Tokyo Skeptics Question Auto Deal Benefits for US

AS observers here see it, the auto pact that the United States and Japan announced last Wednesday in Geneva was a transparent defeat for US President Bill Clinton's oft-proclaimed intentions to break open the protected Japanese auto market.

But the deal does provide an opening for the US auto industry in Japan, if it chooses to exploit it. And the Japanese auto industry will have more of an excuse to move more jobs out of Japan, where a mighty yen has driven production costs sky high.

The addition of about 520,000 vehicles per year in new Japanese transplant manufacturing abroad will shave a few billion dollars off the Japanese trade surplus with the US, as the Japanese will export fewer cars and buy more US-made auto parts locally.

Masami Iwasaki, chairman of the Japan Automobile Manufacturers Association, underlined how nebulous these numbers are at a press conference in Tokyo last Thursday. "Global programs disclosed by major Japanese carmakers early today are not commitments," he said.

Analysts in Tokyo said that the market-opening measures included in the agreement were almost laughable. "If they hadn't made such a fuss over the deal, people would just hoot and haw," said Peter Boardman, an auto analyst with UBS Securities in Tokyo.

The Japanese agreed to some minor tinkering with regulations covering repair garages and auto parts including struts, shocks, power steering, and trailer hitches. Analyst Matthew Ruddick, with James Capel (Pacific) in Tokyo, points out that the market for trailer hitches in Japan is non-existent.

In order to help US car makers expand their dealer networks in Japan, the Ministry of International Trade and Industry agreed to send a letter to all Japanese auto dealers assuring them that they were free to carry US products.

Whether MITI's letters will convince Japanese dealers and repairmen to buck their "keiretsu" ties with Japanese carmakers to take on foreign companies is anybody's guess.

Indeed, some say President George Bush's widely criticized trip to Japan in January 1992, with presidents of the Big Three automakers in tow, did more to open up the Japanese market than last week's auto deal. Japan's Big Five nearly doubled their purchases of auto parts from the US between 1991 and the present.

The Japanese car makers agreed in 1992 to push sales of US cars through their own showrooms. Sales of US passenger cars to Japan increased by 76 percent in 1994, to $1.8 billion, up from $675 million in 1990.

The Geneva deal merely holds out in a side letter by US trade negotiator Mickey Kantor that US makers will seek to expand their dealer networks in Japan by 1,000 over five years.

For the first time in more than a decade, the Big Three seem to be taking the Japanese market seriously. Partly to increase pressure on the Japanese as the 22-month auto negotiations reached a head, Ford Motor Co., General Motors Corp., and Chrysler Corp. each announced deals in the last few months that will substantially increase their market presence in Japan.

Last March, Ford put down $40 million to build an electronics components development center in Yokohama, while GM announced it would open a Tokyo office for its Delco Electronics Corp. subsidiary. Ford has been running a recruitment campaign to sign up new dealers, and has managed to sign up 18 new franchises since May 1994.

Ford's Autorama Inc. retail sales network now has 126 dealerships and 310 showrooms. On the eve of the Geneva agreement, Chrysler announced that it would buy out its Seibu Motor Sales Corp. retail distributor for $100 million, and put down another $180 million to develop three new right-hand drive vehicles.

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