Members of the International Trade Commission yesterday asked senior Ford Motor Co. executives, including chairman Philip Caldwell, why the company was unprepared to meet the flood of imported Japanese cars the company claims has hurt the U.S. auto industry.
During four hours of questioning, the commissioners repeatedly inquired why Ford executives did not anticipate the demand for small cars, particularly those from Japan; why it took so long for them to produce their own small cars, and why Ford is in more financial trouble than General Motors.
Caldwell and Fred Secrest, a former Ford executive vice president and currently a consultant to the company, and David N. McCammon, another vice president, testified before the commission in support of the company's request that the federal government limit the number of imported cars -- especially those from Japan -- entering the country for the next five years. The automaker claims that the dramatic increase in Japanese imports has injured the domestic auto industry and that it needs time to retool and produce more small cars to compete with Japan.
Ford's request was filed under Section 201 of the Trade Act of 1974, requiring the company to prove that imports were the substantial cause of injury to the industry, which is currently plagued with 217,000 indefinite layoffs, 1,000 bankrupt car dealers and projected industry losses exceeding $3 billion this year.
The Japanese, however, contend that high gasoline prices the economic recession and changes in consumer preferences hurt the U.S. automakers and not imports.
The commissioners repeatedly asked the Ford executives why they were caught unprepared since they knew several years ago the Japanese were rapidly building small cars for export. The ford officilas replied that they started the design process for the new Lynx and Escort line as early as 1974. They also said they simply miscalculated how many cars the Japanese would send here.
Commissioner Paula Storm asked Caldwell during a lengthy exchange why it took General Motors less time to develop the new small cars than it took Ford. Caldwell said he did not have enough information about General Motors cars to answer her question.
Stern then asked Caldwell since he knew the Japanese were planning to ship more cars here, "Why were you then caught short?"
"Well, I suppose we could spend quite a bit of time discussing that subject," Caldwell said. "We were sure we were going to do this car [Lynx and Excort] right. We took a little extra time."
Stern continued, "I can't emphasize how important this issue is to find out your plans during the last several years and plans for your fuller lines of cars."
Caldwell said that in 1978 Ford introduced the Fairmount and Zephyr, which have been very successful, and pared down the Cougar and Grenada models. The company also started a new small truck line, he said.
Stern asked if the intent of the quato Ford was seeking was to push U.S. car buyers into purchasing midsized American cars instead of Japanese subcompacts. But Caldwell replied: "No."
Commissioners Michael J. Calhoun and Catherine Bedell asked a similar line of questions, but Calhoun added that he did not mean to imply that the company was negligent. Commissioner George M. Moore asked the Ford executives if the price of cars had an impact on the company's poor financial performance.
"Yes, it is a factor," Secrest said. But, he said, the average cost of operting a new car has increased less than the Consumer Price Index in recent years.
During his prepared testimony before the question and answer session, Caldwell said the company would not have needed to bring its case before the ITC if the Cater administration had asked the Japanese government to voluntarily restrict car shipments to the U.S. Because of the auto industry1s problems, the federal government is spending $1.5 billion to pay laidoff auto workers, and it is losing $1.3 billion in taxes.
One important factor in the case is whether the auto industry is one entity or several. The Japanese contend that the U.S. auto industry is really several industries and that the Japanese industry, consisting almost completely of small cars, competes only with one segment of the U.S. industry.
As a result, the Japanese argue, they compete with such a small portion of the U.S. industry they cause no damage to U.S. automakers.
Ford executives, however, produced charts and graphs yesterday showing that the U.S. auto industry is just one industry.