Foreign VS. Domestic

Buy American Mention of the Week 11-29-06

American Perception Problems of the American Auto Industry

Ford and General Motors have taken turns besting the Toyota Camry in quality surveys for the past two years, but if you talk to many Americans - especially the ones who would never consider supporting home-based auto companies - you’d never know it.

Last year, the Chevrolet Impala beat the Toyota Camry in initial quality according to J.D. Power & Associates, and Consumer Reports just announced that both the Ford Fusion and Mercury Milan scored higher than both the Toyota Camry and the Honda Accord this year.

After the announcement, Ford’s Director of Global Quality Debbe Yeager commented “It’s a perception gap,” referring to the struggle American companies have had overcoming the perceived and seemingly untarnishable reputation of their foreign rivals.

Even as GM and Ford have accumulated award after award on vehicle quality, you’d almost never know about such quality gains made by American companies - or quality declines of foreign companies - by listening to the media. Did you hear about it when the National Highway Traffic Safety Administration announced that Toyota recalled more vehicles than it sold in the U.S. last year? Probably not. Did you hear about Toyota making an “elaborate apology” for their “worrisome series of recalls” that has “tarnished its reputation for quality?” Probably not. Did you hear about the Toyota senior manager quote that stated “We used to do quiet recalls called ‘service campaigns’ to deal with defects but we’re not going to hide anything anymore?” Such a statement suggests Toyota’s past recall numbers were probably much higher than we were led to believe, and they profited handsomely by having a perception of higher quality than they deserved. In Japan, prosecutors are looking into possible negligence on the part of Toyota for shirking recalls for the last eight years. How ironic. You probably didn’t hear about that one either because the American media doesn’t like to bash foreign auto companies – only American ones.

Then there’s the mythical perception that foreign automakers produce the most fuel efficient cars and that Detroit only makes gas-guzzlers when the truth is that all automakers - including Toyota, Honda and Hyundai-Kia alike – have allowed fuel economy to slide in the past 20 years since they all now sell bigger trucks and more SUVs. One of Toyota’s senior executives was even quoted in the Wall St. Journal September 28 saying that both the Toyota Sequoia and Tundra “are big gas-guzzling vehicles” and expressed “concern about the longer-term prospects.” These longer-term prospects about their admitted gas-guzzlers are questioned because they know that Ford’s F-150 and Chevy’s Silverado have led the pack in sales year after year.

Yes, gasoline has been getting more expensive – at least until recently – but the fact that Americans continue to buy it in greater quantities qualifies us as hypocrites for suggesting GM and Ford stop building so many big trucks and SUVs. After all, GM and Ford are only responding to demand as any company would and should if they want to remain profitable in a cut-throat competitive market. According to a Business Week survey, we Americans bought 10% more gasoline in the first six months of 2006 compared to the first six months of 2000 even though gas prices rose 75% in that period. Maybe here I could also mention that the Chevy Tahoe beat the gas-guzzling Toyota Sequoia in quality surveys and gets better gas mileage to boot.

But what has happened since gas prices have been on the decline in recent months? The Wall Street Journal reported a “slight” increase in truck sales by American companies, as Ford Expedition sales were up 41% and Lincoln Navigator sales were up 44%. The American media even tries to restrain its applause for home-based auto companies by referring to gains of over 40% as “slight!”

Perhaps the biggest perception problem is that American automobile companies GM and Ford (Chrysler is now German-owned) squander all their money on plants overseas and foreign automakers build their factories in the U.S. Foreign car lovers will surely point to Kia’s plans to build its first-ever U.S. plant in Georgia, but they probably won’t mention that they received $400 million in tax giveaways to do it, which translates into $160,000 per job. Among the many benefits for the foreign-owned company, your tax dollars are going to be used for road improvements surrounding the complex, complete with flower beds and other beautification features. Hey, as long as we’re going to allow states to bid for private jobs with our public tax dollars, we might as well make it look good, right?

