By on March 18, 2013

 

It’s not just the UAW that is upset about free trade agreements. The Koreans are likewise. The offices of the Korea Automobile Importers and Distributors Association were raided by investigators of the country’s Fair Trade Commission, the Financial Times reports. The agency alleges that BMW, Mercedes-Benz, Volkswagen and Toyota Motor were involved in price collusion.

Imports to Korea Jan/Feb 2013
Jan/Feb %Share
Volkswagen  GRP 6,846 29.9%
BMW GRP 6,476 28.3%
Mercedes-Benz 3,343 14.6%
Totota  GRP 1,666 7.3%
Ford 1,030 4.5%
Honda 866 3.8%
Fiat-Chrysler 743 3.2%
JLR  GRP 621 2.7%
Nissan  GRP 585 2.6%
PSA  GRP 444 1.9%
Volvo 200 0.9%
Cadillac 64 0.3%
Mitsubishi 17 0.1%
Subaru 0 0.0%
Grand-Total 22,901 100.0%

It just so happens that the four are the most successful importers to Korea, accounting for 80 percent of car imports. After free trade agreements with the EU and the U.S. were enacted, exports took surprising turns. Car imports to Korea were up 23 percent in January and February, amounting to 12.9 percent of total sales, compared with only 4.9 per cent in 2009. Korea’s total exports to the EU increased by only 1 percent in the first year after the trade pact came into force, while trade from Europe to Korea rose 37 percent.

American carmakers are not under suspicion of collusion, no wonder; they did not have a big impact on Korea. Biggest American importer to the nation is Ford, up 72 percent.

Ford is against free trade agreements, especially with Japan, and calls the negotiations a “masquerade,” Reuters says. Stephen Biegun, Ford vice president of international governmental affairs, still blames the nasty Japanese for a closed market they say is wide open. There is zero import tax on cars to Japan, and even if the alleged non-tariff barriers are gone, it won’t make Biegun happy. He said change must reach into “the very bowels of the Japanese economy.” And because the Japanese will object to foreigners reaching into their bowels, Biegun will continue to complain.

Refreshing honesty comes from a surprising camp. Four dozen democratic lawmakers wrote a letter to President Barak Obama, warning against a free trade agreement with Japan. The alleged closed market found only passing mention. The lawmakers don’t worry about exports to Japan. They are worried about imports from Japan. Says the letter:

“In an industry with razor-thin profit margins, the elimination of the 2.5 percent car tariff (as well as the 25 percent truck tariff) would be a major benefit to Japan without any gain for a vital American industry, leading to more Japanese imports, less American production and fewer American jobs.”

What Detroit is REALLY worried about is a fall of the Chicken Tax. Detroit has a near monopoly on trucks, which drive its profits.

There is one part about free trade agreements automakers the world over love: A harmonization of standards. Biegun said that the cost of designing and producing according to separate EU and U.S. safety standards was between $3 billion and $6 billion, different environmental rules added a cost of $1.5-2 billion.

 

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61 Comments on “Why Detroit Is Chicken About Free Trade Agreements. And Why Korea Hates Them Too Now...”


  • avatar
    KixStart

    Most of the Toyota, Honda, and Nissan cars sold here are already built here, so stopping a free trade agreement to save Detroit is a colossal waste of time.

    We’re going to be happier, in the long run, if we treat Japan (and South Korea) as friends, rather than allies of convenience.

    • 0 avatar
      TW4

      Have you seen our balance of trade with Japan? The USD should be trading at 50JPY. Japan has extraordinary public debt, and they are often cited as one of the world’s most aggressive currency manipulators. We can’t do a deal with them. To sign a free trade agreement with Japan, would basically be to bailout the Japanese economy on the backs of middle class Americans. If we sign an agreement, it must be of the “free trade” genre, not a real trade liberalization.

      Korea is a different story, but they were also aggressive purchasers of US debt, prior to US-China currency restructuring in 2005. We have to tread lightly.

      • 0 avatar
        KixStart

        If they’re manipulating their currency, they’re not very good at it; they were at about 120 to the dollar a few years back.

        And why would the dollar be worth 50? We’re still the world’s reserve currency. In fact, we’re the official currency in some other countries.

