Are Mazda and Toyota dumping minivans in the United States? That's what General Motors, Chrysler and Ford contend.
Companies "dump" a product when they sell it for less than it costs to produce. The strategy: undersell the competition, gain market share and brand loyalty, and eventually, raise the price.Figuring out how products get priced can be as slippery as mercury. So, in trying to get a grasp on the Mazda situation last week, I heard the word "complex" more often than an RX-7 has rpms.
I spoke with officials of Mazda Motor of America Inc., based in Irvine, Calif., just after they returned from Washington, where they testified before the International Trade Commission on the matter.
"What makes this (charge) particularly preposterous is that the MPV has become one of our most profitable products," said Mazda Vice President Jay Amestoy. The MPV minivan was designed in Irvine for the North American market and about 49,000 were sold in the United States last year. However, nearly 90 percent of the minivan market is held by U.S. companies.
For the moment, the government is favoring General Motors, Ford and Chrysler. The Commerce Department said last month that it would increase Mazda's prospective duties to 12.7 percent from 7.19 percent and Toyota's to 6.75 percent from 0.95 percent. The International Trade Commission will announce a final determination in several weeks. A ruling unfavorable to Mazda "could add $2,000 to the price of a minivan," Amestoy said.
Is there substance to the Big Three claims, as has been found in the semiconductor chip industry?
I don't believe so. Let's start by cutting away some of the pricing "complexity," while acknowledging that a comparison isn't as simple as just looking at price stickers.
One example presented in testimony by Mazda compared a 1992 Mazda MPV, Package B, with a similarly equipped 1992 Dodge Caravan SE. In October 1991 the MPV sold for $20,819 while the Dodge, also in October, sold for $19,670, or $1,149 less.
"In most or all cases, the Japanese vehicle was priced at a substantial premium to the American," said George Peterson, head of AutoPacific Group in Santa Ana, Calif. His testimony before the commission was based on his research. Mazda paid Peterson for the study, but the company agreed to let him testify to his findings - whatever they might be.
Turns out Peterson was critical of the Big Three. "For instance, when Chrysler compared their minivans against MPV, they would always put in their anti-lock brake system - but it's not the same kind of brake system," Peterson said.
Well, if minivan dumping isn't the real issue, what is? Maybe it's the less-than-spectacular reception of GM's slope-nosed APV minivan. And maybe these hearings are only a practice run.
Next in the cross hairs could be Japanese luxury cars, which compete with much bigger profit-producers - the Cadillacs and Lincolns of the world.
So there the politically appointed commissioners sat, learning all about anti-lock brakes and 3.4-litre engines and such - as if understanding the mechanics of these vehicles had anything at all to do with the larger political strategies of their producers.
And how they intend to leverage - fairly or unfairly - an administration that wants to draw a tough line on trade.