Detroit's Pleas for Protection
NEW calls for trade protectionism by the US auto industry should be quickly squelched by Washington. Unfortunately, President Bush is absorbed with events in the Gulf, while many lawmakers in Congress have sided with the global-trade blockers. It would be a mistake if new restrictions were imposed on the flow of consumer goods in world commerce.
The immediate problem is that the Big Three US carmakers - General Motors, Ford, and Chrysler - face tough days. Consumers, skittish about the Gulf as well as recession, are pulling back from buying big-ticket items. The market share of Big-Three passenger cars continues to slip in the US, while the percentage of foreign-owned cars, many of them made in America, continues to grow. Financial losses for the Big Three are mounting. And Honda, which had the best-selling car in the US last year, (the second year in a row for the Accord), is close to edging out Chrysler from third place in the total US car market.
General Motors, which has seen its stock shares lose some 30 percent of their value since last June, recently cut its annual dividend from $3 a share to $1.60. And Standard & Poor's, the credit-rating service, has downgraded the credit ratings of the Big Three US carmakers. This is believed to be the first time S&P has downgraded the three Detroit carmakers simultaneously.
GM officials argue that the Gulf war is eroding consumer confidence and, thus, sales. For the first 20 days of January alone, GM car sales were off 21.2 percent. As a consequence, the company initiated a number of tough cost-cutting measures, including job layoffs and the trimming back of capital spending plans.
Attempting to head off new protectionism, Tokyo announced this month it would extend voluntary quotas on car exports to the US. The quota will remain at 2.3 million passenger cars, as it has since the mid-1980s.
In fact, actual Japanese exports to the US have fallen in recent years, to about 1.9 million passenger cars last year. The rub, however, is that Japanese cars made in the US by American workers - about 1.3 million units last year - have offset the export decline. Japan now has about 28 percent of the overall US passenger-car market for its own models, but about 30 percent of the market when you factor in Japanese cars bearing US nameplates.
Detroit surely has more to do than just push for new forms of protectionism, such as limiting Japanese market share in the US. Consumers have not given up on Detroit - the Big Three still control two-thirds of the US passenger-car market. And it seems curious for Detroit to grouse about Japanese imports when many of its own bestsellers - the GM Geo, for example - are Japanese products sold under a US name.
Rather than brooding about Japan's gains while watching the rear-view mirror, Detroit should be focusing on the road ahead - which means turning out quality products at affordable prices.