        • 0 avatar
          KixStart

          And I might as well ask the usual question about “free trade” and the Japanese auto industry. The #1 vehicle in the JDM auto market is one of the Prius family. The #2 vehicle is a different member of the Prius family. Something like half the market is Kei cars. Just what do you think GM has that they could sell into that market?

          By the way, you’re wrong about a Japanese free trade agreement being settled on the backs of the American middle class. The middle class is already gone; they were sold out by the Fortune 500 in their quest for cheap labor in every facet of their businesses.

          You can’t lay any of that at the feet of the Japanese; Japan is a high-wage country with expensive products.

        • 0 avatar
          TW4

          The Japanese are devaluing their currency to boost exports to the US. We are living in an era of record US trade deficits with Japan, but prior to quantitative easing, the yen was moving down against the dollar. The Japanese are quite good at manipulating the yen, and that’s why OECD nations were hypersensitive to rumors that Japan would engage in aggressive quantitative easing.

          • 0 avatar
            juicy sushi

            Just what does the U.S. make that the Japanese want?

            The Japanese are devaluing the yen because they are desperate to make their companies profitable, and at the exchange rate seen in the first half of 2012, just about no one could make any money at all.

            The history of Japanese attempts at yen devaluation is not one filled with success, especially when the long-term historical record is examined.

          • 0 avatar
            TW4

            “Just what does the U.S. make that the Japanese want?”

            This has little to do with international trade and exchange. Even if the Japanese found nothing of value in the US, trade would eventually balance due to devaluation of the dollar against the yen, caused by Americans swapping copious amounts of dollars for yen. Eventually, the imbalance of trade would make Japanese goods too expensive for Americans to afford.

            Japanese central bankers understand the problem. If they let the yen stay strong Japanese companies can buy cheap aircraft, software services, telecommunications, architect service, etc. Unfortunately, the Japanese central bank has decided to use the strong yen to buy cheap dollars, which merely allows them to continue stuffing Japanese goods into the US economy.

            This is essentially the problem with the global economy. OPEC, NAFTA, China, Japan, EU all shake the US money tree when they need economic stimulus. When the US allowed toxic mortgage lending to weaken the truck of our economy, the tree snapped.

            That’s why we are drilling and CAFE’ing our way to prosperity. About 40% of our trade deficit was attributable to superfluous oil imports. The oil market isn’t hurting at the moment so it’s not that big a deal if we stop importing. The Japan, EU, China situation is a bit more delicate, but we must re-balance.

    • 0 avatar
      challenger2012

      So Japan believes in free trade. Japan levies a 777.7 percent tariff on imported rice, 252 percent tariff on imported wheat, 360 percent on butter, 328 percent on sugar and 38.5 percent for beef.
      Doubt these words, google “Rice Protection”, article in New York Times, Nov 11, 2010

  • avatar
    thelaine

    If Detroit relies so much on trucks, they must be looking with horror on CAFE requirements.

  • avatar
    corntrollio

    I thought the US manufacturers wanted Korea open to import of US vehicles.

    Is it still economical to produce non-luxury cars in Japan and import them here, given how the Yen is doing? I thought at least part of the reason that Toyota and Honda has so much US production was due to exchange rate. Not sure if that’s a problem for Hyundai/Kia.

  • avatar
    niky

    I don’t know if choking the chicken will have an effect in the short run. In the long run, it might allow certain manufacturers to streamline truck offerings between the US and overseas markets, but given the truck-buying culture in the US, those “global” models might not have a big impact on the market.

    Might being the operative word. They might just catch on like hotcakes.

  • avatar
    challenger2012

    Imagine what the response would be if Japan’s domestic auto makers had to compete in a truly free market. Google Detroit’s Collapse: The untold story, for another point of view. It is not just tarrifs, but non-trade barriers (NTB), such as restricting where one can operate a business, or restricting ports of entry, or limiting use of rail lines, or changing emissions requirements, or auditing of taxes of foreign car buyers that restricts foreign cars. Think I am making this all up, the same Steve Biegun Mr. Schmitt writes about in his article talks about what I have listed in the article Detroit’s Collapse: The untold story. Just offering another information source for fairness.

    • 0 avatar
      th009

      The story is certainly a point of view. It’s much less of an information source, though, being desperately short on facts, apart from some innuendos about tax audits and dealership sites.

      Multi-brand dealers are actually fairly uncommon in most countries apart from the US. If you want a dealer, you need to find a new one or get an existing one to switch completely — dealer agreements commonly disallow selling another manufacturer’s cars from the same facility.

      Biegun’s complaints in the story are limited to two 2007-era complaints about Korea: TV advertising restrictions and tax audits of foreign-car buyers.

      • 0 avatar
        challenger2012

        Let me guess, having the government audit your taxes based upon your purchase of a foreign car is OK with you? Japan originated this practice, then Korea copied it as noted in the article. Also, the writer brings out a peculiar purchasing pattern that is identical in Japan and Korea. Expensive High End cars are the cars imported, while low end cars for the masses are not. Japan Importers for 2012 3,4,5,7, 8 are MB, BMW, Audi, BMW mini, Volvo, not exactly cars for the masses, with the exception of VW. By the way 2, is Nissan, 6 Toyota, 9 Mitsubishi are also counted as importers. Korea, 1,2,3,4, leading importers were BMW, MB, VW, Audi in 2011. Where else in the world do you see this pattern? Oh that’s right Japan, where like in Korea, cars that compete against the break and butter of the domestics somehow don’t get sold. Example, Kia sold 2 cars in Japan in 2012 down from 3 in 2011.

        • 0 avatar
          TTACCATT

          I live in Japan with my Japanese wife, I don’t remember any government auditors coming around and when we bought our Peugeot. Maybe just lucky (wasn’t lucky about the car though. Gees!).
          As for why no bread and butter cars imported here, people just like their kei cars (hey, anyone can make one if they actually want to, just like trucks in the US), B-segment cars, hybrids and minivans.
          What imported alternatives are there on the market?
          Go to Ford’s Japan website: ford.co.jp
          They added the Focus and the Kuga recently which is probably a good move, but they are also trying to sell the old Escape, the Explorer and the Mustang.
          How many people in Japan are going to buy them?
          Where are the cars the bread and butter people actually want here?
          If VW can sell the Up here at competitive prices, where is the Ka or something people might actually buy?
          Import volumes are low here because the bread and butter people have a strong connection to Japanese brands, and the importers by and large haven’t put in the yards (or the cars) to overcome that.

          • 0 avatar
            th009

            “Import volumes are low here because the bread and butter people have a strong connection to Japanese brands, and the importers by and large haven’t put in the yards (or the cars) to overcome that.”

            That’s really it in a nutshell. Ford is taking the right steps, offering nicer cars in a reasonable size (Focus and Kuga) but Ka and Fiesta are MIA. VW offers Up!, Polo, Golf, Beetle, Touran, Sharan, … all RHD modern cars that fit onto Japanese streets.

            Even for VW, it’s an uphill battle to win over the consumers, but they are in it for the long haul. But I see Audi, BMW, Porsche and VW dealerships (never shared!) in premium locations in Tokyo. Have never seen a Ford, GM or Chrysler dealership, though I admit I haven’t looked for one.

          • 0 avatar
            juicy sushi

            Thank you TTACCATT. I was just about to raise the same point. American brands have completely failed to address the Japanese market in the past, and have offered nothing to overcome the incumbency advantages enjoyed by Japanese domestic brands. They are the same advantages that the Detroit 3 had at the start of the 1970s, and which were then squandered through incompetent product offerings. Japanese manufacturers have not made those mistakes, and neither Ford nor GM have tried to sell what Japanese buyers want.

          • 0 avatar
            challenger2012

            @juicy sushi You claim American car makers have, “completely failed to address the Japanese market in the past”. If this is so, why don’t you find cars made in Korea being sold in any significant amount in Japan. You would think Kia/Hyundai would know how to build cars that target Asian buyers. Also, what about Ford and GM of Europe, of Fiat of Italy, they all make small care in both LHD and FHD styles. Where are the cars of Citroen, Peugeot, Renault, they seem to be missing as well. It is amazing how many car makers just can’t meet the demands of the Japanese car market, yet somehow see to sell all over the world. Fiat in Brazil, Ford in Russia, GM in China, yet somehow just can’t figure out how to sell in Japan.

