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US, Japan tiptoe toward extension of auto-export limits

By Charles E. DoleAutomotive editor of The Christian Science Monitor / January 28, 1983



With Prime Minister Yasuhiro Nakasone back in Japan after his quick visit to the United States with trade and defense on his mind, Japan appears on the verge of extending for a third year its ''voluntary'' quota on the shipment of new cars to the United States.

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The agreement, which runs out at the end of March, has held Japan's car exports to 1.68 million for the last two years.

Without controls, some stock market analysts, such as David Healy of Drexel Burnham Lambert Inc., say that Japanese car penetration in the US could ultimately rise as high as 40 percent.

Beyond further devastating the US auto industry, it would almost certainly lead to tough trade-control legislation from the US Congress, a risk Japan appears unwilling to take.

The last session of the US House of Representatives did in fact pass, at the urging of the United Automobile Workers of America (UAW), a domestic-content bill that would require 90 percent US content in all of the high-volume auto imports, meaning the Japanese. While the legislation failed to reach a vote in the Senate in 1982, the UAW says it will work for passage of the bill this year.

The Japanese government agreed in May 1981 to a three-year curb on car shipments to the US, renewable each year, setting the first-year export limit at 1.68 million units, a figure extended to a second year in 1982.

In the last few weeks the Japanese Ministry of International Trade and Industry has been hinting at a higher volume of exports because of rising car sales in the US, largely the result of the price- and interest-incentive programs of US car manufacturers. The US auto industry is demanding a figure lower than 1.68 million.

The thought of restrictive trade legislation is anathema to many people in industry.

General Motors chairman Roger B. Smith, pointing to growing sentiment for restrictive trade policies in Europe as well as in the US, says:

''It's been our experience that economic isolationism and protectionist trade policies at best can only be stop-gap measures. In the long run, they do not serve the long-term interests of a country, its people, or its industry.''

''Right now we face an imbalance of trade in favor of the Japanese of approximately $20 billion a year,'' says Lee A. Iacocca, chairman of Chrysler Corporation. ''More than $13 billion of that is in cars and trucks alone.

''It's time the United States brought this assault on our markets to a screeching halt.''

European carmakers also are hurling pointed barbs at the Japanese. Umberto Agnelli, vice-chairman of Fiat, complains that after reducing the pressure on European auto manufacturers in the first half of last year, the Japanese now are increasing the pressure all over again.

''Perhaps it (Japan) fears the consequences of American restrictions; perhaps it underestimates European warnings,'' he says.

''If the present situation continues, it could inevitably lead to strained relations,'' he adds. ''None of us should ignore the danger, least of all the Japanese.''

Mr. Iacocca calls not only for the extension of the quota, but for it to be widened to include station wagons and other specialty vehicles which, he says, ''now bring the real total to 1,830,000 units.''

Originally the restraint agreement was intended to limit Japanese auto sales to about 17 percent of the US market. In 1982, because of low overall auto sales , the Japanese percentage hit 22.6 percent, up from 21.7 the year before.

Why the head-long rush to buy Japanese cars?

Japanese-built automobiles over the years have earned an enviable reputation for quality construction overall, although rust has been a major problem for some carmakers. US cars, by contrast, have often been viewed as inferior to the Japanese cars in quality, a fact that US car companies in the past have readily conceded. However, they now say, thatm criticism is not valid today.

US car manufacturers are spending tens of billions of dollars to upgrade not only the form of the product but the quality as well. Given the time and an improved market, US carmakers say they can meet the Japanese head on.

US and European carmakers also are miffed by the difficulty of increasing their own market penetration in Japan, charging that ''nontariff and hidden barriers'' restrict their share to less than 40,000 vehicles a year.

Volkswagenwerk AG has half of the car-import business in Japan, yet Dr. Carl H. Hahn, the company chairman, sniffs, ''We have 50 percent of nothing.'' Less than 20,000 VWs a year are sold in Japan.

Meanwhile, Toyota alone expects to export 1.65 million cars in 1983, down about 10,000 units from 1982.

''Trade,'' hammers Mr. Iacocca, ''has got to be a two-way street.''

Amid all the flurry, Japanese carmakers, even if reluctantly, are looking harder at the US as a manufacturing base.

Honda already has launched its car-building plant in Marysville, Ohio, adjacent to its several-year-old motorcycle-assembly plant. Now Honda is turning out 4-door Accords with a made-in-USA label. Too, Nissan is completing its truck-assembly plant in Smyrna, Tenn., and expects to be building minitrucks in the US by late next summer.

GM and Toyota are believed close to a deal in which the largest Japanese carmaker would build a small car, probably the Tercel, in an empty GM assembly plant in California.