Foreign Carmakers More Domestic than Detroit's Big Three

Before long, you'll be more likely to get an American-made car by buying an import brand instead of a Ford (F), General Motors (GM), or Chrysler vehicle. New data show that for the first time ever, foreign-based carmakers are poised to build more vehicles in the United States than the Detroit 3.

The American automakers have obviously hit the skids, with Chrysler in bankruptcy and GM headed that way. Detroit's woes are accelerating a market share decline that's been underway for years. And now, forecasting firm CSM Worldwide predicts that in 2010, foreign-based automakers like Toyota (TM) and Honda (HMC) will build more cars in the United States than the so-called domestic automakers.

That's a touchy issue for Detroit—and for President Obama, whose administration could end up spending $100 billion or more to help resuscitate GM, Chrysler, and other players in the U.S. auto industry. On April 30, while announcing the Chrysler bankruptcy, Obama made a pitch on Detroit's behalf. "If you are considering buying a car," he said, "I hope it will be an American car."

Obama may have to hold another press conference to explain exactly what an American car is. The Detroit 3 have long skirted the issue by referring to "North American" production—which includes Canada and Mexico, where they build about one-third of their cars. The slick new Chevy Camaro, for instance, is made in Canada. The popular Ford Fusion sedan is assembled in Mexico. Including Canada and Mexico allows the Detroit 3 to say they build most of their cars in North America.

Some Japanese and European automakers build cars in Canada and Mexico too, but it's a much smaller portion of their overall production. And while the Detroit 3 have been closing American factories, foreign-based automakers have been adding U.S. manufacturing capacity, mostly in the south. The growing U.S. presence of the "transplants," as they're called, has helped increase acceptance among American consumers—and added to the overseas firms' political clout in Washington. When the CEOs of GM, Ford and Chrysler came to Washington last year asking for help, for example, they hit ramrod opposition from some members of Congress. One of their biggest critics has been Republican Sen. Richard Shelby of Alabama, a state that's home to factories run by Honda, Hyundai (HYMLF.PK), and Mercedes.

Detroit's standing in Washington will continue to fade if manufacturing trends are any indication. CSM predicts that in 2010, the Detroit 3 will only build 49 percent of the cars assembled in the United States, a sharp drop from 59 percent in 2008. The recession and the huge drop in auto sales have hit Detroit harder than other automakers because of their overreliance on big, relatively expensive trucks and SUVs. But CSM expects Detroit's share of U.S. production to keep falling even when the economy recovers and the car business rebounds. By 2015, the Detroit 3 will claim just 44 percent of all cars built in the United States, according to CSM.

That's because virtually all of the transplants plan to build more cars in the United States, at the same time the Detroit 3 need to shrink dramatically in order to become profitable. Bestsellers like the Toyota Camry, Honda Accord, and Nissan (NSANY) Altima are all built by Americans in U.S. factories. Toyota and Honda have been the most aggressive about opening American plants, and in 2008, the two Japanese automakers built 26 percent of the cars rolling out of U.S. factories.

By 2015, Toyota and Honda's share of U.S. production should rise to about 34 percent. Korean carmaker Hyundai built about 237,000 cars in the United States last year, a number it hopes to triple by 2015. That would be more cars than Nissan builds in America. And Volkswagen, which hasn't built a car in the United States in more than 20 years, should be turning out more than 300,000 U.S.-built models by 2015, mostly from a new plant in Tennessee.

The unambiguous good news for American workers is that after bottoming out this year, the number of cars made in the USA should steadily increase. We'll just have to figure out what to call them.

Disclosure: no positions

Comments

[mattm:]

You better share what ever it is you have been smoking. The American content of the transplants is much lower than the American Auto Companies and always has been. Quit trying to distort reality to interject you political views and promote your area of the country where the transplants are located heaviest.

May 27 05:38 AM

[capeman228:]

Another shallow comment on the auto industry. What does 'more American' mean when you leave out the facts of the auto and factory design, the engineering that is the lifeblood of the industry and irreplaceable. Is INTEL a foreign company? Substantial parts of the chips are made abroad - but the engineering is primarily here. There is a political cant to these comments that mystifies me.

