Going American: The Business Case

[ChevroletRevived]

Going American: The Business Case

A ChevroletRevived Commentary


Many heated posts on the forums have discussed the issue of buying American. In response to some of this, I have decided to write this commentary in answer to the question: Why should I go American? Enjoy.

1. Jobs/Employment

Toyota realizes the potential backlash that their success can bring. Knowing this, Toyota wants to project it's self as American. I'm sorry, but the ''Toyota is American'' line is not going to work. Why? Because the facts clearly point otherwise. General Motors employs hundreds of thousands of Americans workers, far more then any Japanese automaker. Not to mention they can produce up to 2% of our GDP. What's more, the jobs affected and created by the existence of GM are far more then sheer employment numbers reveal.

2. Deciding Factors

Deciding who's what in today's increasingly intertwined operations and global economy can be challenging and confusing. Therefore, corporational nationality can be determined by a simple, defining factor; where does your money go? That, my friends, is where the company headquarters are based. When you buy a foreign vehicle you are not only increasing the national trade deficit (more is imported into our country then exported out), but also adding to the national debt (your money represents lost American business). Also, the innermost core of a company like Toyota is predominately Japanese. Based in a foreign country (with a leader from the same descent), Toyota in no way can be called American. Being based in a foreign country includes everything that GM supports here and more; executives, plant jobs, ect and money to the country of Japan in the form of taxes and a national trade surplus.

3. A Level Playing field? I think Not

American businesses like GM are burdened by ignorant institutions (I'm talking to you, UAW) that are outdated and bureaucratic, holding on to the fragments of the excessive ''glory days''. Wake up America; this is 2006, not the 50's. In order to remain competitive, America needs to adapt, or it will be outclassed and it's leadership and manufacturing base will be outsourced completely. Ridiculous things like the ''Jobs Bank'' need to come to an end. Changing times require drastic measures and different amounts of jobs and plants. Worker costs need to come down if these workers want jobs at all. A little realized fact is, if America would get behind their automakers like they once did, jobs and plants would stay. Toyota does not have the burden of a jobs bank, health care, legacy costs, and ridiculous worker wages. The average healthcare/legacy costs per vehicle for Toyota is $210 versus $1500 for a GM vehicle. Moreover, Toyota has the support of not only the Japanese government, but the people, which buy and act patriotically. The protectionist Japanese government resists foreign investment and imposes heavy tariffs on imported vehicles. As a result, very little GM vehicles are sold, and we're saddled with a large trade deficit. A level playing field? I think not.


Each and every American enjoys the freedom of choice, one of the defining liberties of our great country. And, that freedom should be preserved and it should be able to be exercised. But what happened to the days of support and patriotism for our country? Is supporting our fellow Americans (who, like us are also are pursuing the American Dream) and keeping our country strong such an agonizing decision? You are only enhancing your well being and ensuring the success of our country by doing so. Doing the right thing can be hard, and right now GM doesn't have a good image. Something has to start somewhere...let's reverse the trend and go American. After all, how did Toyota do it?

[01cavalier]

Definitely a good, accurate werite-up.

[ChevroletRevived]

Thank you, 01Cavalier.

[2648562]

Nice post. You're 100% right about most everything IMO. I don't expect to change your opinion, but here are my two cents:

I'm not a fan of the jobs bank. A little severance pay and some money towards job retraining sounds better.

As for ridiculous wages, well $28 dollars an hour to work on an assembly line (the figure someone gave somewhere here today) is really not that much money. Today's workers are more productive than ever and they produce the best quality vehicles GM ever has (and better than the competition--if not initially, over the long-run). If you cut their wages it's going to hurt morale, quality and productivity will decline, and the better employees will go elsewhere. It's also going to be harder to attract talent. AND it's going to effect you, someone you love, and the whole country to some extent (they're still one of the largest employers in this country... imagine the ramifications even a small pay cut could have on an economy on life support).

If anything needs to be addressed it's healthcare. Being the son of a former GM employee, I can tell you it's really not that good. In fact, my experiences were awful (thank God mom put me on her plan). But, good or bad, it can't be free in this day and age. Make the employees contribute at least $150 a month towards it (to be reevaluated/negotiated in ten years). Make the retirees pitch in or no more GM discount. Period. Huge problem solved. If that's not good enough for GM they had better do some negotiating with their provider(s).

