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 LOS ANGELES, Sept. 17 /PRNewswire/ -- Government policies are as important as products to the competitiveness of the American auto industry, according to Chrysler Chairman Robert J. Eaton.
 Speaking before the Los Angeles Town Hall, Eaton outlined four issues that will play a major role in the automotive industry in the years to come: government regulations, the North American Free Trade Agreement (NAFTA), the trade deficit with Japan and health care costs.
 "We understand from painful experience that there are two things that determine Detroit's competitiveness: the quality of the products we produce, and the quality of the government policies under which we compete," Eaton said.
 "You will have a hard time naming a major social or economic issue that does not have a direct impact on our industry."
 Eaton said a new cooperation between American industry and government regulators has helped ease the distrust that has existed for many years, but indicated Washington must gain a clearer understanding of what the consumer wants.
 "Our biggest challenge is to see that government doesn't put us at war with our customers," Eaton said.
 Specifically, Eaton referenced the California law that mandates that 2 percent of the vehicles sold in the state be emission free by 1998.
 "We'll have a vehicle that will cost us tens of millions to develop and build, but let me assure you that Chrysler will meet the law," Eaton said. "The problem is, I don't know who's going to buy it.
 "There is absolutely no economic basis for electric vehicles in the world. Not even in Italy, where gas is four times the cost of gas in California."
 Eaton indicated there would have to be a significant breakthrough in battery technology for an electric car to be successful, otherwise the typical electric vehicle will have a range of about 100 miles.
 Chrysler has a vehicle now that meets the California law, an electric version of the Chrysler minivan, and is willing to sell it at cost, which is about $120,000 per unit.
 "The vehicle we'll eventually put on the market in California won't be that expensive," Eaton said. "We'll have to price it somewhere near our other vehicles.
 "Will we eat the losses? I doubt it. Neither will any other auto company. We'll have to tack the cost of the electric vehicle onto the price tag of all other vehicles we sell in the state to recoup our losses."
 Eaton said the shared cost of the electric vehicles will have an effect on all car owners in California.
 "Everybody in the state will get to do their part for clean air. When you pass someone on the highway in an electric car, you can get a warm feeling because you'll be subsidizing them in the price of your new car."
 Chrysler estimates that NAFTA will add 15,000 jobs in the auto industry, due to the fact that the growing Mexican market will be open to American companies. The Mexican market is growing at a rate five times faster than the American market and by the end of the decade, the car and truck market will be the same size as Canada's.
 "We want NAFTA to pass for one simple reason: It allows us to sell more in Mexico," Eaton said. "Opponents of NAFTA say the auto companies will run to Mexico, chasing cheap labor. What they don't understand is that we could do that now, if that's all we had in mind.
 "Our manufacturing base and our supplier base is in the U.S. We'd lose our shirt if we shipped everything to Mexico, assembled it, and then shipped it back."
 On the subject of the trade deficit with Japan, Eaton indicated that the U.S. government must do more than "muscle up the yen" to deal with a deficit that has grown to $50 billion.
 He said that Japanese car prices have gone up only 13 percent since 1991, while the yen has appreciated by 27 percent.
 "Washington must insist that prices reflect the true consequences of the strong yen," Eaton said. "And it must be adamant that Japan's market be as open to our goods as our market is to Japan's goods.
 "And for its part, the new leadership in Japan must break down the old iron triangle of politicians, bureaucrats and businessmen who have built Japan's modern economy on the outdated principal of mercantilism. It must throw open the Japanese market."
 Rising health care costs have become a bigger and bigger problem for the auto industry, according to Eaton, and have put American automakers at a distinct financial disadvantage over the Japanese.
 Currently, health care adds about $1,100 to the cost of a Chrysler vehicle, compared to $500-$600 for Honda, Toyota and Nissan, both for cars built in Japan and the U.S.
 "It's tough enough to compete in the global auto industry today, but when you start out $600 behind the competition just because of the way we finance health care in this country, that tends to add insult to injury," Eaton said.
 Eaton advocated a national health care program as a way of curbing the escalating costs, but cautioned that it must have five basic features to be successful: coverage for all Americans, strong cost controls, quality assurance, administrative simplicity and equitable financing.
 "Twenty-five years ago you would not have heard any Big Three CEO advocating a national health care program," Eaton said. "Getting the government involved in health care would have been too risky. So why am I in favor of it? Because health care costs are so wildly out of control."
 -0- 9/17/93
 /CONTACT: Mike Rosenau of Chrysler Corporation, 313-956-3667/

CO: Chrysler Corporation ST: Michigan, California IN: AUT SU:

ML-KR -- DE019 -- 3194 09/17/93 16:02 EDT
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Publication:PR Newswire
Date:Sep 17, 1993

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