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NO. 5 -- February 7, 1997

 

Feature Article

ASIA: THE NEXT AUTOMOTIVE PROVING GROUND? by Susan MacKnight

Today the United States, Europe and Japan. Tomorrow Asia. Automotive industry experts around the world agree that the transmission delivering power to the expansion of global car and light truck sales will shift at some juncture early in the 21st century from major vehicle makers' mature home markets to the developing nations of Asia, where continued economic dynamism in time will create a huge group of first-time buyers. This new business road map, while identifying a potentially enormous source of future sales and profits for stalled Big Three manufacturers, troubles Detroit watchers and Detroit executives alike. Asia is Japan's captive market -- or so it is assumed.

This conventional wisdom has some grounding in fact. Through onshore assembly, licensed production, technical assistance, exports or, typically, a combination of market access strategies Japan's 11 automotive producers have built commanding sales positions in Indonesia, Malaysia, the Philippines and Thailand -- the key members of the Association of Southeast Asian Nations. Asean, however, is not necessarily a proxy for conditions of competition in the rest of Asia. Most notably, the eventually far bigger markets of the People's Republic of China and India are up for grabs.

Capitalizing on the sales opportunities opening up over the next 20 or so years in these two countries as well as elsewhere across Asia will require substantial up-front investments soon that might not pay off for a considerable time. Moreover, the resolve of foreign vehicle makers making a long-term commitment to Asian markets could be tested by the vagaries of policymaking in regional capitals on trade liberalization and other make-or-break sales-related issues.

These risks no longer deter the Big Three, which generally have been less globally focused than their Japanese and European rivals or even the upstart South Korean industry. General Motors Corp., Ford Motor Co. and Chrysler Corp. are beginning to position themselves for the takeoff of Asian vehicle sales. They are committing to plants in selected markets, encouraging their parts suppliers to set up shop in the region and investing in sales and service networks as part of a still evolving broader strategy to be players -- if only number two or number three -- in major economies.

U.S. automotive companies also are moving aggressively into Brazil and Argentina, driven by the belief that the sales and profit potential of nontraditional international markets could be realized first in these fast-expanding Latin American economies. Much of the competition, whether Japanese, European or South Korean, has come to the same conclusion, too. The next proving ground for the world's leading car and light truck builders consequently could be located in America's backyard rather than in Japan's.

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Weekly Review

Hashimoto, Fujimori Agree To Preliminary Talks With Rebels by Barbara Wanner

In an effort to create an opening in the 45-day hostage standoff in Peru as well as to ease tensions in bilateral relations concerning Lima's handling of the crisis, Prime Minister Ryutaro Hashimoto and Peruvian President Alberto Fujimori agreed February 1 to initiate preliminary talks with members of the Tupac Amaru Revolutionary Movement aimed at paving the way toward formal negotiations on a resolution. The Peruvian government and the Marxist rebel group already have consented to form a mediation panel.

 

Uncertain Role For Trade Policy In Second Clinton Term by Christopher B. Johnstone

Clinton administration officials rarely are short on rhetoric emphasizing the importance of bringing down global barriers to trade and expanding American exports. The January 29 Senate confirmation hearing for Charlene Barshefsky, President Clinton's nominee for U.S. Trade Representative, was no exception. Noting her belief that "trade can contribute to the prosperity of both the [United States] and our trading partners," the current acting USTR cited the White House's by now familiar list of accomplishments on the trade front. The nominee also pledged continued action at the multilateral, regional and bilateral levels.

 

Japan's Money Supply And Prices Stable In 1996 by Douglas Ostrom

As Japanese policymakers in recent years have debated appropriate measures regarding the sluggish Japanese economy, they largely have been able to ignore one potentially serious problem -- inflation. Although Japan suffered through double-digit annual price increases in the wake of the first oil crisis in 1973, recent years have been characterized by remarkable stability on the price front, at least if attention is confined to the prices of goods and services (see Table). Last year proved to be no exception, as domestic wholesale prices declined for the fifth consecutive time and consumer prices edged up a mere 0.1 percent.

 

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