You left off any digs at GM's management (you know, the guys that just negotiated that 2 minute deduction in breaks up there in Canada), but I'll let that slide. :-)

Again, nice post.

[ifcar]

"The protectionist Japanese government resists foreign investment and imposes heavy tariffs on imported vehicles. As a result, very little GM vehicles are sold, and we're saddled with a large trade deficit. A level playing field? I think not."

It's not the tariffs that block GM from selling its vehicles in Japan, but the products themselves. Look at the cars popular in Japan, they focus on modern, often polarizing styling inside and out, space efficiency, displacement efficiency, and fuel economy. Does GM offer anything that stands out in those areas? How did the Cavalier do even when sold as a Toyota?

And other foreign manufacturers have been successful there. The Korean manufacturers do all right in the mainstream market IIRC. BMW and Mercedes appeal to the elite.

Japanese cars do well in the US because Japanese automakers design most of their successful products with the US in mind, if any American-made cars were designed specifically for Japanese tastes, they would likely sell in Japan. Not in a large volume immidiately, of course, thanks to owner/national loyalty, but it took Japanese products quite a few years to really establish themselves here as well, overcoming the same barriers.

[pagemaster]

Each and every American enjoys the freedom of choice, one of the defining liberties of our great country. And, that freedom should be preserved and it should be able to be exercised. But what happened to the days of support and patriotism for our country? Is supporting our fellow Americans (who, like us are also are pursuing the American Dream) and keeping our country strong such an agonizing decision?

Sounds like George W Bush's radio adress.

[pagemaster]

Originally Posted by ChevroletRevived

Going American: The Business Case

A ChevroletRevived Commentary


Many heated posts on the forums have discussed the issue of buying American. In response to some of this, I have decided to write this commentary in answer to the question: Why should I go American? Enjoy.

1. Jobs/Employment

Toyota realizes the potential backlash that their success can bring. Knowing this, Toyota wants to project it's self as American. I'm sorry, but the ''Toyota is American'' line is not going to work. Why? Because the facts clearly point otherwise. General Motors employs hundreds of thousands of Americans workers, far more then any Japanese automaker. Not to mention they can produce up to 2% of our GDP. What's more, the jobs affected and created by the existence of GM are far more then sheer employment numbers reveal.

2. Deciding Factors

Deciding who's what in today's increasingly intertwined operations and global economy can be challenging and confusing. Therefore, corporational nationality can be determined by a simple, defining factor; where does your money go? That, my friends, is where the company headquarters are based. When you buy a foreign vehicle you are not only increasing the national trade deficit (more is imported into our country then exported out), but also adding to the national debt (your money represents lost American business). Also, the innermost core of a company like Toyota is predominately Japanese. Based in a foreign country (with a leader from the same descent), Toyota in no way can be called American. Being based in a foreign country includes everything that GM supports here and more; executives, plant jobs, ect and money to the country of Japan in the form of taxes and a national trade surplus.

3. A Level Playing field? I think Not

American businesses like GM are burdened by ignorant institutions (I'm talking to you, UAW) that are outdated and bureaucratic, holding on to the fragments of the excessive ''glory days''. Wake up America; this is 2006, not the 50's. In order to remain competitive, America needs to adapt, or it will be outclassed and it's leadership and manufacturing base will be outsourced completely. Ridiculous things like the ''Jobs Bank'' need to come to an end. Changing times require drastic measures and different amounts of jobs and plants. Worker costs need to come down if these workers want jobs at all. A little realized fact is, if America would get behind their automakers like they once did, jobs and plants would stay. Toyota does not have the burden of a jobs bank, health care, legacy costs, and ridiculous worker wages. The average healthcare/legacy costs per vehicle for Toyota is $210 versus $1500 for a GM vehicle. Moreover, Toyota has the support of not only the Japanese government, but the people, which buy and act patriotically. The protectionist Japanese government resists foreign investment and imposes heavy tariffs on imported vehicles. As a result, very little GM vehicles are sold, and we're saddled with a large trade deficit. A level playing field? I think not.


