Whispering the `D' word. `Dumping' heard as Japan holds down car prices
Japanese carmakers recently agreed to extend their quotas on exports to the United States, but that has not been enough to douse the flames of a new trade dispute that could further threaten Japan's huge share of the American new car market. US automakers may soon file formal charges of illegal dumping against their Japanese counterparts.
The domestic trade group, the Motor Vehicle Manufacturers Association, has launched an investigation into whether Japanese auto importers have been selling their products here for less than the cost of manufacturing them - a violation of US trade laws.
Late last year, Commerce Secretary C. William Verity Jr. indicated his concern about Japanese pricing policies, and later this month the trade group may ask the Commerce Department to begin a formal dumping investigation, which could result in billions of dollars in fines and tariffs.
What has gotten the US automakers so worked up? Up until mid-1985, Japanese carmakers held a huge advantage over their US counterparts. A yen valued as low as 265 to the dollar let them price their cars and light trucks far lower than comparable American-made vehicles.
In a little more than two years, however, the yen has risen dramatically, and is now worth about 130 to the dollar.
This was supposed to ``level the playing field,'' according to American auto executives. But so far the Japanese have failed to pass more than a fraction of the dollar/yen shift onto their customers.
``With their prices up only 25 percent,'' says General Motors Corporation president Robert C. Stempel, ``it does raise some questions.''
During a speech at the Detroit Economic Club last month, Chrysler Corporation vice-chairman Robert S. Miller was more blunt: ``Frankly, that has more than a few people around this town and in Washington whispering the `D' word - D as in dumping.''
Two separate federal agencies are charged with investigating complaints of illegal import pricing strategies: the Commerce Department and the International Trade Commission. Should they find that Japanese carmakers are selling passenger cars, light trucks, or both in the US below a fair market value based on the cost of making them, the government could levy a tariff covering the difference in price. That could add up to thousands of dollars per vehicle.
The so-far relatively modest increase in Japanese car prices has already resulted in a decline in sales, so a huge tariff could hand back to Detroit its biggest market share since the 1979 oil shock.
While government officials may be encouraging the manufacturers' association to explore dumping charges, the trade group's investigators have also been warned they will have to present a well-researched case if they expect to make a successful stand against the Japanese.
Not surprisingly, import executives have already begun gearing up for the fight. Robert S. McCurry, a senior vice-president with Toyota's US sales arm, last week denounced the charges, flatly stating, ``We are not dumping.''
Mr. McCurry and other Japanese executives insist that many factors have allowed them to constrain prices. For one thing, there have been major improvements in assembly operations, lowering production costs.
The stronger yen has resulted in lower raw material costs for the Japanese, and hedging in currency markets helped provide a cushion. And, the executives add, they have a right to settle for lower profits to stay competitive.
During a news conference at the recent Chicago Auto Show, McCurry highlighted one of the problems that will face the domestic manufacturers if they try to pursue their claims. Precedent will require them not only to prove that dumping has taken place, but also to show that it has resulted in measurable injury. Seemingly to set up their case, US officials have taken pains to blame the Japanese for any recent setbacks. Chrysler, for example, partly linked the controversial closing of its Kenosha, Wis., assembly plant to tough import competition.
``This isn't the complaint of someone being injured,'' McCurry contends. ``It's the sound of somebody trying to avoid competition.''
If the Japanese are guilty of dumping, McCurry counters, then so are the Big Three. Last year, 3 percent of the cars sold by GM were imported from Japanese affiliates Isuzu and Suzuki, while 11 percent of the cars and 40 percent of the light trucks sold by Chrysler were built by its Japanese affiliate, Mitsubishi.