Automakers win quotas on Japanese imports and roll out new models
American carmakers last week had one eye firmly fixed on the cashbox and the other on Japan. As the seemingly endless flood of auto company losses continued, the Reagan Administration finally won an agreement with the Japanese government for a "voluntary" cutback of up to three years in the number of autos exported to the U.S. Meanwhile, Detroit was preparing for this week's launching of the latest answer to sluggish auto sales and the Japanese imports: the General Motors J-cars.
The agreement came only after some last-minute shuttle diplomacy across the Pacific. Japanese automakers were firmly opposed to any export reductions, and the Ministry of International Trade and Industry was having little luck bringing them into line. But after a Tokyo dinner of shredded sea eel soup and fried abalone, U.S. Trade Representative William Brock and Minister of Trade Rokusuke Tanaka began moving toward an agreement.
Brock warned the Japanese that if they did not take action themselves, Congress would almost certainly impose formal import quotas. Tanaka at first proposed a one-year reduction of auto exports from last year's 1.82 million to 1.7 million. Finally, Brock accepted a limit of 1.68 million vehicles annually for two years, ending in March 1983. If U.S. auto sales pick up during the second year of the agreement, Japan will be able to boost exports by 16.7% of the amount of the increase. The number of imports allowed in during the third year was left open for future discussion.
Japanese automakers immediately protested the agreement. Nissan Motor President Takashi Ishihara, whose firm makes Datsuns, said he feared that it would "cast dark shadows on the system of free trade around the world." Toyota President Eiji Toyoda said he was "greatly disappointed."
But President Reagan was "pleased" with the plan, and a Senate bill to legislate a limit on imports was withdrawn. Said GM Chairman Roger Smith: "I think it is good news." Less pleased will be U.S. car buyers. The agreement seems destined to make Japanese cars sharply more expensive and also enable U.S. automakers to boost their prices.
Although GM last week reported a $190 million profit for the first three months of the year, Ford announced a $439 million loss, and Chrysler was $298 million in the red during the same period. At tiny American Motors, unit sales slipped 31%, and the company lost $53 million. The rebates that all the automakers offered earlier this year helped sales, but cut sharply into profit margins.
The best way to rebuild profits is for Detroit to produce the kind of cars that the American public wants. GM's new J-cars, a line of front-wheel-drive small autos, represent the strongest effort yet to attack the successful Japanese models. Said Robert Lund, the general manager of GM's Chevrolet division: "We're tired of hearing about how the domestic auto industry let the Japanese take the subcompact business away from us. The whole Chevrolet organization is spoiling for a fight."