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Japanese automakers doing better in the US; Congress to react?

April 4, 2007
By Ken Worsley


Despite continued weak domestic sales results, Japanese automakers continue to do exceptionally well in the United States. Toyota’s sales rose 7.7% in March, Nissan’s were up 3.9%, and Honda has said it is expecting to post a record year.

On the US side, Ford saw its sales fall 12.4%, GM’s sales were down 7.7%, and DaimlerChrysler saw sales slip 4.6%.

These results seem sure to intensify the debate that is going on over dollar/yen exchange rates. Last week, in reference to Japan, Democratic senator Debbie Stabenow said, “Unfair trade practices, like currency manipulation, that cost American jobs cannot be allowed to continue, no matter who the culprit is.”

On March 28, Stabenow introduced a piece of legislation called the “Japan Currency Manipulation Act” which is meant to stop the Japanese government from participating in what she called the “unfair trade practice of manipulating its yen currency.”

The bill proposes steps to “prove that the Japanese manipulate the yen” and would require Washington to work with other countries to put a stop to such practices.

Back in November 2005, the Cato Institute published a paper by Daniel T. Griswold entitled “GM’s Woes Are Homemade, Not Imported,” in which he argues:

Most foreign-owned auto plants in the United States are non-unionized. Their workers are not as generously compensated as GM’s workers, but they are relatively well-paid with good benefits. And because their employers are not saddled with the uneconomic pension and healthcare costs of a UAW contract, they can produce cars at a more competitive price, creating more opportunity and job security for existing workers. Michigan-based GM’s toughest competition these days is not from Japan, but from Ohio, Kentucky, Tennessee, Mississippi, South Carolina and the other states where foreign-owned auto companies have established production facilities.

Trade barriers and harangues about exchange rates won’t save GM from itself and its unions. In an internationally competitive domestic market, GM will need to earn back its market share the old fashioned way: by controlling its costs and by producing cool cars at a price that more Americans are willing to pay.

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Comments

5 Responses to “Japanese automakers doing better in the US; Congress to react?”

  1. Pellegrini on April 5th, 2007 2:35 pm

    So the threat from Japanese automakers isn’t
    really coming from Japan? It’s coming from
    America’s own backyard?

    So who is right in this one? Is it a matter
    of more efficient business practices on the
    part of foreign-owned plants in the US, or,
    as Stabenow alleges, is it one of currency
    manipulation?

    Sorry if this is a stupid question.

  2. Ken Worsley on April 5th, 2007 5:24 pm

    Not a stupid question at all. This is where economics and politics start coming together. Stabenow is a Senator from Michigan, which I probably should have mentioned in the post. She’s looking to appeal to her local constituency and gain votes by ‘taking care’ of them. Not unlike Rep John Dingell from Michigan, who wrote an open letter to President Bush saying:

    Our automakers face increasing healthcare and pension costs which foreign automakers do not. These problems are compounded by the Administration’s failure to prosecute unfair trade practices by our competitors and the lack of support for my legislation that would fight currency manipulation by Japan and China. Health care costs force up the price of an American car by $1,500, currency fixing adds an additional $3,000 to a mid-size car and $10,000 to an SUV.

    The auto industry doesn’t need a bailout- they need effective policies.

    The fact is that Stabenow and Dingell know about as much economics as Paris Hilton does. They’re politicians and politicians do what they do best: spin issues to make their local electorate happy so they can get re-elected.

    It is generally accepted that Japan stopped its formal currency manipulation efforts in March 2004. I wrote a rather lengthly piece about this in February when the issue came up prior to the BOJ’s policy meeting (when it raised the interest rates). I think that can provide some background…

    And back on February 1, in the leadup to the G8 meeting, U.S. Treasury Secretary Henry Paulson stated, “From my standpoint the yen value is set in a competitive marketplace.”

  3. Ken Worsley on April 5th, 2007 5:29 pm

    Actually, Pellegrini, this article might be more helpful…

  4. Pellegrini on April 7th, 2007 1:02 am

    OK, I get it now. The answer: politicians
    are dumb.

    Thanks for linking to thatarticle
    from February! That definitely helped clear
    things up.

  5. Ford Parts News on April 12th, 2007 7:02 pm

    Another Fall In Sales For Ford…

    The Ford Motor Company is one among the three most influential car makers of the US. And it is just as one among the three that suffers the same littered financial stability. But among the Big Three with GM and DaimlerChrysler, Ford has been the one …..

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