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Friday, December 09, 2005

Rethinking "Buy American"

I have always been a "buy American" advocate. But I am seriously beginning to rethink this position. It is becoming hard to defend simply, and I hate convoluted explanations.

"Buy American" is a difficult position to explain nowadays, because there is no such thing as a purely American made car. Our "domestic" automotive companies are all multinational behemoths, with divisions, plants, suppliers, customers and shareholders scattered over the globe. For example...
  • Is a Chevrolet Equinox an "American" car? The engine is made in China, and final assembly is in Canada by CAW organized labor.
  • Is a Ford Fusion "American"? It is assembled in Mexico by non-UAW workers, and because it is a platform-mate of the Mazda6, probably has significant Asian parts content.
  • Is a Mazda6 "American"? It is assembled in Flat Rock, MI alongside the Mustang from a mix if domestic and Asian parts. Since it is built by the UAW, UAW members are allowed to buy them. But 2/3 of the profit goes to Japan.
  • A Saab is built from European sourced parts by Swedish unionized labor. Profit goes to GM. OK to buy, and still feel patriotic?
  • Chrysler is now owned by Daimler, if you take home a 300, are you buying American or German?
How about a Honda Civic? Assembled in the U.S., with 70% domestic parts content, but the company is headquartered in Japan, and the workers are non-Union. (Dennis Kucinich says "not American").

I had convinced myself that the key was to follow the profits. For example, since GM is headquartered in Detroit, has (mostly) American shareholders, and pays taxes in the U.S., buying GM was the patriotic choice. The American companies support our communities directly. But then again, where does Honda buy all those domestically sourced parts from?

The domestic carmakers want the benefits of my patriotism without any sort of return commitment. A company can't wrap itself in the flag and shout "Buy American!", while at the same time offshoring as much business as possible, laying off blue and white collar workers. Ford closes plants in the U.S., while increasing capacity in Mexico. All of the big three lean on their suppliers to move production to China, to cut costs, or risk losing business. Or they refuse to pay fair prices, and drive their American suppliers into bankruptcy.

Who do they expect to buy their products if they help to decimate their customer base, the lower middle and middle middle class? Who will remain committed to their product?

As the global trend continues, the picture will get even more fuzzy. You will walk into your Chevy dealership, and be offered a compact car designed in Korea by GM Daewoo, built in Canada, from mostly Korean and Chinese parts. Or you may walk into a Lincoln dealership and buy a luxury car based on a Volvo platform, with a Japanese sourced engine, assembled in the US. Eventually, the new Chrysler you are interested in may be assembled in China from German and Chinese parts.

I am still rooting for Ford and GM over the foreign-headquartered competition. So much of Michigan's economy relies on their success, it is suicidal for me not to. But "Buy American" is becoming a harder case to make to anyone who lives outside the industrial midwest.

13 comments:

carscomblogger said...

DCX is trying very hard (even on their own internal media blog) to say they are NOT part of the Big three and that the term is outdated. They don't want to be limpe dinto two big failing motor companies based in the US. Amazing.

The Angry Engineer said...

The whole "profits" angle never worked for me. After all, what benefits me more direction - a supplier who buys a lot of parts from my employer at a fair and resonable cost, or a supplier that pulls crap like retroactive price cuts but then supposedly keeps its "profits" in the US?

Anyways, I think much of the problem here comes from the lack of transparentcy in accounting for "domestic content". I don't know of a single person that really understands how such calculations are made.

Anonymous said...

In the end, I really do not care where an organization is headquartered. Toyota may be headquartered in Japan but it has plenty of American shareholders and is actively investing in the US.

One thing that I care about (which no one else seems to mention), being an engineer (though not in the automotive field) is the number of engineers a company employs here and the number of cars it engineers.

If there is any reason why I continue to root for GM, Ford and Chrysler (not DCX, just Chrysler) - that is it. I do not want the US automotive industry to degenerate into nothing more than a manufacturing business. I want the technology to be developed here too.

