Buying American Cars What Does It Mean?

berri

Overhead, now that's an interesting accounting term. I wonder if labor fringe is in Overhead. That often runs around 25% of direct labor, but with UAW that is probably noticeably higher. Some companies treat that as a factor to direct labor instead of overhead though.

Interestingly enough, if labor costs are not included in the sticker US content, that just makes D3 look closer to some of the transplants on this metric than total cost reality due to D3 higher use of plants in Canada and Mexico (e.g. their Mexican and Canadian labor is not reducing the US content calculation like it should, while vehicles like Camry and Accord are not getting recognition of their US labor payroll).

guido65

Tlong you are incorrect about 90% of the money staying here in the U.S. from a Honda assembled here in the U.S. What most people don't think about is the difference between built and assembled. Although Honda assembles vehicles here in the U.S. you must look deeper. What about the plants tooling? parts? support?.. Where do the cars parts come from? Who is the parts supplier owned by? As I read through economic news I believe Americans are too late in understanding what we have done to ourselves economically. We have and continue to ship so much wealth and jobs overseas for such a short term gain. I hope I am wrong that this will turn around. Buy as American as you can, keep your money close to home if possible. Educate others on what it means to buy American products and services. Vote with your money, keep jobs here at home for future generations. You may think you are immune and isolated from this economy, you are not. Think long term, think deeper...Americans just can't put 2 and 2 together when there are so few jobs and opportunities.

stever

Guess you missed the news today about the unemployment rate falling to 5.1%.

The money is interesting - lots of international companies don't bring the money "home" for tax reasons.

berri

Globalization helps profit margins and revenue growth which benefits shareholders and senior executive compensation. But is hurting American workers jobs and salary/benefit levels. Not really a surprise because globalization overall benefits the have not countries far more than the developed ones. They gain while we lose. But who contributes the most to our politicians? Doubt it's the working stiffs.

That tax issue hasn't been resolved because of various opposing special interests in Congress. Lack of tax reform is causing US companies to do inversions which move their headquarters overseas to more tax friendly places like Ireland. Often this is accomplished by purchasing an overseas company and then moving the new combined HQs to the acquired company's home country. Right now the US corporate tax laws are a disaster of stitched together laws that favor some industries over others, and sometimes at their expense.

Mr_Shiftright

As long as Americans shop at WalMart or Amazon and demand consumer goods at cheap prices, you will have globalization. In a way, it's like the "drug problem". If Americans didn't use them, they wouldn't come here.

So if you want to pay $1,000 for an iPad, you can build it here.

Also the "bring the jobs back" argument is a weak one IMO. These jobs are lost forever, to downsizing and automation. They aren't ever coming back.

berri

Yes, but more and more skilled work is also being sent overseas including engineers, computer science, accounting, etc. The government stats understate all of this because they also don't reflect under employed or people, such as those in their fifties or sixties that are pushed out and if lucky end up in a much lower paid job or otherwise stop working altogether beyond the gov stats unemployment period. The stock market knows this and I think it's one of the reasons it's reassessing growth right now. Additionally, show me a successful economy without a successful middle class. Globalization is killing the latter and I think that is why we are now hearing all these warnings about lower stock market returns in the coming decades. Go back a century plus and Great Britain was once a great power.

Mr_Shiftright

This is the "new normal". The American Dream was never sustainable, from the get-go. Things are just getting "realistic". Even the so-called "middle class" was a dream built on easy credit and no real wage gains in the last 30 years.

What would the American car industry be without easy credit?

berri

All I know is that I'm pretty confident that in about 20 years there is going to be a huge retirement crisis with Social Security and Medicare, as well as slowing stock and bond markets combined with the fact that many people don't really understand 401K portfolio's. Hopefully at some point Washington will begin to "realistically" assess all of this or it really could lead to a depression. A more current major issue that is about to surface is childcare expenses. It's impacting millennial's ability to take on car payments and mortgages, or causing them to put off, or skip having kids. Immigration has become a dirty word in politics, but either younger people need some relief in this area, or we'll have to increase immigration to avoid becoming Japan and deflation. Both parties seem to be run by buffoons, so I worry about our young people's future.

isellhondas

Immigration has become a dirty word because of the HUGE numbers if illegals.

Come here LEGIALLY, learn ENGLISH and play by the rules and contribute like our ancestors did!

tlong

Yes,both parties ARE a bunch of buffoons.

fintail

The question of this discussion is impossible to answer. There hasn't been a wholly "American" car for some time, and nothing fits that bill today. Whether it comes to ownership, production, or components, nothing is only from one place. Nobody can agree if production contributes more to a national economy than ownership.

Regarding the "realistic", it's a chicken and egg thing. Is the middle class sustainable? Not in this day of corporate personhood, barely regulated "free trade" masquerading as fair trade, pity-the-rich tax policy, fleeing to dirty tax havens, etc. Was it sustainable once? Yes.

Regarding wage gains, don't confuse a symptom with the disease. The death of what was the middle class isn't caused by wage stagnation - wage stagnation created that casualty. We now have the greatest socio-economic gap since the time of the Great Gatsby, and we know who funded it. Mobility has also decreased, even compared to supposedly "socialist" competitive nations.

Easy credit isn't a problem for cars - the subprime car industry isn't going to sink the economy. If it's not a problem, it isn't too easy.

Mr_Shiftright said:

This is the "new normal". The American Dream was never sustainable, from the get-go. Things are just getting "realistic". Even the so-called "middle class" was a dream built on easy credit and no real wage gains in the last 30 years.

What would the American car industry be without easy credit?

fintail

Racing to the bottom, that's what it is leading to right now. Retirement will be a dream for many young people today who aren't lucky enough to be public sector (let's see how long the defined benefit game can exist) or have an inheritance. Time to end regressive tax policy.

Unfortunately, both parties are bought and paid for by effectively the same forces.

berri said:

All I know is that I'm pretty confident that in about 20 years there is going to be a huge retirement crisis with Social Security and Medicare, as well as slowing stock and bond markets combined with the fact that many people don't really understand 401K portfolio's. Hopefully at some point Washington will begin to "realistically" assess all of this or it really could lead to a depression. A more current major issue that is about to surface is childcare expenses. It's impacting millennial's ability to take on car payments and mortgages, or causing them to put off, or skip having kids. Immigration has become a dirty word in politics, but either younger people need some relief in this area, or we'll have to increase immigration to avoid becoming Japan and deflation. Both parties seem to be run by buffoons, so I worry about our young people's future.

berri

You know the roaring twenties were kind of like this as far as income inequality. But then the following decade brought on the great depression.

For many years I thought our two party system was a valuable asset with the stability and continuity it brought to government. But now I think we may be better off with one of those parliamentary governments with many parties. I don't think the lobbyists have enough money to buy 4 or 5 parties out!

Michaell

berri said:

You know the roaring twenties were kind of like this as far as income inequality. But then the following decade brought on the great depression.

For many years I thought our two party system was a valuable asset with the stability and continuity it brought to government. But now I think we may be better off with one of those parliamentary governments with many parties. I don't think the lobbyists have enough money to buy 4 or 5 parties out!

If you think about it, we sort of have that - unofficially. Tea Party folks are farther to the right than "traditional" Republicans, while Bernie Sanders and his camp are farther to the left than "regular" Democrats. They just can't (or won't) split off into their own party.

No true third party has been able to break the stranglehold on the two party system. Perot probably ran the strongest campaign back in '92.

Mr_Shiftright

You get a lot of simplistic solutions being coughed up during political campaigns, none of which are even remotely workable. You also get a lot of bad, wrong information tossed out as if they were "facts".

Just looking at the struggling American auto industry over the last 30 years should tell us that there are no simple solutions when you are dealing with complex economic, social and cultural systems. All the MBAs, all the high paid "suits", all the paid DC lobbyists, all the muscle and hustle of unions, none of them could keep the Japanese and Germans from rolling right over them.

berri

Ironically, when Toyota put a non family member and Ivy League MBA (Harvard I believe) in charge, quality dropped in an American cost cutting approach (e.g. 2007 Camry) which to this day has resulted in Toyota losing most of the pricing premium it used to have.

Mr_Shiftright

My friend who ran a large and extremely successful company (over 300 employees) swore he would never hire anyone with an MBA degree.

andre1969

berri said:

Ironically, when Toyota put a non family member and Ivy League MBA (Harvard I believe) in charge, quality dropped in an American cost cutting approach (e.g. 2007 Camry) which to this day has resulted in Toyota losing most of the pricing premium it used to have.

I remember for a few years, Toyota was actually using what looked like black electrical tape for blackout trim on the Camry. I remember that if you picked at it enough, you could actually peel it back with your fingernails. I can't remember if that was the 2002-06 style of the '07-11. I can't remember if they did that with other models, but if they did it with the Camry, I'm sure they did it with the cheaper models as well.

I think Toyota might have been cost-cutting for awhile, though. I remember hearing that the 1992-96 Camry was almost *too* well-built and high-quality, so they cheapened them a bit for 1997.

fintail

And the decade that came after the depression brought a deficit-spending world war that was as much about economics as it was about liberation and justice. Let's see if history repeats itself.

I don't call them "cereal box MBAs" for nothing.

Eisenhower must be rolling in his grave about the current GOP - at least the donkeys are the same old schtick. And neither will result in any real help for either the average worker nor the auto industry.

berri said:

You know the roaring twenties were kind of like this as far as income inequality. But then the following decade brought on the great depression.

For many years I thought our two party system was a valuable asset with the stability and continuity it brought to government. But now I think we may be better off with one of those parliamentary governments with many parties. I don't think the lobbyists have enough money to buy 4 or 5 parties out!

isellhondas

andre1969 said:

berri said:

Ironically, when Toyota put a non family member and Ivy League MBA (Harvard I believe) in charge, quality dropped in an American cost cutting approach (e.g. 2007 Camry) which to this day has resulted in Toyota losing most of the pricing premium it used to have.

I remember for a few years, Toyota was actually using what looked like black electrical tape for blackout trim on the Camry. I remember that if you picked at it enough, you could actually peel it back with your fingernails. I can't remember if that was the 2002-06 style of the '07-11. I can't remember if they did that with other models, but if they did it with the Camry, I'm sure they did it with the cheaper models as well.

I think Toyota might have been cost-cutting for awhile, though. I remember hearing that the 1992-96 Camry was almost *too* well-built and high-quality, so they cheapened them a bit for 1997.

You are correct. The 1997 Camrys were "decontented" in several ways. Still good cars but they really cut corners in ways that were obvious. Of course, we were quick to point that out to our customers.

greg128

The US consumer will purchase imported vehicles worth about $350 billion this year which represents about 1/3 of our total trade deficit. Recently The US and S. Korea agreed to do away with tariff's on car imports and exports. The 2.5% US tariff and the 4% Korean tariff are being cut to zero in 2016. With Hyundai-Kia importing around 750,000 vehicles a year the US loses about $375 million in tariffs while Korea will lose perhaps a tenth of that on sales in that country of our exports of about 38,000 vehicles. Meanwhile they are now paying about $866 million a year in compensation for our 28,500 troops on their soil for their protection.
The actual cost of them and their equipment is easily $5 billion a year.

I would say that Trump has a point about our trade negotiators. They don't seem very bright.

Mr_Shiftright

Political populists or clever bloggers can always frame extremely complex problems in simplistic terms, to make them seem easily solvable--which of course they are not.

fintail

IMO, the US subsidizing the defense/economy of those who become competitors is a valid subject. It's a pretty big impact, and not only with South Korea.

greg128

Mr_Shiftright said:

Political populists or clever bloggers can always frame extremely complex problems in simplistic terms, to make them seem easily solvable--which of course they are not.

