Multinational auto industry opens some borders
If Nissan opts to build cars in Britain and Volkswagen AG sets up an assembly plant in Japan, it'll only be further proof of the amalgamation of the world's auto industry, no matter what the language.
Even now, talks are being held between Chrysler Corporation and its Japanese affiliate, Mitsubishi, on the possibility of producing some of the Japanese automaker's products in North America, according to Jerry Pyle, vice-president of sales for Chrysler.
No decision has yet been reached, he says, but if the talks are successful, production would not take effect till the mid-1980's. Chrysler now sells Mitsubishi cars through its US dealerships.
Indeed, it's getting harder and harder to tell who's who without a scorecard.
Forcing the issue are the wrenching complexity and economic realities of the 1980's as well as the skyrocketing costs of design and development to meet the environmental, safety, and mileage demands of government, plus the highway needs of car buyers. As a result, the numerous linkups are making a potpourri of worldwide engineering and design.
Some loss of individuality may accrue but, at the same time, the linkups also could ease the strains between Japan, on the one hand, and the US and Western Europe on the other.
Japan overtook the US as the world's largest vehicle producer in 1980. Thus, the flood of automobiles and light trucks from its homeland factories has fanned the flames of protectionism in some markets, notably the US. Both the US and Western European nations see a big risk in trying to limit the import of Japanese vehicles into their markets.
Even so, hundreds of thousands of auto workers are on long-and short-term layoff in the US alone while the domestic car companies lost a whopping $4.2 billion in 1980.
The US now is pressing the Japanese to voluntarily limit their vehicle exports for the next several years till the domestic companies have the chance to update more of their car fleets and become more competitive in the marketplace.
Meanwhile, Nissan, the Japanese manufacturer of Datsuns, is conducting a feasibility study into the possibility of building cars in Britain while the British Government dangles a carrot in the form of loans and outright grants. In announcing the plan before the House of Commons, Minister of State for Industry Norman Tebbitt said:
"It is Nissan's intention to achieve a very high local content involving UK [ United Kingdom] and other EEC [European Economic Community] suppliers. The local content at the start of production would be 60 percent and the company's objective would be to increase this to 80 percent as soon as practicable after full production is reached."
The Japanese carmaker is seeking an 800-acre site for a plant to assemble 200 ,000 cars a year by 1986 and employ between 4,000 and 6,000 people. The investment will run from $440 million to $660 million, according to Nissan.
Nissan and VW already have reached an agreement to build either the VW Passat (Dasher) or an Audi model in Japan, a decision that is aimed to relaxing the mounting tension within the European Community over rising Japanese exports to Western Europe. Estimated output is 10,000 vehicles a month.
As part of the deal a Datsun car also could be built in the second VW assembly facility in Michigan. This would help to blunt the criticism directed at Nissan because of its high car sales in the US.
The Datsun manufacturer also will build a car in Italy as the result of a pact between Nissan and Italy's state-owned and profitless Alfa Romeo. Honda and Britain's ailing BL, Ltd., will produce a new small car in Britain to be called the Triumph Acclaim. It will be sold not only in the UK but in the Common Market countries as well.
BL also has signed a contract with West Germany's VW under which VW will supply the British carmaker with transmissions for a forthcoming sedan with delivery in two years. The car will be sold in the UK and the Common Market.
Further, BL has an agreement with Peugeot to assemble and market the Peugeot 505 in Australia beginning next fall.
Honda also has agreed with the United Car and Diesel Distribution Company of Pretoria, South Africa, in which Daimler-Benz has a 27 percent stake, to jointly produce Honda vehicles.
Other tieups are in the talking stage or already in the works.
The US carmakers already have a financial stake in several of Japan's largest car companies.
Ford Motor Company, for example, has a 25 percent Japanese connection with Toyo Kogyo, maker of the Mazda. Is it any surprise that the new front-wheel-drive Mazda GLC looks for all the world like a Ford Escort/Mercury Lynx?
[At the same time, Ford has backed off in Japan by selling its 50 percent in the Japan automatic Transmission Company to its two partners, Nissan and Toyo Kogyo, for a reported $45 million. Nissan ends up with 65 percent of the venture located in Fuji City.]
Then there is the General Motors 32 percent stake in Isuzu and Chrysler's 15 percent tie to Mitsubishi.
