What Is an American Car?
These Days Its Hard to Tell, and That Could Snag the Push to Save
Detroit Auto Makers
By JOSEPH B. WHITE
Could there be a more American vehicle than a "Jeep Patriot?" Nothing on
four wheels says American more proudly than Jeep, the rugged brand that
helped America win World War II, and has ferried millions into our wild,
Western spaces since.
See if you know which vehicles were made in American with our quiz.
Yes, in fact, there could be a more American SUV than a Jeep Patriot. A
Toyota Sequoia would be one of them. The Sequoia is 80% "domestic"
according to the National Highway Traffic Safety Administration, while
the Jeep Patriot is only 66%.
"Buy American" is back on the agenda in Washington. Congress is debating
proposals to require that contractors on projects financed by the
economic-recovery package buy "American" steel.
The Treasury has pumped billions into the three American car makers with
head offices in and around Detroit, hoping to avoid a collapse of what
industry and political leaders call the U.S. auto industry. There's lots
of talk about the government supporting American efforts to develop
electric cars and batteries, and some federal programs already
established to do this.
When it comes to the car business, however, consumers and Congress and
the Obama administration are going to confront a tricky question: Just
what is an "American" car, or for that matter, an "American" car company?
Once you put down the flags and shut off all the television ads with
their Heartland, apple-pie America imagery, the truth of the car
business is that it transcends national boundaries. A car or truck sold
by a "Detroit" auto maker such as GM, Ford or Chrysler could be less
American -- as defined by the government's standards for "domestic
content" -- than a car sold by Toyota, Honda or Nissan -- all of which
have substantial assembly and components operations in the U.S.
Thomas Klier, an economist with the Federal Reserve Bank of Chicago who
has studied extensively the realignment of the American auto industry,
wrote in an October 2007 paper that as of 2006 about 25% of the parts
used in vehicles assembled in the U.S. came from overseas, and another
25% were manufactured here by foreign-owned parts makers. The Detroit
companies wave the Stars and Stripes when they advertise their wares or
look for loans in Washington, but when they talk to investors or the
business press, they stress their aggressive efforts to promote "global
sourcing," a code for, "Buy More Parts from China and Mexico."
GM, the most global of the companies with headquarters in Detroit, has
highlighted to investors that it now sells more cars (and has more
employees) outside the U.S., and that its best opportunities for growth
-- assuming the company's restructuring is successful -- are in China,
Latin America and other developing markets.
Over the next several years, the nationality of the cars sold in America
is likely to become harder to pin down. Ford intends to import to the
U.S. market the European designs for its small and medium-sized cars.
German auto maker Volkswagen is pushing ahead with plans to set up a
U.S. assembly plant again. The BMW X5 sport utility (assembled in South
Carolina) is more American than a Pontiac G8, which is an Australian
import, like Oscar host Hugh Jackman.
For nearly 15 years, the U.S. government has required, under the
American Automobile Labeling Act, that car makers disclose to consumers
what share of the car's components are made in the U.S. or Canada --
another way of saying, made by people paid something comparable to U.S.
wages. A 2001 study by NHTSA found that more than 75% of 646 people
surveyed weren't aware of the existence of the domestic content
information, and only 5% of those surveyed said the disclosures --
usually on a window sticker -- affected their decision "to any degree
whatsoever." The NHTSA study also observed that "the introduction of
AALA labels in model-year 1995 was not followed by a resurgence of
U.S./Canadian parts content in the overall new vehicle fleet, but rather
a modest decline from an average of 70 percent in model year 1995 to
67.6 percent in model year 1998."
The muddle about what constitutes an "American" car is evident in the
fleet of cars I own. Depending on who's at home, you could find a
Saturn, a Chevy, a Toyota and a Subaru crowded into my driveway. Of
these, one was assembled in the U.S. (Extra credit in the accompanying
quiz if you can guess which one.)
Meantime, spare some sympathy for the government officials trying to
sort out where to invest the taxpayers' money to support the "U.S. auto
Consider Chrysler LLC. During the 1980s and 1990s, Chrysler was the most
flag-waving, red-white-and-blue American car company among Detroit's Big
Three. Company Chairman Lee Iacocca was a clear, loud voice accusing
Japan's government and auto makers of unfair trade practices. Never mind
that Chrysler had a long-standing link to Japan's Mitsubishi Motors
Corp. and sold various Mitsubishi cars. Then, Chrysler sold itself to
Germany's Daimler-Benz AG to create DaimlerChrysler. Not long afterward,
the new German owners installed a German executive to run what used to
be Chrysler -- and began promoting German engineering as a valuable
attribute of its cars.
Confused yet? It gets better. In 2007, Chrysler was reclaimed for
America -- 80.1% of it at least -- by the U.S. hedge fund Cerberus
Capital Management LP. But Chrysler has taken a pounding as the economy
has gone south, and now Cerberus has reached a tentative agreement to
peddle 35% of Chrysler to Italian auto maker Fiat SpA in return for
access to Fiat's engine technology, small car designs and other
technology. Fiat might also use a Chrysler factory to build cars for the
U.S. market and sell its brands through Chrysler dealers. But Fiat isn't
proposing to put any cash into Chrysler. Should this deal be consummated
-- and that's by no means certain -- Chrysler would once again be
majority owned by corporations located outside the U.S.
So what should you buy if you want to buy a truly American-made car? For
the 2008 model year, the government says the Ford Crown Victoria has the
highest percentage of U.S./Canada content at 90%.
The only hitch: It's assembled in Canada.
(Answer: The Camry)