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MarkV

Buying American Advantages/Disadvantages?

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What are the advantages and disadvantages in regards to buying American? What do you mean by "American?" Is a Dodge built in Mexico "American," or is a Honda built in Ohio "American?"

From a foreign trade viewpoint.

A foreign car is one whose profits are converted into a currency that is not US Dollars. Even though American workers are paid US Dollars to build Hondas in Ohio, the profits from the sale of the car are sent to Japan. Becuause more US dollars are spent on foreign goods than Yen are spent on US goods, the Japanese end up with excess Dollars. They can either buy things in the US, like businesses or buildings or buy US debt. Americans probably don't have enough money to finance our own debt without trade deficits. You can find college economic professors that will argue huge trade deficits don't matter or others that argue they are a huge problem. I tend to think they are a problem.

From a quality viewpoint.

I bought a new Chevy Malibu and love it. Its my understanding that some foreign cars have equally good quality.

From a who builds it viewpoint.

I have this wacky belief that all improvements in a societys standard of living come from people making things, ie people taking materials, money, and energy and creating something of greater value. Almost anyone else is a drain on society. From this viewpoint, I don't really care if it is a "foreign" car as long as a someone who is going to improve my standard of living, a domestic worker, made it. My pickup has a Mexican engine. I understand that some of my dollars paid wages in Mexico.

From a most inexpensive product viewpoint.

People should not just buy American because its American any more than they should not buy foreign goods. Consumers must buy the most cost effective product or capitalism does not work. Manufacturers that do not control cost and quality, foreign or domestic, will fail if they are not competitive.

From a world trade viewpoint.

The only true route to world peace is through world trade. We are probably more at peace with the Chinese now that we are buying things from them and their standard of living is increasing.

This entire issue is so complicated that politicians, schools and buyers just ignore it. I don't understand all the issues, but I try to buy from a domestic supplier when the price and quality is comparable.

Bill

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<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">From a foreign trade viewpoint.

A foreign car is one whose profits are converted into a currency that is not US Dollars. Even though American workers are paid US Dollars to build Hondas in Ohio, the profits from the sale of the car are sent to Japan.</div></div>

However,...

A typical "American car" has a domestic content of <span style="font-weight: bold">65-70%</span>, mainly due to Mexican assembly and overseas part supplies. This is less than most of the most popular domestically produced "Import cars". Accord, Camry, and most trucks/SUVs are well over <span style="font-weight: bold">80%</span>, in some cases <span style="font-weight: bold">90%</span>. Accord and Camry in fact have a higher domestic content than <span style="font-weight: bold"><span style="font-style: italic">ANY</span></span> "American car".

The <span style="font-weight: bold">profit margin <span style="text-decoration: underline">to the manufacturer</span></span> on new car sales is <span style="text-decoration: underline">never more than <span style="font-weight: bold">1%</span></span> (excepting a few SUVs in their now expired heyday). It's usually in the range of 0.25-0.5%. Just the income tax paid by the workers that built the car is orders of magnitude more than the profits generated by the car.

Therefore, <span style="font-weight: bold"><span style="color: #3333FF">it is in fact a <span style="font-style: italic">near certainty <span style="text-decoration: underline">today</span></span> that buying almost any "American car" sends more money out of the country than buying the most popular "domestic imports" does.</span></span>

The rest is just jingoism.

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Here is a good place to go for some facts:

http://www.levelfieldinstitute.org/fact_kit.html

This site was started by a group of retired auto workers.

Here are some other interesing facts from that site:

When you look at the JPC (Jobs Per Car) and percentage of domestic content, GM is about double the domestic content overall of Toyota and has a much, much larger U.S. workforce than Toyota. Ford and Chrysler also have a big difference in jobs when compared to many foreign makes.

This site also lets you compare domestic content and other factors between specific models. For example, on the surface the 2007 Toyota Corolla and Chevy Malibu may seem similar since they are both made in the U.S., right? But the Malibu has 86% domestic content vs. 60% for the Corolla, and the Malibu is supported (supplied) by 19 U.S. plants vs. 3 for the Corolla. This produces a JPC rating of 72 for the Malibu and 32 for the Corolla.

http://www.levelfieldinstitute.org/compare.php

When you compare the Chrysler Sebring vs. Hyundai Sonata, the JPC rating is 83 for the Chrysler, and 12 for the Hyundai Sonata, even though both are made in the U.S.

