You've got to admire Douglas A. Fraser. He's worth every penny of the $66,000 he's being paid as president of the United Auto Workers (UAW). He can make President Carter dance like a marionette. Fraser knows that you get your way not by being free with your affections but by being coy.
No sooner had the White House supported Fraser's demand last year for rescuing the Chrysler Corp. than he endorsed Carter's opponent for the nomination, Edward M. Kennedy. Then, earlier this month, Carter commuted to Detroit to lay the groundwork for another favorite Fraser idea: automobile import restrictions. What does Doug do next? Why, he plays footsie with the Republicans, saying maybe they're not the party of Herbert Hoover after all.
Fraser effectively has been making government policy, and the next item on his agenda is to have the president impose formal import restrictions or (more likely?) work out an informal arrangement with the Japanese that amounts to the same thing. Carter's chief domestic adviser, Stuart E. Eizenstat, calls the auto program the start of an "industrial policy," but it's not much more than election-year politics and economic nationalism.
Faced with severe import competition, many U.S. automakers want restrictions so that they can raise prices and profit margins. The UAW wants to preserve jobs. Carter wants to stay in the White House.
Fraser seems to have taught everyone that if you're an industry with big problems, the surest road to salvation is through Washington. The worst aspect of this entire episode is that it provides a blanket exemption -- for auto executives, union officials and political leaders -- from taking responsibility for their own mistakes and facing their own problems.
The severity of the current auto industry depression stems directly from a shared mistake made five years ago by the auto industry, the UAW and Congress. It was obvious then that the American auto market never again would be the same and that government policy ought to aim at smoothing the massive industrial conversion to smaller and more fuel-efficient cars.
The needed steps were clear: First, push buyers toward smaller cars by letting gasoline prices rise to world levels; and second, assure the shift by imposing a gasoline tax that would rise gradually as companies retooled for smaller cars.
Instead, Congress controlled oil and gasoline prices (the "real" price of gasoline was lower in 1978 than in 1960) and steadfastly rejected gasoline taxes. The UAW shouted loudly against oil price decontrol. The car companies made quiet, routine statements favoring decontrol, but little more. The result was to create an artificial and exaggerated demand for big cars and to postpone the industry's inevitable retooling.
The world auto industry now faces dramatic changes. High oil prices have toured Europe, Japan and the United States into a single market. Squeezed by huge needs for investment capital, companies seek maximum economies of scale through increased production runs and efficient plant sizes. To expand access to foreign markets, companies are forming new international alliances. To evade protectionism -- and to buy the least expensive components -- they are sending parts across national boundaries.
The evidence is everywhere:
By 1983, American Motors Corp. (AMC) will be assembling at least 100,000 Renault cars, with major components coming from Europe. Renault may buy up to 22.7 percent of AMC and, in return, is getting access to AMC's dealers for both imports and cars made in the United States.
Volkswagen's scheduled U.S. production of 400,000 cars in 1982 will still depend on imported engines and transmissions, Honda recently signed an agreement with British Leyland Ltd. to assemble cars in Britain, but with key parts from Japan.
Chrysler will buy engines from Mitsubishi in 1981, and Ford Motor Co. is buying transaxles from Toyo Kogyo Co. Ltd., the maker of Mazdas (of which Ford owns 25 percent).
The political implications of the new trade patterns are inescapable. Given the auto industry's size, countries everywhere will be inclined to promote and protect their own firms.
Our policy should be guided by tw basic precepts: maximizing benefits to American consumers and minimizing damage to our foreign alliances. That doesn't mean sacrificing the domestic auto industry, but it does mean laying the responsibility for the industry's revitalization where it properly belongs: on the companies and workers.
It's hardly a mission impossible. As firms retool, a larger proportion of output will consist of new, fuel-efficient cars; a staff report of the House Ways and Means Committee estimates such production will rise from 1.75 million units this year to 3.3 million in 1981 and 10.1 million in 1984. As long as U.S. cars are competitive in price and regain a reputation for quality, American manufacturers should be able to reduce import penetration to below 20 percent (against 27 percent now).
But the administration hardly mentions these two big qualifications. Even in a slump, list prices of cars rise because underlying costs (heavily dominated by labor costs) continue to rise. Between 1970 and 1978, auto industry wages rose about 25 percent faster than all private wages, and the trend persists. The Ways and Means report also talks discouragingly of the decline of consumer confidence in the quality of U.S. cars.
We don't need an auto policy that attempts to correct these deficiencies with protectionism. The most self-serving aspect of the president's program was his attempt to force the U.S. International Trade Commission to rule in late September or early October on the UAW's petition for import relief. This would have suited Fraser just fine because it would have permitted the president to make a final decision on any agency recommendation just when he would be most hungry for votes.
The ITC apparently has decided not to rule until after the election. In Washington, that's a rare act of political courage.