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U.S.-Japan Dispute Gives Cheer to European Luxury Car Makers

May 17, 1995

BERLIN (AP) _ When Japan moved into the U.S. luxury car market it was bad news for Europeans, who’d dominated Americans’ luxury import market. Now the U.S.-Japan trade dispute over luxury cars could give the Europeans a boost.

German carmakers aren’t cheering too loudly Washington’s announcement it will impose 100 percent tariffs on 13 luxury Japanese models unless there’s a solution. Above all, they say they support free trade.

``First of all, Mercedes is for lower tariffs. Our basic philosophy is free trade and open markets. We hope the dispute can be resolved,″ said Mercedes-Benz spokesman Wolfgang Riecke.

Tariffs would double the price of Japanese luxury cars, shifting many U.S. buyers to German brands.

``But if taxes were to create an opportunity, then Mercedes would be interested in increasing our market share,″ he said in a telephone interview from Stuttgart, the company base.

Munich-based BMW had a similar comment, issuing a statement saying BMW on principle is opposed to a punitive tariff ``although the company could profit from it.″

Auto industry analyst Klaus-Juergen Melzner, of DB Research GmbH in Frankfurt said shares of German automakers had risen in recent days, partly on the stronger U.S. dollar and partly on speculation that the trade dispute could benefit German companies.

``It’s rather positive″ for German automakers, he said.

But he added that both BMW and Mercedes are working close to full capacity now, ``and it’s hard to see how they could deliver more cars.″

Both companies, however, are moving into U.S. production. BMW has cars rolling off assembly lines now in South Carolina, and Mercedes will start in 1997 to build sports-utility vehicles at a new plant in Alabama.

In London, analyst Peter Caldwell of Barclays de Zoete Wedd said Ford-owned Jaguar could sell more British-made cars in the United States if the trade dispute worsens.

``But the downside could be if the Japanese look for markets for cars they can’t sell in America, and they try to place them in Europe,″ Caldwell said.

Japanese luxury cars like Toyota’s Lexus and Nissan’s Infiniti haven’t made many inroads into Europe. But companies like Mercedes are familiar with what happened in the U.S. market five years ago when Japanese luxury imports came in.

``The Lexus moved into our class successfully. It’s no Mercedes, but a beautiful car anyway,″ said Riecke, the Mercedes spokesman.

He said Japanese automakers had lost most of their price advantage against Mercedes in the U.S. market, and the price of a Lexus is little different, at around $55,000, from a Mercedes E420.

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