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Always a G.M. Another threat from Washington that currently worries Donner is the Kennedy Administration's proposal (already passed by the House) to tax the income U.S. companies earn abroad at the time that it is earned rather than when it is brought back to the U.S. Under the present law, U.S. companies are permitted to keep an unlimited amount of their foreign earnings abroad free of tax, to expand their overseas facilities. General Motors has used this provision to good advantage to build up the strength of its foreign subsidiaries. Of the cars that G.M. produces overseas, Opel now ranks second to Volkswagen—in Germany, Vauxhall is fourth in Britain, and in Australia the Holden, in the best G.M. tradition, holds nearly half the market.
The U.S. Treasury, argues Donner, is by far the richer for all this. Since World War II, G.M. has brought into the U.S. through dividends from its subsidiaries and exports from its U.S. plants a staggering $5 billion in foreign earnings. Of this, almost 25% came during the past three years to help out when the gold overflow became critical. (One reason why Detroit raises little outcry against foreign car sales in the U.S.: last year the U.S. spent $400 million on foreign cars, but exported autos and auto parts worth three times as much—$1.2 billion.)
Donner expects the rest of the world to buy more than 10 million cars and trucks by 1970—equal to what the U.S. car market is expected to be by then. "The U.S. automobile industry," he says, "can make its contribution in these expanding markets overseas only if investments continue to be made abroad. If direct overseas investments by U.S. business are discouraged by unwise tax policy, our economy will lose an important and rising long-term source of income."
Other Donner concerns of the moment:
> THIS YEAR'S ECONOMY. "The auto industry swings with the cycle, but moves beyond it. It can give impetus to the cycle on the upswing when we have an attractive product, but it cannot provide much upward pressure during a downswing just because the product is attractive. Motor vehicle sales indicate to us that consumer confidence is now at a high level. For these reasons, I am quite optimistic concerning the business outlook for the remainder of the year."
> GOVERNMENT INTERVENTION IN PRICE SETTING. "Prices of comparable General Motors cars have remained unchanged since the 1959 models were introduced. For the automobile industry, the most persistent force influencing prices has been the discipline of competition in the market. I see no reason to believe that it is either wise or desirable for Government to attempt to influence the results through direct intervention in the economy."
> GOVERNMENT INTERVENTION IN WAGE NEGOTIATIONS. "I am a great believer that the best agreements are those which are reached between us and the unions. So far as I know, General Motors has not been influenced by Government actions, either stated or implied, which have limited its freedom to compete effectively in the markets for its products or to carry out free collective bargaining with the union representing its employees. The maintenance of this freedom is the most important single ingredient in sustaining a dynamic, growing and stable economy."