When President Clinton announced plans to slap sanctions amounting to 100 percent tariffs on 13 Japanese luxury cars arriving after May 20, many Japanese auto dealers braced for a stampede of American consumers eager to buy before the sanctions took effect.
That was the only way consumers could avoid shelling out $57,800 for an Infiniti I-30 rather than the regular sticker price of $28,900, or $120,000 for a Lexus LS400, instead of $60,000, after the sanctions took effect June 28, many dealers said.
But despite the talk of panic-buying and shuttered dealerships, a surprising calm prevails in the showrooms of Lexus, Infiniti, Acura, Mitsubishi and Mazda dealerships-at least for the time being.
“We’ve only experienced a slight uptick in `sanction buying,’ ” said Rick Sbragia, general manager of Lexus of Naperville. “People aren’t panicking . . . they seem to be holding back . . . waiting to see what will happen.”
Other dealers reported similar patterns in their showrooms, indicating that many consumers are convinced some kind of compromise will be worked out before the sanctions go into force.
The Clinton administration is poised to impose the sanctions if Japan fails to open its auto and parts markets by June 28. Both sides have taken their case to the newly created World Trade Organization, while trade officials from both countries are still trying to work out a compromise.
“Most people who buy these luxury cars are fairly affluent, well-educated people,” said Walter Huizenga, president of the American International Automobile Dealers Association in Washington, D.C. “They have followed the trade dispute and they are not motivated by fear.”
As for the 2,028 foreign car dealers in America and their 81,000 employees, there is some fear, said Huizenga. But the fear is moderated by the support Japanese manufacturers have shown for their dealerships in America.
“I think Lexus will support us,” said Sbragia. “So far, Toyota (which makes the Lexus) is putting money into a special escrow account that is equal to the tariff that will be applied to cars imported after May 20. In other words, Toyota is eating the tariff and not passing it on to us.”
Nissan North America said it was engaging in a similar practice.
“We will eat the sanction charge for all cars landing in the U.S. after May 20 and until June 28,” said Nissan North America spokesman Fred Standish. “But we can’t do that indefinitely. This alone is going to cost us about $100 million.”
Other Japanese automakers have taken a different tack. Mitsubishi has halted production of its Diamante models, according to Huizenga, while Acura and Mazda have not shipped any targeted cars to the U.S. since May 20. Nissan will cease production of its targeted vehicles June 10.
Only Toyota is continuing to ship cars-though in limited numbers. It cut its shipments for June from 8,000 to 3,000 in what Huizenga said was a defensive maneuver.
Meanwhile, the Americans who work for Japanese automakers, dealers and those who represent them in organizations like the American International Automobile Dealers Association and the Japanese Automobile Manufacturers Association, are going on the offensive.
They will have their first opportunity to speak out against the punitive tariffs during a one-day public hearing by the U.S. Trade Representative’s office Thursday.
At least they are supposed to have an opportunity, said Standish of Nissan America. But the trade representative’s office has scheduled all 44 anti-sanction witnesses during the afternoon session, beginning at 2 p.m.
“This is a kangaroo court,” said Standish. “It is lopsided and stacked against us. The Big Three will have all morning and part of the afternoon to voice their support of the sanctions, and all those opposed to them will be talking at midnight.”
In an effort to get their views before the public, those representing the Japanese auto industry have taken the unprecedented step of releasing their comments to the press one day before the hearings.
“These sanctions are inappropriate, indefensible and illegal,” said William C. Duncan, general director of the Japanese automobile group. “The administration is being urged on by Ford, General Motors and Chrysler and a few of their suppliers. They are all arbitrarily punishing American consumers, the owners of Japanese dealerships and their employees.”
Timothy C. McCarthy, vice president, government affairs, for Nissan North America, begins the statement he will make Thursday this way:
“It is customary to begin testimony by saying good afternoon. In my view, however, it is hard to find the `good’ in this proceeding and therefore this day.”