Each and every American enjoys the freedom of choice, one of the defining liberties of our great country. And, that freedom should be preserved and it should be able to be exercised. But what happened to the days of support and patriotism for our country? Is supporting our fellow Americans (who, like us are also are pursuing the American Dream) and keeping our country strong such an agonizing decision? You are only enhancing your well being and ensuring the success of our country by doing so. Doing the right thing can be hard, and right now GM doesn't have a good image. Something has to start somewhere...let's reverse the trend and go American. After all, how did Toyota do it?

This is the problem with the free trade agreement signed back in the day. Tariffs prevent import of a lot a Toyota's back then.

[tama z71]

Dude, thats good as hell. I can agree with everything you say in that article. Definitely elaborate on it though, cause you could make a fantastic write-up out of it. Front page material if just a bit longer.

[SmallBlock]

Originally Posted by ifcar

"
It's not the tariffs that block GM from selling its vehicles in Japan, but the products themselves. Look at the cars popular in Japan, they focus on modern, often polarizing styling inside and out, space efficiency, displacement efficiency, and fuel economy. Does GM offer anything that stands out in those areas? How did the Cavalier do even when sold as a Toyota?

And other foreign manufacturers have been successful there. The Korean manufacturers do all right in the mainstream market IIRC. BMW and Mercedes appeal to the elite.

Japanese cars do well in the US because Japanese automakers design most of their successful products with the US in mind, if any American-made cars were designed specifically for Japanese tastes, they would likely sell in Japan. Not in a large volume immidiately, of course, thanks to owner/national loyalty, but it took Japanese products quite a few years to really establish themselves here as well, overcoming the same barriers.

Hmmm.

Could it be all about product, as the fabled IFCAR asserts?

Lets look at how Japan deals with other nations in the world.

Indonesia-Japan Trade
(JAPAN-INDONESIA ECONOMIC PARTNERSHIP REPORT)
May 2005

Japanese auto and auto-parts industries stated that immediate
tariff elimination in principle is necessary in order to strengthen its
cooperation with Indonesia’s local partners through business
partnership in a form of investment as well as complemented division
of labor system on auto-parts.

Let's see what the Japanese response to Indonesian requests were:

The Indonesian side expressed its interests in tariff elimination on
various organic chemicals, plastic bags, glass products, textiles and
footwear where Japan maintains tariffs including significant specific
duties on some products. The Japanese side stressed that footwear,
leather, leather products are sensitive historically and socially for
Japan.

Hmmm.

We demand unfettered access to your market for our auto/steel industries, but cannot budge on anything else. I thought it was all about product?

How do you dispel the data put forth by GM during their trip to Congress?

Stelzer describes how "Japan concocted a devious tax system that enabled their manufacturers to dump cars in the U. S. at prices lower than in their own country, thereby undercutting U.S. companies in our markets, while shutting U.S. companies out of Japanese markets." Stelzer found that Japan imposed consumption taxes on all manufactured goods, including a 22 1/2 percent commodity tax on cars and light trucks. This tax was rebated if the vehicle was exported. He says:

"Here is an example of how it worked: If Toyota produced a car with a basic dealer price of $8,160 it would pay a commodity tax, $1,840, to the Japanese government causing the dealer price to rise to $10,000. That tax was then paid by Japanese consumers as a hidden part of the total price, along with other taxes....

"However, the fine print in Japan's tax manual revealed that if that car was exported to the U.S., Japan would rebate (kick back) the commodity tax."

Toyota could sell the car in America for $8,160...$1,840 less than its price in Japan.

"On the other hand, if a U.S. car carrying a similar dealer price of $10,000 was exported to Japan the U.S. government would not rebate even one dime from $4,000 of taxes that had been imbedded in that price through income, PICA, property, and many other taxes. When the $10,000 U.S. car entered Japan it would not be released from customs bond until the manufacturer paid the 22-1/2 commodity tax, thereby causing the price of the U.S. car in Japan to rise to $12,250, plus other charges...."