Thanks Mr Shiftright. I never considered myself a clever blogger, but I accept the comment as a compliment.
And yes Donald trump is a political populist because many of his ideas are popular.

Mr_Shiftright

Well you know what I mean---things like "we shoulda let GM go bankrupt" and then everyone goes YEAH! and applauds. And then the populist forgets to consider all the plus and minus ramifications of such an event, nor does the audience. It's a mere sound bite.

Or "let's not buy their foreign oil. We'll show 'em" Again YEAH! Again APPLAUSE

But what do these statements even MEAN?

Are such statements about energy, economics or the auto industry any more intelligent than "Let's Nuke North Korea!" ?

I don't think so.

Populist sentiment is like shooting fish in a barrel. Any bar stool occupier can come up with very popular ideas.

Implementing them? Not their department!

SURE populist ideas are popular. They don't require any deep thought. Easy peasy.

carnaught

Deleted

anythngbutgm

andre1969 said:

berri said:

Ironically, when Toyota put a non family member and Ivy League MBA (Harvard I believe) in charge, quality dropped in an American cost cutting approach (e.g. 2007 Camry) which to this day has resulted in Toyota losing most of the pricing premium it used to have.

I remember for a few years, Toyota was actually using what looked like black electrical tape for blackout trim on the Camry. I remember that if you picked at it enough, you could actually peel it back with your fingernails. I can't remember if that was the 2002-06 style of the '07-11. I can't remember if they did that with other models, but if they did it with the Camry, I'm sure they did it with the cheaper models as well.

Actually there was a few other makes that did the same thing. It served double duty by being a sealed surface that was rust proof and it eased the paint process by allowing those components to be in the paint booth sans masking.

My S2000 for example has this approach around the windscreen frame. Lots of club guys have removed the "Tape" (which by the way does not come off that easily and does leave a residue) to make the windscreen frame the same color as the body. Some like it, I personally don't. But I also think the black tape was used in this application to match the black soft tops...

guido65

So, how long do you think we can keep this economy of ours chugging along by purchasing foreign goods and services and going into debt over them? Americans are short term thinkers, impulsive spenders. If Americans really understood the consequences of purchasing foreign goods and services, the real impact it has on their own economic futures, their children s future this economy would boom. You can still buy American goods, just not at Walmart, Target stores. Go to Farmers markets, or a bizarre, search the internet, buy local any chance you can. We cannot give up like some here on this forum have. This countries future, our childrens future depend on it. The excuse of "Globalization" is a term the rich, a CEO, will use. It only benefits a very few, and in a HUGE financial gain of a way...

roadburner

guido65 said:

So, how long do you think we can keep this economy of ours chugging along by purchasing foreign goods and services and going into debt over them? Americans are short term thinkers, impulsive spenders. If Americans really understood the consequences of purchasing foreign goods and services, the real impact it has on their own economic futures, their children s future this economy would boom. You can still buy American goods, just not at Walmart, Target stores. Go to Farmers markets, or a bizarre, search the internet, buy local any chance you can. We cannot give up like some here on this forum have. This countries future, our childrens future depend on it. The excuse of "Globalization" is a term the rich, a CEO, will use. It only benefits a very few, and in a HUGE financial gain of a way...

Keep talking that way and you will convince me to buy an M235i or STI instead of the Mustang GT I'm leaning towards...

tlong

guido65 said:

So, how long do you think we can keep this economy of ours chugging along by purchasing foreign goods and services and going into debt over them? Americans are short term thinkers, impulsive spenders. If Americans really understood the consequences of purchasing foreign goods and services, the real impact it has on their own economic futures, their children s future this economy would boom. You can still buy American goods, just not at Walmart, Target stores. Go to Farmers markets, or a bizarre, search the internet, buy local any chance you can. We cannot give up like some here on this forum have. This countries future, our childrens future depend on it. The excuse of "Globalization" is a term the rich, a CEO, will use. It only benefits a very few, and in a HUGE financial gain of a way...

