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De-Junking the American Auto Industry
Our Buy American Mention of the Week!
by Roger Simmermaker
June 4, 2005

Since the writing of the May 2005 article "In Defense of General Motors," I have received several responses regarding several of the points made in that article. These responses, along with the subsequent announcement that Standard & Poor's Corp., downgraded both General Motors and Ford to junk status, have proven useful in determining the issues that should be addressed in my future articles related to the automotive industry.

General Motors was the primary focus of the May 2005 article since they were perceived to be in worse financial shape than Ford, although it is certainly vital that both of the two remaining American-based automakers survive and prosper.

The majority of the responses were positive and supportive. Of the negative responses, most of the points made were arguments already diffused and disproved as baseless in the article itself. This only reinforced my belief that most Buy American opponents only read what they agree with and conveniently skip over that with which they disagree--even as, and especially when, their positions are being invalidated.

Some foreign car lovers proclaimed that they would only start to buy American when GM decided to build high-quality cars. Setting aside for a minute the fact that various quality surveys prove they already do, the point I made already was this. Since GM is saddled with at least a $1,000 per automobile cost disadvantage to pay for honorable obligations like pensions and health care for thousands of Americans, that is why they have at least $1,000 less (per automobile) to spend on snazzier dashboards and other creature comforts.

These Buy American bashers are decidedly off base in claiming that GM and Ford don't make cars that Americans want since both companies have higher market shares than their closest foreign rival. General Motors, for instance, has over twice the market share in the U.S. than does Toyota. GM's problem is not necessarily low market share (although a return to the higher market shares of the past would surely be beneficial), but it is the lower profit margins they are able to generate in light of their honorable obligations to their current and former workers and their dependents.

The media hasn't always been forthcoming with the facts, but certain news anchors do expose the truth. On "Your World with Neil Cavuto," a program on which this author has appeared five times, Neil Cavuto promptly corrected one of his frequent guests who just couldn't resist trashing American automakers in knee-jerk fashion. When Mr. Cavuto asked Tom Adkins of why GM and Ford were being downgraded to junk status, Mr. Adkins spewed the typical and tired old venom proclaiming that it was because American car makers only made American junk. Kudos to Neil Cavuto for pointing out some of the quality and efficiency gains American automakers have made over the years in response to such garbage.

Other tired refrains Buy American haters use include the accusation that GM and Ford have misguided objectives and have repeatedly missed the boat by concentrating on more profitable, larger vehicles rather than smaller, more efficient ones. This argument is easily diffused taking into consideration the fact that GM and Ford have merely been responding to broad consumer demand for these larger vehicles. Even as gas prices climbed into the $2.00 per gallon range in early 2005, polls taken around that time show that a majority of American consumers remained undeterred when it came to buying bigger and badder American trucks and SUVs. The Ford F-150, for instance, has been the number one selling truck for several years. Surely even Buy American opponents (usually laissez-faire advocates) recognize and subscribe to the law of supply and demand. Are these people really suggesting that Ford not concentrate on this obvious cash cow?

The anti-Buy American argument also conveniently ignores the fact that foreign-based automakers have been aggressively accelerating their entry into the large vehicle market to compete with American dominance in this area. The 2006 Lexus 470 Luxury SUV, for instance, boasts 275 horsepower, a full 40 hp increase over the 2005 model, not to mention 12 ft. lbs. extra torque. And, of course, no one can deny the various entries of foreign automakers into the big truck and SUV markets such as the Nissan Armada, Nissan Titan, Toyota Sequoia, Toyota Tundra, and Honda Ridgeline, just to name a few. It smacks of hypocrisy to deride Ford and GM for making large American vehicles when all foreign-based automakers are scrambling to introduce even bigger models in an attempt to out-muscle them.

Ironically, within days of the "In Defense of General Motors" article, the Wall Street Journal ran a "Drive Buys" column featuring the Nissan Xterra comparing it to four other mid-size SUVs. The Chevrolet Equinox was not only the only American vehicle in the comparison (no Ford product was profiled), but it was also the least expensive and had the best mileage rating.

The point here is that when it comes to analyzing the automotive industry, hypocrisy often reigns. It would be different if Buy American naysayers had rhetoric to offer that lined up with the facts, but they normally do not. Most are stuck in the 1970s and their questionable belief (also disproved in the "In Defense of General Motors" article) that American cars were inferior then and by default continue to be today.

One "Reader's Report" submission to Business Week's May 30, 2005, issue chided GM for not investing their profits wisely enough, claiming they could have bought Honda outright for 75 percent of the money they spent creating Saturn. Such Monday morning quarterbacking overlooks the fact that Japan rarely allows foreign-based companies a majority ownership in their home-based companies. GM does own 49 percent of Isuzu, who recently announced an annual 9.7 percent net rise in profit ending March 31, 2005. The Business Week letter writer also pointed out that one Saturn SUV is powered by a Honda engine as proof that GM has gone astray in its strategies. I wonder if he knows that some BMWs use GM-built transmissions. Let's call it a draw then, shall we?

Finally, and perhaps more importantly, many readers of the original article in defense of the U.S. auto industry cited that it was good to see a non-GM employee stick up for GM. It might be different, of course, if I worked on the factory floor of one of the several dozen Ford or GM domestic plants, but I don't. I defend American auto interests because it is in the best interests of America to do so. And even though the anti-Buy American crowd is aggressively undermining American prosperity with hypocritical and baseless views, those of us who stand for what is right for America deserve a prosperous country and should work hard to create that prosperity. That is what should keep us motivated to fight the good fight. We're all in this together, so let's make it work for all of us--together.


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