‘Made on Earth’
Rich Christianson
“Which is more American?” quizzed a headline that caught my eye in the March 22 edition of USA Today.

What made this headline doubly intriguing was the graphic directly below it, showing a side-by-side comparison of a Chevy HHR and a Toyota Sienna. The graphic observed that 41 percent of the HHR’s content was “made in the USA or Canada” vs. 85 percent of the Sienna’s content which was “made in the USA or Canada.” It further noted that the HHR is assembled in Mexico, while the Sienna is assembled in Indiana.

What would have seemed impossible 20 to 25 years ago and implausible 10 to 15 years ago, now merely seems ironic. At the same time that U.S. icon GM, the world’s largest automaker, is sourcing more than half of its parts and production for the HHR outside of the United States, Japanese stalwart Toyota, the world’s most profitable automaker, is employing the opposite strategy for its Sienna and creating more U.S. manufacturing jobs in the process.

The USA Today story illustrates the extent that globalization has put a topsy-turvy spin on the U.S. auto industry. Toyota is but one of many foreign car manufacturers that have opened plants in the United States to get closer to its customers here. Like GM, Ford and Chrysler have looked beyond the U.S. border to source parts, production and assembly of its products to lower costs.

The Wood Products World
Over the past decade, globalization also has left an indelible mark on the U.S. wood products industry. China’s emergence as a world furniture super power has come at the expense of U.S. residential furniture manufacturing. Many of the best known names — Broyhill, Pulaski and Hooker to name but a few — have completely shut down their domestic wood furniture manufacturing operations in favor of outsourcing full lines of furniture from China and elsewhere.

There seems to be no end to the hemorrhaging of U.S. home furniture manufacturing output and jobs. Last month, Bassett Furniture announced it would close one of its three plants and step up its import program. In a twist to this recurring story line, Richardson Bros., which manufactured solid wood furniture for 120 years before closing its Wisconsin factory in 2003, recently said it also would quit importing furniture and exit the furniture business altogether.

On the flip side, recent years have seen pockets of foreign investment in U.S. wood products manufacturing. Most notably, the popularity of laminate flooring has led to the development of U.S. plants by Pergo, Unilin and Kronotex. On the furniture front, Swedwood, the manufacturing division of international furniture retail giant Ikea, recently revealed plans to build an 810,000-square-foot factory in Danville, VA. In an unrelated announcement, Sauder Woodworking, the largest U.S. furniture manufacturer of ready-to-assemble furniture, has inked an agreement with Ikea to supply kitchen cabinet components.

The composite panel industry has witnessed buyouts of several particleboard and MDF mills by Aconcagua Timber Corp., a Chilean concern, and last year’s blockbuster buyout of six Weyerhaeuser panel plants by Flakeboard of Canada, which has recently pledged to upgrade several of them with new melamine production capability.

What’s in a Label?
What does “Made in America” or made in anywhere, for that matter, mean today? Even a 10-man custom furniture shop in Wichita, KS, can attend the International Woodworking Fair in Atlanta or the AWFS Fair in Las Vegas and develop a global supply chain that encompasses everything from machinery, tooling and software, through raw materials, components and hardware. That same shop might well have a multicultural workforce, too.

Several years ago, the American Furniture Manufacturers Assn. attempted to create a nationally recognized labeling program for American-made furniture that was based on a majority of components being manufactured domestically, plus assembled and finished here. That effort went by the wayside when the AFMA morphed into the American Home Furnishings Alliance in 2004, a move which eliminated the requirement of members to have a U.S. manufacturing facility.

Other than the hundreds of thousands of laid-off workers and affected industry suppliers, it’s hard to find many Americans who seem to worry about the erosion of U.S. manufacturing. While investors put an emphasis on maximizing profits, consumers show they care more about how much they paid than where their products were made.

Given this seeming indifference to the country of origin and considering the melding of investment, equipment and supply sourcing at factories everywhere on the globe, perhaps someday soon labels such as “Made in the USA” or “Made in China” will give way to a more accurate bearing — “Made on Earth.”

 

The furniture angle is quite interesting, but I feel that they left a little out of the car commentary. Toyota has an easier time hiring, and paying, workers in the US as they do not have “legacy” issues that GM does. Oh, and there is also this…

http://www.sltrib.com/ci_5722880

 

Funny, I think USA Today (a rag designed for people who can't read whole sentences) got it wrong. I still have the content sticker for my HHR and it clearly states that it's 85% domestic content, engine and transmission sourced in USA. Maybe GM lied to the consumer AND the government, or USA Today is on the take from Toyota.

