The Nuclear Option: Toyota Pulls Out Of Iran

Now that at least partial civility has returned, with Congress having been officially notified that no ghosts were found in any Toyota machines, and that “the evidence points to a preponderance of cases where people who claimed unintended acceleration were pressing the wrong pedal,” it’s time to ratchet-down the tension on both sides.

In diplo-speak, that’s called “confidence-building measures,” or CBMs for short (not to be mistaken for ICBMs.) Toyota is performing CBMs. In a country that is suspect of building ICBMs.

A day after Congress signaled that they are ready for some Glasnost & Perestroika in regards to the, well, let’s call them now “concerns” about Toyota, Toyota announced that they “suspended auto exports to Iran indefinitely with an eye toward the potential repercussions on sales in the key U.S. market,” says The Nikkei [sub]. You rub my back, I rub your back, and then let’s have some more CBMs.

In that treasure-trove of crowd-sourced knowledge, Wikipedia, confidence-building measures are defined as “certain techniques which are designed to lower tensions and make it less likely that a conflict would break out through a misunderstanding, mistake, or misreading of the actions of a potential adversary.” In this case, it could be more like: Let’s kiss, make up, and focus on a common adversary.

In the Iran, the centrifuges continue to spin and produce radioactive material that will not be used to treat cancer. The U.N. Security Council, the U.S. and the European Union have strengthened sanctions against Iran. As far as the U.S. go, any company that breaches those sanctions can kiss the U.S. market good-bye.

Toyota believes that exports of peaceful Corollas or Land Cruisers do not violate the sanction regime of the U.S. Nonetheless, Toyota told Teheran to forget any more Toyota shipments.

We are not talking about a lot of cars. According to Toyota numbers, ToMoCo exported roughly 4,000 units to Iran in 2008. The number dropped to 250 in 2009. By the end of May, the Iranians had gone on a small shopping spree and imported 230. Since May, no further imports came from Toyota to Iran.

The matter could have been quietly buried. It wasn’t. The timing and the announcements are not coincidental. Speaking of timing, it is also not coincidental that the CBMs are performed after the U.S. and Japan buried the hatchet on Okinawa, and that Japan sacked their Prime Minister that wasn’t all too popular in Washington. (If you think I’m hallucinating: I spent 25 years in a military/diplomatic family in Washington, and compared to what I experienced there, this here would be routine business.)

It will be interesting to watch what happens now. By publicly withdrawing from a market of 230 cars, Toyota handed Washington the perfect pretext to clamp down more. On more makers, more industries and more countries.

Staying in the automotive world, Iran’s second largest maker Saipa has joint ventures with Renault, Nissan, Citroen, and Kia.

Iran’s largest carmaker, Iran Khodro, is deep in bed with PSA Peugeot (the “Iranian national car,” the Samand is based on a Peugeot 405). In addition, Iran Khodro had, at least until recently, joint ventures or alliances with Renault, Daimler and Suzuki.

Renault doesn’t seem to make any preparations for departure. Iran Khodro announced in June that “in a bilateral cooperation, Iran Khodro Industrial Group and Renault Co. are going to produce new products based on X90 platform in Iran.” To Renault, a threat from Washington rings hollow, what market do they have to lose? A missive from Brussels would be more serious. But then, pressure could be brought on Nissan. Itai!

Others, like Daimler are a bit more cautious. In April, Daimler announced its intent to sever ties with Iran Khodro and said that they “plan to sell their 30 percent stake in Iranian Diesel Engine Manufacturing, a subsidiary of Khodro Diesel, plus they will withdraw an application to export commercial vehicles for civilian use to Iran.” It just so happens that in the same April, Daimler was in the grips of the Department of Justice for alleged bribes and got a pass after they paid $185m. Coincidence? Where I lived for 25 years, rule #1 was: There are no coincidences. “Look at that poor guy. Wouldn’t it be sad if that would happen to you?” (S.O.P. in the world I thankfully have left behind.)

Anyway, Daimler will not exit Iran completely. “The company will still honor existing contracts and provide support to their loyal Iranian customers,” wrote the Benzinsider. The E-Class apparently are still being locally produced by Iran Khodro. The Benzinsider heard that Daimler will “cease to supply parts” for it. The matter remains murky. I bet it won’t be too hard to buy a nicely appointed Mercedes in Iran, be it an indigenous E-Class or an imported S-Class.

Some car makers may not have received the memo at all. Iran Khodro’s website announces that “Iran Khodro Diesel Co. (IKD) and South Korean Hyundai open a new chapter in industrial cooperation.” Hyundai has gobs and gobs of exposure stateside. What’s “ouch” in Korean?

If you are interested in the bigger picture, keep monitoring small events such as Toyota not delivering any cars anymore to Iran. Students of history will recall that the thaw between China and the U.S.A., and eventually the downfall of Communism as we know it, started with a ping-pong match.

If you can’t remember, Wikipedia has an article.

PS: If you or a loved one own or owned a Toyota, and were traumatized by dire warnings of impending death, emanating from government websites and Transportation Secretaries – our heart goes out to you. You have been unavoidable collateral damage that simply happens on the way to the common good.