American flags fly at the headquarters of domestic automakers here. But the standard is deceptive.
The reality, particularly for the three largest U.S. car companies, is the presence of a Rising Sun behind the Stars and Stripes.
General Motors Corp., the nation's leading automaker, made that point clear last week in announcing its intentions to rely on Japanese manufacturers for its supplies of small, mostly subcompact cars.
GM said the Japanese can produce small cars at a unit cost that is $1,500 to $1,700 less than the cost of making similar vehicles domestically. So GM has decided to end its battle with Japanese automakers and to collaborate with them in the small-car wars.
GM says its decision is temporary, one designed to give the company time to regroup and come out with its own competitive products. But other industry analysts and officials see the company's strategy as the latest step in a steady movement toward the creation of world car companies and the elimination of the domestic auto industry, in the traditional sense.
"Talk to any auto expert and he will tell you that in 10 years there will probably be only five or perhaps six international car companies vying for a share of the market," said an industry research report circulated here last week at an international meeting of auto manufacturers, dealers and parts suppliers.
"Few domestic companies are separate entities today. . . . The global auto company is rapidly approaching reality if, indeed, it has not already arrived," said the report by California-based J. D. Power & Associates, an auto industry survey firm.
Some GM officials partially agree with that assessment. "It's no longer a neat little domestic market that we have in this country. It's no longer just GM, Chrysler, Ford and American Motors fighting for a share of the U.S. market. That's gone, probably forever," said Harry Kelly, marketing spokesman for GM's Asia-Pacific operations.
As a result, the subcompact Chevies that Americans drive in 1985 probably will be Suzukis, Isuzus or Toyotas built to GM's specifications. The small Ford Motor Co. cars -- the Escort and Lynx -- already have Toyo-Kogyo (makers of Mazda) transmission/axle arrangements and probably will have similar components in the future. And much of the newness in the "New Chrysler Corp." cars comes from the Mitsubishi engines under the hoods.
As for American Motors Corp., the perenially struggling fourth largest domestic automaker is now 46 percent owned by Renault, thanks to a 1979 rescue by the French car manufacturer. The allied company is putting out a new market entry in 1983 -- a relatively inexpensive, small, front-wheel-drive car, appropriately named the Alliance.
There is a substantial amount of stress in the changes taking place. United Auto Workers union leaders worry that the deals between U.S. and foreign manufacturers could lead to fewer U.S. jobs. Domestic auto dealers, concerned about declining sales of their U.S. products, are scrambling to establish "dual dealerships" featuring domestic and foreign cars. Other dealers, and some production officials, worry about the possibility of a U.S. consumer rebellion against the U.S.-nameplate hybrids.
"What's better about buying a G.M.-labeled Japanese car?" one of those dealers asked GM President F. James McDonald at the Automotive News World Congress meeting here least week.
McDonald sidestepped the quality-difference aspect of the question and answered: "We feel that it's awfully important to have competitive cars. We're looking to get competitive cars wherever we can get them. We're looking to do it build small cars here. But in the meantime, we have to stay competitive."
Staying competitive in the small-car market, which accounts for about 60 percent of U.S. sales, means buying 200,000 front-wheel-drive Suzuki minicars for domestic distribution in 1984, McDonald said. It also means going to Isuzu, in which GM has held a 34.5 percent equity interest since 1971, for 150,000 Isuzu ST (sports touring) models for 1984. GM also has been involved in what company officials call "serious, ongoing" discussions about a possible "joint venture" with Toyota.
Ford had similar talks with Toyota. But industry sources said the Ford-Toyota negotiations fell apart last year because the companies could not agree on a product.
GM officials are tight-lipped about their Toyota talks. But they indicate that the negotiations are proceeding with little difficulty and they point out, with apparent cheer, that Toyota officials believe they could have an agreement with GM by October. Such an agreement could lead to the annual production of 200,000 front-wheel-drive small cars at a now-closed GM facility in Fremont, Calif., according to trade press reports that the company finds acceptable.
GM officials, eager to allay union fears and some public speculation that their buy-Japan strategy could become permanent policy, point to their experience with the Chevy LUV (light utility vehicle) trucks.
Isuzu started building the small pickup trucks for GM in 1971, "at a time when the small-pickup market began to catch on here, and we had nothing to sit in there," Kelly said. Since 1972, GM has sold about 593,100 of the imported LUV trucks. But the company began phasing out the LUVs last year when it started selling its own Chevrolet S-10s, "which we feel are better than anything the Japanese have," Kelly said.
What GM needs now is a car to replace the aging, rear-wheel-drive Chevette and the almost identical Pontiac T-1000, the company's mainstays at the so-called low-end of the small-car market. At the moment, without the Japanese, the company has "nothing to sit in there," as Kelly would say.
William E. Hoglund, general manager of GM's Pontiac Division, said: "We would manufacture a replacement car that could make us competitive at the low-end when we could be sure of a return on our investment." Hoglund said GM's problems in small-car competition "involves business strategies and how we relate to our work force." Asked to elaborate, he said: "The $1,500 to $1,700 cost disadvantage in competing with the Japanese is real."
Industry analysts place most of the blame for the Japanese cost advantage on the UAW's labor contracts with domestic automakers. But UAW President Douglas A. Fraser said that is a bum rap.
Fraser said GM could have had competitive small cars years ago, but the company chose to concentrate on building larger, more profitable units. "The market turned overnight in 1979," when Iran pulled the plug on U.S. oil imports, precipitating another energy crisis, Fraser said.
"You had the massive movement toward small cars after that. The Japanese were there with well-built small cars and well-designed small cars, and we were no place," Fraser said.
But Fraser, in an address to the international auto meeting, conceded that his union is in a quandary over the joint-venture question. On the one hand, a Toyota-GM deal could bring jobs back to the Fremont, Calif., plant. On the other, GM's purchases from Suzuki and Isuzu would do little to increase U.S. auto employment.
Also, there is this: The UAW has not objected to Chrysler Corp.'s marketing and manufacturing agreements with Mitsubishi, because the Japanese company has been providing cars "that Chrysler dealers needed to get through bad economic times," Fraser said. Mitsubishi makes Chrysler's popular Dodge Colt and Plymouth Champ models.
Fraser said he believes GM is strong enough to develop its own small cars. If GM is going to buy cars from Suzuki and Isuzu, "It should really market those cars somewhere else other than the United States," Fraser said.
U.S. auto dealers also say that GM and the other domestic car manufacturers should produce their own competitive products. But the dealers say they could improve their sales if they had Japanese and other foreign products to sell.
"I'm doing okay, but the dealers who are also selling popular foreign models are doing better," said Gregory Sutliff, a large-volume Chevrolet dealer in Harrisburg, Pa., who also is chairman of the business management committee of the National Automobile Dealers Association.
Sutliff suggested that GM wants its label on Japanese-made products because of a painful lesson learned by GM and other U.S. auto manufacturers: "GM tells us that every time they have a dual dealership, they lose market penetration" with GM products. And that brings up another problem, Sutliff said.
"There's a little bit of a stigma attached to a 'U.S.' car made in Japan," he said. If the joint-venture cars end up with higher sticker prices than the Japanese originals, "all you would have done is aggravate the competitive position of the U.S. companies," he said.