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Cablegate: Japan to Announce Which U.S. Vehicles Qualify For

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DE RUEHKO #0221/01 0340900
ZNR UUUUU ZZH
P 030900Z FEB 10
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 9184
INFO RUCNWTO/WORLD TRADE ORGANIZATION COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 2936
RUEHRL/AMEMBASSY BERLIN PRIORITY 1685
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RUEHFK/AMCONSUL FUKUOKA PRIORITY 8659
RUEATRS/TREASURY DEPT WASHDC PRIORITY
RHEHAAA/NSC WASHDC PRIORITY
RHMCSUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEHBS/USEU BRUSSELS PRIORITY
RHEHAAA/WHITE HOUSE WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC PRIORITY
RUEAEPA/HQ EPA WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 TOKYO 000221

SIPDIS

STATE FOR EAP/J
STATE ALSO FOR S/SECC, OES/EGC, AND EEB/IEP
PASS TO USTR FOR DUSTR MARANTIS, AUSTR CUTLER AND M. BEEMAN
PASS TO COMMERCE FOR H. MISISCO, K. ROTH, D. BARZDUKAS
PASS TO EPA FOR S. FULTON
PASS TO DOT FOR L. LAWSON, C. MILTTELHOLTZ

E.O. 12958: N/A
TAGS: EIND ETRD SENV PREL WTRO ENRG JA
SUBJECT: JAPAN TO ANNOUNCE WHICH U.S. VEHICLES QUALIFY FOR
ECO-CAR SUBSIDY PROGRAM

REF: 09 TOKYO 2926

TOKYO 00000221 001.2 OF 003


SENSITIVE BUT UNCLASSIFED. CONTAINS BUSINESS SENSITIVE
INFORMATION.

1. (SBU) Summary: Japan is expected to announce February 3
at 7:00PM Tokyo time which U.S. vehicle models will qualify
under its recently revised eco-car subsidy program. In
response to USG and U.S. industry criticism, the GOJ
announced January 19 it will begin accepting foreign fuel
efficiency data to determine eligibility of low-volume
foreign imports for the program. However, despite
interventions by the Embassy and visiting USTR officials,
including Ambassador Marantis earlier this week, the GOJ
opted to not consider USG requests to use the U.S.
Environmental Protection Agency (EPA) combined fuel economy
estimate to determine the eligibility of U.S. models.
Instead, the GOJ will utilize the EPA city measurement.
Although U.S. automakers are pleased that some of their autos
may qualify for the subsidy, most local media coverage has
portrayed U.S. autos as inefficient and as beneficiaries of
political pressure brought to bear on the GOJ by the USG.
End summary.

2. (SBU) The GOJ program, begun April 2009 and extended
through October 2010, offers a cash subsidy of approximately
$4,500 to consumers who scrap older vehicles and purchase
models that meet certain fuel efficiency standards. Because
most U.S. autos are imported to Japan under a low-volume
import procedure (the "Preferential Handling Procedure" or
PHP) that does not utilize Japanese fuel efficiency data, no
U.S. autos qualified for the original Japanese "cash for
clunkers" program. However, the GOJ revised the program and
announced January 19 that cars imported to Japan under the
PHP would qualify for the cash subsidy. Ministry of Economy,
Trade and Industry (METI) officials informed econoffs
February 3 that the GOJ would use the EPA city mode to
determine eligibility, and that the list of qualifying
foreign autos would be released to the public at
approximately 7:00PM Tokyo time the same day. With this
revision, METI has calculated 47 percent of all U.S. autos
imported to Japan under the PHP will qualify for the subsidy.
In the public announcement, which METI has told us it
intends to post "quietly" on its webpage
(www.meti.go.jp/english/index.html) with no formal media
release, only the names of the models that qualify for the
subsidy will be listed, but not the percentage of total
imported autos nor the fuel efficiency calculation method.

3. (SBU) According to METI, eight types of U.S. autos,
listed below, will qualify for the cash subsidy:

General Motors
--------------

--Cadillac CTS 2.8 (ABA-X322A)
--Cadillac CTS Sport Wagon 3.6 (ABA-X322B)
--Cadillac CTS Sport Wagon 3.0 (ABA-X322C)
--Cadillac STS 3.6 (ABA-X295S)
--Hummer H3V8 (ABA-T345E)

Ford
----

TOKYO 00000221 002.2 OF 003

--Ford Escape Limited/XLT (ABA-LFAL3P)

Chrysler
--------

--Chrysler Grand Voyager (ABA-RT38)
--Dodge JC SXT (ABA-JC27)

4. (SBU) In the run-up to the decision, METI Vice Minister
Hiroyuki Ishige presented the following nonpaper to Deputy
USTR Marantis in Tokyo in an effort to explain the rationale
for the GOJ's fuel efficiency calculation method.

Begin text:

The mode for "eco-car subsidy"

1) From the standpoint of expanding options for achieving
eco-friendly society while stimulating economy, PHP cars have
been decided to be covered by Japanese eco-car subsidy scheme.

2) The U.S. "City mode" incorporates freeway run with high
fuel efficiency.

3) Since conversion of modes among different countries is
technically impossible, we made a decision to adopt the most
equivalent modes to Japan, where the ratio of downtown
driving vs. highway driving is 1:3, in the U.S. and Europe
when we include PHP imported cars under our subsidy scheme.
They are U.S. "City mode" and European "NEDC mode."

4) If we directly adopt Japanese mode to U.S. PHP imported
cars, no car would enjoy the benefit. However, when we adopt
these modes, approximately 50 percent of U.S. cars and 40
percent of European cars could be covered by subsidy scheme
in terms of sales.

5) The results show the fairness among chosen modes.

End text.

5. (SBU) In a separate meeting February 2, Japan-based
Detroit 3 automakers told USG officials that due to
differences in weight classifications, driving styles, and
test methods, significant differences exist between Japanese,
U.S., and European fuel efficiency calculation methods.
Although U.S. automakers would prefer that as many U.S. autos
qualified for the program as possible, Japan-based Detroit 3
representatives privately stated they agree with METI that
the EPA city mode most closely corresponds to the Japanese
fuel efficiency measurement. One representative expressed
concern that the Japanese weight classification method makes
heavier cars appear less fuel efficient. (Note: U.S. autos
imported into Japan are mostly larger, heavier, high-end
"lifestyle" vehicles. End note.) As a result, he noted, the
Japanese eco-car subsidy program reinforces an image that
U.S. autos are inefficient.

6. (SBU) Comment: Although the Japanese eco-car subsidy
program initially excluded all foreign autos imported under
the PHP, the media coverage of this issue has instead focused
on the fact that U.S. autos did not meet Japanese fuel

TOKYO 00000221 003.2 OF 003


efficiency standards and now will receive an "exception" due
to U.S. political pressure. Although the U.S. automakers are
pleased that some of their autos will qualify for the
subsidy, media attention unfortunately appears to have
reinforced a recurring image problem the U.S. auto industry
in Japan faces: that American cars are not fuel efficient.
GOJ officials and industry players have expressed their hope
this issue does not develop into a major trade irritant
between the U.S. and Japan, particularly in light of
challenging issues in other areas of the bilateral
relationship.
ROOS

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