Nov. 29 (Bloomberg) -- Nissan Motor Co., seeking to block a proposed U.S. tax change this fall that would have forced the Japanese carmaker to pay more than its U.S. rivals, found a ready champion in Mississippi's Republican Senator Trent Lott.

``I said that was totally outrageous and unfair and we're not going to let that happen,'' Lott, whose home state benefits from a Nissan plant employing 6,000 people, said in an interview. The offending language was dropped before the bill was passed last month; Lott, the former Senate majority leader who has never owned a foreign car, says his next one will be a Nissan.

Japan's carmakers, long a quiet presence in Washington, are flexing their political muscle. Since 1999, Toyota Motor Corp., Honda Motor Co. and Nissan have nearly quadrupled the amount they spend on lobbying in the U.S., and have also increased their political giving. Further adding to their clout, most of their 11 U.S. assembly plants -- which employ 55,000 workers -- are located in Southern states where Republicans, who control both houses of Congress, are politically ascendant.

``In the past, the Japanese automakers would defer to Detroit on auto issues, even when it wasn't in their best interest,'' said Brian O'Neill, president of the Arlington, Virginia-based Insurance Institute for Highway Safety, which works with automakers on legislative issues for the insurance industry. ``Now they're being much more assertive, and their confidence is growing in line with their increase in U.S. plants.''

Already this year, Toyota and Honda used their influence to obtain from Congress an extension of tax credits that favor their hybrid-electric autos over those produced by U.S. companies. And Nissan earned a waiver from a rule relating to fuel-economy standards for its cars.

Taking Notice

Their Detroit-area rivals are taking notice. General Motors of Detroit, Ford Motor Co. of Dearborn, Michigan, and Stuttgart, Germany-based DaimlerChrysler AG -- which lays claim to U.S. status because its Chrysler division is headquartered in Auburn Hills, Michigan -- are preparing to mail a 19-page report to all 535 members of Congress. The companies want to remind lawmakers that they still employ 87 percent of all U.S. autoworkers and build 75 percent of the cars and trucks. The report also emphasizes the U.S. automakers' 395,000-strong workforce and the hundreds of thousands more who rely on their pensions.

Japanese companies have long proven adept at winning tax and other economic concessions from local governments in the U.S., eager to attract their factories and the attendant jobs. They have been less successful on the national level; in the 1980s, for example, they couldn't forestall U.S. pressure to agree to ``voluntary'' export restraints that limited their sales and boosted U.S.-based automakers' profits.

Friendlier Reception

These days, they are getting a much friendlier reception in Washington, said Senator Richard Shelby, Republican of Alabama. ``It used to be all Detroit,'' he said in an interview. ``But we look everywhere now. The automobile business is like everything: It is a competitive global enterprise.''

American companies still spend more on lobbying than the Japanese do, but they have been cutting back while the Japanese are increasing. Disclosure reports filed with the U.S. Senate show that Toyota, of Toyota City, Tokyo-based Honda and Nissan, and the Association of International Automakers -- the Arlington, Virginia, trade association that represents them -- spent $7.2 million on lobbying in 2003, up from $1.9 million in 1999. Over the same period, lobbying expenditures by General Motors, Ford and DaimlerChrysler declined to $17.1 million from $19.7 million.

Toyota and Nissan also contributed $361,250 in 2003 and 2004 to independent political groups incorporated under Section 527 of the Internal Revenue Code, according to PoliticalMoneyLine, a Washington group that tracks campaign finance. That eclipsed the $334,915 that U.S. automakers gave in that period. The 527 groups can accept unlimited donations directly from corporate treasuries.

Scale and History

The U.S. and Japanese manufacturers still agree on many topics. When they don't, the reasons often stem from the vast differences in scale and history between the U.S. makers and the Japanese, who began opening plants in the U.S. in the 1980s.

For example, U.S.-based automakers have 800,000 employees, retirees and dependents, adding $1,200 to the cost of each vehicle they produce. By comparison, pension and health-care costs add only $450 to the cost of foreign makers' models, according to the U.S. automakers' report, because they have fewer plants and employees, and haven't been manufacturing in the U.S. for as long.

``On 95 percent of the issues, we're all in lockstep on issues such as energy and safety,'' said Chris Preuss, a General Motors spokesman for government affairs in Washington. ``But on some issues such as pension costs, huge competitiveness issues, we have unique viewpoints.''

Lott's Help

The tax provision on which Senator Lott intervened was part of a $76.5 billion tax cut designed to help U.S. exporters. The reduction replaced a $50 billion tax break for exporters that the World Trade Organization said violated international trade rules.

The language Lott persuaded fellow lawmakers to remove would have exempted the U.S. operations of foreign automakers from the bill's reduction of tax rates to 32 percent from 35 percent. Without that intervention, General Motors and Ford would have paid lower taxes on the same production.

