Cars and US security
The long-range outlook for the United States auto industry could hardly seem bleaker as the Reagan team prepares to take office. Chrysler, teetering on the edge of bankruptcy, is scrambling for a new infusion of federal loan funds. Ford, without its strong overseas sales, might not be able to remain competitive. American Motors has lost controlling interest to Renault. Worst of all, last year the US lost its crown to Japan as the world's leading auto manufacturer and its total imports of cars soared to 26 percent of the market.Skip to next paragraph
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The question is: How does the US meet this challenge? Not, we hope, by frantically raising new obstacles to trade.
While not indifferent to the enormous task that will be required to rebuild the American auto industry -- not to mention the billions of dollars that will have to be spent -- we seriously question the recommendation of the US Department of Transportation that the government negotiate an agreement with Japan limiting imports. A marketing agreement would mean higher prices for consumers and unnecessarily antagonize a major US trading partner. It would also ease the very competitive pressures on the US industry which are forcing it to develop the type of smaller, fuel- efficient cars sought by consumers.
The DOT report, however, is surely on target in linking the well-being of the industry to national security considerations. Any substantial erosion in the auto industry would almost certainly have adverse consequences for the overall US industrial base.
There is therefore much to be said for Transportation Secretary Neil Goldschmidt's proposal that government, industry, and labor adopt a cooperative approach to ensuring the rebuilding and long-range survival of the car industry. Elements of such a plan would include changes in tax laws to enable the industry to raise the $70 billion needed in the next five years for retooling; an easing of federal regulations without sacrificing necessary safety and pollution standards; wage restraint and greater efforts by labor to boost productivity.
Does this sound like the approach already taken toward beleaguered Chrysler, which is asking labor for a hefty wage freeze, slashing administrative costs, and seeking to persuade creditors to accept preferred stock in exchange for some of its debts -- all part of an effort to obtain an additional $400 million in federally guaranteed loans?
A strong case can be made for approving the short-term loan request. Chrysler, like the entire industry, needs to buy time to overcome the difficulties of the current high-interest-rate economy, which is working against auto sales in general. But that does not mean that federal loan programs should become a permanent feature of any cooperative government-industry-union program. Mr. reagan, to his credit, has expressed misgivings about such "bailouts" although he has indicated support for current short-term aid.
We hope Mr. Reagan will also resist pressures for import quotas against Japan. In fact, Japanese manufacturers themselves have taken steps to reduce their exports to the U.S. They should also be encouraged to locate plants in the US.
The new administration might also consider having talks with the West Europeans who have imposed stiff quotas on Japanese imports -- in effect helping to push Japanese cars into the giant (and freer) US market.
In short, long-term revitalization of the auto industry should not be accomplished at the expense of consumers through restrictions on the free trade. And certainly not at the expense of taxpayers through a permanent government dole.