Do You Buy American Made Cars? Consider the Supply Chain.

I believe that the average American over the last three decades has become progressively more aware of global supply chains and the distinction between an American company and an American made product. However, I also believe that information on country-of-origin is still very opaque in many cases. But the automotive supply chain is an exception due to the regulations and reporting required.

In 2006 I engaged in a conversation with a friend from high school, Adam, and a friend from college, Bob. Adam is an enthusiast of classic American made cars. He owned classics like a 1968 Chevy Chevelle and antiques like a ‘57 Chevy.  In contrast, Bob bought his car for practical purposes. He bought what he considered to be the best car for his needs within his budget. Bob and I had recently completed a graduate school program that included coursework on manufacturing operations and supply chain management. Therefore, we had the concepts of outsourcing and global supply chains fresh on our minds. Bob arrived at the restaurant at which we met in his recently purchased Mazda. Of course, Adam saw the opening to gently hassle Bob for his foreign car purchase. This directed us into a discussion about how American car brands (GM, Ford, Chrysler) were not necessarily American made any longer. At the same time, foreign cars such as the Japanese brands like Honda, Toyota, and Mazda were not necessarily foreign made. The discussion was about automobile manufacturing but also covered the concepts of sourcing, extended supply chains, and of course marketing and branding.

Bob mentioned that the automotive dealer displayed a sticker on his car that outlined the percentage of American made parts it contained. And in fact, much of his car was American made. This is the first I heard of what turns out to be a stipulation of the American Automobile Labeling Act. More recently I received similar treatment from my father about the purchase of my Honda Accord. As a longstanding proponent of “buy American made,” he of course owned a car made by one of the Big Three US auto manufacturers. I decided to point him to a website that provided aggregate information on the percentage of a given vehicle’s parts that were American made (it turns out that the data reflects American and/or Canadian made). We reviewed the data and learned that his Dodge did have a higher percentage of American made parts (78 percent) than my Honda (65 percent), but the difference was much less than expected.

More recently I have been speaking with GTM software suppliers about their software suites and the processes they support. Perhaps most interesting to me are the applications that manage country of origin information and support the calculations necessary to support preferential treatment from free trade agreements. This reignited my interest in the information on automobiles and the relative percentages that are manufactured in various nations, and the role that preferential tariff treatments and threshold calculations play in sourcing and production decisions. I will soon publish a blog post that details the complex process by which automotive manufacturers evaluate and incorporate tariff treatments in their production and sourcing decisions. Let’s just say that product genealogy is likely to have improved considerably due to free trade compliance processes.

In the meantime, I decided to review the Department of Transportation’s information on automotive country of origin data. I found the NHTSA website that provided aggregate information on manufacturer, model, and aggregate percentage.  However, I was unable to obtain the more detailed information that would normally be found on individual vehicles at the point of sale. It’s worth noting that vehicles are required to display not only the percentage value of parts that are American and/or Canadian made, other countries that individually contribute 15 percent or more of the equipment content, the country-of-origin for the engine and transmission, and the location of final vehicle assembly.

I assume that most Logistics Viewpoints readers are aware of global supply chains and their complexity. However, I believe that looking beyond branding and obtaining greater insight into what is figuratively “under the hood” is beneficial to all of us as consumers. Wouldn’t it be great if the average consumer could query a car make and model and find details on the company and country of manufacturers of sub-assemblies, engines, transmissions, and more? Country of origin certainly does not imply quality, but it is additional information that can be incorporated into the average consumer’s buying process. For a proprietary take on the topic, go to the American University Kogod School of Business Made in America Auto Index.

Comments

  1. There are many Americans that want to buy “made in America” products. As you point out, that’s not always easy.

  2. Knowing that something was made in your own country tends to imply that less of an impact on the environment was made too. I would have thought that in the future it’d be mandatory for consumers to understand the supply chain process more and the carbon footprint that their purchases make.

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