Picture my car as a pie graph -- who gets the money I paid for it?

Factual Questions
1

There’s a car dealer here in town who’s running ads imploring us to purchase cars from American car makers to help preserve the jobs of American auto workers. This is not a new argument. I remember it from the 70’s when Japanese imports first began to cut into the American market.

Here’s what I wonder. I buy a Honda Accord. I know the vehicle is assembled in an American factory by American workers, who contribute a portion of their wage directly to the Federal and state government in the form of income taxes, and indirectly to their local communities in the form of sales, property and other taxes. I purchase the vehicle from an American salesman employed by an American dealership. Said dealer pays the salesman a wage and commission, which is also taxed directly and indirectly.

Here’s my question. How much of the purchase price of my auto is leaving the country? I’d like to keep this thread out of GD, so please try to avoid arguing the pros and cons of purchasing domestically.

2

It depends on a lot of factors. Did you finance it? Through who, at what rate, and over what period?

3

This is nearly impossible to answer except on a car by car basis. The individual parts in a car may come from hundreds of sources, some foreign and some domestic. Some so-called American cars have mostly foreign content; some non-American brands have mostly domestic.

The price of a car also includes health-care and pension benefits for previous workers - it was estimated to be $1500 per car for GM until they made a deal with the union to take it off their hands recently. There’s advertising costs and research & development costs and shipping costs.

Wages are just a small piece of a much larger puzzle.

I’d also argue that you can’t just look at a car’s price. What about the whole package? If you have to do more maintenance and service for a domestic car than a foreign car, then the total cost is much higher. That’s money that comes out of your pocket, but its money that stays in America. How do you factor that in?

The American car industry almost destroyed itself because people allowed it to get away with building inferior cars that they would buy merely because they were American. What good did that do anybody?

Jobs won’t stay if people buy American cars because they’re American. Jobs will stay if American cars are the best cars for the money. If you believe that an American car meets that criterion, then buy it. If not, buy non-American cars until Detroit gets the message.

In the meantime, car dealers want to sell cars, not make economic sense in their advertising.

4

Disclaimer: I work for the US auto industry. Not in factory building cars. Well, sometimes in a factory, but I don’t directly build cars.

As Exapno Mapcase says, if you want to view your car as a pie chart, it really can only be done on a car by car basis. Also, all things being equal, it truly can be better for the US economy to purchase a so-called American car, regardless of its percentage of content, and even regardless of where it’s manufactured. I’ll get to that…

…but first, buy the car you like for the reasons that you want. If you’re worried about quality, GM and Ford have recently equaled (and in some surveys, bypassed) Toyota, and are just about par with Honda. When people talk about “Japanese car quality,” these two are the benchmarks. Nissan, Mitsubishi, and the others aren’t in the same leagues. The Koreans have come a long way, but still trail. The Germans still trail. Among the Americans, Chrysler still trails, but there are indications that they’re improved (not enough longer term data). So in most cases, quality isn’t a major reason for making a decision. Taste is.

The auto industry is a lot more complicated than “parts come from X,” “it’s assembled in Y,” and “the profits go to Z.” Cars take years and thousands of people before the first one rolls off the assembly line. Here’s a very abbreviated overview, and it goes for Japanese, Americans, whoever. I’m going to miss a lot of stuff.

We’ve got to identify market needs. Big team of people. Next, we’ve got to design the car. Team of people. Next we’ve got to decide to build the car. Then we’ve got to package the car – huge team of people. Next, can we build the car – big team of manufacturing experts. Clay models, which despite the term consists of huge quantities of materials and respective fabrication experts. Prototype builds, consisting of a full plant of people including skilled trades, operators, fabrication specialists. Manufacturing specialists, who design the assembly lines. Manufacturing specialists, who supervise the construction of the lines, and the launch in the plant. Vendors, who rep the people that make each component in the manufacturing plant, including sales, technical support, field service, applications engineering (several whole companies). Vendors, who rep the people that make each component in the automobile, including sales, engineering, technical support, field service, applications engineering (several whole companies). Steel suppliers, tire companies, robot companies, seat companies, light-bulb companies. We still don’t have a car, but we’ve involved several thousands of people at this point. Finally, we build the car in the factory. The plant employs 2000 hourly and 200 salaried, which is just a tiny little dent in everything that’s gone into it (and I’m skipping a heck of a lot).

Where do these activities take place? Where do all these people earn their salaries? More importantly, where do they spend their salaries? In the case of a Japanese or European transplant, the vast majority of this pre-engineering takes place in the home country or home region. Sure, a particular plant employs a couple thousand people that prop up a local economy, but it doesn’t support too much outside that region. All of the massive numbers are the behind-the-scenes work that no one ever stops to consider.

