Germany, Japan discover dents in their accord on automobile exports

The automobile truce with Japan lasted all of three weeks. Volkswagen is already blowing the whistle on it. And if West Germany's biggest car manufacturer -- with its own hedge of a cooperation agreement with Nissan -- is worried, then Opel and BMW can't be far behind.

The messenger with the bad news was VW's chief financial officer, Dr. Friedrich Thomee, speaking at the company's annual meeting in early July. He called Tokyo's export policy a "time bomb," despite the West German-Japanese "understanding" in early June to limit sales of Japanese vehicles in this country to 10 percent growth in 1981.

In fiscal 1980-81, Dr. Thomee pointed out, the Japanese car industry hiked exports 25 percent to 6.2 million units, or 56 percent of an overall production that now exceeds that of the United States. In West Germany alone the Japanese share of the market rose from 5.7 percent in 1979 to 10.5 percent in 1980 -- and is again rising in 1981.

Dr. Thomee attributed this success not to superior technology -- "VW's own know-how is too good" for that -- but rather to Japan's lower labor and social costs, higher automation, and favorable dollar exchange rates. Outside observers add that Japanese producers did better than European producers in turning out a small economical car in an era of $2.40-per-gallon gas.

Whatever the source of Japanese competitiveness, VW's profit were halved last year and cut by two-thirds in the first quarter of this year, while deliveries dropped 4 percent in the first half of 1981, and factory sales for this year are well down on last year's figure.

It's not all Japan's fault; VW took significant losses in Brazil and the United States last year. But enough German buyers have been lost to Japanese imports to disturb Volkswagen.

The same picture has been recurring throughout the industry since the mid- 1979 economic slump (with the exception of the almost-record 1980 profits of the Daimler-Benz prestige car and truck manufacturer). Ford's West German subsidiary, Ford-Werke, fell from a 483 million mark ($200 million) profit in 1979 to a 463 million mark ($193 million) loss in 1980, dropping one-quarter of its production and one-fifth of its sales. The General Motors subsidiary Opel also incurred losses last year, and both companies had extensive layoffs.

BMW saw its pretax profits drop 20 percent. Overall West German car production fell 10.5 percent, new car registrations fell 7 or 8 percent, and car exports fell 6.2 percent.

Under these conditions West Germany's carmakers have been clamoring for curbs on Japanese sales. Ford-Werke's chief, Daniel Goeudevert, has been demanding a four- or five-year freeze on Japanese imports at the 1980 -- or better yet, 1979 -- level.

A May report by the Economic Models Group of London concluded that the situation is getting so serious that by 1990 the Japanese may be the only surviving mass producers of cars. By 1985, after expected 1982-84 US-European market recovery, it projected a 20 percent Japanese share in the West German market, the only major car market that is still uncontrolled. The group called for an entirely new strategy among European auto manufacturers that would go beyond product orientation to devise "essential orderly marketing agreements."

So far, the traditionally free-trade-minded West German government has resisted administrative market limitations. It criticized the US-Japanese auto agreement that set off this year's Japanese-European agreements as the narrow edge of protectionism. Nonetheless, West German Economics Minister Otto Graf Lambsdorff joined the crowd during his June visit to Tokyo and got a voluntary targeting of no more than a 10 percent increase, and possibly even zero increase in Japanese exports to West Germany in 1981. It is this arrangement that VW, Ford-Werke, and other West German producers find inadequate.

Internally the German manufacturers are making vigorous efforts to revive the 1975-79 boom that quadrupled their annual production to 4 million vehicles and their annual exports to almost 2 million. Despite weak profits and high interest the industry invested some $5 billion last year, and VW alone plans on investing 13 billion marks ($5.4 billion) over the next two years.

About these ads
Sponsored Content by LockerDome

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...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK