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Reply #29: on your points [View All]

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idlisambar Donating Member (916 posts) Send PM | Profile | Ignore Wed Aug-17-05 07:31 PM
Response to Reply #27
29. on your points
Edited on Wed Aug-17-05 07:53 PM by idlisambar
On your first point regarding domestic content, to some extent I grant it, Japanese and other foreign automakers have increased their domestic content since the 80's, but consider this...


The transplants love to tout the U.S. content - parts and labor -- of their products, pointing out the number of jobs their plants and dealerships have created. According to CAR Economics and Business Group Director Sean McAlinden, 20-30 percent of Japanese transplant vehicle parts are imported from Japan. Most of the rest are sourced from North American facilities owned by Japanese supplier companies. Highest in U.S. content are Honda's Accord at a claimed 85 percent and Toyota's Camry at 70-75 percent, but McAlinden points out that the first 25 percent of these figures is sales and marketing expense. That makes the Accord closer to 65 percent U.S. parts and labor and the Camry 50-55 percent.

A vehicle's engine represents a big chunk of value, and a lot of Japanese transplant engines are assembled here. But how "American" is a Japanese engine built in a Japanese-owned U.S. plant with mostly Japanese parts? While a few U.S. companies have been able to penetrate the very tight community of Japanese suppliers, very few parts going into U.S.-built Japanese vehicles are sourced from non-Japanese suppliers. And the labor to assemble these transplant cars and trucks amounts to just five to ten percent of their value.


http://microsite.consumerguide.com/auto/editorial/imho/index.cfm/act/opinion07

The overall point is that domestic content numbers are not definitive. The automotive supply chain is complex and breaking it down by value-added is non-trivial and somewhat arbitrary. In addition as pointed out above since marketing and sales (as well as transportation, distribution, and dealer profits) are counted to some extent even cars that are imported outright have substantial "domestic content", as these are expenses that the foreign maker would need to pay in any case.

The overall picture is getting more complex, but the trade numbers clearly show that over the last 15-20 years as Japanese car companies have supposedly been increasing their use of domestic auto parts, imports of parts directly from Japan have increased from $6 billion to $14 billion, while overall vehicle imports have also increased.

Regarding whether Japanese auto makers are more nationalistic, I will retreat a little bit from this simplistic statement to say more accurately that the Japanese auto industry is structured to meet nationalistic aims. Evidence is present in the trade numbers from the original post, if you just look at the imports of autos and auto parts from the US to Japan. Generally speaking the Japanese auto market is tightly closed to foreign automakers. And it is not just U.S. auto producers that can't get a break, Korean autos have made almost no inroads in Japan despite the fact that low-cost Korean producers have been highly successful in virtually every other market they have entered.

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