A Closer Look at Domestic-Parts Content
One thing we study in our American-Made Index is domestic-parts content labels. The labels show exactly what percentage of parts, by cost, come from the U.S. or Canada. You can find them on a new car's window sticker or, more often, a nearby label.
Critics say the labels don't tell the entire story of a car's domestic status, pointing to jobs generated by assembly lines, dealerships and marketing departments. Since the labels show U.S. and Canadian parts, they can be a bit misleading if you're looking strictly for U.S. content. They also average the numbers across an entire model line, so they could be skewed by a trim level with especially high or low content.
Still, parts-content labels are one of the few numbers available for consumers to find out just how domestic or imported a car might be. At least one automaker — Honda — says the numbers are fairly accurate. So does David Cole, chairman of the Ann Arbor, Mich.-based Center for Automotive Research.
"As I understand it, there's a pretty detailed picture of the content, and it drills down fairly deeply," Cole said. "[The labels do] a pretty good job. The problem that you get into is that when you start looking at the parts on one car, they can vary considerably for a manufacturer."
Case in point: Chevrolet sells the Aveo, which is built by Korean automaker Daewoo. It's "essentially a zero-parts content" car for GM, Cole said. In contrast, the Michigan-built Buick Enclave is mostly domestic. The most important measure is probably the combined domestic content for all the vehicles in a company's lineup, he said.
By most measures, Detroit automakers come out ahead. The National Highway Traffic Safety Administration measures domestic-parts content ratings across the industry. Among the 58 models with ratings of 75 percent or higher, foreign-based automakers produce just eight. Conversely, Detroit automakers produce just 24 of the 140 models with domestic content ratings of 10 percent or less. (We group Mazda and Volvo under Ford, as Ford owns major stakes in both brands.)
Import automakers contend that their manufacturing efforts produce plenty of cars stateside, to the tune of billions of dollars in U.S. investment. Indeed, high-content U.S.-built vehicles from foreign nameplates include popular models like the Toyota Sienna (85 percent domestic content) and Tundra (80 percent). Meanwhile, hot sellers like the Ford Escape and Edge have seen their domestic content spiral downward: The Escape fell from 90 percent for '07 to 65 percent for '08, while the Edge dropped from 95 percent for '07 to 70 percent for '08.
Still, it's hard to deny that among the most popular U.S.-built cars and trucks, the models with the highest domestic content ratings come from Detroit automakers. Of the 35 most popular U.S.-built 2008 and 2009 models — based on sales through May 31, 2008 — 43 percent of GM, Ford and Chrysler contenders had domestic content ratings of 75 percent or higher. In comparison, just 25 percent of the Nissan, Honda, Hyundai and Toyota models on the list achieved that.
That doesn't mean dealerships are teeming with cars that have 95 percent domestic content stickers. Those days are behind us; Toyota reports that in 2007, the industry as a whole saw domestic content ratings decline, and it looks like the trend is continuing through 2008 and into 2009. Of the most popular cars eligible for last January's American-Made Index, we saw an average drop of 3.3 percentage points in domestic content between 2007 and 2008. Looking at a few early '09 arrivals, like the redesigned Honda Pilot and the Toyota Corolla, it's more of the same. Here's how a handful of top U.S.-built models fared in the transition to '08 or '09.
- Ford F-150: 80% domestic content, down from 90% for '07
- Chevrolet Silverado 1500: 85% for '08, down from 90% for '07
- Toyota Camry/Solara: 68% for '08, down from 78% for '07
- Honda Accord: 60% for '08, down from 65% for '07
- Toyota Corolla: 50% for '09, down from 65% for '08
- Toyota Matrix: 65% for '09, down from 75% for '08
- Dodge Ram: 68% for '08, down from 72% for '07
- Honda Pilot: 70% for '09, same as '08
- Honda Civic: 70% for '08, up from 55% for '07
Cole said he wasn't surprised by the ebbing of domestic content, calling it the inevitable result of global sourcing.
"Most of the manufacturers today look at the world as a contiguous global world," he said. "Because of that, it's just a hugely different world from what we've seen in the past, and you make your decisions now on global rules instead of just domestic rules.
"The objective of any manufacturer is to be as productive as possible anywhere they manufacture, whether it's whole vehicles or parts. ... You've got to do what it takes to be profitable."