The International Trade Commission begins hearings today on one of the most important cases affecting the 70-year-old American auto industry.
At issue is whether the government should limit the entry into the United States of foreign-made cars, which are being blamed for the low profiles and high unemployment plaguing Detroit.
The final decision, to be made by the president after the ITC makes its recommendation by mid-November, ultimately could affect the affordability and availability of automobiles as well as the fate of the U.S. auto industry, its 300,000 laid-off autoworkers and some of its near-bankrupt dealers.
Equally important, it also could reflect the direction in which the nation's trade policies are heading.
Just last week the White House, after negotiations with the steel industry and labor leaders, announced a five-year program giving the steel industry time to retool and modernize so it can compete with foreign steel makers more effectively.
The United Auto Workers union and Ford Motor Co., which filed petitions with the ITC to limit the number of cars and light trucks imported here to about half of the current number, are seeking a five-year respite from imports so they can retool their plants and produce more small cars to compete effectively with foreign models.
Retooling is expected to cost the industry about $80 million by 1985.
While steel has been an important campaign issue -- particularly in the key election states of Ohio, Michigan, and Pennsylvania -- so is the auto industry. The Carter administration has refused to grant any import relief to the auto industry, a policy criticized by Republican presidential candidate Ronald Reagan.
The administration claims that import restrictions would raise prices for consumers, impede fuel conservation efforts and lead to retaliation by foreign trading partners.
The government and the auto industry have urged the Japanese automakers to curb voluntarily the numbers of cars they send here. Yesterday Ford Chairman Philip Caldwell blamed that point strongly enough.
"I think the Japanese have been very surprised that we haven't given the signal [to decrease imports] several years ago," Caldwell told reporters at a prehearing briefing yesterday.
Caldwell said that some European governments are negotiating limits on the number of Japanese cars entering their countries while the Carter administration isn't, despite efforts by the administration to formulate an auto aid program. The other governments are trying to limit the imports "because they have leadership in these countries and not just talk," Caldwell said.
Led by Chrysler Corp., the auto industry has lost nearly $2 billion in the first half of this year, and Caldwell said third-quarter profits for his company will be "no better. I think they will be worse."
"U.S. production is at an 18-year low, having plummeted from 12.9 million cars and light trucks in 1978 to about 8.2 million units in 1980 -- far below trend volume," said a statement filed by Ford yesterday. "The difference between now and any prior experience is the dramatic increase in car and truck imports."
Japanese imports have expanded their market share here from 9 percent in 1976 to 21.7 percent, Ford said. "The Japanese producers alone have taken a windfall advantage of the abrupt market shift massively stepping up exports to the U.S., an increase consistent with Japan's need to generate foreign exchange to pay its enormous bill for imported oil," the Ford statements said. eThe Japanese have denied they have such motives.
In addition to quotas, the union requested raising duties on imported cars from 2.9 percent to 20 percent of the wholesale price and maintaining the 25 percent import duty on trucks.
The Japanese automakers, in briefs filed with the ITC, contend that the downturn in the economy and the fuel shortage are to blame for Detroit's sales and profits slumps. They said that imports pose not threat to American automakers because the U.S. economy is improving generally and more consumers will buy the new, fuel-efficient and stylish American cars that are coming on the market.
Nissan Motor Corp. in U.S.A. said that Detroits inability to sell its large cars is a problem, not competition from imports.Import restrictions would lead to a 10 percent increase in small car prices and reduce small car sales here by 9.6 percent, according to Nissan, makers of Datsun cars. They also would raise the consumer price index by 0.5 percent and cost $4.5 billion to consumers in auto price increases, Nissan said.
In another twist, Robert McElwaine, president of the American International Automobile Dealers Association, said any import relief for Detroit would spell lost jobs and less business for American imported car dealers.
The union's action is filed under Section 201 of the Trade Act of 1974, known as the escape clause, which provides temporary relief to industries injured by a substantial influx of imports. The purpose of the clause is to allow sufficient time for the industry to adjust to international competition.