Amy Sancetta  /  AP file
A Toyota dealership in Bedford, Ohio. Toyota is showing such robust sales growth that some officials fear a replay of the "Japan-bashing" trade friction of the 1980s, when Toyota and others were blamed for stealing U.S. jobs.
updated 5/16/2005 7:03:38 PM ET 2005-05-16T23:03:38

When the heads of General Motors and Toyota met in Japan over the weekend, their concerns could not have been more different: GM is losing money and market share, while its Japanese rival is worried about doing too well and sparking a protectionist backlash in the United States.

Some analysts say it is only a matter of time before Toyota surpasses General Motors Corp. as the world's No. 1 automaker.

GM's problems are many. Saddled with huge health care and pension liabilities, it lost $1.1 billion in the first quarter. Its bonds were just downgraded to junk status. Its stock hit a 10-year low in April.

Toyota Motor Corp., meanwhile, reported $2.8 billion in profit in the same quarter and commands an edge in the market for environmentally friendly hybrid vehicles, which run on a combination of electricity and gasoline.

The companies' divergent fortunes — symbolic of the two nations' broader auto industries — have Japanese auto and government officials worried about a replay of the "Japan-bashing" trade friction of the 1980s, when Toyota and others were blamed for stealing car sales and U.S. jobs, prompting outraged auto workers to smash Japanese cars in protest.

The U.S. Big Three automakers — GM, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group — have seen their combined U.S. market share fall from more than 63 percent four years ago to about 57 percent, according to research firm Autodata Corp. During that same period, Asian makers have boosted their share from 30 percent to 36 percent.

GM Chief Executive Rick Wagoner and Toyota President Fujio Cho met over the weekend near Toyota's headquarters in what was described Monday as a courtesy call reaffirming the longtime partnership of the two companies.

The two executives and Toyota president-elect Katsuaki Watanabe met Saturday over dinner in Toyota city after Wagoner visited the nearby 2005 World Expo in Aichi, said Toyota spokesman Paul Nolasco.

But he denied Japanese media reports that Cho and Wagoner discussed sharing hybrid technology or setting up a joint venture on fuel cells.

Toyota and GM already have a partnership but it does not involve investment stakes in each other. They run an auto plant in California together and exchange research under a 1999 pact to jointly develop environmental technology.

The meeting between Cho and Wagoner comes at a time when Toyota’s rosy fortunes contrast with GM’s losses.

Toyota Chairman Hiroshi Okuda caused a stir recently by saying he was considering raising prices on Toyota cars in the United States in a bid to aid ailing U.S. rivals, as well as sharing technological research with American automakers.

"The decline of the once invincible American auto industry in the face of Japanese competition could set off a nationalistic backlash among American consumers," the Japanese daily Asahi Shimbun warned in a recent editorial. "There is every reason for Japanese automakers to work hard to avoid unnecessary conflict."

Such fears are overblown, analysts say.

For one, the Bush administration is much more concerned about imports from China than Japan. In fact, after leaving Japan GM's Wagoner traveled to China, where he is scheduled to speak at a business forum this week.

And over the years, Toyota, Honda Motor Co. and Nissan Motor Co. have made a point of opening plants in the United States and buying U.S.-made parts.

Also, Japanese cars are not only popular, they're viewed as setting the standard. Americans are global consumers, seeking the best quality and price on products, regardless of where they are designed or made.

"Ultimately, U.S. consumers are consumers first and citizens second. Most people don't really think about where their vehicles are made," said Walter McManus, an auto analyst at the University of Michigan Transportation Research Institute.

"The attitude of 'buy American' — in cars at least — is pretty much gone," he said.

If anything, McManus said, Okuda's comments about raising prices on Toyota cars to help GM could backfire, at least among U.S. autoworkers.

"It may have been said with the best intentions, but it sounds condescending," he said.

Still, Japanese automakers remember well the trade friction from the 1980s and the Clinton administration's threat to curb Japanese auto imports 10 years ago for alleged unfair trade practices. And as a country heavily dependent on exports, Japan wants to do everything possible to avoid trade friction with the United States, its biggest market.

"The executives of Japanese automakers today all endured tough times back then and don't want to see a repeat of that history," said Koichi Sugimoto, auto analyst with Nomura Securities Co. "They can't help having that gut level reaction."

AP file
Unionized auto workers reduce a Toyota Corolla to scrap metal in this 1981 rally against buying foreign-made products. Some analysts say it is only a matter of time before Toyota surpasses GM as the world's No. 1 automaker.
Clyde Prestowitz, a former trade negotiator in the Reagan administration, said a massive slowdown in the U.S. economy could chill ties with Japan.

"In a booming U.S. economy, it's fine. But if there's any kind of economic downturn, I wonder what the politics of that are," Prestowitz said.

A significant step toward closer cooperation between U.S. and Japanese auto companies would be a possible joint venture between GM and Toyota to produce environmentally friendly hybrid vehicles or fuel cell vehicles in the United States.

The venture would allow the world's two biggest automakers to share the costs of developing fuel cell cars — which many in the industry believe will eventually replace gasoline-powered vehicles. Fuel cell vehicles emit no pollution because they run on power produced when hydrogen stored as fuel in the car combines with oxygen in the air to make water.

The Nihon Keizai Shimbun, Japan's biggest business daily, reported Thursday that Cho and Wagoner could discuss the project at their meeting Saturday, although the report denied a deal was imminent. GM's spokesman for advanced technology Scott Fosgard denied that any specific talks about a technology pact were planned.

In another move that could be seen as trying to warm ties with the U.S., Toyota said earlier this year that it will build hybrid vehicles at a plant in the United States. According to a report on the Kyodo News wire service Thursday, Toyota picked its plant in Georgetown, Kentucky, as the production site, but Toyota officials would not confirm the report.

Toyota and GM already have a partnership, although it does not involve investment stakes in each other. They run an auto plant in California together and have exchanged research before, including a 1999 pact to work on environmental technology together.

Still, the worries keep looming.

Prime Minister Junichiro Koizumi and U.S. Chamber of Commerce President Thomas Donahue discussed concerns about GM at a meeting Thursday.

Koizumi told reporters he had also met with Okuda, who said he was very worried about the plight of American automakers, and they agreed on the need to work out cooperative relations with U.S. automakers.

"The auto industry is a symbol of the United States, and we wish the best for GM," Koizumi said.

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