Tuesday, January 24, 2006

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No more "buy American"

What with Ford planning to lay off a few people over the next few years, there's going to be a lot of navel-gazing this week about the state of the U.S. auto sector.

Rick Popely and Deborah Horan have a story in today's Chicago Tribune that points out one big problem GM and Ford have -- the "Buy American" campaign doesn't work at crunch time anymore:

When domestic automakers had their backs to the wall 25 years ago, they could count on a "Buy American" sentiment to keep some customers from defecting to fuel-efficient foreign cars.

Today, many loyal domestic vehicle owners say they would be comfortable buying an import....

For one thing, it isn't even clear anymore what "Buy American" means when it comes to cars and trucks. Many of those new models from Toyota and others are built in places like Kentucky, Indiana and Alabama, while the Chevrolet Aveo is imported from South Korea. Meanwhile, some Dodge Ram pick-ups are built in Mexico. Dodge, of course, is a domestic brand, but it's owned by Germany-based DaimlerChrysler.

This blurring of vehicle origin means that Ford or GM can't rely on a "Buy American" marketing campaign.

Art Spinella, president of CNW Marketing Research, says the confusion over national origin means consumers are less likely to try to help fellow Americans by buying a domestic vehicle.

"Basically, they throw their hands in the air and just buy what they like," Spinella said.

The lack of stigma attached to buying a foreign product goes beyond the auto industry.

Compared to the early 1980s, consumers face shelves stocked with foreign-made products--from televisions to running shoes. Often they don't notice the origin of what they purchase.

When CNW surveyed shoppers coming out of Wal-Mart stores, 75 percent said they preferred to buy American, yet an inspection of their purchases found that 90 percent were made in China.

"They don't even look to see where the stuff is made anymore. It's the price that matters," Spinella said.

It's not only price that matters, though, as the story points out later:
Though domestic brands get on the shopping lists of two-thirds of car buyers, Spinella said 20 percent of those people wind up buying an import because of better styling, a lower price or a unique feature.

For example, when Honda got into the pick-up market last year with the Ridgeline, the truck came with a novel lockable trunk in the cargo floor that holds a 72-quart cooler or three sets of golf clubs.

"Ford has been building pick-up trucks for a hundred years, yet no one thought to do that," Spinella said.

The only way Ford and GM can combat their Asian rivals is with innovative features like that, or with exciting models like the Chrysler 300, which looks like a Bentley luxury sedan.

"They just need to build some products people want to buy, something that people are excited about," Spinella said....

Ford has such a hit with the Fusion, a new midsize sedan that attracts one-third of its buyers from Asian and European brands, according to CNW, and GM's Pontiac division is attracting attention with the stylish Solstice, a two-seat sports car.

Ford and GM have steadily closed the quality gap with the leading Japanese brands in owner surveys like J.D. Power and Associates' initial-quality study, yet consumers are still leery.

"You can generate interest and excitement with styling and new products, but when it comes time to purchase, people demand a higher level of confidence and security," said Alexander Edwards, chief executive of Strategic Vision, a San Diego consulting firm.

That is one reason the Toyota Camry is America's favorite car, despite frequent criticism that it is bland. Consumers have confidence in the car and "trust in the brand," Edwards said, while domestic brands have failed to build similar trust.

posted by Dan on 01.24.06 at 10:57 AM




Comments:

Most of Ford and GM's problems are self-inflicted, and the UAW deserves blame for encouraging and ehlping the lunatics to run the asylum.

Problem is, the downsized workers have nowhere to go in an American economy still shedding quality jobs and creating lousy jobs.

(Chrysler is also dumping a big chunk of its' white collar workforce)

Bad times ahead (well, except for Wall Steeters, lawyers, professors and lobbyists).

posted by: save_the_rustbelt on 01.24.06 at 10:57 AM [permalink]



I stopped buying American-brand cars in the 1980s because I was tired of throwing them away at 60,000 miles. Instead I bought American-made Japanese brand cars. They run forever, employ Americans, and even get better gas mileage.