Here is some more information from their site:

U.S. automakers (Ford, GM and Chrysler) employ two and a half times more U.S. workers (per car) than foreign automakers (including all the cars they make here). Even with recent buyouts, GM employs more Americans than all foreign-owned automakers combined. Ford's U.S. job "footprint" is about 20 times bigger than that of Hyundai. And Ford employs more U.S. workers at a single manufacturing facilitiy than Hyundai and VW employ nationwide. Honda is one of the largest, longest operating "transplant" manufacturers operating in the U.S., but it employs only 27,000 Americans, about a third of Chrysler's current total.

I like their slogan: "What you drive, drives America."

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Yeah, but you have to like to drive what you end up buying. That's why we ended up in a VW. I looked at what Ford and GM had to offer, and drove quite a few, but the VW was our choice. I don't regret it one bit. I did buy a Ford truck at the same time, but it was a similar situation. I did not like the other offerings for trucks.

I think the domestic makers need to make cars enjoyable to drive again.

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There's an old saying that's becoming popular. You can put lipstick on a pig and it's still a pig.

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<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Peter Gariepy</div><div class="ubbcode-body">

Dave@Moon,

Your numbers are significantly different that the numbers at http://www.levelfieldinstitute.org. Can you name your source of data so i can compare?

</div></div>

There are a number of sources for this information. The last one I linked on the forum was this page from cars.com. On it the Accord is not shown, but the Sienna and Tundra are. The last one I remember reading, which I think was on CNN.com, had the Accord in the top 5 and the Tundra at #2.

I haven't looked at Joe's site yet.

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<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">I haven't looked at Joe's site yet.</div></div>

It's mainly cherry-picked stats that support their conclusions instead of making intuitive sense. If Toyota sounds worse than the most favorable American company, they use Toyota. If VW sounds worse, they use them. It's actually kind of entertaining to read how they pussy-foot around the subject of "efficiency" using their "jobs per car" approach this way, evidently hiding a bloated workforce behind figures largely from VW's Mexican operations. Their main point of the country needing a real, cohesive, & universal health care plan to become competitive in the world market again is undoubtedly true, however.

Domestic content, while not perfect, is by far the better measure of the impact of car sales on the U.S. economy. This is the term used by the industry as a whole, the Federal govt., and all reputable industry groups. (<span style="color: #009900">In particular, see David Cole's comment on this in the linked cars.com page at the end of this post.</span>) See the domestic content link for a good 4 page discussion of the pros and cons of this measure. Pay particular attention to the graph on page 1, "<span style="font-style: italic">Production weighted domestic content 1997-2006</span> (Detroit 3 vs. foreign-owned)".

I used a typical range of 65-70% domestic content for "American" cars based on selected examples, they list 79% with no specific reference either. This seems quite high for 2008 data. For instance Chrysler's best domestic content vehicle (Dodge Ram) is only 75%. It may be that they're using older data, as the trend towards lower domestic content across the board accelerated in 2008 and even more in 2009. (cars.com, A Closer Look at Domestic-Parts Content)

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Jobs/car confounds inefficiency, assembly method and sourcing. A more meaningful statistic might be % of the workers, including suppliers, that are U.S. Looking at only the OEM workers will be very distorted by, for example, whether the OEM makes the transmission in-house or buys it from a transmission manufacturer. But if you know where the guy who makes the transmission works, rather than who he works for, you get a better idea of where his wages are spent. This same effect confounds the assembly man-hours/vehicle statistic.

If you think back to the "assembled car" OEM's of the 1920's, this is not a new effect. If a car had a Continental engine, the OEM itself had zero employees paid to build the engine.

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Wow, what a great discussion!

I'm impressed by the people who care about this subject and bring different sources and analysis to the forum.

