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Manufacturing is still critical to the economy United States. Clyde Prestowitz, says it's time to start realizing the positive spillovers that manufacturing creates... Read more  

Events & Activities

Stephen Olson at Chinese Development Institute Conference


 Clyde Prestowitz giving presentation to CDI...


Steve Olson teaching trade negotiations at the Mekong Institute...


Stephen Olson to speak at upcoming workshop organized by the International Institute for Trade and Development on 

"Economics of GMS Agricultural trade in goods and services towards the world market"

Chiangmai, Thailand Sep 8-12.

(05/14/05) Clyde Prestowitze quoted in The Associated Press

(05/14/2005) Clyde Prestowitze quoted in The Associated Press
A matter of tact Toyota fears U.S. backlash as GM struggles
May 14, 2005
Section: News

A matter of tact Toyota fears U.S. backlash as GM struggles

Yuri Kageyama, The Associated Press

TOKYO - With the heads of General Motors and Toyota meeting this weekend in Japan, their concerns couldn't be more different: GM is losing money and market share, while its Japanese rival is worried about doing too well and sparking a protectionist backlash in the United States.

Some analysts say it is only a matter of time before Toyota surpasses General Motors Corp. as the world's No. 1 automaker.

GM's problems are many. Saddled with huge health care and pension liabilities, it lost $1.1 billion in the first quarter. Its bonds were just downgraded to junk status. Its stock hit a 10-year low in April.

Toyota Motor Corp., meanwhile, reported $2.8 billion in profit in the same quarter and commands an edge in the market for environment-friendly hybrid vehicles, which run on a combination of electricity and gasoline.

The companies' divergent fortunes - symbolic of the two nations' broader auto industries - have Japanese auto and government officials worried about a replay of the "Japan-bashing'' trade friction of the 1980s, when Toyota and others were blamed for stealing car sales and U.S. jobs, prompting outraged auto workers to smash Japanese cars in protest.

The Big Three U.S. automakers - GM, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group - have seen their combined U.S. market share fall from more than 63 percent four years ago to about 57 percent, according to research firm Autodata Corp. During that same period, Asian makers have boosted their share from 30 percent to 36 percent.

As GM Chief Executive Rick Wagoner and Toyota President Fujio Cho were meeting this weekend near Toyota's headquarters, Japanese auto executives appeared to be making some pre-emptive moves to head off any anti-Japanese sentiment among American consumers.

Toyota Chairman Hiroshi Okuda caused a stir recently by saying he was considering raising prices on Toyota cars in the United States in a bid to aid ailing U.S. rivals, as well as sharing technological research with American automakers.

"The decline of the once-invincible American auto industry in the face of Japanese competition could set off a nationalistic backlash among American consumers,'' the Japanese daily Asahi Shimbun warned in an editorial this past week. "There is every reason for Japanese automakers to work hard to avoid unnecessary conflict.''

Such fears are overblown, analysts say.

For one, the Bush administration is much more concerned about imports from China than Japan. And over the years, Toyota, Honda Motor Co. and Nissan Motor Co. have made a point of opening plants in the United States and buying U.S.-made parts.

Also, Japanese cars are not only popular, they're viewed as setting the standard. Americans are global consumers, seeking the best quality and price on products, regardless of where they are designed or made.

"Ultimately, U.S. consumers are consumers first and citizens second. Most people don't really think about where their vehicles are made,'' said Walter McManus, an auto analyst at the University of Michigan Transportation Research Institute.

"The attitude of 'buy American' - in cars at least - is pretty much gone,'' he said.

If anything, McManus said, Okuda's comments about raising prices on Toyota cars to help GM could backfire, at least among U.S. autoworkers.

"It may have been said with the best intentions, but it sounds condescending,'' he said.

Still, Japanese automakers remember well the trade friction from the 1980s and the Clinton administration's threat to curb Japanese auto imports 10 years ago for alleged unfair trade practices. And as a country heavily dependent on exports, Japan wants to do everything possible to avoid trade friction with the United States, its biggest market.

"The executives of Japanese automakers today all endured tough times back then and don't want to see a repeat of that history,'' said Koichi Sugimoto, auto analyst with Nomura Securities Co. "They can't help having that gut level reaction.''

Clyde Prestowitz, a former trade negotiator in the Reagan administration, said a massive slowdown in the U.S. economy could chill ties with Japan.

"In a booming U.S. economy, it's fine. But if there's any kind of economic downturn, I wonder what the politics of that are,'' Prestowitz said.

A significant step toward closer cooperation between U.S. and Japanese auto companies would be a possible joint venture between GM and Toyota to produce environment-friendly hybrid vehicles or fuel-cell vehicles in the United States.

The venture would allow the world's two biggest automakers to share the costs of developing fuel-cell cars - which many in the industry believe will eventually replace gasoline-powered vehicles. Fuel-cell vehicles emit no pollution because they run on power produced when hydrogen stored as fuel in the car combines with oxygen in the air to make water.

The Nihon Keizai Shimbun, Japan's biggest business daily, reported Thursday that Cho and Wagoner could discuss the project at their meeting today, although the report denied a deal was imminent. GM's spokesman for advanced technology Scott Fosgard denied that any specific talks about a technology pact were planned.

In another move that could be seen as trying to warm ties with the U.S., Toyota said earlier this year that it will build hybrid vehicles at a plant in the United States. According to a report on the Kyodo News wire service Thursday, Toyota picked its plant in Georgetown, Kentucky, as the production site, but Toyota officials would not confirm the report.

Toyota and GM already have a partnership, although it does not involve investment stakes in each other. They run an auto plant in California together and have exchanged research before, including a 1999 pact to work on environmental technology together.

Still, the worries keep looming.

Prime Minister Junichiro Koizumi and U.S. Chamber of Commerce President Thomas Donahue discussed concerns about GM at a meeting Thursday.

Koizumi told reporters he had also met with Okuda, who said he was very worried about the plight of American automakers, and they agreed on the need to work out cooperative relations with U.S. automakers.

"The auto industry is a symbol of the United States, and we wish the best for GM,'' Koizumi said.

Associated Press writer Malcolm Foster contributed to this report.

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