Thursday, May 07, 2009

Made In The USA?

In today's WSJ, Matthew Slaughter (a childhood chum of mine) asks just What Is An "American" Car These Days?:

What exactly makes a car "American?" Does it mean a car made by a U.S.-headquartered company? If so, then it is important to understand that any future success of the Big Three will depend a lot on their ability to make -- and sell -- cars outside the United States, not in it. A big reason Chrysler has fallen bankrupt is its narrow U.S. focus. It has not boosted revenues by penetrating fast-growing markets such as China, India and Eastern Europe. Nor has it lowered costs by restructuring to access talent and production beyond North America.

On many measures the Big Three today are far less global than the most successful U.S.-headquartered companies. Today about two-thirds of IBM's revenue is earned outside the U.S. And what does it say on the back of every Apple iPod? "Designed by Apple in California, Assembled in China." Chrysler and GM will be stronger if they can become more global, not less so. This should benefit not just their bottom lines but their U.S. workers, too. Much research now shows that expansion abroad by U.S. companies tends to support jobs in America, not destroy them.

Or is an "American" car one made within U.S. borders? If so, then it is important to understand that America today has a robust automobile industry thanks to insourcing. In 2006, foreign-headquartered multinationals engaged in making and wholesaling motor vehicles and parts employed 402,800 Americans -- at an average annual compensation of $63,538 -- 20% above the national average. Amid the Big Three struggles of the past generation, insourcing companies like Toyota, Honda and Mercedes have greatly expanded automobile operations in the U.S. In fiscal year 2008, Toyota assembled 1.66 million motor vehicles in North America with production in seven U.S. states supported by research and development in three more.

We're running into a situation at work that raises some of the same type of questions. Some of the recent government stimulus programs have designated that goods supplied in projects be "Made In America."

While we're headquarted in the US and manufacture some of our products here, we also supply the North American market with other products made in Mexico. A Swiss competitor has a plant in Indiana that manufactures some of the same products we make in Mexico.

So even though we're a US based corporation that pays hundred of millions of dollars in taxes and employs thousands of people in the US (far more in both categories than or competitor), the "Made in America" requirement means that a Swiss company gets the government business. I find it hard to believe that those who included the "Buy American" mandate intended for a rich family in Switzerland (its a privately held company) to profit at the expense of an American company, but that's exactly what's happening. Unintended consequences and all that.

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