Can we call any industry a truly “American” industry if it is dominated by foreign-owned companies?
What if GM and Chrysler had been allowed to fail, likely taking Ford down with them, and the “Big Three” Japanese automakers (Toyota, Honda and Nissan) were left to pick up the slack? Would America really have an American auto industry, or would it merely be an industry in America dominated, owned and controlled by distant owners? The answer lies within the latter consideration.
If Russian-owned steel and mining company Severstal, operating in the United States, supplies Detroit with its steel, how American is the resulting automotive product? Surely it is less American than if the steel had been supplied by an American-based, American-owned company producing steel here.
Paul Craig Roberts, former assistant secretary of the Treasury in the Reagan administration, said on Lou Dobbs’ program that when foreigners acquire our assets, they “acquire ownership of our real estate, of our companies, of the corporate and government bonds so we lose all the future income streams that are associated with the assets when we lose the ownership. So it is a bad thing.”
I wholeheartedly agree. A careful look at foreign investment in the proper light is necessary. Foreign companies aren’t investing in America for the good of America. More often than not, they are using America to invest in themselves. Our look at foreign investment in the U.S. also must acknowledge that an overwhelming majority of it does not go to upstart production. Rather, it goes to acquiring our existing American-owned operations.
An annual average of more than 90 percent of Foreign Direct Investment is routinely for the
“purpose of merely acquiring and exporting control” according to U.S. Department of Commerce data. And when you take into account the layoffs that almost always accompany foreign acquisitions of existing U.S. companies, the number of American jobs created by foreign investment can easily be negative. Seen in this light, foreign investment doesn’t create jobs in the U.S., it destroys them.
Russian-owned steel and mining company Severstal began acquiring American operations before the economic crash, and is now selling some of them off as a loss back to an American company. So this may be one eventual bright spot for this American industry if we end up temporarily selling off American assets at a high price and buying them back at a lower price.
Should foreign-owned companies be given U.S. taxpayer-funded loans? Surely if you were against bailing out a big chunk of the U.S. auto industry (I was strongly in favor of the bailout saving the American auto industry), then you should similarly protest your tax dollars being used to subsidize foreign producers, even when those foreign producers set up shop in the United States.
According to a Jan. 6 article in the Detroit Free Press, a U.S. Department of Energy official confirmed Russian-owned Severstal “will no longer be receiving a $730 million loan to produce advanced high strength steel for autos in Dearborn.” No reason was given for the pullback from the planned taxpayer loan, but let’s hope it had something to do with the fact that we would have been subsidizing a foreign producer.
After all, a car made in America with foreign steel (steel produced in America by a foreign-owned company) does not an American car make.
Is a Toyota Camry assembled in the United States with an 89 percent “domestic” parts content qualify as an American car? Not when you consider the following:
The Georgetown, Ky., factory built in 1987, which assembles the Toyota Camry, was built with Japanese steel by a Japanese steel company. Toyota was given 1,500 acres of free land. To attract this Japanese company to America, we even established a “special trade zone” so it could import parts duty-free from Japan. Financing was handled by Mitsui Bank of Japan. Total federal, state and local tax incentives (read giveaways) reached $100 million. So how American is a Camry, really?
But what about Chrysler, which along with General Motors was the recipient of U.S. government bailout? Was a Chrysler bailout a good idea considering it was going to be majority owned (58.5 percent as of January 5) by an Italian company (Fiat)? Normally my answer would be no. Here’s why, in this case, it is yes.
First, consider that Chrysler is keeping Fiat afloat, when just a couple of years ago Fiat was the only factor keeping Chrysler from liquidation.
Second, one must also consider that the number of U.S. factories operated by a majority Italian-owned Chrysler is considerably more than those operated in the U.S. by any other foreign-owned company.
So if a certain segment of American consumers won’t consider a product from the American “Big Two” (GM or Ford), it’s better to have a foreign-owned Chrysler waiting in the wings (many consumers think Chrysler is still an American company) to keep car consumers from snapping up a vehicle from a Japanese or Korean company.
And even though Chrysler is majority Italian owned, Chrysler has a higher domestic parts content than any other foreign-owned company operating in the United States.
And if it’s Chrysler that’s buttressing Fiat instead of the other way around, how long can the Italian, Fiat wing of this merged car company maintain control?
The fact is that American car companies General Motors and Ford (and especially if you throw Chrysler into the mix) employ more American workers, have more factories in America, get more of their parts from America, pay more taxes to America and support more retirees and their dependents than Japanese companies (Toyota, Honda, Nissan, Isuzu, Mazda), Korean companies (Hyundai and Kia) and German companies (BMW, Mercedes and Volkswagen) do.
Volkswagen was given more than a half billion (that’s “billion” with a “b”) dollars in tax giveaways to build its first plant in America for the second time. (It shuttered its original first American plant in Pennsylvania in 1988.)
Meanwhile, Mazda is investing a half billion dollars (there’s that “b” word again) in Mexico, which coincides with the end of its Auto Alliance Michigan plant.
Chrysler, on the other hand, just announced on Jan. 5 that it is creating more than 1,000 jobs in Detroit.
So even though Chrysler can’t be considered part of a purely American industry due to its slight majority foreign ownership, it’s better we bailed it out and kept it around in the end. Regardless of how you classify Chrysler, the American auto industry is roaring back to life.
Since December 2010, Ford, GM and Chrysler have seen gains of 17 percent, 5 percent and 37 percent, respectively. For Ford, production hasn’t rebounded this strongly since the 1980s. Toyota and Honda, on the other hand, have lost U.S. market share over the same period.
Sometimes you have to choose between supporting your ideology and supporting what is clearly better for your country.
So let’s support American industry by supporting American-owned companies, thereby supporting more American jobs and keeping more American dollars within our national borders.