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ReverendDexter
ReverendDexter SuperDork
3/28/11 4:51 p.m.

So, I'd like to get a feel for the opinions of the commentariat.

Obviously, buying local is important. If we want to keep jobs here, we need to keep the money flowing inside our own country rather than shipping it overseas.

But in today's automotive landscape, how to do that? Are you keeping more money here by buying a Ford that's actually made in Mexico and Canada, or buy buying a Subaru made in Kentucky?

Does anyone actually have a fact-based understanding of where the money goes when you buy a new car?

pete240z
pete240z SuperDork
3/28/11 4:59 p.m.

I work for a Detroit based company and they would like to see me buy an "American" car (Chrysler/GM/Ford). I however feel that buying an Accord made in Marysville, Ohio (part of my sales territory) is not totally wrong. Oh yeah; we easily import 20% raw materials from China to make our products.

The whole "American" car is not what it used to be and is convoluted. Then the UAW has their list of cars to buy; which includes some import names.

http://www.pricewheels.com/blog/2009/09/27/uaw-releases-list-of-2010-union-made-cars-and-trucks/

Good Luck

mtn
mtn SuperDork
3/28/11 5:02 p.m.

I'm curious about this too. I've heard far too many conflicting viewpoints from people who do have a good understanding of it.

As near as I can tell, the profits will go to the country where the company is headquartered, but the benefits that your average Joe would see go to where the car is built. That being said, what about Toyota America? Are they a completely separate profit earning company on their own from Toyota Japan?

I really don't know, but would like to.

HiTempguy
HiTempguy Dork
3/28/11 5:30 p.m.
mtn wrote: Are they a completely separate profit earning company on their own from Toyota Japan?

Subaru America and Subaru Canada compete against each other. I think that says it all.

I read a very interesting book about Nintendo based from their beginning until about 1993... very eye opening look at how "north american" companies come to be after starting out as an import.

jrw1621
jrw1621 SuperDork
3/28/11 5:32 p.m.
pete240z wrote: The whole "American" car is not what it used to be and is convoluted. Then the UAW has their list of cars to buy; which includes some import names. http://www.pricewheels.com/blog/2009/09/27/uaw-releases-list-of-2010-union-made-cars-and-trucks/ Good Luck

Note that the Ford Fusion is clearly missing from this UAW list but its somewhat stablemate, the Mazda 6 is included.
A couple of years back new cars started to require a white lable that showed percentage of "domestic" (no distinction between US and Canada) content. Here is the link to the NHSA database of those percentages.
http://www.nhtsa.gov/Laws+&+Regulations/Part+583+American+Automobile+Labeling+Act+(AALA)+Reports

I find it interesting that a 2006 Ford Fusion (first year) had a 30%. By 2007 this had grown to 50%, then 40%. In 2009, 55% followed by 25% in 2010. Now, in 2011 at just 20%.

Mazda 6 went from 65% to 45% over the same time frame. Specifically 55% for 2011

Schmidlap
Schmidlap HalfDork
3/28/11 6:25 p.m.

The Fusion's made in Mexico, while the Mazda 6 is made in Flat Rock, Michigan (in the same plant as the Mustang). The Fusion plant is unionized, but it's not a UAW or CAW plant so the UAW doesn't want to recommend that car.

Bob

bravenrace
bravenrace SuperDork
3/28/11 6:44 p.m.
peter
peter Reader
3/28/11 7:27 p.m.

Just because I'm in finance and can be "that guy", let's add a wrinkle: where are all the shareholders for these companies? They're the ones who are really profiting from the company's performance (or perceived performance).

That muddies the waters a bit...

jrw1621
jrw1621 SuperDork
3/28/11 7:40 p.m.

I will see your muddiness and raise you...
Where are the workers, therefore, where are the paychecks?

Which is more in the auto industry? The amount of dollars the company profits or the amount of dollars the company pays out in salaries?

JoeyM
JoeyM SuperDork
3/28/11 7:41 p.m.

salaries, hands down. The companies that give jobs to our people are better for us.

curtis73
curtis73 Dork
3/28/11 9:15 p.m.

I always had to chuckle at the repair shop when customers would say something like "this isn't what I expected from a German-made car." Then I point out the VIN beginning with 9 and tell them it was made in Brazil.

Anyone who has had a Labatt Blue in Canada and then had one in Texas knows that you can't just send a recipe somewhere and expect it to be the same.

But, having said that, I had heard rumors (which I could not substantiate until bravenrace posted the link) that Toyota and Honda topped the list of keeping the most money in the US.

huge-O-chavez
huge-O-chavez SuperDork
3/28/11 9:21 p.m.

I worked in purchasing for an auto supplier for a time. Sure the parts were assembled here, but 75% was made overseas.

I think JoeyM has it right. Salaries here, no matter the companies nationality is the way to go.

curtis73
curtis73 Dork
3/28/11 11:08 p.m.

