> G.M. Official Says Dollar Is Too Strong
> By DANNY HAKIM with GREG WINTER
> RAVERSE CITY, Mich. Aug. 8 - John M. Devine, the chief financial officer
> of General Motors said today that the strength of the dollar continued to
> hurt United States manufacturers and that G.M. had asked the Bush
> administration to rethink its currency policy.
>"The strong dollar of the last couple of years is certainly giving a lot
> of strength to the Germans and to the Japanese," Mr. Devine said at an
> auto industry conference here.
>"The strong dollar is frankly destroying the manufacturing capability and
> the manufacturing competitiveness of this country," he added.
> A strong dollar is good news for American consumers who buy foreign-made
> goods, like cars, or for American tourists traveling abroad. Both the
> Clinton and Bush administrations have favored keeping the dollar strong.
> At a Congressional hearing last month, Robert E. Rubin, the former
> Treasury secretary, said that moderating the nation's strong dollar policy
> could adversely affect inflation, interest rates and foreign investment.
> Paul H. O'Neill, the current Treasury secretary, has stuck with a strong
> dollar policy. He has gone so far as to say that he will rent Yankee
> Stadium and a brass band if he changes course to say the dollar is too
> high.
> This is not what many domestic manufacturers, like G.M., want to hear. For
> them, a strong dollar means that competing products exported to the United
> States by foreign manufacturers can be sold for fewer dollars without
> lessening profits booked in Japanese yen, South Korean won or euros. It
> also means that profits from foreign units of domestic corporations are
> reduced when they are translated back into the dollar, and that United
> States exports become more expensive for foreign buyers.
> <<...OLE_Obj...>>
> Other manufacturers offer similar complaints about the stinging effect of
> weaker currencies abroad. In its most recent quarter, DuPont said that
> soft currencies overseas, particularly in Europe and Asia, had dragged
> down its sales 2 percent worldwide, ultimately costing it $35 million in
> net income.
> Coca-Cola said that weak currencies, mostly in Europe and Brazil, cut 4
> percent from its operating income in the most recent quarter, while sales
> at Gillette dropped 5 percent. Were it not for the effect of weaker
> currencies abroad, particularly in Europe, Gillette said its sales would
> have fallen only 1 percent.
> One of the main reasons that weak currencies pose such a problem is that
> American companies convert their overseas sales into dollars before
> reporting results. So, even if manufacturers sell the same number of
> products overseas as they do at home, they end up earning less for them.
> Manufacturers disdainfully refer to the phenomenon as the translation
> effect.
>
>"With 30 percent of our business in Europe, a strong dollar and a weak
> euro mean we're going to have to sell much more to make the same money,"
> said Eric A. Krauss, a spokesman for Gillette.
>
> In New York, the euro settled at 88.08 cents today, while the dollar
> settled at 123.30 yen. When the euro was introduced in January 1999, a
> single euro was valued at $1.17.
>"The imbalance has gone beyond what would be a reasonable boundary to have
> against the euro and against the yen," Mr. Devine said.
>"We have not historically been very successful influencing the
> administration on currency, they do what they please," he said."Even if
> the administration wanted to do something about it, currency markets
> operate in their own universe."
>
>"But I think it's something we've got to get on the table because it is a
> fact we're dealing with, and it's turning what is a very competitive
> market into an even more competitive market," he added.
>
> Mr. Devine said the strong dollar had not recently been G.M.'s top concern
> in Washington. The company had vigorously lobbied against significantly
> tougher fuel economy standards that were not included in the energy bill
> recently passed by the House. Of the efforts on dollar policy, Mr. Devine
> said,"it's a dialogue right now."
>
> Frank Vargo, a vice president of the National Association of
> Manufacturers, a trade group, said:"The dollar is up about 30 percent in
> the last four years against the major foreign currencies."
>
>"This is just like putting a 30 percent tax on U.S. exports and saying we
> have a 30 percent sale on U.S. imports," he added.
>
>"I'm hearing more from our manufacturers about the dollar than any other
> issue," Mr. Vargo said."It's having a devastating effect."
> But David Gilmore, a partner at Foreign Exchange Analytics in Essex,
> Conn., which consults with currency traders, said changing the dollar
> policy now would risk foreign investment at a vulnerable time."One of the
> things that sustains that flow is the notion that U.S. currency is not
> going to lose its value and may even increase in value," he said.
>
>"We have a very weak economy, we don't have much happening abroad in terms
> of demand, so there isn't much to offset a sudden decrease," Mr. Gilmore
> said.
>
> Mr. Devine said today that"for us, at least a recognition of the problem
> would be a step forward."
>
>"We have to be careful on this issue," he added,"because we don't want to
> be seen as crybabies."

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