However, there is one thing I don't want to imply and hope no one else does either. That is, you have the right to buy and drive what you like and want. If you like a VW over a Ford or Chevy, or it fits your budget or needs, etc., then buy the VW.

The original question was whether buying American has any advantages or disadvantages. I believe the advantages far, far outweigh the disadvantages so I will vigorously advocate that position. But any other reader/user also has the same opportunity to learn and then decide.

Joe

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<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">A more meaningful statistic might be % of the workers, including suppliers, that are U.S.</div></div>

In it's simplest terms, that's exactly what "domestic content" is defined as. My 1996 Ford Ranger was nearly all U.S. made, but the standard transmission in all Rangers were made in Japan by Mazda. Therefore my Ranger's domestic content when I bought it was 93%.

In 1996 that was a kind of low for a Big 3 truck. Today that's nearly an unattainably high number even in a truck.

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<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Reatta Man</div><div class="ubbcode-body">...interesing facts from that site: When you look at the JPC (Jobs Per Car) ... GM is about double the domestic content overall of Toyota and has a much, much larger U.S. workforce than Toyota. Ford and Chrysler also have a big difference in jobs when compared to many foreign makes.</div></div>

Discussion about the 'universal health care' issue notwithstanding, the above quoted workforce statistic is, in essence, the death knell of the US automotive industry if not corrected. It points directly to the union-driven labor hostage situation confronting domestic producers for the past fifty years.

Don't get me wrong... I'm not 'anti-union', for they have served and important place in the economy... however...

They (as notably documented in the case of the UAW) have forced unsustainable employment, salary, retirement, and health care burdens on the manufacturers. Ideally, the union(s) would see this and act in their best interest of long term preservation. Unfortunately, I don't think this is going to transpire. We will be faced with a repeat of what's happening in the US airline industry: large-scale bankruptcies that force a realignment of salary agreements, release from retirement and health plan liabilities, and workforce restructuring (read: unload the deadwood/overpaid/redundant).

Since the 1950's, feeding the ravenous "labor 'gator" has come at the expense of spending money on development and capital investment. Mix that in with some truly unimaginative corporate leadership, and you get what has happened to the US automotive industry since the 1970's.

While there have been glimmers of hope with respect to the latter problem, the high cost of unionized labor in an increasingly global economy continues to cripple us.

Cheers,

JMC

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<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: John Chapman</div><div class="ubbcode-body">

Discussion about the 'universal health care' issue notwithstanding, the above quoted workforce statistic is, in essence, the death knell of the US automotive industry if not corrected. It points directly to the union-driven labor hostage situation confronting domestic producers for the past fifty years.

</div></div>

John, this goes way beyond the Auto industry. Now it's even affecting state government's. The taxpayer can't flip the bills anymore, and the unions don't want to hear it. Somethings going to give.......

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There is another angle on this that most people don't know about. You may well go down to your local domestic car dealer and buy an "American" car that was actually built in Canada.

There is a good reason for this. Back in 1966 the US and Canada passed what was called the "Auto Pact". This allowed car makers to swap parts and vehicles freely across the border. Instead of having 2 inefficient plants making the same vehicle, they could have 1 efficient plant making, say, cars on one side of the border and another making, say, minivans on the other side - then swap them back and forth as necessary.

I point this out because in the past "patriotic" Americans have refused to buy Canadian made Fords, Chevs etc thinking they were preserving Amercan jobs. When in fact it was just the opposite.

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<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Skyking</div><div class="ubbcode-body">John, this goes way beyond the Auto industry. Now it's even affecting state government's... </div></div>

Yeah, don't I know it! Just ask our Governator Ahhnold. He fought the unions, and he lost. Says something when the president of the transportation worker's union tells the state governor to sit on it, so to speak. In fact one union or another in California have pretty much stonewalled all the reforms promised in the election.

The unions might not hear it... but look to Vallejo CA for an example of what is to come. The city declared bankruptcy last month because they couldn't meet the pension burden any longer.

Remember... it's not about the issues. The guy that promises the most goodies wins.