I don't care where they come from. If its a good car, I'll buy it. I get a kick out of the hypocrisy (not directed at anyone here... just my commentary)

We (as Americans on the average) would rush into a floundering nation to "install" Democracy, but when a country (like China for example) exhibits the textbook definition of Capitalism, we say we would never give any money to those commies.

I would think that when a communist-type nation exhibits such strong Capitalist tendencies on their own, wouldn't it be in our best interest to support it? Or do we just wait until the people start throwing stones at their leaders and then send in some troops?

[/libertarian commentary]

curtis73
curtis73 Dork
3/28/11 11:14 p.m.
huge-O-chavez wrote: I think JoeyM has it right. Salaries here, no matter the companies nationality is the way to go.

I really don't know all the financial facets to this, but I would think that wouldn't be the wisest financial choice for the US. I would think the key factor would be how much of the company's profits remain here and therefore how much they pay in taxes. If they farm out Labor to Mexico or Brazil where its cheaper, that increases their profit and therefore taxable money.

If a foreign country employs Americans to assemble their product, then the only money that comes here is the individual salaries of the employees. The profits all go across the border.

szeis4cookie
szeis4cookie New Reader
3/29/11 6:27 a.m.
curtis73 wrote:
huge-O-chavez wrote: I think JoeyM has it right. Salaries here, no matter the companies nationality is the way to go.

I really don't know all the financial facets to this, but I would think that wouldn't be the wisest financial choice for the US. I would think the key factor would be how much of the company's profits remain here and therefore how much they pay in taxes. If they farm out Labor to Mexico or Brazil where its cheaper, that increases their profit and therefore taxable money.

If a foreign country employs Americans to assemble their product, then the only money that comes here is the individual salaries of the employees. The profits all go across the border.

I see where you're going, but it is a little more complicated than that. Up-thread, someone mentioned profits going to shareholders. It's important to remember that is the primary purpose of a corporation - to return money to its shareholders. This can happen either by operating profit (which will either get reinvested into operations, or returned to shareholders as a dividend) or by increasing the value of the company's shares on the open market (note that the first usually causes the second).

In any case, the operating profit dollars may go to headquarters first...but they don't stay there long. Some portion of those dollars will go back out to factories and such - which implies that the more factories a company has in the US, the more of those operating profit dollars will come back to the US. The rest of it will get returned to shareholders via dividends (and creditors via bond payments) - and the company then has no control over where the money goes. In this case, the best way to ensure that some of those dollars come back to the US is to make sure those dollars come to you - i.e. buy some stock.

I've ignored the case of a company hoarding cash - this is because that is the least optimal use of profit money for a company. Unless building a war chest for acquisitions, shareholders would prefer that the money either get reinvested into operations or paid out via dividends. (See Microsoft's huge dividend from a few years ago.)

Moparman
Moparman HalfDork
3/29/11 6:52 a.m.

In reply to pete240z:

And China imports U.S. aircraft, jet engines and is the biggest foreign buyer of Caterpiller tractors. It is called comparative advantage.

Moparman
Moparman HalfDork
3/29/11 6:59 a.m.

In reply to mtn:

Id is the old GDP vs. GNP. A Toyota vehicle made in the U.S. counts toward Japanese GNP (output of domestic companies anywhere in the world), but U.S. GDP (output within our borders regardless of where the company is headquartered).

The arguement that the profit goes to the country in which the company is based is a bit ignorant. The profit goes to the shareholders, regardless of where the reside. Toyota has many U.S. shareholders, including union pension plans.

Also, Toyota buys many of its components from U.S. parts suppliers. The auto induistry is truly global.

Moparman
Moparman HalfDork
3/29/11 7:01 a.m.

In reply to jrw1621:

Thw Wall Street Journal did a story in 2004 or 2005 in which it detailed that the Toyota Minivan had more U.S. sourced components than the Ford Mustang. Which one is more American?

spitfirebill
spitfirebill SuperDork
3/29/11 7:15 a.m.

I can tell you that BMW has made a huge impact in our area financially. I think theya re up to 7,000 employees there now and they all live within a couple of counties. The salaries paid to those people are spent here. It raised the pay a lot of other companies have to pay. And they use subs that are located within 1 hour of the plant, because of their logistics system. At one time the only parts not made here were the engines and transmissions. That may be about to change because ZF is building a huge plant in Laurens, SC to make 7 speed transmissions.

alfadriver
alfadriver SuperDork
3/29/11 7:27 a.m.

Couple of things...

Of the cost of the car, final assmbly- the part that is herladed that it's in a specific country- that cost is probably 1/5-1/4 of the cost you pay for the car. So not nearly all of the money you pay goes to the local workers. A large chunk of that goes to the sub parts- which is why they list the "American Content" on the window of the car. There are some japanese cars that most of the parts are next sourced from the US, and I'm sure US companies get parts from overseas. just know that the most expensive parts generally are the engine and trans, along with the body.