And the foreign car lovers will probably also not tell you (or maybe they just don’t know or don’t want you to know) that GM and Ford pour more money into existing American facilities than foreign automakers spend on new plants, usually with little or no tax breaks. GM has already spent over $500 million upgrading two transmission plants this year, and has spent nearly a billion dollars over the last decade, for example, for facility upgrades in Texas. And what do GM and Ford get for making their existing plants more efficient? It isn’t tax breaks. Instead, they get accusations of not being “competitive” enough! Maybe here I should also mention that the average domestic parts content for Kia is 3%, while the average domestic parts content of Ford and GM is 78% and 74% respectively. This means that buying a U.S.-assembled (or even foreign-assembled, for that matter) GM or Ford supports more American jobs than a U.S.-assembled car or truck with a foreign nameplate.

Fortunately for our benefit, the U.S. remains the overall global leader in research and development, and a big reason for that is that American automakers – according to the Level Field Institute – invest $16 billion in R&D (Research & Development) annually, which outpaces any other industry one could name. Admittedly, the Level Field Institute counts German-owned DaimlerChrysler as an American automaker, so Ford and GM’s combined R&D contribution to America is closer to around $12 billion. But who’s counting, right? Certainly not the American auto-bashing media.

Japanese companies do employ 3,600 American workers in R&D, but that still leaves the foreign competition behind in the dust staring at American rear bumpers. 3,600 sounds like a big number until you realize that 65,000 Americans work in R&D facilities in the state of Michigan alone. In fact, two of the top four R&D spending companies in America as reported by the Wall Street Journal are – you guessed it – Ford and General Motors. The other two are also American companies: Pfizer and Microsoft.

Ford has recently made headlines as the American automaker with the most challenges to its future, but these challenges certainly are not because they “aren’t making cars people want to buy.” Toyota did outsell Ford in July, but since then, Ford has reclaimed the No. 2 spot and has held it ever since. GM has the highest market share, increasing over 2 percentage points from a year ago. So apparently they can’t be accused of not making cars people want to buy either. Ford sales are also up in Europe, and Ford doubled their sales in China, where GM has the highest market share of any automaker.

General Motors also reported a 3.9% rise in August vehicle sales despite high gas prices and a supposedly slowing economy. And even though Toyota reported record sales that month, they couldn’t match the non-record setting sales volume of Ford. GM’s sales rose 17% in October from the same month in 2005 and Ford sales rose 8% in the same period. Ford also sits on $23 billion in cash, so they have plenty of money to focus on and fix any problems.

And for all the talk about the lack of fuel efficiency of American automakers, it seems three-fourths of all automakers failed to meet Europe’s improved fuel-efficiency standards intended to cut carbon-dioxide emissions. Japanese and German automakers topped the list of the study’s worst performers, but according to an environmental group’s study, GM’s Opel division and Ford both “come out well.”

In closing, I’ll leave some encouraging numbers for those of us who actually like to root for and support the home team. The J.D. Power 2006 Vehicle Dependability Survey reports that Mercury, Buick and Cadillac (in that order) grabbed the number 2, 3 and 4 spots to beat Toyota, Honda, Nissan, BMW and everyone else (except Lexus) in having the least number of problems per 100 vehicles.

Perhaps someday the American media will give GM and Ford the credit they deserve. And once they do, perception among the majority of the American public will rightfully change. GM and Ford aren’t only doing what they should to make gains in the American market to deserve American consumer loyalty; they’re also doing what they should to make gains in the markets of China, Europe and across most of the rest of the globe.

Roger Simmermaker is the author of “How Americans Can Buy American: The Power of Consumer Patriotism.” He also writes “Buy American Mention of the Week” articles for his website www.howtobuyamerican.com and is a member of the Machinists Union and National Writers Union. Roger has been a frequent guest on the Fox News Channel, CNN and MSNBC and has been quoted in the USA Today, Wall Street Journal and US News & World Report among many other publications.

Roger Simmermaker, Author
How Americans Can Buy American
www.howtobuyamerican.com