Future of the Automobile Industry

This is a hearing within the jurisdiction of this committee to deal with a number of matters, probably the most significant of which is the future of the automobile industry in light of recent tentative approval of the Federal Trade Commission of the proposed joint venture between General Motors and Toyota.

Our hearing today is the latest in a series of hearings this subcommittee has been conducting over the last number of months concerning the automobile industry, an important aspect of the subcommittee's jurisdiction and of our continuing interest. Our hearing also reflects the subcommittee's jurisdiction and responsibility for the operation of the Federal Trade Commission.

There is no more important subject on our country's economic agenda than the future of our great manufacturing industries. We are not here today, however, as an advocate of a particular approach to that future. Rather, the subcommittee is here to learn and to inform itself.

Last week, Business Week reported that merger specialists say we are in the midst of a merger wave that is far from having crested, with further consolidation predicted in oil, steel, banks, and automobiles. Time magazine reported last week that 1983 saw a new year high in merger activity.

The automobile industry has been battered by high interest rates, currency imbalance, plant closings, and sagging productivity, until some observers suggest it may soon be impossible to manufacture cars in the United States for the important small car domestic market.

We are not convinced of that.

Almost simultaneously with the FTC tentative approval of the GM/Toyota joint venture, there have been press reports of other domestic auto companies either seeking to establish joint ventures with foreign manufacturers or to initiate new production for the American market by domestic producers in foreign countries.

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if it denies a litigant its due process right to impartiality in the decisionmaking process.

The second principle holds that agency action will be struck down where it results either in whole or in part from congressional pressure. Although the judicial opinions distinguish these two situations, one fundamental principle appears to be applied in all the

cases.

Any sort of interference in an ongoing administrative proceeding from members of the legislative branch of Government can so infect or influence the proceeding that a court will nullify the decision reached in the tainted process and order the agency to make any appropriate action to ensure reasoned, independent decisionmaking.

In fact, that Pillsbury case goes back to 1966, but it set aside, I believe, a 1950 or 1951 decision of the Federal Trade Commission after Senator Kefauver had inquired of certain members of the Commission as to their reasons in a certain case similar to the case that we are looking at today.

The subsequent case law supports the prudence in the Commission's decision not to appear before us at this time. It should be stated for the record that Chairman Miller, who has submitted a statement for the record, has indicated that he would welcome any opportunity to appear before this subcommittee to discuss this issue fully after final FTC action has taken place. I would point out that on February 27, in just a few days, the close of the public comment period occurs, and at that point the Federal Trade Commission would be happy to appear and discuss this issue at length.

As documented in the correspondence between this committee and the FTC, their concern is the avoidance of even the appearance of unwarranted congressional influence on their final decision in the context of this hearing.

The CRS' memorandum also includes a discussion at pages 52 to 54 of the lines of questions and statements which could pose a potential problem if pursued by any of the members with the Commission witnesses at this hearing today.

This analysis underscores the need to exercise considerable caution during the Commission's appearance today, so as to avoid any possible impropriety. And I would like to ask permission to circulate copies of this memorandum to all members attending the hearing.

Your efforts, Mr. Chairman, to protect the integrity of the Commission's ongoing proceedings in this matter are most important as well as necessary.

Thank you, Mr. Chairman.

Mr. FLORIO. Thank you very much. We are pleased to have with us in attendance the chairman of the full Energy and Commerce Committee. I at this point recognize him for the purpose of an opening statement.

Mr. DINGELL. Mr. Chairman, I thank you for the courtesy. Mr. Chairman, I commend you and the members of the Subcommittee on Commerce, Transportation, and Tourism for undertaking an inquiry on the future of the auto industry as it may be affected by the General Motors/Toyota joint venture.

I would recognize at this point the gentleman from New York, the ranking minority member, Mr. Lent.

Mr. LENT. Thank you very much, Mr. Chairman, ladies and gentlemen, and members of the hearing panel.

There is no doubt that the domestic automotive industry is undergoing radical changes. Clearly, the auto industry of the eighties is quite different from the auto industry we knew in the sixties. The trend of the last decade toward the internationalization of the industry is well documented by an increasing variety of commercial interrelationships between domestic and foreign automakers.

For example, GM owns 34 percent of Isuzu and 5 percent of Suzuki; Ford owns 25 percent of Mazda, and Chrysler owns 15 percent of Mitsubishi.

Hence, joint ventures between foreign and domestic auto manufacturers are a predictable consequence and perhaps one of the principal aims of the domestic content legislation that was recently passed by the House of Representatives.

Most recently, the headlines link not only GM with Toyota, but also Ford with Mazda and Chrysler with Mitsubishi in possible joint ventures. The competitive health of our industry is certainly critical to our economy. We should, as Chairman Florio suggests, review these industry developments with an eye toward their longrange impact, not only on the economy, but also on American jobs and American consumers.

However, I would like to take this opportunity to express my reservations about this hearing. The Commission's action to date with respect to the proposed GM/Toyota joint venture includes tentative approval of a consent agreement with General Motors and Toyota which is subject to public comment until February 27, 1984.

After the Commission reviews these comments, it will then make its final decision on the proposed venture. Since the Commission has not completed its review of the venture as yet, this hearing poses particular risks of tainting their proceeding if undue influence is brought to bear on the decisionmakers, namely, the Commissioners.

At this point, Mr. Chairman, I would like to ask to have a memorandum entitled "Avoiding Prejudice to the Pending FTC Proceeding Concerning the Proposed Joint Venture Between General Motors and Toyota in the Conduct of Congressional Hearings" entered into the record.1

This memorandum was prepared by the American Law Division of the Congressional Research Service at the request of Congressman Broyhill and myself. It includes a comprehensive analysis of the legal issues raised by the case of Pillsbury against the Federal Trade Commission and subsequent decisions in the context of this hearing.

As the memorandum explains at pages 11 and 12, Federal Court decisions have developed two closely related principles of law. First, the questioning of an agency official regarding the reasons or the rationale for deciding an issue still pending before that official may be an impermissable intrusion into the administrative process

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Future of the Automobile Industry: Hearing Before the Subcommittee on ...