Brands don't employ people: firms do. If an Indian software firm comes to the USA AND hires American coders, I don't see a problem. However so far Indian firms come to the US and bring along their homegrown workforce on L-1s and H-1bs. I have a problem with that.

posted by: Scott Kirwin on 01.24.06 at 10:57 AM [permalink]



When I walk across the campus of the University of Illinois-Chicago you begin to notice that the ratio of "import" cars to "domestic" cars is about 9 to 1. One might make a simple observation that the acquisition of "import" cars is of particularly strong trend among young people.

No doubt, the big three must be paying attention as they have seen their US marketshare decline almost 20% in only 15 years. It is bound to get worse as those buying new cars, ie. young people, are not buying models from the big three.

posted by: Brennan on 01.24.06 at 10:57 AM [permalink]



We haven't seen anything yet. When the Chinese introduce their 2007 sub-$10,000 cars Detroit will have real problems. It's happened to every mature industry unions have dominated.

posted by: Richard Heddleson on 01.24.06 at 10:57 AM [permalink]



Turning this discussion into some "Unions are killing America" debate seems misleading and drab. Maybe there could be another problem with Ford: Few people want their dog food. Last time I read up on it, Bill Ford--whose family name is on the company--drives a Volvo! (David Kelly, BusinessWeek) I can't think of any upwardly-mobile professional in my life that drives a Ford or even considers test driving a Ford, and "Buy American" isn't where it is at in the automobile--or consumer electronics for that matter--market.

Getting back to the Union argument, even if you removed the benefits and perks that the unions have gotten over the last 100 years, I don't think there is an American family--even in "Smallville", USA--that could live off of the wages being earned in (SE) Asia. The last time this approach was tried, it was called "Wal-Mart", and they have been having their butt handled to them on a PR/Consumer front. From what I've seen, even the white collar folk on Wall Street aren't impressed with the "Race to the Bottom" where Unions have not been able to make much of a dent.

posted by: Yagij on 01.24.06 at 10:57 AM [permalink]



Getting back to the Union argument, even if you removed the benefits and perks that the unions have gotten over the last 100 years, I don't think there is an American family--even in "Smallville", USA--that could live off of the wages being earned in (SE) Asia.

Ah, but what about the non-union autoworkers for the Japanese automakers in the US? They aren't union, and they make fine wages. And of course there's the non-union computer industry.

posted by: John Thacker on 01.24.06 at 10:57 AM [permalink]



Yagij, it's worse than that. Two wage-earners pulling down $8.00/hr, deliberately on less than full-time work, with a company which desires to get rid of employees after a few years, won't be buying a new car.

posted by: Barry on 01.24.06 at 10:57 AM [permalink]



Now WHY does Ford suck so badly? People do not buy their cars because they do not get value for the money (whether the value is in quality, variety or whatever else).

Ford has a huge "natural" cost/revenue disadvantage vs. the Japanese (due to pension obligations in the USA, and lack of home market monopoly that the Japanese enjoy) and therefore they are forced to put low-cost parts into their vehicles to be able to sell them cheap enough, with expected effects for quality. But it's only a partial explanation. Here's a few more reasons:

- At the plants the assembly quality sucks and you cannot fire the union guy who is screwing up. Local management literally can't get anything done w/o kissing ass to UAW (contrast with Toyota where workers are the source of innovation).
- Union aside, HQ is not too efficient either. New model development takes too long and the process of making changes is "Mediterranean" (unlike the Japanese who basically create the car in the computer, build one prototype, and then make one wholesale round of changes for things that don't work, Ford builds a prototype early and makes hundreds of small changes sequentially right before the assembly start date).
- Unlike Toyota, who works with suppliers on their processes to make sure they get BOTH a low-cost and quality product. Ford EITHER goes for a lowest bidder (who then does one of three tings: provides crappy parts, goes bankrupt or jacks the price up in a year) OR is forced by legacy contract to buy parts from Visteon (ex-Ford division) WAY above the market rate.

