THE JOINT venture between General Motors and Toyota presents substantial advantages to all of the participants. To General Motors, it gives a small car with front-wheel drive, filling an important gap in its range of products. To Toyota, the benefits are more heavily political. It offers some insurance against the possibility of protectionist legislation and, beyond that, it constitutes an answer to labor unions' complaints that Toyota won't invest in its biggest foreign market. To the United Auto Workers, the venture offers thousands of jobs. With so much right about this deal, what could possibly be wrong with it?
General Motors and Toyota are the two largest automobile companies in the world. Collaboration between them raises large and obvious questions about competition. Perhaps the anti-competitive aspects of this limited venture are not sufficient reason to condemn it automatically. But neither are they negligible. Although the Justice Department and the Federal Trade Commission have remained tactfully silent, precisely what kind of a precedent is being set here?
Under this agreement, the two companies will form a third corporation, jointly owned, that will buy a GM assembly plant near San Francisco. The plant, although new, has been shut down by the decline in auto sales. Toyota will supply what engineers call the drive trains for the cars--the engines, transmissions and so forth. The bodies and fittings will be added here. The cars are to be sold under the Chevrolet label through Chevrolet dealers. The workers will be American, but, in an interesting departure, the plant managers will be Japanese. GM wants to see whether Japanese methods can be successfully applied to American conditions in an operation as large and complex as an automobile assembly plant.
Perhaps this venture will serve the useful purpose of deflecting some of the protectionism now rolling around Congress. But it is chiefly important as an indicator of the changing character of the world's automobile industry. GM, once the most insular of big corporations, is now engaged in close relationships with several Japanese companies. In the late 1970s, it seemed likely that the number of big automobile companies would soon drop sharply through a series of mergers and failures. The past several years suggest that, on the contrary, governments will go to great lengths to keep companies from folding. Instead of consolidation, a pattern of coalitions and partnerships appears to be emerging. The GM-Toyota joint venture is not an isolated response to unusual circumstances, but rather a heavy hint about the future organization of the world automobile industry.