decision, Japanese auto makers insist that the action will hurt them in the U.S. market.
“Remarks from people like Harold Poling that it is not significant--that’s a bunch of hoo-ha,” said Jim Olson, vice president of external affairs for Toyota’s U.S. sales arm.
Barring plans to export cars to the U.S. from another country, Olson predicted that Toyota--whose U.S. plant already operates near capacity--will lose market share when the economy improves.
Mitsubishi, whose Illinois plant operated at 64% of capacity last year, and Mazda, whose Flat Rock, Mich., plant operated at 68% of capacity, may be in better shape to cope with import restrictions.
The Nikkei, a Japanese business daily, suggested in its Thursday edition that Honda was likely to consider changing some of its U.S. production plans as a result of the new export restraints.
Honda already produces more than 60% of its cars sold in North America at plants in Ohio and Ontario. It may consider building a fourth plant next year to accommodate demand as the U.S. economy recovers, the Nikkei reported.
Toyota may export to America from its British plant, which begins production at the end of 1992.
But such plans might result in retaliation from an already protectionist-minded U.S. Congress. Bills to cap the number of Japanese cars produced in the United States have already been introduced, and analysts say the quota reduction came largely as a result of Japan’s fear of such legislation.
Times staff writers Leslie Helm in Tokyo and Douglas Jehl in Washington contributed to this story.
Japanese Autos in the U.S.
In recent years, the number of Japanese cars shipped to the United States has dropped, while the number of “transplants”--vehicles made by Japanese companies are U.S. plants--has risen.
Source: Automotive News
