Making American cars abroad
If economists could put together an ideal world marketplace, it would be assumed that those firms - and nations - that could produce a particular product at the lowest possible price and of the highest quality would be left to do so, while their higher-priced competitors would either be driven from the market or shifted to some other product. In fact, that tends to happen anyway, though too often after the expenditure of large sums of money and years of ruthless competition.
In this connection, a recent address by General Motors President F. James McDonald is worthy of more than passing note. Mr. McDonald argues that American auto manufacturers are on target in entering into ''creative new relationships'' with makers of car imports so that the US firms can continue to produce small cars. Thus, Ford has linkages with Toyo Kogyo of Japan, Chrysler with Mitsubishi , and AMC with Renault, which owns 46 percent of the US company. Now, the two top world producers - GM and Toyota - are negotiating an agreement that could lead to a joint car-building venture later this year.
Japanese manufacturers can make subcompacts for about $1,500 less per car than US firms. So, Mr. McDonald notes, it is logical to enter into a tie with an overseas firm like Toyota. Why not do so, if in the end this creates more jobs worldwide, leads to maximum economic efficiency, and keeps US auto firms solidly in the small car market? Given the social and political strains of the ''auto wars'' of recent years, a little bit of joint cooperation and common purpose on the part of tough rivals would surely be of benefit to all nations.