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Fuji and Isuzu Will Build $485-Million Auto Plant in U.S.

May 20, 1986|SAM JAMESON | Times Staff Writer

TOKYO — Spurred by the yen's steep rise and concern over continuing export controls, two Japanese auto makers announced Monday that they have agreed to build a factory in the United States to produce 120,000 motor vehicles a year beginning in 1989. No decision has been made on a site, they said, or the number of jobs that will be created.

The announcement, by Fuji Heavy Industries Co., makers of the Subaru, and Isuzu, brings to eight the number of Japanese auto firms that have invested or plan to invest in Canada and the United States.

4 Million Cars a Year

The $485-million factory planned by Fuji and Isuzu would increase capacity at plants owned or partly owned by Japanese in North America to 1.97 million units--of which 1.77 million would be passenger vehicles.

Combined with Japan's present export quota of 2.3 million passenger cars to the United States, the move announced Monday promises to give Japanese firms the capability of putting at least 4.07 million passenger cars a year into the North American market.

Another Japanese passenger car maker, Daihatsu, said Monday that it is considering providing the parts and technology that would enable Bombardier, a Montreal maker of snow vehicles, to assemble a subcompact car in Canada. Bombardier, which at present does not make autos, asked for the Japanese help, Daihatsu said.

Unlike earlier investment plans, the venture by Fuji and Isuzu was inspired at least partly by a steep appreciation of the yen, which has made Japanese-made cars and other exports more expensive. The yen has risen 44% against the dollar since last fall and, on Monday, closed on the Tokyo Foreign Exchange Market at 168.15 to the dollar.

"The yen's recent steep appreciation and voluntary car export controls to the North American market were the main factors behind our decision to invest in the United States," Toshihiro Tajima, president of Fuji, told a news conference. "We are convinced that now is the best time to invest in the United States in view of the yen's appreciation."

Joint Venture

Tajima said that Fuji and Isuzu, the No. 7 and No. 9 auto makers in Japan, respectively, had concluded that they form "the most ideal combination" to carry out a joint investment. He did not elaborate, but other officials explained that separate investments were considered too risky.

Last year, Isuzu manufactured only 587,000 motor vehicles, and 70% of them were exported. Fuji Heavy Industries produced 584,000 units, 49% of which were sold overseas.

A fraction of Fuji's stock, 6.1%, is owned by Nissan Motor, and 34% of Isuzu's is owned by General Motors. Spokesmen for both firms said the venture will not affect the relationship with their partners.

Under restraints imposed by the Japanese government, Fuji Heavy Industries may ship 117,200 passenger cars to the United States in the current Japanese fiscal year, which ends next March 31; Isuzu may ship 117,110 cars to the United States, 91,110 of them to be sold through the GM dealer network.

60,000 Cars, 60,000 Trucks

The two firms said that Fuji will own 51% and Isuzu 49% of the joint venture. Initially Fuji will produce 60,000 four-wheel-drive passenger cars at the new plant, and Isuzu will produce 60,000 trucks.

The plant will be built to permit expansion to a production level of 240,000 units a year, they said.

Like earlier such investment plans, the Fuji-Isuzu project was based on the belief that some form of restraint on auto exports to the United States will continue. The current 2.3-million export quota, imposed by the Japanese government, is to expire next March 31.

Honda, Nissan and Toyota (with GM) are already producing cars and trucks in the United States. Mazda, Toyota (in a 100% self-owned venture) and Mitsubishi (with Chrysler) have started building factories in the United States. Honda, Toyota and Suzuki (with GM) have announced plans to build plants in Canada.

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