Mich. congressmen tie auto woes to Japan

Ascendent Democrats view yen as a subsidy

February 02, 2007|By Justin Hyde | Justin Hyde,Detroit Free Press

WASHINGTON -- The ascendance of Michigan's congressional Democrats may grant Detroit automakers a long-held legislative wish - a full hearing of their complaints that Japan uses its currency to boost its automakers.

In his first salvo since regaining the chairmanship of the House Energy and Commerce Committee, Rep. John D. Dingell sent a letter to Treasury Secretary Henry M. Paulson Jr., asking him to answer several questions about the Bush administration's stance toward Japan by March.

The Michigan Democrat noted in the letter released yesterday that U.S. imports of Japanese vehicles surged last year, and said the weak yen amounted to a $4,000 subsidy per vehicle.

"For much of the last decade, Japan has intentionally weakened the value of the yen to support its exports to other nations and, more specifically, to gain an advantage within the U.S. market," Dingell wrote. He indicated that the strategy has helped Japan at the expense of the domestic auto market.

News of Dingell's letter came on a day when Ford Motor Co. and General Motors Corp. reported that they got off to inauspicious starts in the new year, with steep January U.S. sales declines that both struggling automakers blamed on their deliberate moves away from rental fleet sales.

Ford's 18.9 percent slip to 166,835 cars and trucks from 205,671 in January 2006 also illustrated what many industry observers see as a product lull for the Dearborn, Mich., manufacturer as it pushes through its sweeping restructuring efforts.

GM posted a 16.4 percent decline in for the month to 247,464 vehicles, also squarely blaming its steady retreat from the rental car market.

At the same time, Toyota Motor Co., including its luxury Lexus brand, tightened its grip on the No. 2 position in the U.S. market, with a 9.5 percent increase for the month to 175,850 vehicles.

DaimlerChrysler, which eased past Ford to hold the No. 3 spot in the U.S., surprised industry observers early. The German-American car giant turned in a slight improvement, led by a 37 percent surge in its rejuvenated Mercedes-Benz luxury division.

By weakening the value of a currency relative to the U.S. dollar, countries can make their exports cheaper to U.S. customers, although at considerable costs to their own economy.

Many lawmakers have been far more concerned with China, which keeps the value of its yuan closely tied to other currencies, than with Japan, which hasn't directly moved in currency markets since 2004.

Paulson told a Senate panel Wednesday that while he watches the yen's value "very, very carefully," he did not think the Japanese government was artificially suppressing its value - a thought he shared with the heads of GM, Ford and the Chrysler Group in November when they met with President Bush.

"This is an economy where there's been weak growth, where there's been deflation, and so interest rates are very low. And I think it's those economic fundamentals that are driving it," Paulson told the Senate banking committee.

"The things that concern me are currencies where the value isn't determined in a competitive marketplace, and the yen has a broad, deep, competitive marketplace."

Detroit automakers, led by GM chief executive G. Richard Wagoner Jr., have been agitating for more government action against Japan for years, saying an artificially weak yen was bestowing a windfall on well-financed Japanese competitors.

Japan's automakers routinely admit that the yen boosts their profits: Honda Motor Co. said yesterday that of the $1.2 billion in profits it earned last quarter, about $87 million were due to a weaker-than-expected yen.

Dingell's committee does not have direct jurisdiction over Paulson or Treasury Department issues, but other Michigan Democrats are well-positioned to press Detroit's currency arguments.

Democratic Sen. Debbie Stabenow won a seat on the Senate Finance Committee, and Democratic Rep. Sander M. Levin is chairman of the trade subcommittee of the House Ways and Means Committee.

With those positions, "there's a much better chance the message will get more traction," said Brian Pomper, a lobbyist and former counsel to the Senate Finance Committee.

Pomper also said it was likely that Congress would launch a bill against currency manipulation this year. Previous bills have not targeted specific countries, but attempted to set guidelines for defining manipulation.

MarketWatch contributed to this article.

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