Current Affairs

If 75% of an American car is not made in America...who are we really saving here?

 Today a friend and fellow auto enthusiast (JB) brought to my attention a fact that American cars have for years been increasingly manufactured in other countries (Mexico, Canada, etc), to the degree that the contents and origin of a cars parts must be disclaimed or stated on a new car's window sticker.  Outside of the UAW...who are we actually bailing out here?  

Oh...and please check out the quote made by the Georgia auto dealer toward the end f this editorial...seriously??

What makes a car American?

  • STORY HIGHLIGHTS
  • Fewer than half of parts on some Big Three vehicles made in U.S.
  • More than 80 percent of parts on some foreign vehicles made in U.S.
  • Study: U.S. brand vehicles support more engineering jobs in U.S.
  • Consumer says he prefers quality of foreign cars to American ones







(CNN) -- With the top U.S. automakers in economic survival mode, "Buy American" is a frequent cry among those trying to save jobs at home.

A window sticker on a new Lincoln MKZ shows the vehicle's multinational origins.

A window sticker on a new Lincoln MKZ shows the vehicle's multinational origins.

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But buying a car to benefit the U.S. economy has become an ambiguous, complicated challenge.

"How you define an American car is one of the great conundrums of this world," said Dutch Mandel, the editor and associate publisher of AutoWeek.

Fewer than half of the parts on some Big Three vehicles are made in the U.S.

Looking at a Ford Fusion? It is assembled in Mexico. The Chrysler 300C is assembled in Canada, but its transmission is from Indiana; the brand's V-8 engine is made in Mexico. Engines in the Chevrolet Equinox sport utility vehicle are from China.

On the other hand, Toyota's Camry is comprised 80 percent of parts made in the United States, and 56 percent of Toyota's vehicles sold in the U.S. also are made here, according to Toyota spokeswoman Sona Iliffe-Moon.

The Toyota Sienna and Tundra also have 80 percent of their parts manufactured in the U.S.

"When you have manufacturers from around the world building cars in the U.S. with 85 percent domestic content -- engine, transmission, assembly -- is that an American car?" Mandel asked. Or, he asks, is it considered foreign because the profits go back to a foreign country?

"It's truly a global industry," said Thomas Klier, a Chicago, Illinois, economist who co-authored "Who Really Made Your Car?" an encyclopedic analysis of the auto industry melting pot. 

"When you think of buying American, you should focus on three points -- its engine, transmission and where it was assembled," Klier said.

To get that information, read a vehicle's window sticker. U.S. automakers are legally required to detail the origin of a car's parts and its final assembly point.

"Unfortunately, there are few people who know about the sticker or even bother to look at it," said Bernard Swiecki, a senior project manager at the nonprofit Center for Automotive Research in Michigan, which follows trends in the industry.

The sticker's details were news to Douglas Sullivan, 43, a truck driver from Snellville, Georgia. Though he prefers foreign brands, believing them to be of higher quality, he said he used to favor U.S. brands because he wanted to support American workers.

"I wanted to keep the jobs right here," Sullivan said.

Swiecki said many people think about image of a brand, rather than the way that brand has evolved over decades as the market has grown more diverse and competitive.

"They will think, 'I'm buying a GM, I'm getting an American car,' " Swiecki said.

Foreign car manufacturers generate billions of dollars in jobs and community infrastructure in the U.S., but there is a difference between Detroit's economic footprint and that of its foreign rivals.

The Center for Automotive Research says Detroit's Big Three employed almost 240,000 people in the U.S. at the end of 2007. Foreign makers had about 113,00 U.S. employees at the time.

The key difference in how the Big Three and foreign brands support jobs in the U.S. comes outside the factories, according to a 2006 study by the Level Field Institute, a group formed by Big Three retirees in Washington.

"What's driving the difference in jobs ... is investment in research, design, engineering and management," Level Field President Jim Doyle said in a statement on the 2006 study.

The Center for Automotive Research said the Big Three had 24,000 engineers on U.S. payrolls in 2007. The Japan Automobile Manufacturers Association said its member companies had 3,500 U.S. research and development employees in 2007.

Level Field found that every 1,000 vehicles sold by Detroit's Big Three in the U.S. support more than twice as many jobs as 1,000 vehicles sold by foreign nameplates.

Most Americans consumers understand that the industry is global, Swiecki said, and they are more savvy than ever in purchasing vehicles.

"For the most part, gone are the days of people going to a car lot and paying a buck to take a swing of a hammer at a foreign-made car," Swiecki said.

But there are exceptions.

A Savannah, Georgia, Ford dealer sold 15 cars last weekend after he ran a radio ad blaming Japan for Detroit's financial funk.

While 15 was substantially better than weekends before the ad, dealer O.C. Welch said, it was still about half of the business he did a year ago.

"All you people that buy all your Toyotas and send that money to Japan, you know, when you don't have a job to make your Toyota car payment, don't come crying to me," Welch says in the ad. "All those cars are rice ready. They're not road ready."

