Early Warning

Auto bonuses could backfire

Trade Representative William Brock has been one of Detroit's best friends. For three years, he helped pressure the Japanese into accepting quotas on their auto exports to the U.S. But last week he sounded like a friend betrayed. Angered by the huge bonuses being given auto executives. Brock warned that the Reagan Administration, if reelected, would probably not ask Japan to renew the quotas when they expire next March. "Our reluctance," he told the Washington Post, "would be a mile wide and a mile deep." Brock admitted that he was not speaking for the White House, but added, "I don't know of anyone in the Administration who will disagree with me."

Ending import curbs would threaten the auto companies' high-octane recovery. Sales of U.S.-built cars surged 36% in the last ten days of April, and the industry expects a record $10 billion profit this year. It is in this atmosphere that Detroit paid out a grand total of $314 million in bonuses for 1983. General Motors paid bonuses that averaged $31,289 to 5,807 executives, while Ford gave an average of $13,372 to 6,035 managers. If shareholders agree, Chrysler plans bonuses that average $35,222 for 1,465 executives. Says Ford Chairman Philip Caldwell: "We cannot run a successful company with mediocre people. We have to offer incentives."

The United Auto Workers argues that if quotas are lifted, the Japanese share of the U.S. market will jump from about 22% to 40%. By the union's count, 200,000 American jobs would be lost. Says U.A.W. President Owen Bieber: "Brock apparently wants to punish the workers for the greed of their bosses."

Peter Zaglio, an industry expert with the investment banking firm Lehman Brothers Kuhn Loeb, predicts that an end to quotas would slash auto profits by more than 50% in 1985. Ford and American Motors would suffer the worst setbacks because they have made no deals to distribute Japanese cars. Chrysler might be able to maintain its market share by selling more models from its Japanese partner, Mitsubishi. The only company to favor a removal of import curbs is General Motors, which plans to sell Suzuki and Isuzu cars through its Chevrolet dealers.

Quotas have helped boost the average price of an American car by 17.4%, to $10,527, since 1981, while imports have gone up 23%, to $11,008. To some degree, Brock pointed out, American consumers are paying for those hefty Detroit bonuses.