Thanks for your reply.
I picked the Toyota numbers up from a radio spot a few years ago. I picked up the Ford numbers from my last company doing business with them.
As for profits, I think that profits are dwarfed by wages. I may be wrong but I bet there is far more money pumped into the US economy by paying those that make the cars/parts than just bringing the profits back into the US from making the cars/parts elsewhere.
Just looking at profits alone does not give you the bigger picture. I would like to see what the final figure ends when you include all of the issues that I brought up, i.e. profits, tool/die costs, R&D spending as well as transfer pricing. Probably not too much more than pure wages.
As for tool/die work, I think it's probably a high content from the local sources around the plant but since Mexico doesn't have a large skilled trade population, I could see it coming from places like Michigan. I know Toyota has lots of work done by local vendors (my company does controls work for them and used to help install good size conveyor projects, etc).
Yes it may have a local content but, as you state later on, a lot of the local vendors tend to be local branches of companies making those very parts back in the home country.
One has to remember that a lot of 'foreign' makes started assembly in the US back in the 70's when quotas were sure to be instituted. Local assembly started as a work around to avoid quotas. Since then, the process has progressively become more localized. Some it could be due to more efficient production in the US. I heard Ford is planning to build the Kuga in US, even though it will only sell in Europe (unless it becomes the new Escape), partly due to lower labor costs.
As for R&D, I'm sure that there is more spent on R&D by Ford/GM/Domestics here than Toyota but that's not to say that they Toyota doesn't spend money here. They do have the engineering centers here. Honda designed the entire Ridgeline truck here. Don't forget the fact that GM designed the new Buick entirely in Germany (where it is also built).
As for parts from foreign countries, I don't have enough stats on that to say one way or another. I know that many foreign automotive companies like to buy from their own countries. With that said, if you can open a branch of a native company in the producing country, they will generally buy from the local branch. My last company did just that by buying a Korean supplier and then opening a branch in Alabama, which now supplies both Kia and Hyundai their brake/fuel assemblies. Since the Korean company is 60% US owned, part of the profits stay here and since 100% of the workers are here, all of the wages go into the US economy.
I personally think that the wages of 20,000+ far outweigh any profits coming back, especially since those wages go to the typical middle class family and not the investor class that typically gets the profits.
While I agree wages staying here is a good thing, foreign makers tend to pay less wages which translates to more money for the manufacturer. Lets also not forget the other stuff (R&D etc) also means wages for a different set of people.
The other issue with parts is transfer pricing. Honda was famous for this back in their earlier days, although I do believe it does not go as much on now. My wife drives an 'import' and when I open the hood I find all parts make overseas. Obviously the local company is buying the parts from the home country, but at what prices? An easy way to transfer profits back to the home country.
Automotive companies, for the most part, don't like to ship parts very long distances because of potential disruptions of the supply chain. All it takes is one "widget" missing and the entire line shuts down. Not saying that they don't do it, but I know that several have "balked" about moving operations even to Mexico (for parts suppliers) because the cross-country shipping of parts was one more potential block to daily production.
Edit: One thing I noticed in my previous company is that the amount of Mexican labor was ALWAYS underestimated. Not sure whether it was this way with other companies or not but quotes would be one for one Mexican labor vs the same amount of US labor. Many US plants would quote automation vs Mexican labor and would lose out barely. However, once in the Mexican plant, labor was almost always double (i.e. double the number of expected workers). Pissed off lots of the US plants (now closed) because they could have competed with automation if allowed. Again, not sure of other companies, just an observation.
Labor is always underestimated. :biggrin: I see that in my field of work as well - not auto related.
I understand that globalization has made it more difficult to say which vehicle has more US content or which manufacturer is more beneficial to the US economy. Maybe I'm old school (yes I'm getting old) but I would still prefer to support a domestic manufacturer who builds vehicles here and pays a decent wage. The good thing is US manufacturers have made rapid improvements in quality.
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