Surprise: Japanese, Korean Carmakers Want a Detroit Bailout

For Toyota, Honda, and Hyundai, a collapse of GM, Ford, or Chrysler would create more problems than opportunities

By Ian Rowley and Moon Ihlwan

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Considering the home states of some of the Republican Senators opposed to a $25 billion bailout of Detroit, a cynic might concede that they are doing Asian automakers' work for them. After all, Republicans who have criticized the planned aid package for (GM), Ford (F) and Chrysler include those from states where Japanese and Korean automakers have factories. For instance, Republican Senators Richard Shelby and Jeff Sessions represent Alabama, home to Honda (HMC), Toyota (TM), and Hyundai plants. John Cornyn represents Texas, which has a 200,000-capacity Toyota Tundra plant in San Antonio. And Bob Corker, who is "very skeptical" of the package, is a GOP Senator from Tennessee, which has two Nissan (NSANY) plants—in Smyrna and Dechard—and the company's U.S. headquarters in Nashville.

Yet the senators opposing a bailout bill also may be in disagreement with those same Japanese and Korean automakers. For Asia's leading automakers, the prospect of one or all of the Big Three failing is arguably of greater concern than rivals receiving government aid. Indeed, since executives worry the collapse of GM, Ford, or Chrysler would have a negative impact on car sales, hurt the financial health of suppliers, and trigger a possible backlash against import brands, the problems of Detroit are problems for foreign rivals, too.

While a bankruptcy filing would likely boost Asian sales and shares eventually, in the short term it could make matters worse for Toyota, Hyundai, and the others. One problem, notes Andrew Phillips, an analyst at KBC Securities in Tokyo, is that one or more U.S. carmakers entering into Chapter 11 would do little to cut excess capacity and probably worsen consumer confidence. "It's in the Japanese and Korean carmakers' interest for the U.S. economy to stabilize and, if bailing out the Big Three means that, they are not going to be opposed to it," he says.

In Their Interests to Help Detroit

With no bailout plan yet agreed upon, Japanese and Korean automakers are mostly avoiding commenting on what the U.S. authorities should be doing. For one thing, it might look as if they're crowing when rivals are in need of emergency surgery. Those who have spoken have offered qualified support for U.S. government aid for their struggling rivals. Among them, Nissan Chief Executive Officer Carlos Ghosn and Honda CEO Takeo Fukui have indicated that they back bailouts in principle. Fukui, for instance, said on Nov. 6 that he isn't opposed to the U.S. government helping automakers as long as fair competition is maintained. The Honda boss, who would also like to see the Japanese government intervene to weaken the soaring yen, added that it's only natural for a government to support one of its country's key industries.