 

Let me know if i'm wrong but isn't USA Today an Ad Based "news source". Just like most consumer reports style mag's, those who pay the most for adds get the best reviews.

 

Read the part highlighted in red. Yeah, now you'll want to say that Mexico is U.S.

Foreign? American? Auto parts go global
By Justin Hyde
Grand Forks Herald
May 19, 2006

After years of ignoring GM vehicles, Geraldine Bowers found herself drawn to one in February when she bought a Daytona blue Chevy HHR, lured by its looks and flexibility.

The fact it came from a Detroit automaker didn't hurt nor did it matter to her that the HHR was built in Mexico with a sizable share of foreign parts.

'We like to buy American,' said Bowers of Auburn Hills, Mich. 'I'm not unhappy that it's assembled in Mexico ... . It's very hard to go into a store and find (products) totally American made.'

More than ever, automakers are drawing on suppliers around the globe, shuttling parts across borders in search of lower prices and higher quality.

A Free Press analysis of federal data found that vehicles built by Detroit automakers have steadily increased their proportion of parts from outside the United States and Canada. By the same measure, vehicles built in North America by Japan's largest automakers increasingly use U.S. and Canadian parts.

Detroit automakers still build a far higher share of their vehicles in the United States than foreign automakers, and most of their models draw more than three-fourths of their parts value from U.S. or Canadian sources. But some popular Japanese models now surpass their U.S. competitors for content made in the United States or Canada, the government records show.

The statistics also illustrate the painful contraction of the U.S. auto parts industry, where 30 major suppliers, including Delphi Corp., and dozens of smaller firms have declared bankruptcy since 1999.

Meanwhile, foreign-owned suppliers with close ties to Japanese automakers have grown, mostly in the southern United States, winning new business not only with their traditional customers but also with GM, Ford and Chrysler.

'In a global industry, it is hard to work with companies tied just to one particular area,' said Tony Brown, Ford's senior vice president of global purchasing, in a recent speech in Detroit. 'We need companies that are either global, or savvy enough to form global partnerships.'

Under the American Automobile Labeling Act, automakers must tell consumers what percentage of a vehicle's parts by value come from either the United States or Canada. The law went into effect in 1994 thanks to the support of domestic automakers and the United Auto Workers, who wanted to boost purchases of American-made vehicles.

The Free Press analysis of the data supplied by automakers to the government found, for cars assembled in North America:

** 81 percent of the parts value in General Motors Corp. vehicles sold last year came from the United States or Canada, down from 87 percent five years ago and 91 percent in 1995.

** For Ford Motor Co., 82 percent of parts value was U.S. or Canadian-sourced, down from 87 percent in 2000 and 86 percent in 1995.

** Chrysler had the lowest total for a Detroit automaker at 76 percent, down from 80 percent five years ago and 89 percent 10 years ago.

Among the top three Japanese automakers:

** Toyota drew 75 percent of its parts value from U.S. or Canadian sources for the vehicles it made and sold in the United States last year, up from 57 percent in 2000 and 49 percent in 1995.

** At Honda, 68 percent of its North American vehicles' parts value was U.S. or Canadian. That was down slightly from 70 percent in 2000 but up from 47 percent in 1995.

** Nissan had the lowest total among Japan's Big Three at 57 percent, compared with 58 percent in 2000 and 42 percent in 1995.

However, when considering all vehicles sold in the United States last year, including those made in Japan, the share of parts value from U.S. or Canadian sources fell dramatically:

Toyota, 49 percent.

Honda, 58 percent.

Nissan, 48 percent.

'The trends in all of our vehicles, as time goes on, will be to source more and more from here in North America,' said Dennis Cuneo, Toyota's senior vice president of manufacturing in North America.

Among Detroit automakers, values for U.S. or Canadian content by model ranges widely, from more than 90 percent to less than 30 percent.

GM's new Chevrolet Tahoe has 62 percent U.S. content, 25 percent from Mexico, 9 percent from Canada and 3 percent from China. The Chrysler 300C has 72 percent U.S. or Canadian parts value, with an engine made in Mexico. Ford has a number of models at 90 percent, including the F-Series pickup, but the hybrid Escape comes in at 55 percent thanks to Japanese-sourced components.

The Chevy HHR, made in Ramos Arizpe, Mexico, is sold with a window sticker mandated by U.S. law saying the vehicle has 85 percent 'domestic' content, meaning parts from the United States or Canada.

But Bo Andersson, GM's vice president of global purchasing, said in a recent speech that 64 percent of the parts value in the HHR originates in Mexico, while 30 percent comes from the United States.