- HCE

koshermafia said...

It does not reall matter where the "profits" go. If you buy a Lexus RX330, which has parts made in Japan and is Assembled in Japan, all you are really doing is sending paper with dead presidents on them to Japan. As Todd Buccholz wrote in "New Ideas From Dead Economists", "A country is wealthy if it consumes lots of goods and services, not if it stockpiles metals or paper currency." If consumers are choosing foriegn over domestic cars or even "domestic" cars assembled by foriegners, big deal! If the American consumer has decided that the whole concept of buying an American car is bad for the consumer, than that allows America to direct its resources elsewhere, to something more valuable to the nation. Just as the car replaced the railroad industry, or how the computer replaced typewriters, or how the cell phone and VoIP are replacing traditional phones. True wealth isn't paper currency, its consumption.

iamhoff said...

I really want to buy American, but how do you do that? You all are right, with questions as to the practical "origin" of such multinational vehicles as the Equinox, the GTO, the Fusion, the 300, the Accord, the Titan, etc. Profit is the logical point to define the "effective" country of origin, but the content issue (as Angry pointed out) is so confusing as to not be of any help. Somehow, without any conscious thought or effort, my last two vehicles have been made by Japanese companies, and fully assembled in Japan...a 1996 Acura Integra and a 2001 Nissan Pathfinder. I actually managed to find "pure" vehicles (the Integra was 94 percent or so Japanese content) that were Japanese. Probably the only true American domestic vehicles actually assembled in the USA using a majority of US-sourced parts are the full size trucks and SUV's. I certainly wouldn't mind a Z71 Tahoe, but I don't need anything that big, nor do I want to try and feed it gas over 30k miles per year. What to do?

Anonymous said...

...mildly off topic..
For one of the domestics, I've seen presentations up to the V.P. level. I think, since a lot of those guy have a finance and marketing background, they'd be happy to wither the company to a marketing organization rebranding what is made by everyone else. Manufacturing, engineering and design are such difficult things to manage and there are such easy profits when geniuses market to the masses. Foolishness! This is the same way all of the electronics firms withered away. I hope the best for the domestics, but I fear they are like the oak tree in Atlas Shrugged:

"The great oak tree had stood over the Hudson, in a lonely spot on the Taggart estate. Eddie Willers, aged seven, liked to come a look a that tree. It had stood there for hundreds of years, and he thought it would always stand there. Its roots clutched the hill like a fist with fingers sunk into the soil, and he thought that if a giant were to seize it by the top, he would not be able to uproot it, but would swing the hill and the whole of the Earth with it, like a ball at the end of a string. He felt safe in the oak tree's presence; it was a thing that nothing could change or threaten; it was his greatest symbol of strength.
"One night, lightning struck the oak tree. Eddie saw it the next morning. It lay broken in half, and he looked into its trunk into the mouth of black tunnel. The trunk was only an empty shell; its heart had rotted out long ago; there was nothing inside- just a thin gay dust that was being dispersed by the whim of the faintest wind. The living power had gone, and the shape it left had not been able to stand without it.
- Atlas Shrugged, Ayn Rand

I read this when I was 18. I've worked in the auto industry since I was 18. This passage haunts me. I think it too well describes the domestics today. We are just waiting for that lightning bolt.

Call me Eddie Willers today.

iamhoff said...

Anonymous,

I haven't read Atlas Shrugged in years. You nailed it...that passage completely nails the domestic auto industry. We look at companies like GM and Ford as these pillars of American strength, but they're rotting away inside. We can only hope that the diseases that are eating them up (pick one...unions, horrible management, uninspired product, etc.) can be eradicated before too much damage is done.

Anonymous said...

Remember that this is a market-driven economy. People won't buy junk or cars they don't want, wherever they come from (Eastern European and Chinese included).