The transplant assembly plants represent the colonization of the American labor force by corporations whose top tiers of management and industrial engineering are all abroad.

May 27 07:11 AM

[mcbain:]

In US sales, the average Detroit 3 foreign content is about 20% and the average foreign car content is about 65%. This guy does not seem to realize that auto assembly plants are only part of the picture, engine plants and transmission plants etc. employ tens of thousands here in the US and their products go to US assembly plants whereas much of the foreign manufacturers get their parts from overseas. Also, a couple of years ago the Detroit 3 spent about $18 billion in R&D, about 80% of which was spent in the US while the foreign companies spend much of their R&D overseas. This article is very misleading.

May 27 08:28 AM

[Speedzzter:]

I agree that this article is very misleading. The Detroit 3 clearly provide more American value-added content (i.e. design, engineering, testing, management, marketing, manufacturing, parts and components) than any of the "invaders." Unfortunately, the "domestic content" labels are too narrow to reflect this.

But with respect to the narrow measure of assembly, Ford is poised to assume the honor of building more vehicles in America than anyone else (and but for the arcane and obsolete "two fleets" CAFE rule, undoubtedly even more vehicles would have been built here).

"Ford . . . will rank first in 2009 with 1.9 million units, according to data from forecasting group IHS Global Insight, which released its North American light-vehicle production forecast this month."

"GM . . . is idling most of its plants over the next couple of months and will produce an estimated 1.7 million vehicles this year" which is good enough for second place.

What about predatory foreign invaders like Honda and Toyota? PLEASE! They'll still be behind Chrysler (which is in the midst of a total production shut-down during its bankruptcy) when the 2009 counting is done. And the domestic content of Honda and Toyota still lags far behind the Detroit 3.

"[A]mong the most popular U.S.-built cars and trucks, the models with the highest domestic content ratings come from Detroit automakers. Of the 35 most popular U.S.-built 2008 and 2009 models — based on sales through May 31, 2008 — 43 percent of GM, Ford and Chrysler contenders had domestic content ratings of 75 percent or higher. In comparison, just 25 percent of the Nissan, Honda, Hyundai and Toyota models on the list achieved that."

Ford is quietly emerging out of the Obamanomics chaos as the only true AMERICAN CHOICE.

May 27 10:26 AM

[Paul Killinger:]

Lots of ways to distort numbers. Nissan imports the steel they use because NO ONE MAKES IT HERE. They would obviously prefer to purchase it domestically.

Since the UAW is now in control of Detroit, I will buy my next U.S. branded vehicle in my NEXT lifetime. Thank you.

May 27 01:54 PM

[ahnoahno:]

Great article the unions have been taken over by leaders who depend on tax payers for their income. Best to let the big three die to prevent a massive tax increase to take care and baby them. The foriegn cars have better warranties and reputation. Who would be dumb enough to depend on "big (federal) government" for a warranty?

May 27 09:00 PM

[303820:]

How much American is there in the 800 thousand vehicles imported from Korea by HYUNDAI AND KIA
How much American is there in the millions vehicles that Toyota and Honda import from japan, Korea, and mexico?.

May 28 12:54 PM

[JCCIII:]

As one who will likely be purchasing a new sedan within the next 1-3 years, I really don't care about domestic content, nation of origin of design, or any other non-consequential metric. I care about safety, quality, reliability, efficiency, etc. Which ever car offers the best value is the car I will buy; value meaning quality product for the price.

May 28 04:19 PM

[ariel1939:]

303820 includes Mexico on a list of non-American countries. They would be suprised to hear that in Mexico.
I have never bought a new foreign car. My travel trailer cannot be safely pulled by any foreign car, SUV, or pickup truck. My experience is that American cars are cheaper and much better than they were before. As I don't want my children to take in laundry for a living I am unwilling to buy products made overseas just because they are a little better than ours. No amount of excess by the UAW and the "Big3" management alters where my family lives and works.

May 28 07:16 PM