So here goes…one of my first serious posts on truths about domestics.
I was driving into work today and listening to the 89X radio station, as I usually do in the morning. During my commute, the main topic of conversation was yesterday’s 237-170 House approval of the $14B financial support package for the D3 and a South Carolina dealership’s controversial and racially charged advertisement campaign. As I was listening, a number of callers called into the radio station to give their perspective on the D3 situation.
I have a lot of respect for Dave, Chuck, and Lisa (the three hosts of the radio station), but I noticed that a lot of the callers still had the wrong perception of the D3. They were clearly misrepresenting the industry, Detroit, and the United States as a whole. So, for my first real blog entry, I’d like to make some comments to some of the radio station listeners:
Call 1: The first caller I heard mentioned that Honda builds cars here in the US. In fact, he says, Honda builds over 80% of the cars sold in the US, in the US. Plus this caller says the resale value of Hondas is very high, which also helps stimulate the economy.
I’ll begin by stating that even though Honda has plants here in the US, and it may build a significant portion of the cars sold here in the plants here, it is not 80%. Honda still sold fewer cars than Chrysler this year, and GM sold more cars than Toyota. All in all the D3 still make ~50% of the cars sold in the US.
And what about the number of assembly plants Honda has in the US? Well, Honda only has three (3) assembly plants in the US, one in Alabama and two in Ohio. Just look at how many assembly plants GM has in Michigan (http://gmdynamic.com/company/gmability/environment/plants/facility_db/index.php?submitForm=true&mode=state&state_id=22); hint, it’s more than three. Granted Honda has other facilities, that build engines, parts, stampings, etc., but so do the D3. And this doesn’t take into account the actual development resources… All in all, the rule of thumb is that less than 1/3 of the revenue of foreign auto manufacturers, for the cars sold in the US, stays in the US, the rest goes back to the auto maker’s home country. Most of D3′s revenue stays in the US…
Finally, what does the high resale value of a Honda have anything to do with stimulating the economy? The perception that Hondas are better than anything else out there is actually wrong, and so are their high resale values…
Call 2: Another person called in explaining how disillusioned she was by people who blame foreign car owners for the current situation. She mentioned that she drives a Honda and has had it for seven years and hasn’t had one issue with it. In comparison, the previous GMC that she had was taken in for six recalls. She also claims that the pro-domestic consumers who blame foreign car owners are hypocrites and that they should look at the tags on their cloths.
I’ll begin with this: she has had the Honda for seven years, and assuming that she drove the GMC for at least five years, that would make her last domestic purchase 12 years ago! Most will agree that auto quality has increased tremendously in the past 15, 10, and even 5 years! Even for Honda and Toyota. Just because she had a bad experience with a domestic car 12 years ago, it doesn’t mean that they are all junk now; think about it. Check the major publications, quality of GM, Ford, and Chrysler vehicles are on par with their foreign counterparts. And in some cases, even better. So if this caller feels that there is no need to shop around at the domestic auto dealerships, well then, she is only hurting herself.
And the hypocrite comment: you made a very good point, but it seems like you drew the conclusion that we might as well give up on all industry here in the US, since everything is made somewhere else. This is the whole point of helping the domestic automakers: we need to help them to keep the industry in the United States, it is just that important!
Call 3: Another person called in, and he clearly did not have an understanding of Econ-101. He questioned the possibility of how it is possible that more money stays in the US from the D3 when they do not even post a profit.
Was he serious? It’s not about the profit; it’s about the revenue that the company brings in from selling vehicles: paying their employees for developing the vehicle, manufacturing the vehicles, and selling the vehicles. Since the D3 clearly do more of that here, more of the money stays here.
Call 4: One listener sent in an email, and Dave read it on the radio. This person was frustrated by a dealership ad which advertised a Malibu, which this person really wanted, and when he tried to purchase it, the car ended up costing more than he/she though it would. Plus, this person was mad that the car is fuel inefficient. So this person settled on a small Kia (I don’t remember the exact model), that is cheaper and more fuel efficient.
I am not even sure what to make of this. The person first needs to realize that most dealers own both domestic car dealerships and foreign car dealerships. Claiming that a domestic’s auto dealership is evil because of its bad advertising and a foreign car dealership is great because this person seemingly got a good deal from it is just wrong. This person went from purchasing a mid-size sedan that by all accounts is as good in quality, efficiency, and cost as its major competitors and purchased a smaller vehicle that is cheaper and more fuel efficient. I hope the smaller vehicle was cheaper and more fuel efficient; that just seems to make too much sense…
Those are all of the calls I remember from the show… Again, my initiative (and the goal of truth about domestics) is too set the record straight on the domestic automakers, and clearly, these callers were misrepresenting the truth.
-Alex
