FTC's approval keeps GM-Toyota joint venture on schedule

The General Motors-Toyota joint car-building venture is right on schedule. By the end of the year, GM and Toyota will be building a car in a vacant GM assembly plant in Fremont, Calif., now that the Federal Trade Commission has ruled 3 to 2 that the transpacific linkup is not monopolistic. The go-ahead signal had been widely expected after the preliminary approval by the FTC late last year.

Final commission approval constitutes acceptance of the agreement between the federal agency and the two automakers to safeguard antitrust concerns.

Fremont is part of GM's wide-ranging ''Japanese strategy'' aimed at bridging the gap between today's cars and its own futuristic small-car project, code-named Saturn.

''Our dealers are going to get a car that will last them until we get Saturn on its feet and going,'' says GM chairman Roger Smith.

Critics of the project have argued that it would take away American jobs. ''We are going to have 12,000 jobs at the plant,'' Mr. Smith adds, ''and I have yet to find anybody that's going to be hurt except our competitors.''

The Chrysler Corporation has opposed the Fremont plan from the start and last winter filed suit to block the deal and still argues that the arrangement is bad.

''We continue to believe this is an illegal combination between two of the three biggest and strongest car companies in the world and that it clearly violates the nation's antitrust statutes,'' the carmaker asserts.

Ford Motor Company, while not a party to the litigation, also opposes the GM-Toyota linkup as bad for the industry. Ironically, Ford and Toyota tried for more than a year to nail down a joint-output pact, without success.

The GM-Toyota joint venture expires in 12 years, restricts output to 250,000 vehicles a year, and allows the two carmakers to exchange information on joint production. Besides the plant, GM's cash contribution to the deal is minimal, while Toyota's input is about $200 million.

Despite opposition from its competitors, the joint venture makes sense, says Martin Anderson, executive director of the Future of the Automobile program at the Massachusetts Institute of Technology.

''We think that such things as the Toyota-GM adventure will continue,'' he says, ''and they should become even more pronounced internationally.''

Such linkups are necessary for the Japanese, according to Mr. Anderson.

''The Japanese are, surprisingly, in an ironic position of weakness, and their strength of centralized production in export has now become their weakness ,'' he says. In part, this centralized production makes them more vulnerable to protectionist measures in the United States.

''The Japanese face a challenge that might be almost as large as that of the North American producers, in that the Japanese have got to move offshore. Honda and Nissan are both very skilled at that, but companies such as Toyota are not.

''All of this represents a major challenge to them, probably as big as the challenge facing the North Americans in terms of restructuring. We do not see Japan just taking over the world auto industry.''

GM also has deals with Isuzu and Suzuki, besides Toyota, as the world's largest carmaker applies its Japanese strategy to the full. GM will market the 1 -liter Chevrolet Sprint in nine Western states beginning in May and the Isuzu-built Spectrum on the East Coast a short time later.

GM also jointly owns a car-producing operation with Daiwoo in Korea. Another Korean carmaker, Hyundai, partly owned by Mitsubishi and which at one time had a deal with Ford, is already selling cars in Canada.

''That's the sleeper,'' says to Bennett E. Bidwell, head of sales and marketing at Chrysler. The Japanese fear the Koreans, who can produce cars at lower cost than the Japanese.

''The Japanese will get into the US market one way or another and then they'll sit in the forefront of the protectionists against Korea and Taiwan,'' Mr. Bidwell says.

Honda is already producing cars in Ohio, while Nissan is building pickup trucks in Tennessee and has indicated it also plans to produce new cars at the facility.

Ford Motor Company owns 25 percent of Mazda Motors in Japan and is building an assembly plant in the Mexican state of Sonora to produce a derivative of the Mazda 626. Ford also may sell one of its US facilities to Mazda for production of a Mazda-built car. Mazda has made it clear that if it does decide to build cars in the US, it will do so on its own, not with Ford.

Ford may buy some of the vehicles, and it may sell a plant to the Japanese, but the production plant itself will be owned and run by Mazda.

Chrysler has been talking with its Japanese affiliate, Mitsubishi, for joint production of cars in the US, but so far without success.

MIT's Anderson sees the Japanese challenge in a different light than Bidwell does. If they see a chance that they'll be able to ship everything to the US from Japan, they'll probably let things stay as they are, Anderson asserts.

Mitsubishi has fallen to fifth place, behind Mazda Motors and Honda, in Japan. Honda, for example, is seen as a far more progressive company, while Toyota is a juggernaut. Nissan is in second place.

Meanwhile, Toyota will operate the Fremont plant.

''It will tell us whether or not the Japanese system will work in the United States,'' concludes GM chairman Smith.

You've read  of  free articles. Subscribe to continue.
QR Code to FTC's approval keeps GM-Toyota joint venture on schedule
Read this article in
QR Code to Subscription page
Start your subscription today