Slippery Roads

Japanese autos invade Europe

The plight of the European auto industry sounds all too familiar to depressed American carmakers. Sales in 1980 declined an estimated 12%, while Japanese imports climbed nearly 30%. Thousands of workers were laid off or had their hours cut back last year, and losses by major car manufacturers are staggering. France's Peugeot S.A. lost an estimated $33 million in 1980, and BL Ltd. (formerly British Leyland), maker of Triumph and Jaguar, ran $960 million in the red. In fact, BL Ltd.'s very existence depends on its receiving $2 billion in government aid to help pay for development and introduction costs of a new 59 m.p.g. Mini-Metro model.

The aggressive Japanese are a key factor in the European auto slump. Hardest hit are countries that do not have an agreement with Japan to limit imports. In Sweden, for example, Volvo and Saab assembly lines have been working three-day weeks. The Japanese have increased their market share in that country from 1% in 1970 to 14% at present.

Japanese-made autos currently command 10.3% of sales in West Germany, almost double the level of just one year ago. Because of lower labor costs, more efficient production and currency differences, a Toyota now sells in West Germany for up to 20% less than a Volkswagen. A recent cover on the German newsmagazine Der Spiegel showed a yellow car with slanted eyes for headlights and buck teeth projecting over the bumper. Since West Germany ships 27% of its national production of goods abroad, the Bonn government thinks that it cannot impose import restrictions on Japanese cars without risking a damaging trade war. But pressure from labor unions is growing. Volkswagen this week had to put 6,700 of its workers on a shortened work schedule.

France and Italy, on the other hand, have stringent import restrictions that have prevented the Japanese from capturing more than 3% of the local markets. The success of its economical R-5 (known as Le Car in the U.S.) helped France's Renault to increase sales last year by 11%. Italy's Fiat expanded its share of the local market from 50.9% to 52.3%, despite weak demand for its larger models and intermittent strikes that reduced production in September by 48%.

So far, the Europeans have not been able to agree on a unified approach for battling the Japanese. In November, auto-industry representatives from France, Italy, Sweden, West Germany and Britain went to Tokyo to plead for export restraints. But at exactly the same time, Volkswagen Chairman Toni Schmuecker was busy arranging an important deal with Nissan, maker of Datsuns, that could eventually lead to the production of up to 200,000 Volkswagens in Japan. Said one Volkswagen official: "I think there's an American saying for it: 'If you can't beat 'em, join 'em.' "

The Europeans will have to move quickly to fight Japanese competition or they will lose even more, of their auto market. Experts predict that next year Europe will import more cars than it exports. By 1985, according to forecasters, the Japanese may have captured nearly 15% of the British market and 17% of West Germany's new car sales. The Japanese now have 21% of the U.S. auto market. European automakers, like their American counterparts, will have to face the Japanese challenge by obtaining more cooperation from often fractious labor unions, boosting productivity and turning out cars that can compete with the Japanese in price and appeal. qed

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