Two major Japanese auto makers yesterday announced a tentative joint venture to build cars in this country, a deal that would mean every large Japanese car company would have at least one assembly plant in the United States by the end of the decade.
Fuji Heavy Industries Inc., maker of Subaru cars and trucks, and Isuzu Motors Ltd., producer of the popular Impulse passenger car, said they plan to start producing 120,000 cars and trucks annually at an undisclosed site in this country beginning in late 1989.
However, some Isuzu officials said yesterday that the joint venture eventually will be able to produce 200,000 or more vehicles a year on U.S. soil. If that projection proves accurate, it would give Japanese companies the capacity to produce about 1.7 million vehicles a year in North America by 1990, analysts said.
The $480 million Fuji-Isuzu pact marks the first time that two Japanese companies are joining forces to enter the U.S. market. It also means that seven of Japan's 11 automotive manufacturers will have assembly capacity here.
The Fuji-Isuzu agreement is regarded by auto industry analysts as the natural outcome of a variety of pressures that have been driving Japanese auto production to western shores. Chief among those are the import quotas that have limited the shipment of Japanese cars to the United States since April 1981, the analysts said.
Other pressures forcing Japanese auto production overseas include a shrinking auto market in Japan -- and a rising yen that is boosting the cost of Japanese vehicles and threatening to reduce their sales in the United States.
Honda Motor Co. Ltd., for example, yesterday announced its fourth price increase -- estimated at 2.9 percent, or $238 more for the "average" Honda car -- on 1986 models.
Overall, Japanese auto makers have raised their prices by an average $1,027 a car for the 1986 model year.
Domestic car prices also have increased, but by a lesser amount, rising an average $800 for General Motors Corp. cars, for example, for 1986. But the domestics also have run low-rate financing programs to make their price increases more palatable. Japanese auto makers largely have ignored the discount-rate route.
The relocation of Japanese auto-assembly capacity, an apparent boon for the U.S. economy, also has a downside, some auto industry analysts said yesterday.
By 1990, there will be so much auto-assembly capacity in the United States in particular and in North America in general that the market simply will be overwhelmed by too many products, some analysts said.
"There's going to be so much product in the marketplace, it's going to be very difficult, if not impossible, to move it all," said Dennis Virag, vice president of auto industry analysis for Detroit-based Ward's Automotive Research of Detroit.
David Healy, an auto industry analyst with Drexel Burnham Lambert Inc. of New York, agreed. Auto makers already have the ability to produce 14.2 million cars and trucks annually in North America, Healy said.
"I've added it all up, and if everyone -- Japanese, Koreans, Americans, Europeans -- builds what he says he's going to build, there will be about 2.2 million additional 'transplant' vehicles available in the North American market by 1990.
"That means you're looking at about 16.4 million cars and trucks for North America alone," Healy said. "That's a lot more capacity than anybody needs."
To put matters into perspective, a total of 15.7 million cars and trucks -- domestically produced and imports -- were sold in the United States last year, the best sales year in U.S. automotive history. The nation's Big Three auto makers -- GM, Ford Motor Co. and Chrysler Corp. -- will lose some ground in the emerging, intensely competitive U.S. auto market, Virag, Healy and several other auto analysts said.
"But GM, Ford and Chrysler are not going to roll over and play dead," Virag said.
The likelihood is that some of the newcomers might not make it, and that a struggling U.S. company, American Motors Corp., could fall in the firefight for sales, Virag and Healy said.
Fuji is Japan's seventh-largest auto maker. Isuzu, 39 percent owned by GM, is the ninth-largest.
Isuzu will build utility vehicles (a Trooper derivative) and "pickup products" in the joint venture, while Fuji will build sedans (Subaru derivatives) and station wagons, a spokesman for the two companies said yesterday.
The venture will not build hybrid vehicles, such as the Nova passenger car produced by GM and Toyota in Fremont, Calif., the spokesman said. Fuji-Isuzu products will be marketed separately by Subaru and Isuzu dealers in the United States, the spokesman said.
GM will "not be involved" in the marketing of the U.S.-built Fuji-Isuzu products, according to the spokesman.