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GM-Chrysler Joint Transmission Venture Seen As Vanguard

November 30, 1989

DETROIT (AP) _ Federal government clearance of a joint manufacturing project by General Motors Corp. and Chrysler Corp. could herald more cooperation among the Big Three automakers, who face increasing foreign competition and slumping earnings, analysts said Thursday.

The GM-Chrysler project would be the first manufacturing collaboration between any of the Big Three, which also includes Ford Motor Co. It would join Chrysler’s New Process Gear plant in Syracuse, N.Y., and GM’s Hydra-matic factory in Muncie, Ind.

The Federal Trade Commission cleared the venture on Nov. 14 after consulting with the Justice Department’s antitrust division.

In the last 15 years, Ford , Chrysler and particularly General Motors have seen their dominance of the U.S. auto market eroded by Japan-based companies that first exported cars and later established manufacturing plants in the United States. During that time, each of the Big Three set up joint ventures with foreign automakers on a variety of projects.

There are 10 major manufacturers - both Japanese ″transplants″ and U.S. companies - of cars and trucks in the United States.

″I think it is a symptom of the tough competitive situation in the U.S. auto industry where the Big Three feel themselves threatened by imports and transplants,″ said independent auto analyst David Healy, in New York.

″Since all of the cars produced here generally use pretty similar components, it doesn’t make a lot of sense to have independent development of fairly routine parts like transmissions and axles and so forth,″ he said.

″Earnings are down because of the weaker (vehicle) sales and they don’t have the kinds of bucks to throw around as they did before.″

However, consumer advocate Ralph Nader criticized federal approval of the venture.

″It’s a mockery of the antitrust laws,″ Nader said. ″The issue is whether we abandon our antitrust laws if it’s between U.S. companies.

″Fifteen years ago, this wouldn’t even be proposed, it would have been laughed out of existence.″

Chrysler spokesman Mike Gonda on Thursday declined to say how much the project would cost the nation’s No. 3 automaker. He said manual transmission manufacturing under the joint venture could begin shortly after Jan. 1.

GM spokeswoman Janine Fruehan read a statement saying: ″We plan to be operational Jan. 1, 1990, and the details of the venture are still being worked out.″ She declined to elaborate.

Chrysler will own 64 percent of the joint company and GM will own the rest.

GM’s Muncie plant has been operating below capacity and Chrysler’s Syracuse plant, the only one making manual transmissions for the company’s vehicles, has too much work.

″We’ve got them (the Big Three) collaborating in clean air and plastics and those are pretty much design and development efforts,″ said auto analyst Charles Brady of Oppenheimer & Co. in New York. ″This is more meaningful to the here and now.

″I think there will be cases popping up here and there over time where this will be sort of the mold.″

Brady, Healy and economics professor Dominick Armentano of the University of Hartford, who specializes in antitrust matters, agreed that competition in the auto industry will push the Big Three into more joint manufacturing projects. But they predicted the cooperation would stop short of sharing product secrets or actually making an entire car or truck.

″If the three companies had all the market to themselves, there was no need to share technologies,″ Armentano said. ″But with international competition, that’s changed.″

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