Glad to hear you do your shopping at the bizarre.

stever

"The U.S. imported a record $138 billion in car parts last year, equivalent to $12,135 of content in every American light vehicle built. That’s up from $89 billion, or $10,536 a vehicle, in 2008. In 1990, only $31.7 billion in parts were imported."

5 Things to Know About the U.S. Auto-Parts Industry (WSJ - currently free blog post)

"Beijing’s industrial planners have identified car-parts plants like this as a vehicle into the world’s auto markets. By first learning to make and sell car parts in markets like the U.S., leaders in China’s auto industry say, companies can then use the lessons to move on to selling cars overseas."

“By running factories there and hiring local people” in the U.S., says Dong Yang, a vice president of the government-backed China Association of Automobile Manufacturers, “it will pave the way for the Chinese to build and sell cars there ultimately.”

China’s Strategy in U.S. Car Market: Make Parts First (WSJ registration link)

fintail

Bizarre, isn't that Wally World?

greg128

By running factories there and hiring local people” in the U.S., says Dong Yang, a vice president of the government-backed China Association of Automobile Manufacturers, “it will pave the way for the Chinese to build and sell cars there ultimately.”


Where are Volvos Made? Not an easy search on google.

berri

Great, more China crap...

robr2

greg128 said:

By running factories there and hiring local people” in the U.S., says Dong Yang, a vice president of the government-backed China Association of Automobile Manufacturers, “it will pave the way for the Chinese to build and sell cars there ultimately.”


Where are Volvos Made? Not an easy search on google.

Volvos are made in Sweden, Belgium, China, and in 2018, the US.

Currently, all Chinese made Volvos are for their domestic market. An extended wheelbase version of the S80 will be exported from China to the US next year.

fintail

I thought the S60 LWB was coming here too, to be bought by 3 or 4 Volvo fanboys and a handful of proud people of Chinese background.

robr2

You're right. It's the S60 LWB that is coming from China. And IMHO, your sales number forecast will be pretty much on target. Further, I don't quite understand the need for it as the new S90 will be about the same size.

Perhaps it's a cheap way to test the waters for a Chinese made car in the US or to try and get some livery exposure for Volvo.

berri

Let's see, China is hacking to steal everything they can get from the west. They are discriminating against and extorting from western companies that operate in their country to enhance their own firms. They are the primary funders of North Korea which is developing nuclear weapons with the explicitly stated purpose of using them against the US. Now why would I buy a Chinese car, be it Volvo, Buick, or whatever???

stever

Same reason you go to Walmart or buy a Lenovo or a cheap TV.

$$$

Or you could buy a Subaru made in Indiana.

Subaru’s secret: Low-paid foreign workers power an export boom (Reuters)

fintail

Yes, $$$, to heck with durability or the externalities of supporting the Wally World trinkets. Just keep one's head in the sand. I am sure the same people would have bought stuff from Germany in 1939 or USSR in 1953. It's not that much different.

That foreign worker article is interesting, and is also part of the reason why some European nations have let in so many refugees lately. We'll see how that pans out - another case of shortsighted thinking.

fintail

That's the fun part. You won't, neither will I. At least for the moment, we can still vote with our wallets. Some people have enough awareness to follow more than the $$$.

berri said:

Let's see, China is hacking to steal everything they can get from the west. They are discriminating against and extorting from western companies that operate in their country to enhance their own firms. They are the primary funders of North Korea which is developing nuclear weapons with the explicitly stated purpose of using them against the US. Now why would I buy a Chinese car, be it Volvo, Buick, or whatever???

berri

So I see Chairman Xi is in your neck of the woods right now. I wonder how many hackers and spies he has with him for those tech company meetings? I saw on the news today that China has even got its malware on some Apple I-phones. They seem pretty good at all of this, while the US comes across as pretty impotent right now. Hopefully that's more our country's current leadership that it's tech workers and capabilities.

fintail

Espionage is probably a cost of doing business in this brave new world. If you can't force your way in via government mandated joint venture nonsense, you just observe and take.

