Friday, September 14, 2007

My car, my self--buying American in a global economy

cross-posted at Michigan Messenger

In Michigan, identifying with a car company can be like claiming an ethnicity. People boast, "we're a GM family" or "I'm from a Ford family." These loyalties have ripened over generations of auto industry employment and are rooted in the days of American auto manufacturing dominance.

There really was a time you could be sure a car was American-made (in the U.S.A.) from bumper to bumper.

In today's global production environment, cars are evaluated for "domestic," not American, content. The October Chicago Fed Letter titled "Whose part is it?-Measuring domestic content of vehicles" (by Thomas H. Klier and James M. Rubenstein) examines how the federal government determines domestic content of vehicles sold in the U.S. and the factors influencing the ultimate mix of materials.

There are actually three methods in place to determine whether a car can be called "domestic."

EPA calls a vehicle "domestic" if at least 75% of its content is produced in North America, including Canada and Mexico. The Department of Treasury, Customs Service uses the benchmark of 50% U.S. or Canadian content. The American Automobile Labeling Act (AALA) of 1992 calls a vehicle domestic if 85% of its parts originate in the U.S. or Canada. In addition, those parts must have 70% of their content from the U.S. or Canada.

The domestic/foreign distinction has become very, very blurry.

"You can't just look at the badge on a hood and think that gives you an accurate representation" of the car's origin. "You have to look at it on a model by model basis," said Bernard Swiecki, senior project manager with the non-profit Center for Automotive Research.

"The Chrysler 300C has been held up as the return of the traditional American sedan, with rear-wheel drive, V8 engine, aggressive styling, and muscle. But the car itself is built in Canada. It has a Mercedes designed transmission and the hemi engine is actually built in Mexico," he said.

"The Honda Accord is a Japanese automaker's vehicle. But certain configurations have an American transmission and engine and are built in Ohio."

The Fed Letter reports that the 2006 Honda Accord was 70% domestic, while the 2006 Ford Mustang came in at 65% domestic.

Like a nutrition label, the AALA label is there to help you decide what to buy based on your values, not just your appetite.

The AALA requires manufacturers to disclose where vehicles are assembled, where engine and transmission originate, and--in cases of less than 85% domestic content--the two foreign countries contributing the highest amount of content. This is on the same label that lists emissions and gas mileage data.

If you don't want to read the label, but still want a statistic to buttress your loyalty consider this: in 2006, 96% of vehicles sold in the U.S. by the Detroit three were assembled in North America.

Most vehicles sold in the U.S. by the Detroit three are still American-made--North American-made, that is.