Since I don't know how these things can be rectified, I am not sure what positive things are in Ford's future....

posted by: Ivan B Zhabin on 01.24.06 at 10:57 AM [permalink]



I'm trying to point out that the failure of the "Buy American" campaign has little to do with unions or union intervention. John, I'm going to guess that you aren't a blue-collar factory worker since you have the time--and access--to post to this blog during business hours. I'm also going to state for the record that I work for a company in the "non-union computer industry", and I work in a state that historically hasn't been very receptive towards unions. However, bad management/bad leadership is a bigger problem with Detroit more than $24-$35/hr fuel injector technician.

Japanese manufacturers seem to be giving me what I want, and Detroit just wants to give me "Bigger, Faster, Blaher". Worse yet, they wouldn't stop suckling at the tit of the SUV market, even when the Japanese were giving me Elements and hybrids. Don't really think the unions are to blame for poor marketing, poor branding, and poor direction. Heck, the Japanese hybrids aren't all that they were meant to be--especially with the EPA recalculating MPG--but they are handle their workforce, manufacturing capacity, and brands much, mcuh better.

posted by: Yagij on 01.24.06 at 10:57 AM [permalink]



Ivan:

I agree with everything you stated. The technical details that I didn't include, but you did it for me. Ford & GM just can't get out of their own way: HQ, Unions, etc.

"Buy American" is a cheap, slacker's way out of a series of problem that they should've been handling long before now.

posted by: Yagij on 01.24.06 at 10:57 AM [permalink]



I'd give this post more credence if it hadn't started out with the statement, "What with Ford planning to lay off a few people over the next few years,". 30,000 employees qualifies as more than jsut a few people.
Mr. Dresner marginalizes his comments with his clear disdain for the future of so many fellow Americans, so that I couldn't really give his further statements on the issue much credence.

posted by: SF Bay on 01.24.06 at 10:57 AM [permalink]



Having just done the research to buy a used-car, I am astounded that Ford and GM are still in the game at all. A solid 3/4 of the "most reliable used cars" are Toyotas and Hondas, no matter what the source you get your list from. The remaining 1/4 are a smattering of European and American cars, all from random years (The '95 and '97 Concord: good, but '96,'98-'03: well, good luck--that sort of thing). So I can buy any Accord or Camry with confidence, but have to search out particular makes when it comes to Ford and GM (and even there, the lack of consistency reduces my confidence in their reputedly reliable model years.)

If I were buying a new car (one for which reliability date has not been generated), this would tell me two things: (1) If I buy a Toyota or Honda (a long, unbroken track-record of reliability) I will be able to drive it for a loooooong time, unlike many American cars (which have a somewhat more spotty record) , and (2) If I choose not to keep my Honda or Toyota, I can easily sell it to somebody else who would like to drive it for a loooooong time (assuming of course, I opt not to trade-in).

The only reasons I can thing of that would induce me not to by a Honda or Toyota are: (1) The American car has some feature or styling that I just cannot resist (which is not the case for me and many people), (2) I have enough money to buy me a new car if the one I'm about to buy breaks down; I can afford not to care (again, not the case), (3) I know that the particular model I'm buying has a looooong history of reliability, in contrast to the rest of the fleet (not common, but not impossible), (4) I enjoy taking unreasonable risks, (5) I enjoy causing myself heartache.

posted by: drew on 01.24.06 at 10:57 AM [permalink]



The problem is, where it's been all along; At the feet of the unions.

After having raised the cost of the average car by thousands of dollars, they wonder why Ford can't compete with the imports, on price and on build quality.

The fact is that both are directly reflective of high labor costs.... costs that impose both a higher sticker price, and a less impressive design, since the copany has to cut corners somewhere to get the sticker into the ballpark of their competition.

