Japan's Carmakers Face Scrutiny

FOR years Japanese carmakers - with shouts of "racism,Japan-bashing," and "protectionism have effectively parried almost every move by United States lawmakers who wanted to lend a helping hand to the Big Three US automakers.But with trade tensions between the two countries continuing, and with growing concern about the long-term viability of the American auto industry, the cavalry finally appears to be getting ready to ride to the rescue. "No other country would allow the Japanese to have 40 percent of the market," says a former ranking trade official with the Reagan administration who asked not to be identified. But that's precisely the market share that the Japanese could end up with this year. Despite a recession-slowed winter, their sales have been booming in recent weeks even while the Big Three remain stuck in the doldrums. Second-quarter domestic auto industry losses are likely to reach near-record proportions following record losses during the first three months of the year. "There is a growing feeling in Washington that the auto industry is fragile and that it is more important to the nation than lawmakers believed only a while ago," says David Cole, director of the Office for the Study of Automotive Transportation at the University of Michigan. Mr. Cole is one of many experts who believes there is already a quiet government effort under way to use existing laws to punish the Japanese and in turn favor the Big Three. There are signs he may be right: * Both the Commerce Department and the International Trade Commission have agreed to investigate Big Three charges that Mazda and Toyota are "dumping" minivans into the US market - selling them here for up to 30 percent less than the same vehicles go for in the Japanese market. * The US Treasury Department is expected to reject claims that cars built at CAMI Automotive Inc. - an Ontario-based joint venture of Suzuki Motor Company Ltd., and General Motors Corporation - meet the minimum domestic-content requirements of the US-Canada Free Trade Agreement. CAMI, the government claims, may have lied about the value of North American-made parts it uses, and that could mean stiff new tariffs and millions of dollars in back duties. * The US Customs Service is conducting a similar investigation to see if the Honda Motor Company also misreported the domestic content of Canadian-made vehicles shipped across the American border. * Federal investigators are looking into allegedly illegal practices linking Japanese carmakers, suppliers, and their bankers in the tight-knit keiretsu system. * The government is also looking to see if Japanese automakers have misstated their American operating expenses in order to minimize the US taxes they pay. George Borst, Toyota's vice president for US strategy, insists the minivan dumping charges are "ludicrous." The US automakers allege that a Previa sold in this country for around $15,000 would sell for at least 30 percent more in Toyota's home market. Mr. Borst claims that comparison is "faulty," and insists that the Previa sold in Japan is equipped with far more standard equipment. Honda officials deny they have violated any laws. And CAMI officials say that if they misreported their domestic content levels, it was the result of an "innocent" misreading of the free-trade law. But some Japanese industry leaders don't see these investigations as isolated events. "The alleged dumping could be a tool to promote protectionism in trade," says Yutaka Kume, chairman of the Japan Automobile Manufacturers Association. Mr. Kume adds that Japan should act prudently so as not to fuel protectionism, since this is the first time the Big Three have united in calling for action on such an issue. Though Borst denies a direct connection, observers note that Toyota unexpectedly shelved plans to unveil a new full-sized pickup this spring, as had long been expected. The pickup would have challenged the Big Three in one of the few remaining market niches they totally dominate. The former Reagan trade official, now an influential Washington consultant, says the mood in Washington is shifting in favor of US carmakers. "There will be an attempt to make [the Big Three] competitive."