WASHINGTON - The road to still another promising Asian market just got bumpier for auto companies.
The U.S. sanctions against the government of India for its nuclear weapons testing will not have a direct effect on vehicle manufacturers there. But the turmoil threatens the nation's business climate.
'To the extent it affects India-U.S. relations, there's an impact,' said a Big 3 company vice president who insisted on anonymity.
Similarly, Willard Workman, vice president for international affairs at the U.S. Chamber of Commerce, repeatedly told news organizations last week that the effects will be significant and far-reaching. They come as more and more U.S. businesses are trying to enter the Indian market.
Both General Motors and Ford Motor Co. are involved in joint ventures with Indian companies producing cars. Their respective parts divisions - Delphi Automotive Systems and Visteon Automotive Systems - also are in joint ventures of their own to make parts in India.
A complication for American companies: They cannot argue against sanctions as a tool of international diplomacy. A 1994 law requires the penalties against any country contributing to nuclear proliferation. President Clinton had no choice but to impose them.
'This isn't about trade. This is a national security issue,' said the Big 3 executive, defending the U.S. action but not wanting to further anger the Indian government.
A call to India's Washington embassy was not returned.
In the past, political situations have caused automakers to pull out of markets. South Africa during the apartheid era is one example.
But Ford spokesman Tom Hoyt said late last week, 'We want to do business in India. I hope that things get resolved.'
GM spokesman Henry Wong observed, 'In all of the developing markets, there are always setbacks.' And, he said, 'We hope we can expand (in India) as we learn from the market.'
Ford and its Indian partner, Mahindra and Mahindra Ltd., operate one plant that can assemble 25,000 European-style Escorts a year. The partners are building another plant with a capacity of 100,000.
GM is in a joint venture with Birla Group that could produce up to 24,000 Opel Astras a year.
The Ford and GM ventures each sold about 10,000 cars last year, or only about 2 percent of India's total. The rapidly expanding market is dominated by Maruti-Udyog Ltd., a joint venture of the Indian government and Suzuki Motor Corp.
Although sanctions are unlikely to affect either U.S.-based carmaker directly, GM's Hughes Electronics subsidiary is one company facing an immediate impact.
It is involved in an Indian wireless telephone project that was in line for $200 million in loans from the Export-Import Bank.
The 1994 sanctions law requires termination of the following:
Loans and loan guarantees by agencies such as the Export-Import Bank and the Overseas Private Investment Corp.
Foreign assistance other than humanitarian aid.
Exports of military equipment or products that can be adapted for military use.
Japan also has imposed sanctions on India.
Suzuki, with its joint venture, and Toyota Motor Corp., which has plans for a factory, are the only Japanese automakers actively involved in India.