Cheers,

JMC

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<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: 1948Lincoln</div><div class="ubbcode-body">What are the advantages and disadvantages in regards to buying American?</div></div>

Others on this forum, point fingers of blame at the automotive industry. Truth is, our domestic auto manufacturers are barely hanging on (look at Ford stock). This is in keeping with the rest of our economy. Look at the big picture, pertaining to your question, Wes.

Simply put, we Americans have put our hard-earned greenbacks down on so much foreign products, mostly ALL of our industries have either sold, or simply abandoned-shop, and moved to another country. Why? Americans buy foreign goods. Look around your entire house. How much American content have you sustained? I admit, you could argue that some things aren't made here, but we all know why.

When I was a lad, we were all afraid, 'the communists are coming.' Today, we fall over each other at Wal-mart, trying to give the Communist Chinese, all the profits for their products as we can, in the name of saving our money.

Here's a direct answer to your question: When you buy American, our national debt stays here, profits are turned and returned here, employment on all levels (from the manufacturer down to the retailer) is bolstered, unemployment goes down, welfare decreases, fewer loans are defaulted, Fannie Mae & Freddy Mac don't need to be bailed out, (you know the rest). in short, our economy grows.

An old saying goes: "A foolish country and his money soon part company." (Literary license) Very soon, the US will owe rather than own. Millions of Americans owe in excess of $10-20,000 in credit card debt, (and they are facing certain unemployment). It is getting worse. Lawyers are advertising, 'you only need to pay back pennies on the credit card dollar' on TV. We'll all pay, just like the S&L, and Enron collapses.

Look what happens when we depend on foreign energy! This has been going on for so long, our beloved United States is in economic shambles, headed towards utter devastation. Remember what happened to the USSR? Look for something similar to happen to the United States; division and collapse.

Who owns our debt? If China cashed-in, since they already have our factories, soon we will work for them. When we (or our children) start working for the communists, there will be no advancement, no pay raises, no OSHA or child-labor laws, no unions; all of which are far too expensive.

In short, you may save a nickel on your next foreign purchase, but it will come back and bite real hard in the future.

"REAL AMERICANS BUY WHATEVER THE HELL THEY WANT." We have the individual liberty to do that. But we've been here before, like when we were owned by England (remember the Boston Tea Party? Americans chose war over foreign-imposed taxes). We absolutely depend on other countries, like OPEC energy. Nobody forces us to pump gas, and there is no international regulatory commission. If they can get $10/gal., they will. Recovery may require substantial personal sacrifice, but we need to take back our country before our 'land of opportunity' is gone forever.

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<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: simplyconnected</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: 1948Lincoln</div><div class="ubbcode-body">What are the advantages and disadvantages in regards to buying American?</div></div>

Others on this forum, point fingers of blame at the automotive industry. Truth is, our domestic auto manufacturers are barely hanging on (look at Ford stock). This is in keeping with the rest of our economy. Look at the big picture, pertaining to your question, Wes.

Simply put, we Americans have put our hard-earned greenbacks down on so much foreign products, mostly ALL of our industries have either sold, or simply abandoned-shop, and moved to another country. Why? Americans buy foreign goods. Look around your entire house. How much American content have you sustained? I admit, you could argue that some things aren't made here, but we all know why.

When I was a lad, we were all afraid, 'the communists are coming.' Today, we fall over each other at Wal-mart, trying to give the Communist Chinese, all the profits for their products as we can, in the name of saving our money.

Here's a direct answer to your question: When you buy American, our national debt stays here, profits are turned and returned here, employment on all levels (from the manufacturer down to the retailer) is bolstered, unemployment goes down, welfare decreases, fewer loans are defaulted, Fannie Mae & Freddy Mac don't need to be bailed out, (you know the rest). in short, our economy grows.

An old saying goes: "A foolish country and his money soon part company." (Literary license) Very soon, the US will owe rather than own. Millions of Americans owe in excess of $10-20,000 in credit card debt, (and they are facing certain unemployment). It is getting worse. Lawyers are advertising, 'you only need to pay back pennies on the credit card dollar' on TV. We'll all pay, just like the S&L, and Enron collapses.

