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Tread Marks On Detroit


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TREAD MARKS ON DETROIT

Candidate Bill Clinton knew how to get smiles from Detroit's Big Three auto makers: pledge to restore a 25% truck tariff on Japanese minivans and all-terrain vehicles. The grins widened when President Clinton acted as if he were going to follow through on his promise by blasting the current low tariffs as "a $300 million-a-year freebie" handed to Japan by George Bush.

Suddenly, though, the euphoria is over. On May 14, a federal court in New York shot down 25% duties on Nissan Motor Co.'s two-door Pathfinder sport-utility vehicles. Judge Jane A. Restani of the U.S. Court of International Trade ruled that while the vehicle shared some engineering characteristics with trucks, the Pathfinder's design "virtually shouts to the consumer, `I am a car, not a truck."' This reasoning, concedes one key U.S. government official, "makes it very difficult" for the Treasury Dept. to press tariffs on four-door sport-utility vehicles, much less passenger minivans.

JUGGERNAUT. The decision is a blow for Detroit--and not just because it denies U.S. carmakers the price edge they had sought. More ominously, the ruling demonstrates the riskiness of carmakers' strategy of relying on government help to halt the Japanese export juggernaut.

The Nissan ruling is the latest in a series of lobbying setbacks for Detroit. Last February, negative press and weak White House support forced the Big Three to drop plans to file a major antidumping case against seven Japanese car exporters. Critics charged that such a move would have been a blatant appeal for protectionism. Detroit was also dismayed with a Feb. 19 Commerce Dept. decision to grant Nissan special foreign-trade-zone status for an expansion of its giant Smyrna (Tenn.) facility.

The Big Three had complained that the zone enabled Nissan to import parts duty-free to Smyrna. That will make the plant even more competitive with rival U.S. auto facilities. The decision also makes it much less likely that Chrysler, Ford, and GM will challenge Toyota's pending request for foreign-trade-zone status for its U.S. plant expansion.

American carmakers aren't about to give up seeking government help, though. Industry lobbyists have been closely involved in fashioning the sweeping new Japan policy soon to be unveiled by a White House interagency task force. The new policy is almost certain to set numerical targets for increasing the paltry 16,000 units per year exported to Japan by the Big Three. And at the behest of Detroit, Commerce Secretary Ronald H. Brown and U.S. Trade Representative Mickey Kantor plan to step up their campaign to get the Japanese to purchase more U.S. parts. Detroit, says David E. Cole of the University of Michigan, aims to "keep the heat on."

Industry insiders say Detroit is also beating a path to Capitol Hill to overturn the Nissan decision. Officially, Ford, Chrysler, and GM are downplaying the ruling in the five-year-old dispute as a sideshow in U.S.-Japan trade relations. "This would be old news if the President hadn't raised it recently," says Stephen Collins, director of international economics for the American Automobile Manufacturers Assn. "We have much broader goals now." But industry sources say the companies still hope to have the tariff imposed legislatively. Such an effort passed the House but failed narrowly in the Senate last year.

SOLIDARITY. It's not clear where the Administration would stand on such a bill. While the President continues to blow hot on trade, his advisers are sharply divided over the minivan issue. Even trade hard-liner Laura D'Andrea Tyson, who chairs the Council of Economic Advisers, has sided with Treasury Secretary Lloyd M. Bentsen in opposing higher fees on foreign minivans. They have argued that raising tariffs without formal charges of trade violations amounts to protectionism, pure and simple. But Kantor, who served as Clinton's campaign chairman and remembers his promises, supports the move as a show of solidarity with the auto industry.

Ironically, Detroit is seeking aid in a market where it is king. Led by Chrysler Corp., the U.S. dominates the minivan sector with 90% of sales. And the strong yen will make it difficult for Japan to drop prices to expand market share. If it cares to, Detroit can learn several lessons from the Nissan case. One is that the government isn't a dependable ally. Another is that the auto industry doesn't always need Uncle Sam's help to compete successfully.MORE HELP WANTED

FROM UNCLE SAM

TARIFFS A federal trade-court judge took a test drive in a Nissan Pathfinder

and promptly shot down its 25% tariffs. That means Detroit probably won't win

the higher tariffs on imported minivans.

DUMPING With White House support lukewarm, the Big Three pulled back from

filing a dumping case against seven Japanese car exporters.

DUTY-FREE ZONES Over Detroit's opposition, the Commerce Dept. granted an

expanded Nissan plant special foreign-trade-zone status. Toyota may get a

similar deal.

DATA: BUSINESS WEEK

Douglas Harbrecht in Washington, with James B. Treece in Detroit


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