Sullivan, who was at an Atlanta, Georgia, dealership Thursday to pick up his American brand minivan from the service department, said he has had a different experience.

"What I look for is good gas mileage, and when I pay it off in four or five years, it's still running," said Sullivan, who has owned several American and foreign brands. "It seems I get better quality with a foreign car."

He said the vehicle has given him trouble, and whenever he replaces it, he'll probably go with a foreign brand, regardless of whether any of the parts were made in the United States.


Let's Cut Cap-Gains Taxes on Auto Investments - WSJ - Polis

Reading the news and other blogs each day, I realize what a job it is to keep up with content. As such, it has been some time since my last post.  

Well, in reading the Wall Street Journal today there is a great opinion written by Boulder, Colorado's very own entrepreneur Congressman Jared Polis, provided below.  It hits on not only current events but also a topic that is of great interest to me...the auto industry.  I have long been a consumer critic of the US auto industry as many have.  I have also become weary of the socialist direction that our country is headed in by providing private industry a safety net with our tax dollars.  Where does it end???  Starbucks?

 Jared's opinion struck me as a thoughtful opportunity f0r the government to forego using today's dollars to solve the problem by allowing those private firms with capital an opportunity to invest in the auto industry without capital gains.  Why wouldn't they do this???

__________________________________________________________________________

Let's Cut Cap-Gains Taxes on Auto Investments

Then the private sector can do the 'bailout.'


The din of clattering metal echoes through the halls of our capital: panhandlers! Erstwhile captains of the automobile industry, having foregone their Learjets, now don the tattered rags of beggars as they seek congressional approval for a $34 billion bailout of the Big Three automobile companies.

Our United States Congress of lawyers, doctors, diplomats, retired military officers and career politicians -- along with their staffs of intelligent young political science majors and MBAs -- now finds itself poring over "business plans" submitted this week by Ford, GM and Chrysler. People who have never before in their lives seen -- no less implemented -- a business plan are now trying to decide if these companies will succeed by means of a "capital infusion" with various imposed preconditions and negotiate what we taxpayers (investors) should be getting for our money. Something is wrong with this picture.

If we as a society place a public premium on "saving" the automobile industry from its default reorganization under Chapter 7 or Chapter 11 bankruptcy -- which has been good enough for the steel and airline industries, among others -- then a better manner in which to express that premium might be to establish special tax consideration for those who are willing to take on the risk. One way of doing that is to provide an exemption from capital-gains taxation on all debt or equity instruments used in the next six months to invest in the troubled auto makers.

By waiving the future capital-gains tax on all investments in the automobile industry, we enhance the projected return models and therefore the likely occurrence of a privately funded "bailout." There are turnaround firms and funds, and they are experts at what needs to be done. Tax exemption for gains would certainly get their attention. It also wouldn't cost taxpayers anything because it only forgoes future government revenues that wouldn't exist absent this incentive.

At the very least, my constituents in Colorado won't find themselves as limited partners in a private equity fund run by Congress making speculative investments in flagging automobile manufacturers and who knows what else with their taxpayer money. And Congress can focus on issues more directly related to its core competencies and the necessary role of government, such as how to make training accessible to workers who might be transitioning between industries.

At best, the tax incentive would lead to a far more efficient investment than anything Congress can negotiate. Such a tax incentive could save jobs, make our automobile industry more competitive and viable, and earn tax-free return on capital for the savvy investors who step up. If it works in this particular case to incentivize additional risk-taking through a capital-gains tax exemption, it may indeed work in other cases or, I dare say, across the entire U.S. economy.

Most members of Congress and staffers on the Hill are smart people, but we should not pretend that we are better at what are so clearly other people's jobs. One of the tremendously difficult tasks that we are ill-equipped to successfully orchestrate is restoring these three failing companies to health. As one of the members of Congress with a strong business background, I know what I don't know in business. While I hold my colleagues in great esteem, I doubt their abilities as turnaround artists are very much superior to mine. Any pretension of a government bailout being a good deal for taxpayers should be abandoned for the insincere (or perhaps ignorant) rhetoric that it is.

Among the reasons I ran for Congress, one was to make government work. Let's get government back to doing the work of government. Reading business plans and making investments is the job of equity funds and turnaround specialists, not members of Congress.

Mr. Polis, the founder of proflowers.com and bluemountain.com, was recently elected to Congress as a Democrat from Colorado.


"Really...a bailout???"

SNL spoofs Lehman Brothers CEO, Dick Fuld, who made nearly $72M  in annual compensationand has watched his fortune dwindle..."Really...a bailout?"

Click to Play SNL Spoof

On a serious note, Marc Cuban makes a good point about the importance of the recently announced government bailout, but the lack of thought or plan for the period after it happens...

Mark Cuban's Blog Post  "After the BailOut - Can the Bankers Who Caused the Mess Fix It ? "  


LB1