          • 0 avatar
            juicy sushi

            Challenger, the reason for poor Korean sales comes down to two things. Korean cars until recently weren’t very good (they corrected that), and traditional asian racism. Korean electronics didn’t do well until recently either (Samsung smartphones changed that), and Koreans won’t buy Japanese stuff so much either.

            As for Ford and GM of Europe, perhapFord and GM would like to comment on why they never attempted to sell those cars in Japan?

            When I was living there I saw plenty of Alfa Romeos andy wife’s hometown has a Fiat/Alfa dealer (I saw a lot of 500s the last time I was there). French cars somewhat less, but they don’t sell well anywhere for reasons adequately explored elsewhere.

            VW does well, and does so because it sells what the Japanese want. Fuel efficient A/B/C segment offerings with plenty of electronic goodies.

  • avatar
    bd2

    European sales started to rise dramatically a couple of years of ago when the German makes started to forgo ridiculously high profit margins for the Korean market and cut prices.

    The recent rise in European and Japanese sales have as much to do with the valuation of the dollar, euro and yen in relation to the won as it has with the FTAs.

    On a side note, despite the doing away of the import tariff on luxury goods from Europe and more favorable currency valuation, the European luxury goods makers, instead of dropping prices, have done the exact opposite and increased prices (some several times).

  • avatar
    Ion

    Yes, yes the old chicken tax is keeping detroit trucks alive line. the Tundra and Titan are really delivering a ko to that segment right?

  • avatar
    L'avventura

    Japan’s Automotive manufacturing is in a long decline, the TPP won’t save that.

    The trend for the Japanese has been to diversify & globalize production. Fluctuating currency, Japanese quake, Thai floods, and Chinese boycotts have taught them that. Diversify or die.

    The largest exporter of American cars are foreign automakers not the Big 3. Honda alone exported $22 billion last year of US-made parts and cars. The shift towards North American manufacturing is a long-term trend.

    The benefit of the TPP towards Japanese automakers is very limited, the likelihood is that Japan will barter on keeping tariffs on US agricultural goods in exchange to protect tariffs against Japanese-made cars (this is actually a bad-deal for the US but its to protects Detroit).

    More importantly the TPP is crucial for America. It projects US economic influence throughout Asia and Latin America, it forces countries that join this free-trade agreement to play by American rules and recognize American regulations, intellectual property, and agricultural goods. The TPP comprises 40% of the world’s GDP with Japan involved. Its set-up as club of nations that excludes Chinese influence in key emerging nations with America sitting in the middle of it.

    • 0 avatar
      wmba

      Source: @L’avventura:
      Honda alone exported $22 billion last year of US-made parts and cars.

      Source: Honda.com:
      Since 1987, Honda has exported more than $22 billion worth of automobiles and components from the U.S. This includes its exports of finished vehicles as well as component parts sets from suppliers in the U.S. that are used to produce automobiles at Honda plants overseas.

      • 0 avatar
        L'avventura

        Thanks for the correction, it should have read “as of”. But the point stands, the Big 3 exports very little US-made cars or parts. In fact, the Big 3 import more cars from Mexico to the US than it exports US-made cars to every other country combined.

        The unfortunate reality is that Detroit is a very poor exporter of US-made goods and a poor creator of American jobs. Worse, in fact, than foreign automakers

  • avatar
    TW4

    The Chicken Tax puts a large tariff on compact trucks built outside of the US.

    Has anyone looked at the CAFE 2025 requirements for light trucks? According to the footprint criteria, a small truck, like an old S10, will have to reach EPA of 37mpg combined. Unless the auto lobby knows that CAFE 2025 will be adjusted in 2017 to revise standards for light trucks, compact trucks aren’t going to make a comeback.

    • 0 avatar
      niky

      Ford’s new 2.2 diesel Ranger can meet that requirement (consider that the CAFE targets are based on the old EPA testing regimen). America can have its compact trucks… but people won’t like how slow they’ll be.

      Of course… the solution is to make trucks un-compact. The Ranger is now almost as large as the old F150. Add a few more inches here and there and boom, it’s in.

    • 0 avatar
      DenverMike

      @TW4 – I’ve read over and over, folks complaining about how Chicken tax loopholes/tricks like stripping the seats from Transit costs OEMS like Ford hundreds of dollars. OK, how is that any worse than a 2.5% tariff that would also cost OEMs hundreds in the absence of a Chicken tax?

