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Threat of Sanctions Could Spur Luxury Sales

May 17, 1995

DETROIT (AP) _ The U.S. government’s threat to punish Japan with 2tariffs that would double the price of Lexus, Infiniti and other Japanese luxury cars could stimulate sales to buyers trying to beat the increase.

But Japanese automakers and their thousands of dealers and employees in this country say the effects will be devastating if the sanctions proposed Tuesday by the Clinton administration are imposed.

``If it stays like it is, it will eliminate the luxury Japanese car market in the United States,″ said Max Pearson, president of Pearson Automotive Group, which includes Infiniti and Acura dealerships in Virginia and Florida.

His outlets in Richmond, Jacksonville and Gainesville represent an investment of more than $7 million, have about 90 employees and will go out of business if 100 percent tariffs are imposed, Pearson said Tuesday.

``There isn’t any way Lexus can survive a 100 percent tariff,″ said Susan Jacobs, an analyst who tracks the luxury car market for her own firm, Jacobs & Associates in Rutherford, N.J. ``Infiniti can’t survive a 100 percent tariff. The luxury market is too competitive.″

The tariffs, which would affect 13 Japanese luxury models, would take effect June 28. The threat of them is intended to force Japan and its auto companies to relax business practices and government regulations that U.S. automakers say make it extremely difficult to sell their products there.

Japanese imports comprise about 15 percent of the U.S. luxury car market _ a segment that has been lukewarm lately as it competes with the growing popularity of sport-utility vehicles. The prospect of a 100 percent price increase could stir things up.

``If the government goes through with this, I will simply move up the timetable for the purchase of my car,″ said a lawyer who was shopping for an Infiniti at Pearson’s Richmond dealership. She declined to give her name.

Japanese luxury dealers ``could get a rush of sales in the next 30 to 60 days,″ said Christopher Cedergren, an automotive analyst at AutoPacific Group in Thousand Oaks, Calif.

``I think as people get educated over the next few days we might see something like that,″ said Theo Proctor, general manager of Proctor Acura in Tallahassee, Fla.

Conversely, if buyers believe the percent tariff will be imposed, they might avoid the Japanese cars, fearing that dealers would be crippled and service for their expensive cars might not be available.

Particularly hard hit by the tariffs would be Toyota’s Lexus division and Nissan’s Infiniti brand, Jacobs said. The 13-car list includes all the models Lexus sells and three of Infiniti’s four, including it’s I30, a new model being launched this week with a national advertising campaign.

Acura, Honda’s luxury line, has a strong-selling lower-priced model, the Integra, which isn’t on the list. That could soften the effect on Acura dealers. Mazda and Mitsubishi, the other two targeted carmakers, sell a number of models in addition to those on the tariff list.

The Association of International Automobile Manufacturers, the Arlington, Va., trade group that represents foreign-based auto companies in this country, said 2,028 dealerships would be affected if sanctions are imposed.

But a blow to the industry would affect more than dealers, the group said, referring to the 550,000 American jobs related to the manufacture, sales and service of foreign-brand cars and trucks in this country.

The trade group for the Big Three domestic automakers applauded the administration’s action, as did the United Auto Workers union.

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