What's more American than the Ford (nyse: F - news - people ) Mustang? The Toyota (nyse: TM - news - people ) Sienna, for one. The Mustang is assembled in Michigan. But 65% (by value) of the parts that compose it come from the U.S. and Canada. The Sienna, built in Princeton, Ind., contains 90% North American content.
This contrast says plenty about the state of automaking in the U.S. these days. Struggling American parts suppliers, such as Delphi (nyse: DPH - news - people ), Visteon (nyse: VC - news - people ) and Dana, are in the midst of a sweeping migration to greener pastures overseas. While shutting plants in the U.S., they are adding to plants overseas. With those, they either supply foreign automakers in their home countries or make low-cost parts to ship stateside.
Meanwhile, foreign suppliers like Bosch of Germany and Denso of Japan have followed European and Asian automakers to the U.S. as the those firms build more vehicles here. In 1994, 109 of the 150 biggest suppliers to North American factories were in the U.S., according to James Rubenstein, a geography professor at Miami University in Ohio. By 2004 only 68 were. "It's just a big role reversal," says James Gillette (nyse: G - news - people ), an auto- supplier analyst with CSM Worldwide.
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Labor costs in the Czech Republic are 77% lower than in the U.S. In the early 1990s a sun visor for a small GM pickup cost $11. Now the cost is $6 for one made in China, making it nearly impossible for U.S. companies to make them profitably in the U.S. General Motors has for the past few years encouraged its suppliers to source parts in low-cost countries.
The foreign-owned supplier giants are joining their main European and Asian customers in the U.S. Last year these companies built 4 million cars in the U.S., up from 3.2 million in 2002. The foreign suppliers choose to move here to dodge tariffs, currency swings and transportation costs. But they also mitigate the higher labor costs, often by setting up in the South, where unions aren't always welcome.
Smaller overseas suppliers gain cheap entrée by buying struggling U.S. factories. Spain's Corporación Gestamp bought an Alabama factory in 2004 that the now-failed Oxford Automotive built to supply a nearby Mercedes-Benz plant. Last year India's Bharat Forge bought Federal Forge of Lansing, Mich. China's Asimco bought a Livonia, Mich. maker of engine mounts. By and large, the phoenixes rising from these ashes are nonunion.
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It appears that unions continue to drive work out of the US Unions have stopped protection and now only protect union headcount, which is now causing it dwindle away to the competition. Unions need to embrace more productive enviroments and rules, or they will become less and less important.