What about American plants in Mexico? Again, only the final assemblists work in those plants. All of the other work takes place in the United States. The GM plant in Silao and the Chrysler plant in Toluca and the Ford plant in Hermosillo all require the direct and continued support of employees in the United States, and suppliers in the United States. The Nissan plant in Aguascalientes requires similar support from their home base in Japan.

Is it better for the US economy to buy a US brand car? Absolutely. But… don’t compromise and buy a US brand car just because you’re guilted into it. This is a capitalist market, and if everyone were to buy American just for the hell of it, you can guarantee that we’d be back to the quality of the 1970’s and -80’s. Competition has made American cars good again.

5

Well, I both agree and disagree. You’re completely right about “Japanese car quality” being carried entirely by Honda and Toyota- the others are only average, no reason to buy one. I think Buick is currently #1, but they only badge 3 vehicles, I beleive. I can’t see why anyone buys Nissan or Mitsubishi- all the extra cost and none of the reliability. (Then again, if you buy Toyota you will likely buy from a Toyota dealer, the biggest crooks in the business. Good cars, though.)

But there is no reason at all to pay extra for a foriegn car when the quality is sucktastic. Mercedes and VW have had crappy quality and reliability for the last few years. I’d stay well away.

I agree with Hyundai, it’s likely the best quality for the price tag. Oddly Kia, which is kind of a Hyundai product, has extremely bad quality. Go figure.

I completely agree with “But… don’t compromise and buy a US brand car just because you’re guilted into it.”. All other things being equal- it’s better for us to buy USA. But note that “All other things being equal-” part. Shop informed.

So, please fellow Americans- shop GM (espially Saturn), Ford & Chrysler 1st. Do the research. If your end informed decision has you buying a Honda, then fine. But give the American car-makers a fair shot, OK?

Balthisar and others, as a slight hijack, what do you think of the new Volvo C30? :confused:

6

If he’s keeping current, Rick will have a lot more to say about the C30 than I can. It’s a sharp little car. Personally, I’m waiting to see if I can fit into a Verve (I’m cheap, and have the Lincoln for when I want to be comfortable), or whatever we’ll eventually call it.

I do want to encourage people to give US cars a fair shot, but all the same, if I start spouting out too much about it, then my informed commentary starts to look like propaganda more than anything, and there goes the credibility. Given that, everything else being equal, there’s no question that buying an American car (even when not made in the USA) benefits the American economy an order of magnitude more than buying a foreign brand, even when that foreign brand is made in America. (If you want to buy a foreign brand, at least consider getting one that’s made in the USA, or even Ontario. There’s still a huge difference, but at least it’s something).

7

Verve? :confused:

OK, somebody invite Rick here. :smiley:

8

What about the American plants in Canada?

How about the parts suppliers in China? Korea? Malaysia?

In fact a brand new Chevy Impala I’m doing some work on had three bad terminals in the main fuse block. I look at where it’s made. China. How about that?

You are not correct in your assertion that “all other work takes place in the United States.” That’s a bunch of horseshit.

9

I’m here.
The C30 is built on what we call the P1 platform which is a shared platform with the Mazda 3 and the Ford Focus C-max (Europe only).
The design is the same, but the steels used in construction are different. Volvo uses 4 different grades of steel in the front section to achieve the desired crash worthiness. The Mazda and Ford version to the best of my knowledge only use one grade of steel. The Volvo version has the same crash worthiness as our large cars. Which is pretty amazing when you look at how short the hood is on these cars.
The C30 is pretty much the same car as the new S40/V50 with a 2 door body.
The S40/V50 (sedan and wagon versions) have been around since 2004. They are pretty much trouble free. IOW I can’t think of any serious issues with them at this point.
I have only driven a C30 a few miles, but I liked it. They shortened the storage space which gives the back seat more room. A full sized adult fits back there. If you are hauling luggage, you can fold the rear seat down for more cargo area.
alice_in_wonderland bought an S40 a while back, and last I heard from her, she loved it.
If you are serious about getting a C30 I can get you a bit of a deal, though Ford’s friends and family program. I know it worked out well for Alice.
If you want to take me up on the offer, send me an e mail or PM and we can talk.

10

Thanks, I am, but not for a couple months. The options really add up, price-wise.

