NEWS ANALYSIS : Detroit’s Big 3 Accelerate Effort to Compete in Japanese Market

DETROIT —  As the Clinton Administration steps up pressure on Japan in trade negotiations on autos and auto parts, U.S. car makers are increasing efforts to be more competitive in the lucrative Japanese market.

One example came Thursday when Chrysler Corp. lowered the price of the Jeep Cherokee, its most popular vehicle in Japan, by 10%. The new price tag makes the Cherokee the cheapest imported sport- utility vehicle in Japan, placing it in head-to-head competition with Mitsubishi’s hot-selling Pajero model.

The action follows recent announcements by Ford Motor Co. and General Motors Corp. to expand their auto-parts sales efforts in Japan. In recent months, the Big Three have also opened sales offices, expanded their dealer networks and increased product advertising.

Detroit’s latest attempts to compete in Japan are designed to quell criticism that its poor performance has less to do with market barriers than with an inability to produce vehicles that appeal to Japanese customers.

“The old adage that we are not trying hard enough just doesn’t hold any water,” said Jason Vines, a Chrysler spokesman in Washington.

The burst of activity comes in the midst of strained and long-running trade negotiations with Japan. U.S. trade officials are threatening to impose sanctions on Japan unless steps are taken soon to open up its auto and auto parts markets.

U.S. Trade Representative Mickey Kantor said Thursday in Washington that he is optimistic that the two sides can reach an agreement--even though talks that ended this week left both sides far apart.

“We will not wait forever,” Kantor said. “We are going to insist on the markets being open.”

The talks have heated up as President Clinton has felt growing pressure from Congress to deal harshly with its No. 2 trading partner. The auto sector accounts for 60% of the U.S. trade deficit with Japan.

In recent negotiations, U.S. officials have sought to require Japanese auto makers to “voluntarily” purchase more U.S. auto parts. They also want easier access to dealer networks and deregulation of the spare-parts industry.

Japanese officials, however, complain that the auto parts goals are numerical quotas, which they will not accept. “Purchasing quotas violate both free-market principles and international trade agreements,” said William C. Duncan, director of the Japanese Automobile Manufacturers Assn.

Some Japanese auto makers are worried about the strident tone of recent talks. They fear political pressure may force Clinton to pursue retaliatory sanctions such as higher tariffs on imports of Japanese luxury cars.

“Attacking Japan seems to be safe ground for an embattled administration,” noted Nissan Vice President Don Spetner.

Both U.S. trade officials and auto officials, however, have long maintained that Japan’s policies discriminate against U.S. car manufacturers.

Chrysler Chairman Robert J. Easton said recently that despite significant investments in right-hand drive models and in setting up distribution and service organizations, he is frustrated by “our constant exclusion from the Japanese market and the ongoing laborious negotiations to gain access.”

The company was able to lower the price of the Jeep Cherokee about $3,500 to $30,600 because of the strong yen. The yen has surged in value recently against the U.S. dollar, making U.S. products cheaper in Japan.

Chrysler, which sold 13,600 vehicles in Japan last year, believes it can sell as many as 100,000 there by 2000. “There is one caveat,” Vines said. “The market has to be open.”

Ford and GM also plan to increase auto and auto part sales in Japan. Two weeks ago, Ford began building a $40-million electronics components development in Yokohama in an attempt to increase parts sales to Japanese auto makers. GM’s Delco Electronics Corp. recently opened a Tokyo office and plans to double the staff of the parts unit to 100 this year.