Toyota may come out on top in GM deal
Is Toyota getting the better deal in its small-car compact with General Motors? ''I hope not,'' asserts Robert C. Stemple, head of GM's new large-car group (Oldsmobile, Buick, and Cadillac), which the world's biggest automaker launched a few weeks ago in a major reorganization.
The Japanese carmaker, for example, will be able to sink its roots into the United States at a fraction of what it would have cost had it ''gone it alone'' as have Honda and Nissan. Also, it will receive expert advice by GM on how to survive in the tough American marketplace.
''What we at General Motors want to know is: What is this production system that the Japanese tout so highly?'' Mr. Stemple asks. ''How do they build a car in less time than we?''
Yet despite the bright hue placed on the plan to produce a small car in a long-closed GM plant in Fremont, Calif., the top GM management team may still have some reservations about what the automaker is getting into. Also, there is no absolute certainty that the joint venture will go ahead.
The Federal Trade Commission (FTC), by a 3-to-2 vote, approved the joint venture following a six-month study last fall. But the plan continues to draw flak. Chrysler Corporation has sued; congressional hearings on the small-car project are scheduled to begin Wednesday.
''If that's what it takes, then so be it,'' Stemple says.
As it now stands, a final decision by the FTC will follow the end of the 60 -day comment period Feb. 27.
Granted, the agreement would provide yet another small car for GM's dealerships; but it also takes the heat off Japan's largest carmaker, Toyota. Honda and Nissan - its two large Japanese competitors - already are building vehicles in the US, Honda in Ohio and Nissan in Tennessee.
Toyota has been under sharp pressure to produce vehicles in the US as well.
The car-assembly plant would be the major part of GM's contribution to the deal. Most of the tooling cost - plus the vehicle - would be provided by Toyota, which will operate the plant.
It also opens up a large American supplier network to Toyota, yet another big benefit to the Japanese company.
The Japanese want to know a lot more about American suppliers to the auto industry, how to deal with American workers, and how to get environmental permits, for example, in a state such as California.
Even so, the benefits to GM aren't small. GM now uses six sealers in its cars , each meticulously chosen for its temperature tolerance, waterproofing quality, and position. Each requires a different application tool.
By contrast, the Japanese use one sealer, one tool. Despite the higher cost of their sealer, it can't be put in the wrong place, and the carmaker has only to deal with one supplier, not six. Small differences such as that add up.
Unlike the Japanese auto industry, domestic carmakers have always had 20 to 30 job classifications instead of Japan's two: skilled and unskilled.
If approved, the GM-Toyota deal would provide 3,000 direct jobs, plus 9,000 supplier jobs, according to GM. The first car would roll off the line in December.
According to Stemple, Chrysler chairman Lee A. Iacocca was in California last month talking with his company's Japanese affiliate, Mitsubishi, about a joint venture. Stemple charges that Chrysler ''has sold more Japanese cars in the US than Ford and GM combined.
''I guess he's following our chapter on how to do it.''
Although Ford Motor Company will feel the impact as well, the Fremont deal is expected to hurt Chrysler the most and could even sidetrack its entry-level Dodge Omni and Plymouth Horizon.
''The way the agreement is set up,'' according to Stemple, ''there is no way the two competitors are going to collude to do anything wrong,'' a key consideration in the six-month FTC study.