The Multinational Monitor


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Bill for U.S-Made Auto Parts

The Right Solution for Industry Woes?

by Jeff Bentoff and Tim Shorrock

A union-sponsored piece of legislation aimed at encouraging more Japanese investment in the U.S. and curbing the global strategy of the auto companies, will soon be voted on in the U.S. Congress. Known as the "local content" or "domestic content" bill, it has encountered stiff resistance from the Reagan administration, Japanese auto firms, and U.S. auto dealers - but only token opposition from domestic automakers.

The "Fair Practices in Automotive Products Act," H.R. 1234, would require car manufacturers to use a specified amount of domestic labor for cars sold in the U.S. If passed, the measure will require auto companies that sell more than 900,000 cars per year in the U.S. to use domestic labor for the production and marketing of at least 90 percent of the cost of those autos by 1986.

Support for local content has practically become the political litmus test for gauging pro-labor sentiment for the United Auto Workers, author and chief lobbyist for the bill. Democratic Presidential candidates Mondale, Cranston, and Glenn have lined up behind the bill, along with liberal economists Robert Heilbroner and Robert Lekachman, the Congressional Black Caucus, and the pro-union Consumer Federation of America. After the House of Representatives voted 215 to 188 in favor of the measure last December, the UAW newsletter "Washington Report" proclaimed a giant step forward in defending the industrial base of the free world," and listed the voters in columns headed "they voted right" and "they voted wrong."

The UAW and Congressional backers of the bill, such as House Energy and Commerce Committee chairman John Dingell (D-Michigan), who personally shepherded the bill through his committee, view it as a weapon in the ever -intensifying trade war with Japan. Support for the bill, retiring UAW president Douglas Fraser said in December, is "a real expression of the frustration of the American people over the lack of fairness and equity in our trading relationship with the Japanese. . .they cannot continue to capture a growing U.S. market share unless they open some factories here and create some jobs here."

Passage would pressure Japanese auto companies to build more factories in the U.S. Already, Nissan and Honda have located in Nashville, Tennessee and Marysville, Ohio respectively, while Toyota has reached agreement with General Motors on a joint venture to produce small cars in Fremont, California.

The measure was passed by the full House during its last session, was reintroduced this session, clearing the House Energy and Commerce Committee on June 21st, and appears likely to pass again this summer. But Senate passage is not considered likely, and President Reagan has vowed to veto the bill if passed by both Houses. In addition, many Congressmen say they are voting for the bill reluctantly.

H.R. 1234 is also aimed at changing the foreign investment practices of American companies. "The primary target of this legislation is Detroit's `world car' policy," says Robert McElwaine, president of the American International Automobile Dealers Association, which represents auto import dealers and strongly opposes domestic content legislation. The "world car" strategy of domestic automakers involves the production of components in countries such as Brazil and Mexico that offer tax incentives, low wages, and access to new markets for car sales. General Motors, for example, built 400,000 engines at its Mexican plant last year for assembly in the U.S., while Ford expects to manufacture at least 740,000 engines abroad this year for domestic use.

Most opponents of the measure view it as protectionist, and predict that jobs could be lost if Japan retaliated with similar measures. Critics include administration officials like Secretary of Commerce Malcolm Baldridge, who told Congress last year that the bill "would handcuff American auto manufacturers.

The big three companies - GM, Ford, and Chrysler - all presently meet H.R. 1234's standard of 90 percent domestic content. But a recent study by Arthur Andersen and Co., an international accounting firm, and the University of Michigan predicts that locally produced components in U.S. domestic cars will fall to 75 percent by 1985 and drop to 65 percent by 1990 if present trends continue.

H.R. 1234 has been proposed in order to slow the process. But the response of the big three automakers has been surprisingly muted; according to one congressional observer, GM, Ford, and Chrysler have been "virtually silent." And in hearings last April, industry spokespersons testified in conciliatory language, declaring themselves "sympathetic to the objectives of domestic content legislation."

Lee Price, a Washington-based economist with the UAW, attributed this soft approach to the inability of the companies to be persuasive with Congress. Because of their time-worn practice of complaining about the costs involved in regulations and then showing they can adjust to them when they pass the companies "don't have credibility, at least with the Democrats," Price says.

But auto dealer president McElwaine has another explanation: "Maybe they are just reluctant to discuss their global production strategies because they would be criticized for exporting American employment abroad. I suspect that may be their reason."

Representatives from GM and Chrysler denied to the Monitor that they plan to increase their amount of foreign production. But these claims should be taken with a grain of salt, asserts Price. The automakers "don't want to be very public about [their plans] because they don't want to rouse the animosity of their employees," he added.

Thus the best explanation may be in the companies' delight in the legislation's visibility - as long as it doesn't pass. Says Price "[the bill] has been a useful vehicle in making the public aware that there's a [trade] problem."

And as McElwaine puts it, "they enjoy having this bill around as a threat to the Japanese."

To some unemployed workers and rank-and-file activists in the UAW, the anti-Japanese nature of the bill sidesteps the issue of corporate responsibility and reinforces racist and anti-foreign stereotypes. "I think the auto worker is being fooled. What's going on here is essentially the UAW leadership trying to get a quick fix to the crisis in the auto industry, and ride the racist and jingoist sentiment in the U.S.," says Mike Parker, a laid off Ford worker and member of UAW Local 600 in Detroit.

Kathy McPherson, Vice President of UAW Local 76 in San Leandro, California - an area hard hit by layoffs and plant closures - argues that local content "skirts the issue of corporate responsibility - their right to close plants, how investments are made, the contract concessions they have demanded. It takes the focus off the plight of our economy, and puts it on Japan."

Parker and McPherson point to racist bumper stickers and leaflets produced by local unions as examples of the antiJapanese character of the bill. "I have a whole set of clippings from locals with slogans equating imports of Nissan, Honda, and Toyota cars with Pearl Harbor, or bumper stickers with a yellow slant-eyed pac-man character being stomped by an American worker," she says.

At the same time that it blames Japanese companies for causing U.S. trade problems, the UAW is pushing Japanese investment in the U.S. and the acceptance of Japanese management practices, union dissidents say. "Japanese management and investment is just a code word for changing work rules," says Parker.

Thus a major reason the auto companies are being quiet about the bill is because it could bring them concessions from their workers. At any rate, their work is being done for them. The Reagan administration and U.S. auto dealers are lobbying against the bill, and most observers give it little chance of passing in the Senate.

Jeff Bentoff, a former intern with Multinational Monitor, is now MM's Midwest correspondent.

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