Foreign Carmakers: More "Domestic" Than Detroit

By next year, foreign-based automakers will build more cars in U.S. factories than the Detroit 3.

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Before long, you'll be more likely to get an American-made car by buying an import brand instead of a Ford, General Motors, or Chrysler vehicle. New data show that for the first time ever, foreign-based carmakers are poised to build more vehicles in the United States than the Detroit 3.

The American automakers have obviously hit the skids, with GM and Chrysler in bankruptcy and Ford losing billions. Detroit's woes are accelerating a market share decline that's been underway for years. And now, forecasting firm CSM Worldwide predicts that in 2010, foreign-based automakers like Toyota and Honda will build more cars in the United States than the so-called domestic automakers.

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That's a touchy issue for Detroit—and for President Obama, whose administration could end up spending $100 billion or more to help resuscitate GM, Chrysler, and other players in the U.S. auto industry. On April 30, while announcing the Chrysler bankruptcy, Obama made a pitch on Detroit's behalf. "If you are considering buying a car," he said, "I hope it will be an American car."

Obama may have to hold another press conference to explain exactly what an American car is. The Detroit 3 have long skirted the issue by referring to "North American" production—which includes Canada and Mexico, where they build about one-third of their cars. The slick new Chevy Camaro, for instance, is made in Canada. The popular Ford Fusion sedan is assembled in Mexico. Including Canada and Mexico allows the Detroit 3 to say they build most of their cars in North America.

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Some Japanese and European automakers build cars in Canada and Mexico too, but it's a much smaller portion of their overall production. And while the Detroit 3 have been closing American factories, foreign-based automakers have been adding U.S. manufacturing capacity, mostly in the south. The growing U.S. presence of the "transplants," as they're called, has helped increase acceptance among American consumers—and added to the overseas firms' political clout in Washington. When the CEOs of GM, Ford and Chrysler came to Washington last year asking for help, for example, they hit ramrod opposition from some members of Congress. One of their biggest critics has been Republican Sen. Richard Shelby of Alabama, a state that's home to factories run by Honda, Hyundai, and Mercedes.

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Detroit's standing in Washington will continue to fade, if manufacturing trends are any indication. CSM predicts that in 2010, the Detroit 3 will only build 49 percent of the cars assembled in the United States, a sharp drop from 59 percent in 2008. The recession and the huge drop in auto sales have hit Detroit harder than other automakers because of their overreliance on big, relatively expensive trucks and SUVs. But CSM expects Detroit's share of U.S. production to keep falling even when the economy recovers and the car business rebounds. By 2015, the Detroit 3 will claim just 44 percent of all cars built in the United States, according to CSM.

That's because virtually all of the transplants plan to build more cars in the United States, at the same time the Detroit 3 need to shrink dramatically in order to become profitable. Bestsellers like the Toyota Camry, Honda Accord, and Nissan Altima are all built by Americans in U.S. factories. Toyota and Honda have been most aggressive about opening American plants, and in 2008, the two Japanese automakers built 26 percent of the cars rolling out of U.S. factories.

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By 2015, Toyota and Honda's share of U.S. production should rise to about 34 percent. Korean carmaker Hyundai built about 237,000 cars in the United States last year, a number it hopes to triple by 2015. That would be more cars than Nissan builds in America. And Volkswagen, which hasn't built a car in the United States in more than 20 years, should be turning out more than 300,000 U.S.-built models by 2015, mostly from a new plant in Tennessee.

The unambiguous good news for American workers is that after bottoming out this year, the number of cars made in the USA should steadily increase. We'll just have to figure out what to call them.