US-Japanese trade gap perilous, Ford chief warns
If Japan does not adjust its trade practices with Europe and the United States, the world could face ''another 1930,'' warns Donald E. Petersen, president of Ford Motor Company.Skip to next paragraph
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In Boston to address the Sloan School of Management at the Massachusetts Institute of Technology on the new Ford contract with the United Automobile Workers union, he asserted: ''There will be reaction - and some of the reaction, if we're not careful, will be very damaging.''
Indeed, it's the most significant issue now being debated among governments today, he said.
''It's a governmental issue that the government has to deal with.''
''It has taken a long time, especially for the US, to become fully aware of the seriousness of the trade imbalance and the magnitude of this imbalance which is solely attributable to automobiles,'' he went on. ''Europe became concerned before the US - and it's just as bad between Europe and Japan.''
(Japan last week agreed to hold passenger-car exports to the US in the next 12 months to the same level - 1,680,000 units - which existed between April 1, 1981, and March 31, 1982.
(Few people seem impressed, however, because during the same time period no more than 40,000 cars from the rest of the world were shipped to Japan.)
''It's important for Japan as a country to understand it cannot do what it's doing - targeting segments of the economies of other countries in the world on a prolonged basis. It creates gross disruption and there will be reaction,'' Mr. Petersen said.
''The grossest risk is a return to a protectionist world. Many people remember what that did to us in 1930 when the Smoot-Hawley bill was passed by the US Congress. It drove the world into the deepest recession it had ever seen.''
''That's the ultimate risk,'' he declared.
Heeding the criticism, Honda is completing a factory in Ohio that will build Accord automobiles beginning later this year, and Nissan (Datsun) is putting up a plant in Tennessee to produce pickup trucks. General Motors and Toyota are discussing joint operations to build small cars for the US market. All three top US carmakers - GM, Ford, and Chrysler - own stock in Japanese car companies.
Many nations now have local-content laws that require that a specific percentage of all materials and labor in a vehicle be supplied by the country in which the vehicle is sold.
The UAW is pressing for a similar law in the US.
Mexico passed such a law in 1980 which said it wanted equity. Ford Motor Company has responded by building an engine plant in Mexico.
''The flow of business between the US and Mexico was all one way,'' Petersen said. ''Everything was shipped from the US as components and were simply assembled and sold in Mexico, so that the balance of trade was grossly to the advantage of the US.
''I find it hard to say the new Mexican law is unreasonable.''
Interestingly, the percentage of North American content in Ford cars now is higher than it was 5 or 10 years ago. On the Pinto, many parts, including the engine and steering, came from overseas. On the new Escort, the engine is built in Michigan and the transmission in Ohio.
Too, Ford no longer ships in the Fiesta and Capri.
Among other issues:
* Wages. Automobile wages are significantly higher than the industrial wage average in the US.
''Our wage rate is about $10 an hour more than the Japanese wage,'' Petersen said, ''and 80 percent higher than the industrial wage average in the US.''