GM's Price Hike Confirms Need to Abolish Car Import Quotas

By Samuelson, Robert J. | American Banker, April 9, 1986 | Go to article overview

GM's Price Hike Confirms Need to Abolish Car Import Quotas


Samuelson, Robert J., American Banker


GM's Price Hike Confirms Need To Abolish Can Import Quotas

EVEN GENERAL MOTORS IS NOT powerful enough to overrule the laws of supply and demand. Its recent announcement of a 2.9% price increase -- following last fall's 3% increase and in the face of declining sales -- simply confirms that the U.S. car market remains fundamentally uncompetitive. What GM has done is to provide a reason for eliminating the basic cause of the problem: quotas on Japanese imports.

It's madness. GM raises prices while shutting factories to reduce excess inventories. The action can only be a desperate attempt to increase profits. But sales have been so slow that the auto companies may be forced to adopt new "incentives" -- possibly low-interest loans -- to revive them. GM apparently hopes that this calculated confusion, raising prices with the left hand and lowering them with the right, will create higher overall prices. It's a contemptuous attitude that assumes car buyers are morons.

What gives it a slim chance of success is the artificial ceiling (2.3 million units annually) on Japanese imports. In competitive markets, excessive prices result in lost sales. But the Japanese cannot respond by increasing their own sales. Indeed, because each Japanese company has a quota, no individual company can increase its market share against the others by shaving prices. Although Ford and Chrysler might exploit GM's price increase, they usually follow GM's price leadership.

Import Quotas Should Be Scrapped

The perfect place to undo the auto quotas is the Tokyo "economic summit" of the major industrial countries in May. The United States and Japan would have to act together, because Japan -- under American pressure -- adopted the restrictions "voluntarily" to minimize U.S. protectionism. But it's doubtful the Japanese would keep the limits if asked by the Reagan administration to drop them. The President ought to exact additional concession from Japan to open its market, while pledging to veto any future congressional quotas.

Anyone who has watched the administration on this issue cannot be optimistic. Despite embracing free trade, the White House pushed Japan to impose the quotas in 1981. It has never completely reversed itself, even though the reasons for the "temporary" restrictions -- to allow U.S. companies to convet to fuel-efficient cars and to soften the effects of a slumping economy -- have disappeared. Since 1983, profits of the "Big Three" U.S. producers (GM, Ford, and Chrysler) total $24 billion.

Ending the restrictions is not a favor for Japan. Rather, their continuation poses twin threads to the U.S. economy. By encouraging GM to raise prices, they hamper economic expansion and abet inflation. Although inflation is low, the depreciation of the dollar -- which raises the prices of imports -- is one remaining problem. And Japanese car and light truck imports ($19.6 billion in 1985) are a significant part of that problem, accounting for 8% of manufactured imports. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

GM's Price Hike Confirms Need to Abolish Car Import Quotas
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.