11

“Horse shit” is such a strong term. Go back and read what I said about suppliers. The fuse block was manufactured in China, sure. That’s no different than assembling a car in Mexico or Canada. It’s a bunch of Chinese people in a plant. But the people that selected that fuse block, tested that fuse block, packaged that fuse block, integrated that fuse block are all in North America. The supplier representatives are in North America. Their field service people are in North America. Their sales teams are in North America. Ultimately (as I plainly said) it doesn’t matter where the point of assembly is; there’s sooo much more that you don’t see that takes place on home turf. If that same fuse block were on a Korean car (and it probably is), then all of that duplicate, behind-the-scenes work takes place in Korea, despite it being a similar fuse block from the same plant in China.

Re: American plants in Canada aren’t any different than American plants in Mexico. If you’re racist, then at least you can argue that white people built your Canada-origin car.

12

The Verve.

13

Horseshit is indeed strong and entirely applicable. You were not talking about suppliers, you specifically spoke to the location of “all final assembly.”

First you stated that everything but final assembly was completed in the United States and that . Now you are changing it to North America. What’s next, generalizing it further to encompass the entire Northern Hemisphere? How do you account for GM opening a design center in India and Ford announcing a $500 million investment in Indian operations ?

“Everything else” does not happen in the US, plain and simple :rolleyes:

That has nothing to do with what is being discussed, both the lack of distinction between Canadian and Mexican plants as well as your assumption that where you live dictates what race you belong to. I will not debate the distinction between the plant locations nor your ad hominem implication of racism; only the obvious distinction between the foreign and domestic plants (to which there is no debate)

What does have something to do with what is being discussed is that American plants in Canada are quite different from American plants in the US. Specifically, the wages and benefits that are paid to employees, as well work rules and employee protections.

I will ask you to keep the red herrings out of this going forward.

14

Is it an ad hominem to suggest (again) that go go back and read? Perhaps I wasn’t clear enough for you in my admittedly rushed description, but I’m plainly stating that the final assembly point is unimportant. Including for suppliers.

Actually, no. Changing to “North America” was a courtesy to you, since you pointed out the Ontario plants that I omitted discussing originally. It also acknowledges that a great number of our suppliers have a large Canadian presence, and as such much of the trickle down work affects them, too. Our economies are intertwined.

Those are other markets. If you’d’ve taken the time to read your own cites, you’d plainly have seen that.

When talking about the American market (Canadian market, too), it does. Again if you take my extemporaneous comments literally such that “everything” is literally everything, then I’ll accuse you of being obtuse, because this isn’t a debate. If you want to argue points and counterpoints in a formal fashion, then I’ll be less hyperbolic in what I say. However what I’ve written is clearly lay speak, professor.

I do apologize; that wasn’t intended to you-you, just the general you (all). There are people for whom that’s an important distinction. However, saying that there’s no debate as to the “obvious distinction between the foreign and domestic plants” is everything that you’re riling on about without any evidence to refute it. Like I said, you (general you, not you-you) can buy a foreign car if you want; it’s all about taste. Just don’t make up bullshit as your justification. If you (not you-you) can’t justify your purchase on its merits, than you’re (not you-you) a dickless coward. In all cases, though, there is a world of difference between who owns the plants. You’re (this time, I mean you-you) seriously shortsighted if you believe the only impact of a plant is the employees that it employs directly.

I don’t get what you mean here relative to the discussion at hand? Do you mean just the Big 3 plants, or the imports, too? They have government health insurance, but the rest depends on the union contract or lack thereof. With the current dollar imbalance, Canadian labor is grossly overpriced today.

It seems to me that you’re introducing the red herrings, and I’m sticking to the main point, other than where you’ve led me off the path. :wink:

15

Getting back to my original query. Is there no way to quantify how much of the $20K (for the sake of argument) I spend at the dealership is kept by them, and how much is returned to the manafacturer? Is there further no way to distinguish how much of the wholesale cost of the vehicle is manufacturer profit and how much is the cost of materials versus the cost of labor, capital improvments, regulatory costs, etc?

I don’t need to know precise amounts. Gross generalizations would be acceptable.

16

Could you give a specific car or two? It will be very different. A lot of the information is bound to be proprietary, but we can, as you say, give you a gross generalization.

Here’s an example chart that’s way too general (misses some important parts), but kind of gives you an idea of differences.

Also in the example car, lots of what you want to know is dependent upon actual purchase price versus net dealer cost. Let’s assume you pay 3% over net dealer cost, but then, there’s your first answer: the dealer keeps 3% of the invoice, or just under 3% of the purchase price. That’s not an easy assumption to make, due to the way that most cars aren’t fixed price (haggling and all the associate B.S.).

And then, do you want just manufacturing costs, or a breakdown of the total investment? (Remember, the first car off the line costs $1 billion.)