The auto-production agreement announced yesterday by Chrysler Corp. and Japan's Mitsubishi Motors Corp. continues the rapid spread of foreign car manufacturing plants to this country.
By 1990, analysts say, at least 10 percent of the cars produced in this country will roll out of plants that are wholly or partially owned by foreign auto makers.
What is occurring is a radical reordering of competition for the domestic auto market. Foreign manufacturers, once wedded to a strategy of building cars at home to sell here, are beginning to build where they sell. American companies, still struggling to reduce domestic production costs, are beginning to import cars and parts that are too costly to make at home.
On occasion, the strategies come together, as in the Chrysler-Mitsubishi case. Each company has invested $250 million to create Diamond-Star Motors Corp., based in Bloomington-Normal, Ill., which will produce up to 180,000 passenger cars a year beginning in 1988.
It is the second joint venture involving a major American auto maker and a Japanese partner. New United Motor Manufacturing Inc., a joint-venture company operated by General Motors Corp. and Toyota Motor Corp. in Fremont, Calif., last year began producing a Chevrolet Nova model derived from the Toyota Corolla.
In all, five Japanese auto makers are building, or have announced plans to build, cars on U.S. soil by 1990. Toyota will do it both ways -- in the joint venture with GM, and alone at a yet-to-be announced U.S. site where Toyota plans to assemble 200,000 cars a year.
So far, according to Detroit-based Ward's Automotive Reasearch, the potential 1990 U.S. production capacity of Japanese-owned companies looks like this: Honda Motor Co. Ltd., 300,000 Honda Accords and Civics, Marysville, Ohio; Mazda Motor Corp., 240,000 passenger cars, 40 to 60 percent of which will be produced for Ford Motor Co. under the Mustang nameplate; Diamond-Star, 180,000 subcompact, Mitsubishi Mirage-derived passenger cars; NUMMI (GM-Toyota), 250,000 Nova subcompacts; Toyota U.S.A, 200,000 cars based on the mid-size Toyota Camry; Nissan Motor Co., Ltd., 125,000 Nissan Sentra subcompact passenger cars, Smyrna, Tenn. (Nissan also will have the capacity to produce 132,000 pickup trucks in the United States in 1990.)
Combined with U.S. production of European-nameplate cars, Volkswagen chief among them, foreign manufacturers will have the ability to assemble 1.3 million of the expected 10.3 million cars that will be made in this country in 1990, according to Ward's researchers. "You're looking at some really tough competition in this market," said Dennis Virag, Ward's vice president of auto industry analysis. The competition will mean a better selection of cars for buyers. But it could mean hard times for traditional U.S. auto makers and their union-represented workers, Virag said.
Analysts at Chicago-based Arthur Andersen & Co. agree. By 1995, traditional U.S. auto companies will account for 63 percent of the cars sold in this country, compared with 72 percent in 1983, the Andersen analysts said. The rest of the market will be made up by a combination of imports and U.S. production of foreign-nameplate cars, the report said.
Economics and politics are driving the turnabout, the analysts said.
For example, the Japanese have labored since April 1981 under voluntary quotas that restricted their shipment of cars to the United States. Those quotas were increased last March -- from 1.85 million cars a year to 2.3 million. But the Japanese aren't taking any chances. Increasingly, the Japanese are reasoning that it is better to build here than it is to be locked out of the market.
The Americans, meanwhile, are winning more liberal and less costly labor agreements in the joint-venture companies. Diamond-Star, for example, is a new company with no contractual obligations to the United Auto Workers union