TWO MONTHS AGO, President Carter met at the White House with auto industry executives and with UAW president Douglas Fraser on the accumulating problems of the industry, already hard-hit by recession and battered by import competition.
"There is no dispositon to back off our policy," one of the President's chief advisers then assured this reporter. That policy asserted that the source of the auto industry's troubles lay not in Tokyo, but in Detroit, where management too long had clung to a policy of producing big cars, instead of small, efficient ones. Thus, the American industry lacks the small-car capacity it needs to meet foreign competition in an energy-short era.
But this week, as the president studies a report by a task force headed by Transportation Secretary Neil Goldschmidt (as whittled into an options paper by the White House Economic Policy Group), that same adviser is no longer so sure.
"We are in a period of agonizing reappraisal that may lead to a change," he now says.
What seems to be in the offing is a package of tax and regulatory concessions designed to help the embattled automakers, plus a subtle message to the Japanese government that this country would welcome the imposition of "voluntary" restraints on Japanese car sales, which now account for about 23 percent on the U.S. market.
PRESIDENT CARTER, who is making an extraordinary gesture of friendship for Japan by going to the July 9 memorial service for Prime Minister Masayoshi Ohira, will bring the matter up then with Japanese government leaders. Carter is planning to take Trade Ambassador Reubin Askew with him.
The Japanese position all along has been that voluntary or informal restraints on car exports to the United States is not the answer to the industry's problem here and in any event, such a step would not be taken unless the U.S. government asked for it. And the U.S. government (which all along has hoped that Japan would make the move without being asked) has resisted doing so, because it has no authority to back up any such official suggestion.
One option suggested early on by Goldschmidt was a joint congressional resolution authorizing the President to negotiate a constraint agreement with Japan. This has now been set aside as unrealistic. "Many dealers here now handle both imports and domestic cars," explains a Capitol Hill source, "and they are gaining politica clout."
But on the Hill, the feeling is that the timing may be right for Carter to make a move himself in his Tokyo discussions. The president had already raised the question, at the Venice economic summit with Japanese Foreign Minister Saburo Okita, about reports of expanded Japanese production. Carter told Okita that the auto industry here feared that increased Japanese output would mean further penetration of the U.S. market.
There has been a decided shift in Washington's attitude over the past two months for two reasons. First, politics. This is an election year, and some 300,000 UAW members are out of work. Goldschmidt has become an effective spokesman for short-term and long-term aid to the industry.
SECOND, economic realities. Recession has hit so hard that American automobile manufacturers are not even selling all of the smaller efficient cars they are able to produce.
Carter's political advisers have been urging him to "do something" to help the industry, preferably before the Republican convention opens July 14 in Detroit. But cautionary flags have been hoisted by Askew, Undersecretary of State Richard Cooper, economic council chairman Charles L. Schultze and inflation adviser Alfred E. Kahn.
The key to the whole proble may be held by the International Trade Commission. The ITC already has an "escape clause" case before it, brought by the UAW, charging that Japanese imports have seriously injured the U.S. industry. If the ITC should decide that there has been an injury because of imports -- or even a threat of injury in the longer run -- it could impose a wide range of sanctions ranging from tariffs to quotas on Japanese cars.
Among the options in the EPG report to Carter is one by which the president would ask ITC to accelerate its decision, not otherwise expected until after the election in November.
But some members of the Carter team urged caution in any such move. The point out that an ITC ruling against the UAW, if it came just before the election, might touch off a groundswell for an extreme, protectionist response.
"The one thing we should not do," says one White House adviser, "is to force American consumers to pay for the mistakes of American car manufacturers."
But even if Carter manages to avert formal or informal quotas, and thus avoids a shortage-induced inflationary price increase, some costs -- through the budget and in relaxed safety and environmental standards -- now appear inevitable. Thus, Detroit's board-room bloopers won't be paid off for many years to come.