GM said the HHR's label reflects an average of its parts value with larger U.S.-made sport utility vehicles, such as the Chevrolet Trailblazer.


Andersson said GM now buys $9.3 billion a year in parts from Mexico, equal to 16 percent of GM's total North American parts bill making Mexico the second-largest source of GM's parts behind the United States.

While hailing GM's commitment to North American suppliers, Andersson also made clear that the company must control costs to compete.

'We are an American company, but we are also a global company,' he said. 'I need to buy the best part with the best quality at the best landed cost.'

Larry Jutte, senior vice president and general manager of parts and procurement for Honda North America, said the company had found that importing parts often created more headaches in quality and inventory control than savings.

'We have very, very little sourcing that we do directly from overseas,' Jutte said. 'That's not our drive and not our message to suppliers.'

American automakers have said for years that Japanese companies still import a large portion of their parts, taking advantage of currency rates to get lower prices. Andersson noted that Toyota is the third-largest importer of shipping containers into the United States, behind Wal-Mart and Heineken. Toyota's hot-selling Prius hybrids, Scions and most Lexuses come from Japan.

Toyota's business with North American parts suppliers has grown from $5.7 billion a year a decade ago to $20 billion annually today. Cuneo said Toyota buys about $2 billion a year from Michigan parts makers.

Unlike other Japanese automakers, Toyota has also imported a scaled-down version of the partially owned supplier network it built in Japan. It has controlling stakes in Aisin Seiki and Denso Corp. and owns some smaller suppliers such as Bodine Aluminum.

That network has given Toyota a boost under a quirk in the federal labeling law that was originally designed to help Detroit automakers. Under the rules, parts that an automaker buys from a supplier that it owns or has a financial stake in count more toward its domestic content than parts from an independent company.

Denso and Aisin Seiki have also won an increasing number of contracts from other automakers, and stand to gain large swaths of the market as U.S. suppliers restructure inside and outside bankruptcy. Andersson said that of the 200 new suppliers to Cadillac, a majority are Japanese firms that have built or bought plants in Michigan including Denso.

While Delphi and Visteon have won some contracts with foreign automakers, the new business has not offset the decline in business from their former parents, GM and Ford.

The shrinking of Delphi and Visteon opened a door for foreign suppliers. Industry consultant Dennis DesRosiers calculates that foreign-owned suppliers with U.S. factories held 30 percent of the $239- billion U.S. parts market in 2005, up 10 percentage points in the last five years.

Kathleen Ligocki, the chief executive of bankrupt supplier Tower Automotive of Novi, Mich., said her compatriots in the U.S. parts industry faced many hard choices about where to put their resources.

'Domestic automobile manufacturing will profoundly restructure' in coming years 'or disappear to be absorbed into successful global players,' she said.

'There is simply no future in the status quo.'

 

Thanks to the Unions I bet.

 

are you walking about! Why is it always the unions? What about minimum wage? In Mexico the can get labor a lot cheaper than the US minimum wage and that has nothing to do with any Union. Unions are not the enemy! I don't believe biased ass USA Today either.

 

You GO CH! It has nothing to do with Unions or for that matter anthing else other than " How can we make more MONEY !" As Americans , like it or not, we are greedy and if there is any opportunity to make more or spend less we will go for it as a company.... As far a Japan sending more to be built in the US well go figure, the public opinon is that there stuff is better quality so it would be wise to invest your efforts in that country.. Feel free to correct me if you think I am wrong. Just putting in my 2cents.

 

In case this is being missed by people

 

CH...even though I have been a long time union member myself,the International Assn.of Machinists and Aerospace Workers,I have to agree somewhat with JimZ.Although the UAW will tell you that they have recently made many concessions,I think that overall in the last 20 years the union has shot itself in the foot.I won't bore you with the details,but I think they have really gone too far with alot of their demands.Just one example:They can draw a full paycheck even if they are laid off due to lack of sales.Man,where else in this country can you get that? I know I don't.I would get,and have on two occasions in the last 20 years,drawn only what the State of Alabama would give me.And that ain't much.And the American auto companies are also at fault themselves for creating excessive operating expenses with the huge salaries and severance packages that the CEO's and upper management receive both when they are employed and when they are let go for whatever reason.There is no easy answer to all of this.The shareholders demand returns on their investments as well.What the companies do then is out-source in order to turn a larger profit.We are driving an example of that by driving our beloved HHR's.I do try to buy American when possible,but anymore that does not mean I am buying an entirely American made product.At least all my firearms are American made...for now.