Tariff Clock Is Ticking for Luxury Car Dealers : Sales: The prospect of prices doubling draws more shoppers. There’s lot of talk about impact of sanctions, but no ready answers.
Visions of $100,000 price tags on $50,000 Japanese luxury cars are pulling more Southern California shoppers into dealer showrooms to jockey for position ahead of threatened federal trade sanctions against 13 popular models.
A few dealers, such as Steve Shuken of Vista Lexus in Woodland Hills, said sales shot up from two a day to five on Wednesday and that the tariff threat is driving the action. But many other dealers haven’t seen the growing groups of potential customers buying more cars yet.
“People are coming in to ask what we think will be happening,” said Frank D’Agostino, general manager of Campbell Mazda in Costa Mesa. “They want some inside information, but mostly they still aren’t ready to jump just because prices might go up.”
The uncertainty has the entire Japanese luxury car industry on edge. Trade negotiators could still break the stalemate with a new agreement that opens the Japanese market to U.S. cars and auto parts. Or the fledgling World Trade Organization could rule on Japan’s petition that the retaliatory 100% tariff proposed by the Clinton Administration is too tough.
“Everything is up in the air,” Shuken complained. “It’s like the O.J. trial. There’s a new spin on it every day.”
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Not all dealers who sell targeted cars are furious. Preston Han, manager of Hollywood Mazda, said he is sympathetic to the Administration’s position.
“I know they want to open up trade,” Han said. “I think we should be able to send [cars] there and let the Japanese people decide themselves if they want to buy it. If they don’t want it, they won’t buy it. The Japanese people are making a lot of money over here, and I think that should go both ways.”
But most dealers are like Mike Sullivan, owner of Santa Monica Lexus. “In Southern California we have earthquakes, fires, floods and riots,” he said. “I used to say that all we need now is locusts. Sure enough, Mickey Kantor is my locust.”
Kantor, the U.S. trade representative negotiating auto sales quotas with the Japanese, is the Administration official who announced the new tariffs Tuesday. Barring a negotiating breakthrough, he said, the sanctions would be imposed June 28 and made retroactive to cars that arrive in the United States after midnight tonight.
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Top officials of the five Japanese car importers that would be affected by the tariffs--all headquartered in Los Angeles and Orange counties--have said they don’t believe the final result will be as punishing a sanction as the 100% duty Kantor announced.
But in the meantime the companies are mounting lobbying campaigns aimed at pointing out their sizable U.S. employment and the impact on the economy here.
Importers would love to stockpile the models that could be hit by the sanctions, if only they could figure out how to make the huge cargo transports that ply the Pacific move faster. It takes 10 to 14 days for a ship crammed with 3,000 to 4,000 autos to cross the Pacific. “We can’t get out there and row the ships any faster,” said Nancy Hubbell, a spokeswoman for Toyota Motor Sales USA in Torrance.
Toyota Motor has about 3,000 Lexus models at sea--all slated to arrive after Saturday’s deadline and, thus, subject to the punitive duty.
The 13 luxury models from Toyota, Honda, Nissan, Mitsubishi and Mazda on the government’s hit list accounted for $5.9 billion in sales last year. The importers maintain that, if the tariff is imposed and prices double, there will be no sales next year and hundreds of luxury dealerships could close, throwing thousands of sales and service employees out of work.
While the political debate rages, the ships keep coming: Mazda has three on the way, Nissan and Toyota have about a dozen each and Mitsubishi has one in transit. American Honda Motor Co. in Torrance, the U.S. arm for Honda sales, won’t disclose how many cars are en route.
None of the Japanese auto carriers are due at the ports of Los Angeles and Long Beach before Saturday’s deadline, according to Capt. Richard McKenna of the Marine Exchange, which publishes daily lists of ship arrivals and departures. Spokesmen for the five companies said they did not know of any scheduled to dock anywhere else in the United States before midnight tonight.
But at least two ships already near shore will be unloaded before Saturday, though that will add only about 1,200 targeted luxury cars to the roughly 52,000 already in the country.
Both Toyota and Nissan had weekend landings scheduled at the port of Newark, N.J., and have diverted the ships to Jacksonville, Fla., to unload them before Saturday. That will put about 1,000 Lexus and 200 Infiniti models on the ground before the deadline.
Lexus has about 12,000 cars in dealers’ hands and in distribution warehouses already, and there are about 16,000 Infinitis, 5,800 Mitsubishi Diamantes and 6,500 Mazda Millenias and 929s in the United States. Honda won’t disclose its stock on hand, but most car companies try to keep at least a 60-day supply in the pipeline at all times. That would amount to about 12,000 Acuras.
The supply means that dealers are unlikely to run out of pre-deadline cars before June 28, unless a jittery public becomes convinced that the tariffs will go into effect and launches a buying binge. That opens the possibility that some cars that arrive after today could be sold before June 28 and later be made subject to any trade sanctions.
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Importers are divided on how to handle the situation, but none said they would seek more money from customers or dealers.
Toyota Motor Sales will pay any punitive tariffs in such situations, said Hubbell, the spokeswoman. Nissan’s Infiniti and Honda’s Acura divisions say they’ll do the same.
At Cypress-based Mitsubishi Motor Sales of America, however, the plan is to warehouse luxury Diamante models subject to the tariff. A ship loaded with 400 of the four-door sedans is scheduled to reach the Port of Los Angeles in the next two weeks. If the automotive trade conflict isn’t resolved, Mitsubishi “most likely” will ship the cars back to Japan for sale in other countries, spokesman Kim Custer said.
Sullivan, at Santa Monica Lexus, said that Lexus already has assured him that it would pick up the tab for any cars that were sold and later hit by the tariff. So, for him, it is business as usual for now.
But not all dealers are that comfortable.
Clarence Minton, general manager of Mazda of North Hollywood, says he thinks the tariffs “will never fly.” But to be safe, he has stopped ordering Mazda Millenia and Mazda 929 models.
“I don’t want to be ordering cars and all of a sudden have the price double or triple,” he said.
Minton, who has about 125 cars on his lot at a time, said he sells only about 10 Millenia and one 929 a month anyway. These high-end cars “are not the bread and butter cars of the Mazda line,” and he has plenty of other models in stock, he said.
A.J. Patterson, owner of Nissan of Thousand Oaks, is so nervous about the proposed tariffs that he’s cut back 75% on his orders of Nissan cars for the summer, even though none of the cars he sells is on the current hit list for tariffs.
“We don’t know if it’s going to spread to other models,” Patterson said. He also sells Buicks and GMCs, so he can afford to be cautious. He said the threat of tariffs has sent ripples of confusion through the new-car industry. “Everyone’s unsure,” he said.
Sullivan said he doesn’t believe that the sanctions will be imposed, because the impact on the economy would be too great.
A 100% tariff on Toyota’s Lexus line would force him to close that dealership, he said, and that, in turn, would lead to the collapse of his adjacent Volkswagen and Isuzu dealerships. Combined, the three lots account for more than $70 million in car sales each year.
“The city gets a percentage of that through taxes,” Sullivan said, “and if I go out, it means the same day you have to fire two policemen and a fireman. I feel badly for my 157 employees too. That’s the worst part. They’re coming up to me, looking me in the eye and asking, ‘What’s going to happen?’ ”
