Old-fashioned self-interest links Chrysler and Mitsubishi
Lee A. Iacocca, chairman of Chrysler Corporation, says the new link between his company and Mitsubishi Motors Corporation should be an example for those who seek to ease trade friction between the United States and Japan. ``If we can do it, then why can't our two countries do it?'' he asked a large gathering of American businessmen here yesterday.
``All it takes is a sense of fairness, some old-fashioned enlightened self-interest and a good healthy dose of oriental [long-term] wisdom on both sides of the Pacific,'' Mr. Iacocca added.
On Monday his company reached agreement with Japan's Mitsubishi to set up a joint venture for manufacturing subcompact cars in the US.
Iacocca says the two companies need each other. Chrysler needs a leg up on the competition for small cars, he says. And Mitsubishi, on the other hand, feels that ``long term, no matter what happens in the area of [trade] restraint and controls, they should have a presence and an investment in the United States,'' he adds.
Mitsubishi president Toyoo Tate said earlier this week, ``We decided to go ahead because even though the US is a big market for cars, it looks unlikely that we'll be able to export cars freely.''
Takashi Ishihara, chairman of Nissan Motor Company, agrees and says building some Japanese cars in the United States is ``probably going to be the trend from now on.''
Mitsubishi is the fifth Japanese automaker to be taking steps toward building cars in the US. Toyota Motor Corporation, Nissan Motor Company, and Honda Motor Company are already building cars in the United States. Mazda Motor Corporation is planning to build a US plant.
Industry analysts observe that joint ventures similar to the Chrysler-Mitsubishi agreement show that US automakers are giving up the attempt to compete in the small-car market. Instead, they are linking up with Japanese automakers which have the expertise.
``We will need Mitsubishi to compete in the low end of the market,'' Iacocca says. He says that at Chrysler's lowest point its share of the United States market dipped to 8 percent. ``We fought like tigers to get it up to 121/2 percent. . . . We need that share and we'll do everything we can to keep that share.''
If Japanese cars continue to account for 25 percent of the American market, ``then we want Mitsubishi to help maintain that 121/2 percent share,'' Iacocca explained.
According to the joint-venture agreement, Chrysler and Mitsubishi will own equal shares of a new company which will start producing subcompact cars in late 1988. The new plant, estimated to cost about $500 million, will employ about 2,500 US workers.
When operating at full capacity, the plant should turn out 180,000 units of two- and four-door sedans annually. Production parts will be about half Japanese, half American, Iacocca said.
The plant location is still undetermined, but it will probably wind up in a midwestern state, such as Illinois, Ohio, Indiana, Kentucky, or Michigan.
Mitsubishi will not only be responsible for taking charge of plant design and constructing and developing the subcompact models, as part of the shared responsibilities, Mitsubishi will also be dealing with the US labor unions -- a task Iacocca said he firmly believes in ``sharing.''
``Welcome to the club'' he said humorously.
Iacocca says employees of the new company will work under a new contract, different from those in effect in other Chrysler plants.
Along with the joint-venture agreement, Chrysler's equity in Mitsubishi Motors will be increased from 15 percent to 24 percent.
Chrysler and Mitsubishi have had business relations since 1970. Last year the US automaker imported 87,500 Mitsubishi-built cars to sell under Chrysler brand names. Iacocca said he has asked the Japanese Ministry of International Trade and Industry to allow thousands of additional units this year.
Iacocca is expected to stop in South Korea on his way home to conduct business with a Korean company. But the Chrysler chairman declined to comment on the purpose of his trip until he arrives in Seoul.