Look what happens when we depend on foreign energy! This has been going on for so long, our beloved United States is in economic shambles, headed towards utter devastation. Remember what happened to the USSR? Look for something similar to happen to the United States; division and collapse.

Who owns our debt? If China cashed-in, since they already have our factories, soon we will work for them. When we (or our children) start working for the communists, there will be no advancement, no pay raises, no OSHA or child-labor laws, no unions; all of which are far too expensive.

In short, you may save a nickel on your next foreign purchase, but it will come back and bite real hard in the future.

"REAL AMERICANS BUY WHATEVER THE HELL THEY WANT." We have the individual liberty to do that. But we've been here before, like when we were owned by England (remember the Boston Tea Party? Americans chose war over foreign-imposed taxes). We absolutely depend on other countries, like OPEC energy. Nobody forces us to pump gas, and there is no international regulatory commission. If they can get $10/gal., they will. Recovery may require substantial personal sacrifice, but we need to take back our country before our 'land of opportunity' is gone forever.

</div></div>

Very well stated from a man from Michigan. You once had a Senator named Donald Regal who was trying his damm hardest to stop what was happening in this country. I used to sit and listen to him on C-span in the very early nineties talking about the Asian auto industry when Lexus, Infinity and Acure were dumped on our market. They were just starting to take off and he was <span style="font-weight: bold">DEAD </span> against it. Carla Hills, an ex-lawyer from Old George Bush days was the trade representative that did more damage than anyone in history. From that day on I never saw or heard from him again. He should have been our President. All in all, there was <span style="font-weight: bold">too </span> much money to be made and he was in the way.....................and now where are we???

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After all that has happened this week, I don't know which is worse:

* The greedy slimy pigs in the Middle East gouging the price of oil so they can buy another mansion....or country

* The greedy slimy pigs on Wall Street gouging their profit statements in order to push up their bonuses and buy another mansion

* The greedy slimy pigs in Congress who want us to bail out the greedy slimy pigs on Wall Street because they gave them hundreds of thousands of dollars in campaign contributions

* The greedy slimy pigs in China who are so hypnotized by money that now they are poisoning THEIR OWN children in order to make more money--but not releasing the information until AFTER the Olympics

Notice a pattern here?

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<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Reatta Man</div><div class="ubbcode-body"> Notice a pattern here?</div></div>

I noticed the pattern when Lee Iacocca was on national TV, back in the late 1980's-1990. Let me quote him: "NAFTA is good for America." The biggest opponent was CANADA! They didn't want to lose US manufacturing, to Mexico.

The pattern is, EVERYONE IS FOR HIMSELF! All the special intrest groups rally, but so do the American people, every time we buy. You know who we support, it isn't Americans. Who pays attention to a label that says, 'MADE IN USA' (if you can find one)? I haven't seen one in so long, I almost stopped looking, because that's the exception, and 'foreign made' is the rule. Honestly, we would all be naked if we only wore domestic clothes.

That's the pattern! How many steel companies produce in the U.S.? About six years ago we lost NINTEEN in one year. That's when USS bought National because they owned blast furnaces in the Ukraine. Domestic cars are now made from foreign steel, because we don't have much choice. Just like buying DVD players or camcorders, our choice is rapidly narrowing. As you can see, soon we won't have one. Better learn a good-paying service job, or move your family abroad.

Bob (Skyking), Donald Wayne Riegle, Jr. (D) from Flint (the home of Buick and the soul of GM), Michigan, served as a US Congressman, and as a US Senator; a career spanning from 1967-95. All of Michigan sorely misses his insightful leadership, honesty, and nearly 40 years of proven dedication to all of us.

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It's just a darn shame only a small percent of us think the way we do................. Maybe things would be different.

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Dave@Moon stated that the profit to the manufacturer is never more than 1%. Dave look at it from this perspective. Why would you go through all of the trouble to manufacture any product for a profit of 1% or less when you could put your money in to CD's and earn 3 or 4 or 5 times more with no investment or effort? No business works on a 1% profit and survives, unless it is being subsidized from an outside source.

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