A good portion of the money also goes to the engineering base- say Warren MI for GM, or Dearborn MI for Ford.

As for profits- you'd be suprised that the shareholders don't get as much as you may think- they do get dividens, but the employees also get profit sharing, and in many cases, profits on cars are directly routed toward engineering new cars. And on the highest of high orders are the bond holders and lenders- so if the bank is a US bank, they get interest on their loans that companies take to produce and develop cars. Again- shareholders don't get all of the profit (and actual profit margins are very, very thin in this idustry- 2-5% of gross sales- Toyota sells +$200B of product, and only, generally, has $5-10B in profit. That $190-195B has to go somewhere......)

Most money derived from stock isn't dividens, it's speculation and stock price.

To Moparman- number of parts isn't as important as cost of the parts. One engine vs. 15 switches.... I know the engines in the Mustang are made in Romeo MI, and now in Cleveland OH.

keethrax
keethrax Reader
3/29/11 8:01 a.m.
szeis4cookie wrote:
curtis73 wrote:
huge-O-chavez wrote: I think JoeyM has it right. Salaries here, no matter the companies nationality is the way to go.

I really don't know all the financial facets to this, but I would think that wouldn't be the wisest financial choice for the US. I would think the key factor would be how much of the company's profits remain here and therefore how much they pay in taxes. If they farm out Labor to Mexico or Brazil where its cheaper, that increases their profit and therefore taxable money.

If a foreign country employs Americans to assemble their product, then the only money that comes here is the individual salaries of the employees. The profits all go across the border.

I see where you're going, but it is a little more complicated than that. Up-thread, someone mentioned profits going to shareholders. It's important to remember that is the primary purpose of a corporation - to return money to its shareholders.

Sure. But then again, if they want to use their money to buy into a company that employs more Americans they're more than welcome to. Then when people buy cars that involve more Americans employed the shareholders benefit too. If they instead would rather invest their money in a company that does most of it;'s work elsewhere, that's they're choice too, but it's not my problem.

If anyone is dumb enough to invest in an "American" company just because it doesn't have a foreign name, that's their own tough E36 M3. If I'm trying to "vote American" with my car purchasing dollar, I want factories here (components as well as final assembly whenever possible), I want workers here, and I want as much of the engineering and design done here as possible. The various shareholders themselves can deal with the keeping the rest of the money here by buying stock in the companies that do so, whatever the name of the company if they actually care.

dculberson
dculberson Reader
3/29/11 8:25 a.m.

When my wife and I needed a new washer and dryer, we decided to buy American. Shopping around, all the American brands made their appliances in Mexico, except one had their washers made in Germany. The only brand that seemed to consistently have both made in America was Bosch! They got great marks from Consumer's Reports so we bought those and were very happy with them. More recently we needed a dishwasher and found that Bosch makes their dishwashers here, too, so we bought one from them - again it's an amazing appliance and does a great job. I just think it's odd that one American company makes their American market appliances in Germany and one German company makes their American market appliances in America. It's definitely a global market out there.

Even if the profits go to a foreign country, look at the percentage of moneys that stays here. Say a company consistently pulls 10% net profit - which would be astounding for a car company - that means that 90% of the money from sales goes elsewhere. If the car's assembled here, and 65% of the parts are from here, then the vast majority of the money stays here. So if 10% or 20% of the money goes to Japan when you buy a Camry, that beats the hell out of a Fusion where only 10% or 20% of the money stays here.

There is no black and white answer, life isn't that simple now and never has been.

dculberson
dculberson Reader
3/29/11 8:31 a.m.

Oh, and don't forget that once you're buying used it really doesn't matter anyway. Unless you think you're so cool you'll influence other people's buying decisions - good luck with that. Since I have no plans to buy new cars probably ever again (not since my 1996 Neon, youthful indiscretion), I don't have a lot of influence on the auto makers.

Moparman
Moparman HalfDork
3/29/11 12:33 p.m.

In reply to alfadriver:

When they add up content of parts, I believe they view the engine based on parts, not as a unit. There are engines built in the U.S. with many foreign parts and ice versa. The U.S. is a big source of car interiors as well.

Moparman
Moparman HalfDork
3/29/11 12:39 p.m.

Here is something to consider. When we buy a Toyota, the transaction occurs in dollars. When a dealer buys a car from Toyota, teh transaction is in dollars. When Toyota buys raw materials (metals, etc.) The transaction occurs in dollars (regardless of where the raw materials are sourced). All commodities trade in U.S. dollars.

When Toyota recieves revenue, it tends to hold the bulk of it in dollars. To do this it buys U.S. treasuries. Toyota is helping to fund the U.S. debt and helps to keep our long-term interest rates low. Foreign governments do this as well.

To those who are tempted to counter with the opinion that other currencies are posied to supplant the USD as the world's resevre currency: It makes fior a nice story, but it is not currently feasible and probably won't be feasible for many decades if not longer.

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