The unions have effectively cut down yet another American industry. Nice work, guys.


posted by: Bithead on 01.24.06 at 10:57 AM [permalink]



Ask an independent mechanic and you will get the same answer, buy a Honda or Toyota.

Ford was making junk long before they had a price differential. Ford let the Taurus franchise turn into the ugliest car on the road.
Ford sold 4-cylinder engines with a bad habit of blowing up.

The UAW should get their share of the blame as well. Featherbedding, high absenteeism, substance abuse, etc. etc.

Too little, too late. Sorry Bill.

posted by: save_the_rustbelt on 01.24.06 at 10:57 AM [permalink]



John, I'm going to guess that you aren't a blue-collar factory worker since you have the time--and access--to post to this blog during business hours. I'm also going to state for the record that I work for a company in the "non-union computer industry", and I work in a state that historically hasn't been very receptive towards unions. However, bad management/bad leadership is a bigger problem with Detroit more than $24-$35/hr fuel injector technician.

I'm not sure which is a bigger problem, but certainly they're both problems, I don't doubt that. I was disputing the commenter who claimed that car production is suffering because US automakers can't compete with cheap SE Asian labor, that US jobs in general can't compete with them, and that without unions US workers would make as little as workers in SE Asia. Obviously that's garbage-- there are plenty of nonunion jobs with good wages, including blue collar factory workers in the autmobile industry.

Wages are not a "race to the bottom." Worker productivity has an enormous amount to do with wages.

posted by: John Thacker on 01.24.06 at 10:57 AM [permalink]



Two wage-earners pulling down $8.00/hr, deliberately on less than full-time work, with a company which desires to get rid of employees after a few years, won't be buying a new car.

Yeah, because those wage-earners on $8.00/hr working less than full-time who leave the company after a few years are often students, people who want to be part-time or are taking a second job, and the retired taking another job. There's high turnover in retail positions like that. Wal-Mart is hardly the only retailer with lots of part-time positions, and with lots of students working there. (They do employ more elderly than most places.)

posted by: John Thacker on 01.24.06 at 10:57 AM [permalink]



Having just visited California I think US manufacturers have another really simple partial remedy. Build some cars that don't look BUTT UGLY (actually Nissan could use that advice too).

I'd buy any of Audi, BMW, Honda, Toyota ... over just about any "domestic" car because I would prefer to drive something "smooth and sexy", not something that looks as attractive as a female bodybuilder.

posted by: Francis on 01.24.06 at 10:57 AM [permalink]



Consumers have confidence in the car and "trust in the brand," Edwards said, while domestic brands have failed to build similar trust.

The essence of any consumer brand is 99.999% reliable, repeatable quality: the exact same high-quality experience, regardless where or when the product is purchased. No amount of styling magic will save Detroit-- or eventually, the European brands, given their downward quality trend in recent years-- if it cannot find a way to match Toyota and Honda quality.

posted by: thibaud on 01.24.06 at 10:57 AM [permalink]



I feel bad for ppl at Ford, GM, Chrysler who are being laid off because the market leans towards the consumer buying foreign made cars. But in a way - I am glad Ford is in such a hole. I owned a Lincoln Town Car (Ford's flagship car) - and let me say - Ford cant build a car to save its life - ask anyone who owns a Ford - the damn cars take forever to warmup in the winter - let Ford build quality and maybe people will consider a buy - until then - I will stick to GM primarily.

posted by: stan on 01.24.06 at 10:57 AM [permalink]



