Buying "American"

by Russ Roberts on May 11, 2006

in Cafe Conversation, Trade

The Wall Street Journal reports (in a no-charge article for non-subscribers) that buying American isn’t what it’s cracked up to be:

Few sports cars have captured the nation’s imagination
like the sleek Ford Mustang, a 21st-century reincarnation of an
American classic. The Toyota Sienna minivan, by contrast, speaks to the
utilitarian aesthetics of Japan: refined interiors, arm rests and lots
and lots of cup holders.

Yet, by a crucial measure, the Sienna is far more
American than the Mustang. Statistics from the National Highway Traffic
Safety Administration that were publicized in "Auto Industry Update:
2006," a presentation by Farmington Hills, Mich., research company CSM
Worldwide, show only 65% of the content of a Ford Mustang comes from
the U.S. or Canada. Ford Motor Co. buys the rest of the Mustang’s parts abroad. By contrast, the Sienna, sold by Japan’s Toyota Motor Corp., is assembled in Indiana with 90% local components.

Calling a car "American" or "foreign" has no meaning. But that doesn’t stop "American" car companies from trying to use emotion to affect buyers:

There’s more than a little irony in this, considering
Ford has launched a campaign to regain its footing with an appeal to
patriotism (catchphrase: "Red, White & Bold"). "Americans really do
want to buy American brands," asserted Ford Executive Vice President
Mark Fields in a recent speech. "We will compete vigorously to be
America’s car company."

As the Mustang shows, though, it’s no longer easy to
define what is American. For 20 years now, the dynamic car makers of
Asia — led by Toyota, Nissan Motor Co. and Honda Motor
Co. — have been pouring money into North America, investing in plants,
suppliers and dealerships as well as design, testing and research
centers. Their factories used to be derided as "transplants,"
foreign-owned plants just knocking together imported parts. Today, the
Asian car makers are a fully functioning industry, big and powerful
enough to challenge Detroit’s claim to the heart of U.S. car

So if there’s no such thing as an American car company or a foreign one, what’s an "American" company to do?

On Thursday, the Level Field Institute, a grass-roots organization
founded by U.S. Big Three retirees, is scheduled to hold a news
conference in Washington. Among the points the group is expected to
make is its belief that comparing relative North American component
content is an ineffective way to determine who is "more American" among
auto makers. A better way, says Jim Doyle who heads Level Field, is to
look at the number of jobs — from research and development to
manufacturing to retailing — each auto maker creates per car sold in
the U.S.

Mr. Doyle says the institute’s study shows that Toyota in 2005 employed
roughly three times more U.S. workers, on a basis of per car sold in
the U.S., than Hyundai Motor Co. Each of the Big Three manufacturers in
the same year employed roughly three times as many U.S. workers, on a
per-car-sold basis, as Toyota. "What’s better for the American
economy?" Mr. Doyle asks. A GM car "built in Mexico with 147,000 jobs
back here in America or a Honda built in Alabama with 4,000 or 5,000
jobs in America?"

A challenge to our readers: why is this job creation measure irrelevant?


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