Content Gap Between Domestic & Foreign Vehicles . . .
05-08-06, 12:07 PM
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Content Gap Between Domestic & Foreign Vehicles . . .
Foreign? American? Auto parts go global
U.S. cars add content from other countries
May 7, 2006
BY JUSTIN HYDE
FREE PRESS WASHINGTON BUREAU
WASHINGTON -- After years of ignoring GM vehicles, Geraldine Bowers found herself drawn to one in February when she bought a Daytona blue Chevy HHR, lured by its looks and flexibility.
The fact it came from a Detroit automaker didn't hurt -- nor did it matter to her that the HHR was built in Mexico with a sizable share of foreign parts.
"We like to buy American," said Bowers of Auburn Hills. "I'm not unhappy that it's assembled in Mexico.... It's very hard to go into a store and find [products] totally American made."
More than ever, automakers are drawing on suppliers around the globe, shuttling parts across borders in search of lower prices and higher quality.
A Free Press analysis of federal data found that vehicles built by Detroit automakers have steadily increased their proportion of parts from outside the United States and Canada. By the same measure, vehicles built in North America by Japan's largest automakers increasingly use U.S. and Canadian parts.
Detroit automakers still build a far higher share of their vehicles in the United States than foreign automakers, and most of their models draw more than three-fourths of their parts value from U.S. or Canadian sources. But some popular Japanese models now surpass their U.S. competitors for content made in the United States or Canada, the government records show.
The statistics also illustrate the painful contraction of the U.S. auto parts industry, where 30 major suppliers, including Delphi Corp., and dozens of smaller firms have declared bankruptcy since 1999.
Meanwhile, foreign-owned suppliers with close ties to Japanese automakers have grown, mostly in the southern United States, winning new business not only with their traditional customers but with GM, Ford and Chrysler.
"In a global industry, it is hard to work with companies tied just to one particular area," said Tony Brown, Ford's senior vice president of global purchasing, in a speech last month in Detroit. "We need companies that are either global, or savvy enough to form global partnerships."
By the numbers
Under the American Automobile Labeling Act, automakers must tell consumers what percentage of a vehicle's parts by value come from either the United States or Canada. The law went into effect in 1994 thanks to the support of domestic automakers and the United Auto Workers, who wanted to boost purchases of American-made vehicles.
The Free Press analysis of the data supplied by automakers to the government found, for cars assembled in North America:
81% of the parts value in General Motors Corp. vehicles sold last year came from the United States or Canada, down from 87% five years ago and 91% in 1995.
For Ford Motor Co., 82% of parts value was U.S. or Canadian-sourced, down from 87% in 2000 and 86% in 1995.
Chrysler had the lowest total for a Detroit automaker at 76%, down from 80% five years ago and 89% 10 years ago.
Among the top three Japanese automakers:
Toyota drew 75% of its parts value from U.S. or Canadian sources for the vehicles it made and sold in the United States last year, up from 57% in 2000 and 49% in 1995.
At Honda, 68% of its North American vehicles' parts value was U.S. or Canadian. That was down slightly from 70% in 2000 but up from 47% in 1995.
Nissan had the lowest total among Japan's Big Three at 57%, compared with 58% in 2000 and 42% in 1995.
However, when considering all vehicles sold in the United States last year, including those made in Japan, the share of parts value from U.S. or Canadian sources fell dramatically:
Toyota, 49%.
Honda, 58%.
Nissan, 48%.
"The trends in all of our vehicles, as time goes on, will be to source more and more from here in North America," said Dennis Cuneo, Toyota's senior vice president of manufacturing in North America.
Content varies by model
Among Detroit automakers, values for U.S. or Canadian content by model ranges widely, from more than 90% to less than 30%.
GM's new Chevrolet Tahoe has 62% U.S. content, 25% from Mexico, 9% from Canada and 3% from China. The Chrysler 300C has 72% U.S. or Canadian parts value, with an engine made in Mexico. Ford has a number of models at 90%, including the F-Series pickup, but the hybrid Escape comes in at 55% thanks to Japanese-sourced components.
The Chevy HHR, made in Ramos Arizpe, Mexico, is sold with a window sticker mandated by U.S. law saying the vehicle has 85% "domestic" content, meaning parts from the United States or Canada.
But Bo Andersson, GM's vice president of global purchasing, said in a recent speech that 64% of the parts value in the HHR originates in Mexico, while 30% comes from the United States.
GM said the HHR's label reflects an average of its parts value with larger U.S.-made SUVs, such as the Chevrolet Trailblazer.
Andersson said GM now buys $9.3 billion a year in parts from Mexico, equal to 16% of GM's total North American parts bill -- making Mexico the second-largest source of GM's parts behind the United States.