In another political victory this year, Nissan won a waiver from a U.S. fuel-economy rule that allows it to continue counting Mexican-built Sentra sedans as imports, despite trade rules that would have reclassified them as domestically produced. The change came over the objections of Ford, General Motors and Chrysler. Nissan threatened to move production of some car models from Tennessee and Mississippi to overseas factories if it didn't get the waiver.

Hybrids

In 2001 lawmakers approved tax credits for hybrids sold by Toyota and Honda that combine a gasoline engine, electric motor and battery pack to save fuel and curb tailpipe exhaust. While Ford also backed the provision, Toyota's Prius and Honda's Civic and Insight models have been the main beneficiaries of the $2,000 credit.

A Ford SUV using technology licensed from Toyota qualified for the credit this year. General Motors and Chrysler currently don't plan to sell models that meet the criteria for the tax break, which was extended to 2006, until the 2007 model year.

U.S. automakers, in their public-relations counteroffensive against the Japanese, want to remind lawmakers how important they remain to the economy, said Stephen Collins, president of the Automotive Trade Policy Council, which represents the U.S. automakers on trade issues in Washington and produced their report to Congress. From 1980 to 2002, while foreign automakers invested $27 billion in new plants, U.S. automakers invested $176 billion in improving existing plants and adding capacity, he said, quoting from the report.

Trade

Trade remains a particular point of contention. Even though the Japanese makers have shifted production to the U.S., they continue to import many models and oppose restrictions that would limit their option to do so. Meanwhile, the new U.S. makers' report revives 1990s-era calls for U.S. government pressure for improved access to the Japanese and South Korean markets and criticizes Japan's efforts to lower the value of the yen relative to the U.S. dollar.

U.S. automakers' ``views haven't really evolved over the years,'' said Paul D. Ryan, director of government affairs for the Association of International Automobile Manufacturers. ``Our view is that a job is a job. A job in Alabama is just as important as a job in Michigan.''

The U.S. makers' public relations efforts extend beyond their report. General Motors has placed its own newspaper advertisements making similar points in Washington and in Texas, where Toyota will start building pickups in 2006. The ads portray General Motors' 182 facilities in 33 states, 154,000 U.S. employees and 500,000 retirees as having an impact across the U.S. economy.

Growing Power

Even so, the Japanese makers' political power is likely to increase as they continue to expand. Nissan in 2003 opened its Mississippi plant, to assemble Titan pickups, while Honda this year opened a second assembly line at its Alabama plant that makes Odyssey minivans and Pilot SUVs. South Korea's Hyundai Motor Co. will make Sonata sedans and Santa Fe SUVs in Alabama next year. In addition, Toyota, Honda and Nissan operate or are building another 12 parts, transmission and engine factories in the U.S., employing another 25,000, again mostly in the South.

Then there's that Toyota truck plant, opening in U.S. President George W. Bush's home state. Last September, the president's father, former President George H.W. Bush, thanked the company for choosing Texas in a speech to a meeting of Toyota auto dealers in Philadelphia.

It's getting tougher for General Motors, Ford and Chrysler to have their way on trade issues now because Toyota has ``a lot of employees here, and we're a growing part of the economy,'' said Dennis Cuneo, Toyota's North American senior vice president.

Even Michigan

Even in Michigan, where U.S. automakers built 2.7 million vehicles last year, the state legislature agreed in September to sell 690 acres of land to Toyota to expand a technical center after the automaker offered $9 million for the property, less than the $25.3 million bid from a residential development group.

Democratic Governor Jennifer Granholm, who was elected with help from the United Auto Workers, backed non-union Toyota's Michigan expansion to ``cement Michigan as the global epicenter of the automobile industry.''

Collectively, Asian brands boosted their share to a record 34.4 percent of the U.S. market in the first 10 months of the year from 28.2 percent in 2000, according to Woodcliff Lake, New Jersey-based Autodata Corp. In the same period, the market share for General Motors, Ford and Chrysler fell to 58.9 percent from 66 percent.

Rising Shares

Toyota's U.S. shares have risen 11 percent this year to $76.47 in composite trading on the New York Stock Exchange; Honda's U.S. shares have risen 9.1 percent. In the same period, General Motors shares fell 27 percent and Ford shares declined 11 percent. The S&P 500 Index of the largest U.S. industrial companies has risen 6.4 percent so far this year.

Senator Lott, for one, said the U.S. manufacturers shouldn't expect much help from Washington.

``They have created their own problems, kind of like a lot of the airlines,'' Lott said. ``Bad management decisions, caving in on labor-union demands, and in many cases not creating a good product. And they want us to bail them out? No.''

To contact the reporters on this story: Jeff Green in Southfield, Michigan, at Jgreen16@bloomberg.net; Alan Ohnsman at aohnsman@bloomberg.net.

Last Updated: November 29, 2004 00:04 EST