As a result of these assaults on American auto manufacturers, Stelzer says, "GM has closed at least 70 plants and offices in the U.S. while reducing its domestic work force from over 600,000 to barely 300,000 today, and opening plants in many other countries. At the same time, GM's role as the largest private generator of federal, state, and local tax revenue shrunk by at least 50 percent." He points out that federal, state, and local governments have enacted millions of tax and regulatory laws that have been responsible for over 80 percent of the cost of the average American product. That being a ratio of 4- to-1, it constitutes a tariff of 400 percent on our products. Yet we assess a tariff of only 2 percent on imported cars and parts which are assembled in Japanese plants in the U.S.?

Narcissistic IFCAR, how do you reduce this argument?

[ChevroletRevived]

Originally Posted by pagemaster

Sounds like George W Bush's radio adress.

Really? Thank you. And thank you everyone else for their comments also.

[ifcar]

Originally Posted by SmallBlock

Hmmm.

Could it be all about product, as the fabled IFCAR asserts?

Lets look at how Japan deals with other nations in the world.

Indonesia-Japan Trade
(JAPAN-INDONESIA ECONOMIC PARTNERSHIP REPORT)
May 2005

Japanese auto and auto-parts industries stated that immediate
tariff elimination in principle is necessary in order to strengthen its
cooperation with Indonesia’s local partners through business
partnership in a form of investment as well as complemented division
of labor system on auto-parts.

Let's see what the Japanese response to Indonesian requests were:

The Indonesian side expressed its interests in tariff elimination on
various organic chemicals, plastic bags, glass products, textiles and
footwear where Japan maintains tariffs including significant specific
duties on some products. The Japanese side stressed that footwear,
leather, leather products are sensitive historically and socially for
Japan.

Hmmm.

We demand unfettered access to your market for our auto/steel industries, but cannot budge on anything else. I thought it was all about product?

How do you dispel the data put forth by GM during their trip to Congress?

Stelzer describes how "Japan concocted a devious tax system that enabled their manufacturers to dump cars in the U. S. at prices lower than in their own country, thereby undercutting U.S. companies in our markets, while shutting U.S. companies out of Japanese markets." Stelzer found that Japan imposed consumption taxes on all manufactured goods, including a 22 1/2 percent commodity tax on cars and light trucks. This tax was rebated if the vehicle was exported. He says:

"Here is an example of how it worked: If Toyota produced a car with a basic dealer price of $8,160 it would pay a commodity tax, $1,840, to the Japanese government causing the dealer price to rise to $10,000. That tax was then paid by Japanese consumers as a hidden part of the total price, along with other taxes....

"However, the fine print in Japan's tax manual revealed that if that car was exported to the U.S., Japan would rebate (kick back) the commodity tax."

Toyota could sell the car in America for $8,160...$1,840 less than its price in Japan.

"On the other hand, if a U.S. car carrying a similar dealer price of $10,000 was exported to Japan the U.S. government would not rebate even one dime from $4,000 of taxes that had been imbedded in that price through income, PICA, property, and many other taxes. When the $10,000 U.S. car entered Japan it would not be released from customs bond until the manufacturer paid the 22-1/2 commodity tax, thereby causing the price of the U.S. car in Japan to rise to $12,250, plus other charges...."

As a result of these assaults on American auto manufacturers, Stelzer says, "GM has closed at least 70 plants and offices in the U.S. while reducing its domestic work force from over 600,000 to barely 300,000 today, and opening plants in many other countries. At the same time, GM's role as the largest private generator of federal, state, and local tax revenue shrunk by at least 50 percent." He points out that federal, state, and local governments have enacted millions of tax and regulatory laws that have been responsible for over 80 percent of the cost of the average American product. That being a ratio of 4- to-1, it constitutes a tariff of 400 percent on our products. Yet we assess a tariff of only 2 percent on imported cars and parts which are assembled in Japanese plants in the U.S.?

Narcissistic IFCAR, how do you reduce this argument?

You could start by reducing mine.

What effort has GM put into selling cars in Japan compared to the effort of Japanese automakers selling cars here, and how do you explain other foreign cars selling well in Japan?

