The new chairman of the Senate Foreign Relations Committee, Sen. Richard G. Lugar (R-Ind.), said yesterday he favors continuing import restraints on Japanese cars for another year because the strong dollar prevents American auto makers from being competitive.
He added, however, that he has a "hunch" that President Reagan will remain silent on whether the quotas should be continued for a fifth year when they expire March 31, placing the Japanese in the uncomfortable position of having to make the decision themselves about whether to continue "voluntary" restraints.
Leaders of Japan's ruling Liberal Democratic Party, visiting Washington for the inauguration, told Reagan administration trade officials and Lugar that there would be no surge in exports if the quotas were lifted.
They said that Japan's manufacturing capacity limits exports to the United States to 2.5 million cars, 650,000 more than the 1.85 million allowed in under the so-called "voluntary restraint agreement" that has been in effect for four years. The Japanese government, moreover, would intervene if auto exports jumped too high, they said.
Their contentions, however, were challenged yesterday by Owen F. Bieber, president of the United Automobile Workers union, which wants the quotas continued.
"The industry in Japan has the capacity to produce an additional 2 million cars a year or more," he said, directly contradicting the view presented here last week by the Japanese political leaders.
"Any suggestion that the Japanese auto makers would be unable to exceed 2.5 million is totally unfounded," Bieber continued in a letter to Susumu Nikaido, the LDP leader who led the delegation here.
In Tokyo, meanwhile, AFL-CIO President Lane Kirkland, on a visit to Japan, asked Prime Minister Yasuhiro Nakasone to continue the auto export restraints.
The major American auto makers are split on the issue, with Chrysler and Ford in favor of keeping the quotas. General Motors, which has financial interests in two Japanese auto companies and wants to increase its imports of Japanese-made small cars, opposes continued quotas.
Administration trade officials said President Reagan will not decide whether to ask for new quotas until he sees the auto companies' balance sheets, which will indicate whether they are strong enough to face import competition.
Although the big three U.S. auto makers recorded record profits in 1984, that splash of black ink may not have been enough to overcome their poor showing in earlier years.
U.S. Trade Representative William E. Brock, a principal Reagan adviser on trade issues, said he doesn't expect a presidential decision "at least for a couple of weeks."
"I continue to question the value of restraints," he told wire service reporters Wednesday. He agreed "Our best bet is to keep things pretty much as they are." -- Sen. Richard G. Lugar with the Japanese political leaders that "an overwhelming surge" of exports is unlikely to follow a lifting of restraints.
Lugar, who has a reputation as an advocate of free trade, told the Washington International Trade Association yesterday that "I come out on the side of being slightly protectionist" in the case of automobiles.
"Our best bet," he told reporters later, "is to keep things pretty much as they are," although the quotas for the Japanese should be raised "slightly higher."
Lugar, whose state has the second-largest chunk of the American automobile industry after Michigan, blamed the domestic industry's problems on the strong dollar, which reduces its ability to compete by 40 percent.
He acknowledged, however, that retaining quotas is likely to hurt the American consumer by artificially raising automobile prices.