DETROIT — Mazda Motor Corp. is indefinitely postponing the construction of its first U.S. auto assembly plant and might abandon the project altogether, company officials said Friday.
Mazda announced its decision to delay the April 24 ground-breaking ceremony at its Flat Rock, Mich., plant site in the wake of the federal government's decision Thursday not to issue a $20-million urban development grant for the project.
Mazda also said the $450-million project's fate has been threatened by the inability of its Japanese building contractor to win labor concessions from the Detroit building trades council, which represents the construction workers who will build the plant.
Mazda spokesman Ron Hartwig said the federal subsidies "or their equivalent" are "critical" to the future of the plant. He also said that "unless an acceptable agreement is reached with the building trades council, the project can't go forward."
Hartwig added that Mazda executives will meet in Japan next week to decide the future of the Michigan plant.
Mazda's warning comes just as import quotas on Japanese cars are about to end on Sunday, after four years of restraints that have severely restricted the number of cars Mazda and other Japanese auto makers have been able to import into the United States.
It also follows immediately after the Japanese government's announcement Thursday that, once the quotas are lifted, it will allow Japanese auto exports to the United States to rise by more than 24%.
Mazda officials insisted that the ending of import quotas had nothing to do with their decision to delay the start of construction at the Flat Rock plant.
"The decision to proceed has never been based on the continuation of voluntary restraints," Hartwig said. The plant isn't scheduled to begin car production until 1987, and so Mazda's plans for the facility couldn't have been swayed by whether quotas were continued in 1985, Hartwig said.
So far, most government officials in Michigan say they believe that Mazda isn't having second thoughts because the American market is now wide open to Japanese auto makers.
"We are trying to keep away from associating this with the Japanese decision to let more cars in," said Walt Sanders, an aide to Rep. John D. Dingell (D-Mich.), whose congressional district includes Flat Rock. "Mazda hasn't said anything to us about withdrawing (their plans for the plant) on that basis."
"It has nothing to do with quotas, and I'd be very surprised if the project doesn't go ahead eventually," Flat Rock Mayor Ted Anders added.
Mazda announced last November that it would build its first U.S. plant on the site of a closed Ford Motor casting plant in Flat Rock, a blue-collar suburban community just south of Detroit. Mazda said the plant would employ 3,500 workers--many of them laid-off members of the United Auto Workers--and would produce 240,000 cars a year beginning in 1987.
Mazda is expected to share the plant's output with Ford, which owns 25% of the Japanese auto maker.
State officials here worked hard last year to persuade Mazda to build the big facility in Michigan rather than in the Sun Belt. Winning the plant was seen as a major political coup for Michigan Gov. James J. Blanchard, who decided to match or beat any incentives offered Mazda by other states.
Before the federal government's decision to cut back its grants to the project, the package of public incentives for the plant totaled at least $120 million, making it one of the most expensive economic development projects in Michigan history.
But the problems with the Mazda plant surfaced Thursday, when the U.S. Department of Housing and Urban Development turned down a request for $20 million for the project and said it would provide only $2.5 million instead.
Mazda now claims it will go ahead with the plant if it is given a $6.5-million, interest-free 20-year loan for the project, which it says would be the equivalent of the earlier federal package.
State Will Help
Late Friday, Blanchard promised that the state will make up the $4-million difference and vowed that Michigan would do all it could to keep Mazda from backing out.
"Any project of this magnitude runs into a series of difficulties," Blanchard said. "This project is no different. But we can solve them at the state level and we are doing just that."
Mazda said it was "very encouraged" by Blanchard's statement.
But Mazda and state officials believe that serious differences remain in the labor talks between the plant's general contractor, Kajima International of Japan, and the Detroit building trades council.
Mazda said Kajima built its assembly plant in Hofu, Japan, which is the model for the Flat Rock plant, and so wants Kajima to avoid a rigid labor contract that might make it difficult for it to build the Flat Rock plant in the same way that it did the Hofu facility.
Officials from Kajima and the building trades council could not be reached for comment on the status of the negotiations.