If anybody insists we all buy American, there is little incentive of the Big Two to actually compete, no incentive to actually improve their offerings, and no reason for car salesmen to be thought of so poorly.

Hence, the state we're in now.

-Jeff
http://www.jwfisher.com
(Blogs, RSS, and 3000 pages of car stuff!)
p.s. - keep up the good work on your site! I'm enjoying it!

carpundit said...

Buy the best car at your price. Or spend what it takes to buy the best car in the segment you want. Reward good design, good build quality, and efficient operations by sending your money their way.

GM and Ford will change or die. The UAW will change or die. Let the market decide and the chips fall where they may.

Big Ford Fan said...

AutoProphet, as one who has posted on "buying American" many times, in all honesty, you've hit the nail on the head.

With the globalization of the industry and outsourcing of design and parts, it's very difficult to do so.

I still agree with the sentiment, even if to do so is almost impossible.

ericgp said...

How about my scenario, I recently sold my VW Bora Sportline (Jetta 1.8T) which was Assembled in Mexico with drivetrain made in Germany, for a Chevy.

I Chevy which was built in Gunsan, South Korea, with an Opel engine built by Holden in Melbourne, Australia, with a suspension designed with the help of Lotus in the UK, sold to me in the US by a Suzuki Dealer because it is the only market that Chevy doesn't sell the car in, under its own name(s). (It is a Buick, Holden, Daewoo, etc. elsewhere).

All in all, what did I buy? American? It is a Chevy afterall, though I have to say that Chevy in the US would never provide me with the 7 year, 100,000 mile warranty for its car that Suzuki is.

Eric
autoviews.blogspot.com

Lifelong Volunteer said...

The answer is simple: FOLLOW THE PROFITS! If the parent company is US, the lions share of profits ( and donations to non-profit groups) go almost entirely to the benefit of those who live in the US. Buy a Saab or Impala, you're stimulating the US economy. Buy a Honda thats (final-assembled) in the US, you're supporting Japan's economy (at the expense of people who live in the US) You want to see companies donate money for stadiums, universities, parks, in the US -- buy GM or FORD. If you want those tax-free public donations sent to Japan, then buy a lexus or Honda. IT MAKES A BIG DIFFERENCE. Few people realize HOW MANY "public" Librarys, parks, programs, univerisities, forests, YMCA's auditoriums and other life-enriching benefits exist SOLELY because of a LOCAL entrapreneur or company provided the cash. Do you car about YOUR "quality of life?" then buy from a company headquarterd in YOUR neck of the woods.

Brian said...

These are turbulent times for the Domestics. Being a lower-income buyer it is hard to find a vehicle that I like, that I can afford. I leased a 2005 Impala ($150 month) and I really like it. Before that I owned a 2000 Impala (same car)... same faulty head gasket (3.4 liter)LOL!!!
When I was looking for a new car, I went over to the local Toyota dealer and drove a Carolla, because that was all I could afford. It was ok, but it just seemed kinda cheap, and I felt kinda dirty driving it. Sort of like I was cheating on my community or something. So I leased this impala and found it was made in Canada. Many of the union activist in my area want tariffs added to the foriegn cars, so that the market is fair for their products. I believe we tried that tariff angle in the late 19th early 20th century. All the tariff did was give the domestic manufacturers the "go-ahead" to raise prices through the roof. In my opinion, a tariff on the final assembled product is not the answer.
I really think that the future is going to be an engineer(s) that breaks away from a domestic and comes up with a totally new concept that kicks everyone's butt. I dream of the day where we can tool around in a truck that is powered by "free energy." A vehicle that has style, is clean, and doesn't look like a pop can that I will get killed in a wreck. I live in a community where the main employer is GM (Cobaly Plant). I really like some of the designs of the Cobalt, and I will probably buy one after this lease. I guess I will just stay the course and keep on supporting GM to the best of my ability as a consumer.