I disagree with the majority of posters. I have bought... 4 new cars --all American made --and never had a problem with any of them. They didn't "blow up" or fall apart. I'm driving a 98 Ford Explorer now and have never had a problem with it. Everyone who believes Japanese cars are better are victims of misinformation. Does Japan produce quality cars? Yes, they do but American cars are just as good.
I will always look out for my country by buying American. I will never buy a Japanese car. When I was in the Air Force, I bought a new Ford Aerostar. Before it was a year old I got orders to Japan and had to sell it. You know why? Because Japan doesn't allow American cars to be sold in their country or even for American service members to bring theirs temporarily. Given that fact and the fact that American cars are just as good I think you can understand why I only buy American. I find it ironic that the poorest among us, the people who live in the country where there aren't many jobs, are the people who have the most traditopnal values and continue to buy American. It's ironic because those that can afford it the least demonstrate their patriotism by buying American. The next time I see a Japanese car with an American flag on the bumper, I'm going to rip it off --or paste a Japanese flag over it. Because they have no right to wave the flag. They've shown where their loyalties lie. And don't tell me "oh, you can't say a car is built in the USA anymore. They're made in Mexico and Canada, etc --BULLSHIT. I don't care of they're made in the heart of the USA. If the name on the car says Toyota or Honda, guess where the profit made when that car is sold goes. That's right. Straight to tokyo. Straight to Mitsubishi. Straight to the same companies that built the machines that killed our father, uncles, and grandfathers.

posted by: Ray on 01.24.06 at 10:57 AM [permalink]



I love American cars and have had them the last 20 years, I think its economic stupidity to send all that money overseas. But maybe I am narrow minded, I care about this country and its economy, I will buy there radio and tv's but, not big ticket items. I have never been unhappy with my American cars. I think the foreign cars ones are way over rated.

posted by: bob on 01.24.06 at 10:57 AM [permalink]



It's only acceptable for women to drive Japanese cars. And maybe young kids. 'Cause they don't know better. But if the husband is any kind of real man, he would teach his wife and kids to drive American. We have three Fords in our driveway and we're all satisfied. BTW, if any of you Japanese car driving sissies break down on the side of the road, don't expect me to stop and help you. You hoed your own row.

posted by: Bill on 01.24.06 at 10:57 AM [permalink]



HAHA BILL YOU DUMBASS COWBOY!! The only husks I see on the highway are Fords!!

posted by: Will on 01.24.06 at 10:57 AM [permalink]



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posted by: Tifany on 01.24.06 at 10:57 AM [permalink]



disagree with the majority of posters. I have bought... 4 new cars --all American made --and never had a problem with any of them.


You're lucky--I've had 6 vehicles in my life, 5 American, 4 crap, 1 good, 1 great. Wanna guess who made the 1 great one? Not an American company.

posted by: John on 01.24.06 at 10:57 AM [permalink]



To date i brought 4 cars. First three American, Ford tempo, Ford escort then 2006 Dodge charger. I had to sell the charger in less than 6 months, the reasons were simple i lost close to 1000 bucks in lost wages cuz of my repeated visits to the dodge dealers for repairs... the two earlier fords had no better stories either. The escort in the beginning was reliable (costing me less than 400 bucks an year on repairs)...the tempo was bad from the day one...all in all i lost 6k (excluding lost wages) on dodge,4k on fords = 10k in less than 5 years

Now I have a subaru legacy GT....oh boy GM,FORD,DC and Dodge have a lot of learning AND catchingup to do. They just dont know how to build fast, safe, reliable and drive exciting cars..

take the 2006 charger it can go fast ONLY in straight line...its a damn joke to make a fast car that cant handle bends at good speeds..Fords and Dodge build their suspensions out of cheese sticks !...the steering sucks

To the joker who said japanese cars are for women I think the only things you have driven till date are MULES and AMERICAN CARS..so no wonder you like them so much...try any japanse /german sports sedans and you would know what REAL CARS feel like :-)

I am not a big fan of flag waving...I believe competition leads to better things. It always does..what good an American car bring to a worker family if they have to spend 200 bucks every month on its repairs, while they have medical bills to pay ? Besides supporting Corporate America profits on my dime based on patriotism ?.. not my idea of fun, I would leave that to, all you flag waving car buyers

posted by: sid on 01.24.06 at 10:57 AM [permalink]






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