[mgescuro]

Originally Posted by SmallBlock

As a result of these assaults on American auto manufacturers, Stelzer says, "GM has closed at least 70 plants and offices in the U.S. while reducing its domestic work force from over 600,000 to barely 300,000 today, and opening plants in many other countries. At the same time, GM's role as the largest private generator of federal, state, and local tax revenue shrunk by at least 50 percent." He points out that federal, state, and local governments have enacted millions of tax and regulatory laws that have been responsible for over 80 percent of the cost of the average American product. That being a ratio of 4- to-1, it constitutes a tariff of 400 percent on our products. Yet we assess a tariff of only 2 percent on imported cars and parts which are assembled in Japanese plants in the U.S.?

Why is the focus solely on the Japanese? You think Cadillac lost it's #1 position because it couldn't sell cars in Japan? What about the Germans? The Koreans?
You think the US could compete against the robotics and automation of Japanese plants by using hundreds more workers? No.
GM could have easily built their own plant in Japan and bypassed the "tariff." Did they? No.
GM kept selling cars with LH drive. Would you buy a Camry if it had the steering wheel on teh right hand side? No. So why would the Japanese buy a car with the wheel on teh wrong side?

Sure, the Japanese market is a tough nut to crack. The best way to crack a nut is with a hammer. What GM used was a Q-Tip.

[SmallBlock]

Originally Posted by ifcar

You could start by reducing mine.

What effort has GM put into selling cars in Japan compared to the effort of Japanese automakers selling cars here, and how do you explain other foreign cars selling well in Japan?

Nice side step.

For the most part, the greatest volume of imported vehicles are sold through existing dealship channels arranged through mergers/JVs, or most likely, through various mega-importers like Yansae or others.

Not surprisingly, the strength of these sales are in the luxury/image range which is resistant to soft tariff/duty.

Check out the stats for January 2006.

Vehicles Change On Year
Overall 13,399 +10.0%
Passenger Cars 13,232 +10.5%
Trucks 166 -19.0%
Buses 1 -75.0%

Top 10 January Auto Import Brands (including Japanese brands)
Total Vehicles Change On Year Mkt Shr
VW 3,208 +14.6% 22.1%
Mercedes 2,718 +30.7% 18.7%
BMW 2,010 +22.9% 13.8%
BMW Mini 778 - 2.7% 5.4%
Toyota 755 - 8.5% 5.2%
Audi 753 + 0.7% 5.2%
Volvo 496 -39.7% 3.4%
Peugeot 468 + 4.9% 3.2%
Honda 386 - 6.1% 2.7%
Ford 356 -20.0% 2.5%

Of particular interest is the lack of any pedestrian brands (other than VW which still enjoys a strong brand image).

Now, considering that the heart of the Japanese market is full of smaller, economical vehicles, I would think to see a decent amount of utilitarian brands in there (assuming import restrictions were nonexistent). Case in point, the Euro-spec Focus family. Or even more Puegeots and 1-class/A-class Mercedes. But they don't exist.

Why? Because the vehicle price cannot absorb the soft tariff systemically imposed by the Japanese government, vis-a-vis its Japanese domestic competition.

Its not all about product when the pricepoint you are bureaucratically forced to sell at isn't competitive.

[ifcar]

What you are saying:

"GM can't sell cars there because of the difficulty of importing them. Other foreign makes sell cars there by dealing with a major importer company."

Why can't GM do that? Why can't GM design cars for the Japanese market and sell them or even build them there? They're only trying to sell American cars there at this point, which doesn't work. It would be like Toyota only selling RHD 3-cylinder economy cars here, and complaining about the sales.

VW manages to get around the import problems without a problem. MB and BMW do, too.

Also, what was the total January sales volume in Japan, for comparison?

[CobaltSScrazy]

Nice job Chev Rev, seeing you speak up on your positive views proactively, that takes guts, sweetness.

2 things to add:

1 Its becoming a global economy, the UAW will have to let GM adapt and cut salary, benefits, jobs bank, etc. OR THEY WILL DIE!!! Plain and simple.

2 Healthcare MUST be paid for by PEOPLE not companies. We should have national "chevy" healthcare for ALL people, gov't sponsored. With the option to purchase "Cadillac" insurance if your rich which is more comprehensive coverage with cutting edge techniques and top notch facilities / docs.