1
It is difficult to separate fact from rhetoric on this matter. The Japanese are targeting fuel economy in Japan (U.S. Department of Commerce and Motor Equipment Manufacturers Association, 1990) under the threat of tougher U.S. corporate average fuel economy (CAFE) laws and the possibility that Japan will adopt its own version of CAFE standards, and because the price of gas is nearly $4 a gallon there and the Japanese government has been critical of declining fuel economy. Nonetheless, it must be noted that in general, on a class-by-class basis, U.S. cars currently have better fuel economy than similar Japanese cars. In its presentation on November 4, 1991, to the Standards and Regulations Subgroup of the committee (see Appendix F), General Motors noted that for MY 1990 cars, if the sales mix of its vehicles had been the same (by size class and transmission types) as its principal Japanese competitors, its CAFE rating would have been as follows: GM with a Honda mix, 31.6 vs. Honda's 30.8 mpg; GM with a Nissan mix, 29.4 vs. 28.4 mpg for Nissan; GM with a Toyota mix, 30.3 vs. 30.6 mpg for Toyota. General Motor's actual CAFE rating for MY 1990 was 27.1 mpg.
2
Labor and overhead costs are relatively constant over all models. Nonetheless, on average, trucks contribute more profit per unit, followed by large luxury automobiles. Trucks are redesigned infrequently, so tooling investment per unit is relatively low. Historically, small cars have been less profitable than large cars, and there has been greater competition in this market segment from imports. Larger cars can command higher prices because of their size and features. Moreover, as discussed herein, the CAFE standards may themselves establish pressures on manufacturers to reduce the prices of small, fuel-efficient cars to ensure compliance.
3
The Japanese share of the U.S. automotive market rose from 19.6 to 28.1 percent between 1980 and 1990. The Japanese share of the light-truck segment has consistently trailed that for automobiles. In 1980, the Japanese share of light-truck sales was 10.1 percent, rising to 16.1 percent in 1990. The 25 percent tariff on imported two-door trucks limits profitability and, in addition, the Japanese do not, as yet, produce many popular types of light trucks, such as standard-size pickup trucks, vans, and sport-utility vehicles.
4
In 1985, Britain, France, West Germany, Japan, and the United States met at New York's Plaza Hotel and reached agreement on depreciating the dollar, which made it cheaper for foreigners to buy U.S. Goods.
5
Their U.S. factories benefit from a young, skilled work force. They have virtually no pension liabilities as yet, and health care costs are low because of the young work force and lack of retirees. They are also not burdened by the need to provide wages and benefits to workers displaced by plant closings. In addition, states that won transplant investment provide incentives in the form of funds for training workers, tax abatements, and so forth.