While hailing GM's commitment to North American suppliers, Andersson also made clear that the company must control costs to compete.
"We are an American company, but we are also a global company," he said. "I need to buy the best part with the best quality at the best landed cost."
Japanese favor U.S. parts
Larry Jutte, senior vice president and general manager of parts and procurement for Honda North America, said the company had found that importing parts often created more headaches in quality and inventory control than savings.
"We have very, very little sourcing that we do directly from overseas," Jutte said. "That's not our drive and not our message to suppliers."
American automakers have said for years that Japanese companies still import a large portion of their parts, taking advantage of currency rates to get lower prices. Andersson noted that Toyota is the third-largest importer of shipping containers into the United States, behind Wal-Mart and Heineken. Toyota's hot-selling Prius hybrids, Scions and most Lexuses come from Japan.
Toyota's business with North American parts suppliers has grown from $5.7 billion a year a decade ago to $20 billion annually today. Cuneo said Toyota buys about $2 billion a year from Michigan parts makers.
Unlike other Japanese automakers, Toyota has also imported a scaled-down version of the partially owned supplier network it built in Japan. It has controlling stakes in Aisin Seiki and Denso Corp. and owns some smaller suppliers such as Bodine Aluminum.
That network has given Toyota a boost under a quirk in the federal labeling law that was originally designed to help Detroit automakers. Under the rules, parts that an automaker buys from a supplier that it owns or has a financial stake in count more toward its domestic content than parts from an independent company.
Denso and Aisin Seiki have also won an increasing number of contracts from other automakers, and stand to gain large swaths of the market as U.S. suppliers restructure inside and outside bankruptcy. Andersson said that of the 200 new suppliers to Cadillac, a majority are Japanese firms that have built or bought plants in Michigan -- including Denso.
While Delphi and Visteon have won some contracts with foreign automakers, the new business has not offset the decline in business from their former parents, GM and Ford.
The shrinking of Delphi and Visteon opened a door for foreign suppliers. Industry consultant Dennis DesRosiers calculates that foreign-owned suppliers with U.S. factories held 30% of the $239-billion U.S. parts market in 2005, up 10 percentage points in the last five years.
Kathleen Ligocki, the chief executive of bankrupt supplier Tower Automotive of Novi, said her compatriots in the U.S. parts industry faced many hard choices about where to put their resources.
"Domestic automobile manufacturing will profoundly restructure" in coming years "or disappear to be absorbed into successful global players," she said.
"There is simply no future in the status quo."
JUSTIN HYDE
More related links CLICK HERE
U.S. cars add content from other countries
May 7, 2006
BY JUSTIN HYDE
FREE PRESS WASHINGTON BUREAU
WASHINGTON -- After years of ignoring GM vehicles, Geraldine Bowers found herself drawn to one in February when she bought a Daytona blue Chevy HHR, lured by its looks and flexibility.
The fact it came from a Detroit automaker didn't hurt -- nor did it matter to her that the HHR was built in Mexico with a sizable share of foreign parts.
"We like to buy American," said Bowers of Auburn Hills. "I'm not unhappy that it's assembled in Mexico.... It's very hard to go into a store and find [products] totally American made."
More than ever, automakers are drawing on suppliers around the globe, shuttling parts across borders in search of lower prices and higher quality.
A Free Press analysis of federal data found that vehicles built by Detroit automakers have steadily increased their proportion of parts from outside the United States and Canada. By the same measure, vehicles built in North America by Japan's largest automakers increasingly use U.S. and Canadian parts.
Detroit automakers still build a far higher share of their vehicles in the United States than foreign automakers, and most of their models draw more than three-fourths of their parts value from U.S. or Canadian sources. But some popular Japanese models now surpass their U.S. competitors for content made in the United States or Canada, the government records show.
The statistics also illustrate the painful contraction of the U.S. auto parts industry, where 30 major suppliers, including Delphi Corp., and dozens of smaller firms have declared bankruptcy since 1999.
Meanwhile, foreign-owned suppliers with close ties to Japanese automakers have grown, mostly in the southern United States, winning new business not only with their traditional customers but with GM, Ford and Chrysler.
"In a global industry, it is hard to work with companies tied just to one particular area," said Tony Brown, Ford's senior vice president of global purchasing, in a speech last month in Detroit. "We need companies that are either global, or savvy enough to form global partnerships."
By the numbers
Under the American Automobile Labeling Act, automakers must tell consumers what percentage of a vehicle's parts by value come from either the United States or Canada. The law went into effect in 1994 thanks to the support of domestic automakers and the United Auto Workers, who wanted to boost purchases of American-made vehicles.
The Free Press analysis of the data supplied by automakers to the government found, for cars assembled in North America:
81% of the parts value in General Motors Corp. vehicles sold last year came from the United States or Canada, down from 87% five years ago and 91% in 1995.