All are getting substantive help on components from their Japanese affiliates. Ford, for example, has called on Toyo Kogyo to supply it with major components for a front-wheel-drive car which Ford plans to build in the 1984 -model year to vie with a minicar from GM, according to Automotive News, the trade weekly.
Honda and Renault may soon sign a pact for joint output of a Renault car in Japan.
The Japanese already are staking out claims for manufacturing capability in the US. Honda is building a car-assembly factory in Marysville, Ohio, adjacent to its brand-new motorcyle plant which went into production last year; while Nissan is constructing a truck-assembly plant in Smyrna, Tenn., near Nashville.
Volkswagen AG, of course, has been producing Rabbits at its assembly facility in western Pennsylvania for the last three years and will open a second plant, near Detroit, within a year.
Ford Motor Company and Toyota have been talking for months about the possibility of building a Toyota model in a Ford facility in the US. Ford, it is reported, wants a small car while Toyota is looking for a larger model.GM is watching the Ford-Toyota talks with care and may revise its isolationist posture at some point if it seemed to its advantage at the time.
If the Ford-Toyota talks break down, Toyota could possibly get together with either Chrysler or GM.
"I see it as an absolute necessity for Toyota to manufacture in the US," asserts a stock-market analyst, "but Ford has waffled on the issue."
Ford, for example, took an anti-import stance in Washington last fall when it appealed to the International Trade Commission, along with the United Automobile Workers Union, for an unfair-competition finding against the imports. The ITC decision went against Ford and the union.
Among other potential linkups, long-suffering Chrysler Corporation has been talking with both Volkswagenwerk AG and PSA Peugeot-Citroen about a potential linkup of some sort that would give new financial and product clout to the third-running, but stumbling US carmaker.
Earlier this month word came out that Chrysler was urging Ford Motor Company to take it over -- a highly unlikely event, say observers.
Chrysler has since said it will not pursue a takeover by Ford.
Lee A. Iacocca, Chrysler chairman, asserts the company now is "in a position to be a viable and strong competitor, with or without a partner."
American Motors already has a deal with state-owned Regie Nationale des Usines Renault of France, which ultimately will result in the production of a Renault car in the US and will give Renault a controlling interest in the US auto company. Independence no longer is feasible because of the staggering cost of research and development as well as the up-front price of production itself. A new engine line, for example, costs upward of $200 million.
The US industry is investing more than $80 billion to downsize its automotive fleets across the board by 1985.
"It will be necessary for all the companies to have additional capital," says Arvid Jouppi, a Detroit-based industry analyst with John Muir & Co.
The move toward increased global cooperation has made some trade unionists wary. A warning was sounded last fall by Herman Rebhan, general secretary of the International Metalworkers Federation. "The auto industry," he said, "is losing its national configuration and entering an era in which planning, development, production, and marketing are on a world scale.
"To counter the managerial and employment policy that goes with the world car we have to develop world trade unionism." He said this did not mean worldwide multinational bargaining, but the strengthening of union international links to stop companies playing the game of divide-and-rule.
Some Japanese trade-union leaders also view the growth of multinational companies with alarm, seeing it as a way of moving into regions of cheap labor.
The growth in multinational cooperation isn't limited to car assembly, however.
European carmakers have long been linking arms in developing new engines and transmissions as well as other components of the modern automobile. Volvo of Sweden, plus Renault and PSA Peugeot-Citroen of France, came up with a new V-6 engine a couple of years ago. It's the same engine being used by John Z. De Lorean in his stainless-steel-clad sports car which is in production in Northern Ireland.
The trend to smaller-size cars, including front-wheel drive, has made many of the new-era cars look as if they were stamped out of the same press. Also, it has given an impetus to the so-called world car, a term Ford Motor Company is fond of using when talking about the new Ford Escort/Mercury Lynx.
What it means is that a carmaker can source its components in many parts of the world, therefore providing economy of scale in building the units in several locales. GM's first world-class vehicle is the J-car to be introduced in mid-May.
The automobile business has always been in flux, of a sort. Out of more than 3,000 nameplates since the first cars were built in the US, only a handful survive. Most of the numerous European nameplates also have succumbed to the capriciousness of the market as well as the heavy demands on the industry itself.
