Booming auto imports: Is it time for limits?

By , Staff correspondent of The Christian Science Monitor

Few problems bear more directly on President Reagan's political and economic fortunes than his coming decision on what to do about Japanese automobile imports.

His own administration is sharply divided over whether car imports from Japan should be held below the 1.9 million mark of 1980, which gave the Japanese roughly 21 percent of the US market. Imported cars from all sources grabbed a record 28.7 percent share of the US auto market in February.

Caught in the cross fire are millions of American workers in the automobile and related industries, workers who desperately want relief from imports. Caught also are consumers, who would face higher prices for cars if Japanese sales were curbed.

Recommended: Could you pass a US citizenship test?

Impressive arguments are mounted on both sides of this issue, as a presidential task force readies its findings for Mr. Reagan.

In Congress, meanwhile, hearings open March 9 on a bill that would limit Japanese car imports to 1.6 million units a year through 1983.

Ford and the United Automobile Workers (UAW), which last November lost a major battle before the US International Trade Commission to curb Japanese imports, are expected to back the bill, introduced by Sens. John C. Danforth (R) of Missouri and Lloyd Bentsen (D) of Texas.

With a third of their labor force laid off -- plus additional thousands of workers out of jobs in supplier firms -- Detroit automakers face two huge problems:

* Four Americans carmakers -- GM, Ford, Chrysler, and American Motors -- lost enormous sums of money last year and offer large cash rebates to customers now to move their 1981 models.

Chrysler's 1980 losses totaled $1.71 billion (a record for any US corporation), Ford chalked up $1.54 billion in red ink (a record until Chrysler surpassed it), General Motor's losses amounted to $763 million, and the much smaller American Motors suffered a $198 million shortfall.

* All four firms need to attract and spend tens of billions of dollars over the next few year to retool the meet the public preference for small, fuel-efficient cars such as the Japanese make.

So grave are the problems that Chrysler's existence in its present form remains uncertain, some analysts believe mighty Ford is in danger, and American automobile workers -- among the best-paid in the US -- are taking pay and benefit cuts.

Already Chrysler workers have, agreed to wage reductions and have foregone the cost-of-living-adjustments (COLA) that compensate for inflation. Ford and perhaps GM are expected to ask their workers to sactifice the same way.

"Give us time" is the plea of industry leaders, who insist they can compete head- to-head with the Japanese down the road, if only they can stem the onrush of Japanese vehicles now.

"We all are concerned," a top GM official told the Monitor, "that Americans who buy Japanese cars will develop customer loyalty and keep on buying Japanese."

Japanese automakers and their American importers and dealers claim that a high volume of sales is needed to maintain a dealer network able to offer good service to buyers.

Favoring import curbs are the secretaries of transportation, labor, and commerce. Advocates of free trade, opposed to limits on the Japanese, include Treasury Secretary Donald T. Reagan chief White House economic adviser Murray Weidenbaum, and, reportedly, Secretary of State Alexander M. Haig Jr.

Searching for a compromise on the issue is Bill Brock, President Reagan's top trade negotiator, who says that the "American people never would accept letting the US auto industry go under."

Rather than import curbs legislated by Congress, which in his view might bring on trade retaliation by the Japanese, Mr. Brock talks of negotiations with Tokyo for voluntary restraint.

Inflation in general would rise slightly and the price of cars would increase markedly, acording to critics, if barriers were raised against Japanese imports.

With not enough Japanese cars on hand to meet demand, prices of imported models would jump, while US manufacturers -- shielded from full competition -- could raise prices on domestic models.

The temptation to do so would be strong, because all US carmakers need to generate profits if they are to establish credit- worthiness in their search for outside capital.

Beyond all this, increased government aid for the US automobile industry, even in the diluted form of import restrictions, might encourage other ailing industries to mount campaigns for protection against imports of other kinds.

US new car sales (% market share) 1979 1980 GM 46.5% 46.1% Imports 21.9% 26.7% Ford 20.0% 16.5% Chrysler 8.6% 7.4% AMC 1.4% 1.3% Volkswagen 1.6% 2.0% of America

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...