Sunday, May 14, 2006

"Made in America" automobiles: Myth versus Reality

Written by: S.M.Mehdi Hassan
I know the title looks a bit awkward but my intention was to reflect the identity crisis that the North American Automobile Makers are now going through. You may know that Ford, General Motors and Daimler Chrysler are the leaders in USA automobile market. These companies cash on American’s patriotic emotion to sell their cars but the funny thing is that a good portion of production of their cars takes place outside America. According to an article published in Monterey a good portion of the auto parts are brought from abroad. I am quoting from the article,
A Free Press analysis of federal data found that vehicles built by Detroit automakers have steadily increased their proportion of parts from outside the United States and Canada. By the same measure, vehicles built in North America by Japan's largest automakers increasingly use U.S. and Canadian parts.
Detroit automakers still build a far higher share of their vehicles in the United States than foreign automakers, and most of their models draw more than three-fourths of their parts value from U.S. or Canadian sources. But some popular Japanese models now surpass their U.S. competitors for content made in the United States or Canada, the government records show.
I hope now you understand the reason of my title. American automobile market has been a very competitive market and now days, not only the domestic car makers but also foreign car makers especially, from Asia and Europe are producing and selling cars in America. This has added to the existing conditions and made it more critical. As a result, to increase their profit margin automobile producers are forced to look for cheaper and cost effective alternatives which resulted in outsourcing the production of auto parts to other countries where the labor cost is cheaper and assemble those parts in the home country plant. This type of outsourcing has become a trend among American Automobile companies. The out come is shut down of plants and a huge number of people becoming jobless. Moreover, the auto parts made in other countries are not of that high quality.
According to an article published in the Duluth Tribune Ford has launched a campaign that appeals to patriotism and their catchphrase is “Red, White, and Bold.” Ford’s Executive Vice President in his recent speech said that Americans really did want to buy American brands. My question is: What is really the “American Brand”?
Level Field Institute, an organization founded by retired officials of the top three American automobile producing companies held a news conference in Washington on 11th May. In the conference the officials of the firm said that judging whether a car should be said to be “Made in USA” or “More American” based on its contents made in North America is not an effective determiner. Jim Doyle, Head of Level Field said that a better way to determine was to consider the number of jobs from research and development to manufacturing and retailing, created by each automaker inside the country.
In my previous posts on automobiles I have written about Asian automobile especially, the Japanese automobile producers: Toyota. At present USA is Toyota’s biggest market. Last month it outpaced the Daimler Chrysler in terms of sales and moved in the third position in American Auto market. The striking thing about the Japanese automobile companies: Toyota, Honda, Nissan operating in USA is that these companies are known as ‘TRANSPLANTS’ that does not produce anything only assemble parts but the truth is these companies have their fully operational plants in USA where they are producing their own parts. In terms of North American content Japanese competitors may surpass their American rivals.
Last but not the least, if we consider consumer’s point of view then we would see that there are vast categories of consumers based on different needs and priorities. There is one group who thinks that through buying a car produced by Ford, or General Motors they are upholding their devotion toward their country and contributing to the country’s economy. ‘Made in USA’ gives them a sense of joy and pride. However, the car may not be produced in USA. On the other hand there are those who are concerned with safety, fuel efficiency and price. The bottom line is in order to survive and to grow in a highly competitive automobile industry as that of the United States, automobile makers always have to adopt cost effective ways to produce and sell cars and increase their profit margin which may result in shutting down plants and outsourcing works in the neighboring country or other countries.

Related article:
Monterey Herald
Duluth News Tribune.Com
Starter Online


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