For Ford Motor Co., 82% of parts value was U.S. or Canadian-sourced, down from 87% in 2000 and 86% in 1995.
Chrysler had the lowest total for a Detroit automaker at 76%, down from 80% five years ago and 89% 10 years ago.
Among the top three Japanese automakers:
Toyota drew 75% of its parts value from U.S. or Canadian sources for the vehicles it made and sold in the United States last year, up from 57% in 2000 and 49% in 1995.
At Honda, 68% of its North American vehicles' parts value was U.S. or Canadian. That was down slightly from 70% in 2000 but up from 47% in 1995.
Nissan had the lowest total among Japan's Big Three at 57%, compared with 58% in 2000 and 42% in 1995.
However, when considering all vehicles sold in the United States last year, including those made in Japan, the share of parts value from U.S. or Canadian sources fell dramatically:
Toyota, 49%.
Honda, 58%.
Nissan, 48%.
"The trends in all of our vehicles, as time goes on, will be to source more and more from here in North America," said Dennis Cuneo, Toyota's senior vice president of manufacturing in North America.
Content varies by model
Among Detroit automakers, values for U.S. or Canadian content by model ranges widely, from more than 90% to less than 30%.
GM's new Chevrolet Tahoe has 62% U.S. content, 25% from Mexico, 9% from Canada and 3% from China. The Chrysler 300C has 72% U.S. or Canadian parts value, with an engine made in Mexico. Ford has a number of models at 90%, including the F-Series pickup, but the hybrid Escape comes in at 55% thanks to Japanese-sourced components.
The Chevy HHR, made in Ramos Arizpe, Mexico, is sold with a window sticker mandated by U.S. law saying the vehicle has 85% "domestic" content, meaning parts from the United States or Canada.
But Bo Andersson, GM's vice president of global purchasing, said in a recent speech that 64% of the parts value in the HHR originates in Mexico, while 30% comes from the United States.
GM said the HHR's label reflects an average of its parts value with larger U.S.-made SUVs, such as the Chevrolet Trailblazer.
Andersson said GM now buys $9.3 billion a year in parts from Mexico, equal to 16% of GM's total North American parts bill -- making Mexico the second-largest source of GM's parts behind the United States.
While hailing GM's commitment to North American suppliers, Andersson also made clear that the company must control costs to compete.
"We are an American company, but we are also a global company," he said. "I need to buy the best part with the best quality at the best landed cost."
Japanese favor U.S. parts
Larry Jutte, senior vice president and general manager of parts and procurement for Honda North America, said the company had found that importing parts often created more headaches in quality and inventory control than savings.
"We have very, very little sourcing that we do directly from overseas," Jutte said. "That's not our drive and not our message to suppliers."
American automakers have said for years that Japanese companies still import a large portion of their parts, taking advantage of currency rates to get lower prices. Andersson noted that Toyota is the third-largest importer of shipping containers into the United States, behind Wal-Mart and Heineken. Toyota's hot-selling Prius hybrids, Scions and most Lexuses come from Japan.
Toyota's business with North American parts suppliers has grown from $5.7 billion a year a decade ago to $20 billion annually today. Cuneo said Toyota buys about $2 billion a year from Michigan parts makers.
Unlike other Japanese automakers, Toyota has also imported a scaled-down version of the partially owned supplier network it built in Japan. It has controlling stakes in Aisin Seiki and Denso Corp. and owns some smaller suppliers such as Bodine Aluminum.
That network has given Toyota a boost under a quirk in the federal labeling law that was originally designed to help Detroit automakers. Under the rules, parts that an automaker buys from a supplier that it owns or has a financial stake in count more toward its domestic content than parts from an independent company.
Denso and Aisin Seiki have also won an increasing number of contracts from other automakers, and stand to gain large swaths of the market as U.S. suppliers restructure inside and outside bankruptcy. Andersson said that of the 200 new suppliers to Cadillac, a majority are Japanese firms that have built or bought plants in Michigan -- including Denso.
While Delphi and Visteon have won some contracts with foreign automakers, the new business has not offset the decline in business from their former parents, GM and Ford.
The shrinking of Delphi and Visteon opened a door for foreign suppliers. Industry consultant Dennis DesRosiers calculates that foreign-owned suppliers with U.S. factories held 30% of the $239-billion U.S. parts market in 2005, up 10 percentage points in the last five years.
Kathleen Ligocki, the chief executive of bankrupt supplier Tower Automotive of Novi, said her compatriots in the U.S. parts industry faced many hard choices about where to put their resources.
"Domestic automobile manufacturing will profoundly restructure" in coming years "or disappear to be absorbed into successful global players," she said.
"There is simply no future in the status quo."
JUSTIN HYDE
More related links CLICK HERE
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