The visit should make for some insane traffic jams, all in the name of "free trade", of course. As the west coast for questionable investments coming from some regions, the visit makes sense.

Unfortunately, it's not as easy as changing leadership - the money flows from the same sources no matter who has the chair, and never dare ask where it comes from.

berri said:

So I see Chairman Xi is in your neck of the woods right now. I wonder how many hackers and spies he has with him for those tech company meetings? I saw on the news today that China has even got its malware on some Apple I-phones. They seem pretty good at all of this, while the US comes across as pretty impotent right now. Hopefully that's more our country's current leadership that it's tech workers and capabilities.

berri

I don't think corporations really have a country identity other than for tax and legal purposes. They primarily focus on short term profits and senior executive pay.

As for China, I see a replay of Russia not all that long ago. Basically, we Americans can be saps. We think all nations think like us. But China will use the West, just like Russia did, to gain economic and technical insight and ability. Once they have what they want, they will turn on us so fast your head will spin. They've gained computer access to most of what is important in the US, and probably the rest of the West. They keep North Korea funded as their indirect nuclear weapon should they need to use it. Meanwhile industry throughout America thinks just like Boeing - we can sell some more planes.

stever

China won't blow us up - their Volvo factory would be at risk, not to mention losing a bunch of customers.

Some people in Chattanooga are irritated with all the incentive money given to Volkswagen to build the factory there and more people are concerned about layoffs and delay in building the new SUV line. Doesn't sound like there were any clawback provisions.

Sohn: What was Volkswagen thinking? (timesfreepress.com)

berri

Shorter term I agree, but longer term the Asian markets, including both eastern and western Asia, will dwarf the West as their middle class expands. At that point we will just be a military thorn in China's side. That's when their cyber will change from espionage to cyber attack on our infrastructure. They are building all the knowledge base they need to do this right now, while our country just kind of stands by and weakly complains. If we respond too strongly to their future cyber attacks, they'll have NK let a few missiles fly over here. Remember how the Soviet thaw was going to westernize Russia and all was going to be peachy keen back then.

fintail

China won't nuke the US or support such a move - too many of their kleptocratic officials are using the real estate market here for money laundering purposes and for a place to escape if the axe falls at home. I mean, their Horatio Alger entrepreneurs are moving here for opportunity and growth.

I like the Boeing analogy - it's appropriate here. Short term profit with no thought of long term consequences, and no price paid for the problems created. A local news show was tacitly fawning over the movement by mentioning how many Boeing planes have been sold there this year vs 20 years ago. It's also why the US doesn't complain about the wholesale IP theft (not to mention the social and environmental crimes - of course a piece of garbage like Kissinger supports it) - a few are making a nice pile of money out of the ruse. It's not just China using the west, it is our own treacherous corporate and political leaders - usually joined at the hip.

But hey, some American cars are loved there, so maybe it's worth it.

berri

Don't get me started on Kissinger. His bs peace with honor nonsense delaying the conclusion of the Viet Nam War killed or maimed many US servicemen needlessly. I have no use for him and don't believe a word he says. If he had been honest with Nixon, that foolish war would have been over much earlier with less grief to American families. The Paris peace talks accomplished little . It was a fraud perpetrated on the public while Kissinger sought some spin to save face. I was in the military during that war and many officers' had already seen its futility and waste. btw: the lifting of the old military draft had more to do with minimizing war protests in the future than really caring about young men in this country. Middle class and wealthy Americans were having their kids affected by the ugliness of war because of the draft and they voted.

fintail

He makes Cheney look like the Tooth Fairy. If there's one cowardly old monster who slithered his way to power and who deserves a Nuremberg style inquisition, it's him. With similar results, of course.

No doubt he's loving the events of today.

stever

berri said:

They are building all the knowledge base they need to do this right now, while our country just kind of stands by and weakly complains.

It's kind of hard to complain to China about stealing our intellectual property. Thank you Edward Snowden. (link)

I just hope Chevy didn't steal code from VW for the Cruze diesel.