What is an American car?

“The Treasury has pumped billions into two of the three American car makers with head offices in and around Detroit, hoping to avoid a collapse of what industry and
political leaders call the U.S. auto industry. ....

When it comes to the car business, however, consumers and Congress and the Obama administration are going to confront a tricky question: Just what is an "American" car, or for that matter, an "American" car company? ....

Thomas Klier, an economist with the Federal Reserve Bank of Chicago who has studied extensively the realignment of the American auto industry, wrote in an October 2007 paper that as of 2006 about 25% of the parts used in vehicles assembled in the U.S. came from overseas, and another 25% were manufactured here by foreign-owned parts makers. The Detroit companies wave the Stars and Stripes when they advertise their wares or look for loans in Washington, but when they talk to investors or the business press, they stress their aggressive efforts to promote "global sourcing," a code for, "Buy More Parts from China and Mexico."

GM, the most global of the companies with headquarters in Detroit, has highlighted to investors that it now sells more cars (and has more employees) outside the U.S., and that its best opportunities for growth -- assuming the company's restructuring is successful -- are in China, Latin America and other developing markets. ....

Consider Chrysler LLC. During the 1980s and 1990s, Chrysler was the most flag-waving, red-white-and-blue American car company among Detroit's Big Three. Company Chairman Lee Iacocca was a clear, loud voice accusing Japan's government and auto makers of unfair trade practices. Never mind that Chrysler had a long-standing link to Japan's Mitsubishi Motors Corp. and sold various Mitsubishi cars. Then, Chrysler sold itself to Germany's Daimler-Benz AG to create DaimlerChrysler. Not long afterward, the new German owners installed a German executive to run what used to be Chrysler -- and began promoting German engineering as a valuable attribute of
its cars.

Confused yet? It gets better. In 2007, Chrysler was reclaimed for America -- 80.1% of it at least -- by the U.S. hedge fund Cerberus Capital Management LP. But ... now Cerberus has reached a tentative agreement to peddle 35% of Chrysler to Italian auto maker Fiat SpA .... Should this deal be consummated -- and that's by no means certain -- Chrysler would once again be majority owned by corporations located outside the U.S.”

Joseph B. White, "What Is an American Car?", Wall Street Journal (26 January 2009).

http://online.wsj.com/article/SB123265601944607285.html


Joseph B. White is a senior editor for The Wall Street Journal.

Figures on the foreign input to the domestic production of any American-made product tend to greatly understate the external contribution of materials, labor and capital used in the production process. Imports are deeply embedded into everything produced in ways that cannot be easily measured, for example, in the machinery used to make the autos rather than the parts themselves, or even the machinery used to make the machinery. Both the ranks of auto worker and auto executives include the foreign born and the foreign trained and the technology they use on the job may well have been developed abroad. Shares of stock are owned by foreigners not only directly but indirectly through their ownership in mutual funds. It is simply not a useful question to ask whether huge multinational corporations are American or foreign. They are both to a degree that no one knows and no one can know.

At Hat Tip to Larry Willmore and Keith Acheson.