General Motors Corp.'s agreement in principle with Toyota Motor Corp. Ltd. to produce compact cars in the United States "raises serious antitrust questions," some of which could lead to major court battles, a Chrysler Corp. official said today.
"It is fundamentally a bad deal because it joins together two of the world's largest car producers," Robert A. Perkins, Chrysler's vice president for Far Eastern operations, said.
"Neither company needs the other. They each have the capital, the technology and the manpower to produce this car alone . . . it raises serious antitrust questions," Perkins said here in an address to the Third U.S.-Japan Automotive Industry Conference.
Perkins said later in an interview that GM, the world's largest automaker, and Toyota, the third largest, could become targets of antitrust suits if they proceed with plans to implement their agreement. But he declined to say if Chrysler, GM's third largest competitor in the United States, would take legal action to try to block the joint production pact, signed Feb. 17 in Fremont, Calif.
Perkins said that any possible Chrysler action against GM and Toyota depends on the outcome of the Federal Trade Commission's review of the agreement, which GM and Toyota insist does not violate antitrust laws. "We'll be watching very closely to see what the FTC does."
The FTC is continuing a study of the antitrust implications of the GM-Toyota arrangement, but the review has been held back because a final agreement has not been signed by the two companies.
FTC Commissioner Patricia P. Bailey told the Senate Commerce Committee the commission is unlikely to reach a quick decision.
GM's other domestic competitors, Ford Motor Co. and American Motors Corp., also are paying close attention to the FTC review.
"Here you have a situation where the largest car manufacturer in the world is teaming up with the third largest to make a car that either of them could make alone," said W. Paul Tippett, chairman and chief executive officer of AMC.
"I'm not a lawyer. But a lot of lawyers, whose opinions I respect, think that this is an open and shut case in terms of violations of antitrust laws."
Asked if that meant AMC would take either GM or Toyota to court over the agreement, Tippett replied: "Lawyers I respect say there are serious antitrust implications. They say they would love to argue this one in court. But the FTC ultimately will decide if antitrust violations exist."
Ford reportedly has been studying possible legal actions against GM and Toyota if antitrust questions aren't satisfactorily resolved from Ford's viewpoint. Ford officials neither confirmed nor denied those reports. But Harold A. Poling, vice president of Ford North American Automotive Operations, said this week that his company is concerned that the agreement would help GM save considerable labor costs in small car production.
Under the terms of the agreement, 50 percent of the parts, including the drive train, would be made by Toyota in Japan. The remainder of the components, such as mouldings and seats, which require less labor, would be produced in this country. "To the extent that GM and Toyota purchase more of their labor-intensive components from Japan, as opposed to the United States, it will give them a better labor cost structure. That's a concern," Poling said.
Both GM and Toyota have denied that their agreement violates antitrust law. Those denials were repeated by J. F. Smith Jr., director of GM's worldwide product planning division, who spoke here today.
Smith said the agreement was the only "sensible interim solution" to help GM maintain a presence in the domestic small car market. GM has said that it was being driven out of that market because it could not compete effectively against Japanese imports, because Japanese automakers could produce small cars at a unit cost ranging from $1,500 to $2,000 less than their American counterparts.
"We could have waited until we developed additional new small cars of our own. . . ," Smith said.
"As you know, that takes time--years to design, engineer, tool, test, and implement new manufacturing systems and work practices." He said GM did not have that much time.
Under the terms of the agreement, GM and Toyota jointly would produce 200,000 four-door small cars each year at a former GM plant in Fremont. Smith said production would begin "as soon as possible" in 1984, to produce 1985 models.