Contemplating Life if GM Fails

I think there’s some validity to these concerns voiced by the head of Toyota:

OSAKA, Japan (Reuters) – The outspoken chairman of Toyota Motor Corp. said on Wednesday he feared the possibility that U.S. policy could turn against Japanese auto makers if local giants such as GM and Ford were to collapse.

“Many people say the car industry wouldn’t revisit the kind of trade friction we saw in the past because Japanese auto makers are increasing local production in the United States, but I don’t think it’s that simple,” Hiroshi Okuda told a news conference. “General Motors Corp. and Ford Motor Co. are symbols of U.S. industry, and if they were to crumble it could fan nationalistic sentiment. I always have a fear that that in turn could manifest itself in policy decisions,” he said, speaking as the head of the nation’s biggest business lobby, the Japan Business Federation.

One likely policy change that I could imagine in the face of a potential collapse of GM or Ford would be a government bailout along the lines of the Chrysler bailout. But I think that Okuda was referring to other types of “policy changes” – e.g. tariffs and quotas on Japanese cars, or even on other Japanese goods. Such trade protection would be of limited use in the car industry, since so many Japanese cars are now made in the US… but perhaps they would be combined with higher local (i.e. US) content rules as well. Of course, a large fraction of Ford, GM, and Chrysler cars are produced outside of the US as well…

Most worrying of all, however – and not at all out of the question if a GM or Ford fails – might be the imposition of across-the-board import tariffs by the Congress. Such import tariffs would do nothing to help the US current account deficit, but they would help US firms that compete with imports, while at the same time reducing economic growth both at home and abroad…