Mapping the Defense of Detroit

A Reagan plan for a Government-industry-labor "compact"

As it has been for all too long, the news out of Detroit last week was not good. General Motors announced a recall of 6.4 million cars, the second largest call-back in history, to fix defective axle bolts. Big Three auto sales continued to slump, falling 23.7% during the middle ten days of February. Chrysler got another $400 million in federally guaranteed loans but had to write checks for $350 million to unpaid suppliers. The company also announced the size of its 1980 loss, which, as expected, was the largest ever suffered by a U.S. corporation; at $1.7 billion, it was appreciably worse than the previous record--the $1.5 billion loss reported by Ford just eight days earlier.

The Reagan Administration is quietly trying to do something about the industry's malaise by attempting to put together a plan that would help get Detroit back on its feet, with aid and direction from Washington. It is tinkering with a proposal worked up late in the Carter Administration for the development of a three-way "compact" among industry, labor and Government to restore the health of the carmakers. In broad terms, the Reagan Administration aims to use a promise of a curb on Japanese imports as a carrot to get all of Detroit to accept the kind of changes in traditional ways of doing business that Chrysler and its union agreed to in return for loan guarantees. Explained William Brock, Reagan's Trade Representative, who met last week with one of Japan's top trade officials: "Any negotiations on imports must be part of an overall program to revitalize the U.S. auto industry."

Secretary of Transportation Drew Lewis broached the plan to auto executives in Detroit late last month. Though the specifics have not been hammered out, the Administration hopes to get the companies to sell harder in overseas markets, put more money into plant modernization and research, improve quality control and slash overhead costs. That would include deep cuts in the ranks of executives. The United Auto Workers will be asked to accept wage restraints, perhaps in return for profit sharing.

Though the companies want the Japanese tide curbed, they are unsure how much they can do in terms of meeting the Administration's goals. After two years of slumping sales, they have already cut their payrolls deeply, and what few dollars they can spare are being plowed back into programs to build smaller cars. Says one automan: "I'm in favor of this in principle, but I think Lewis is being a little naive." The U.A.W., which is already under pressure from GM and Ford to agree to the kind of wage and benefit concessions that Chrysler workers accepted, is prepared to negotiate some sacrifices, but not until its current contract ends in 1982.

If the automakers and the U.A.W. join the compact, the Administration says, it will try to negotiate restrictions with the Japanese, who last year brought in 1.9 million vehicles and garnered a record 21% of U.S. auto sales. The Administration is suggesting that it will get the Japanese to accept an import limit of about 1.7 million cars annually--if Detroit falls in line quickly. Reagan wants to have the industry concessions in hand and an agreement negotiated with Japan before May, when Prime Minister Zenko Suzuki is scheduled to visit Washington.

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