  • avatar

    free trade is fine if it’s fair. for too long this nation has taken the short end of the stick.

    • 0 avatar
      Athos Nobile

      I’ve yet to see a fair war.

      • 0 avatar
        Big Al from Oz

        @Athos Nobile
        The problem is the US is less able to overcome more external pressures now. The so called “trade war” is fairer.

        In the past up until the collapse of the old Soviet Regime the US reigned and its influence generally succeeded. It seems the divide and conquer theory is apt here.

        The collapse of the Soviets hastened the Eurozone to be setup, that has contributed to some of the current woes. The Chinese economy has increased manyfold.

        Added is the rise of group of developing nations. This breaks down into 4 quite equally competitive regions. It’s hard for the US to realise its global position might have to step down from number 1.

        Add the above up and the US is struggling to restructure and change the way it thinks about trade. The “old ways” is not effective as they can be overcome by other competitive markets.

        This is due to economic pressures at home. The world (OECD including the US) from a trade perspective can either free up or create more barriers.

        Creating more barriers will only reduce prosperity.

  • avatar
    Big Al from Oz

    The position the Big 3 find themselves in is the fault of many fingers stuck in the pie. It is caused by protectionism, and look at the worst performing OECD economies, they are subsidised and protected in many industries.

    A gradual change in regulations has to be implemented to minimise the distruption to the US vehicle manufacturers.

    If the US is looking long term, then it had better look at what the global industry is doing. The US doesn’t manufacture vehicles the globe requires or really needs. Your vehicle industry is quite insular.

    The US is currently the 3rd largest market outside of UNECE and China. This gap will continue to widen quite. In the end the US will eventually become more of a bit player. Look at where much of your vehicle technology is coming from now.

    The US isn’t building what we want externally and if the US want to become like the Germans, Koreans or Japanese and export large quantities of vehicles then its market has to change to be able to produce them.

    CAFE should go, the model it is using is not as effective in modifying behaviour as the Euro/Asian model is. The CAFE regulations were intended to improve mpg with minimal effect on fuel pricing.

    Fuel pricing has to be used if behaviour is to be modified. Whilst fuel prices are quite low as in the US you will have large, more inefficient vehicles.

    The Big 3 have their backs against the wall due to poor decisions starting back in the 1950s, just like your agri-industry it will have to change or your country will not be able to rise.

    This is the hard part for many in the US, your influence/lead is waning. If you don’t start doing what we do you will be overlooked and you can become arrogant like the French.

    @Ion
    How can you state that Toyota and Nissan are an example that CAFE doesn’t afffect pickup imports?

    Do you know what vehicles we have that you don’t?

    Where all the midsizers, we have 11 manufacturers to choose from in Australia. And these midsizers also have very efficient large SUVs based on them that are also getting 30mpg and can tow 7 500lbs.

    Google the Colorado 7 or the Everest based on the new global Ranger.

    • 0 avatar
      Ion

      The Titan and the Tundra are not imports, well atleast not in the traditional sense. Both trucks are built in america for the american market and no deus ex machina makes them uncompetitive

      • 0 avatar
        niky

        I think the point was that those trucks were only built because the global platform pick-ups available elsewhere would not be competitive in the market.

        Though, to be fair, the fact that they’re being built at all means that volume in the US is big enough to justify building a separate truck line INSIDE the US if you’re dedicated to it.

        • 0 avatar
          DenverMike

          @niky – It just points to the tired argument that US full-size pickups are ‘only’ a runaway success because they’re “soooo protected”. Meanwhile the Titan and Tundra enjoy this same exact “protection”, but still hardly sell.

          • 0 avatar
            niky

            Not the cars themselves… but the class. The thirst for huge pick-ups and SUVs over the years has been driven by CAFE. The Chicken tax isn’t the only protection they receive, mind. Many first-world markets use fuel economy regulation to disincentivize buying large-displacement vehicles. But the United States is unique in that its “footprint” formula favors larger vehicles.

            Combine that with lax fuel taxation, and someone who wants the luxury and power of a V8 or big V6 will spend more if they get one in a smaller vehicle (which would be more econoical) as opposed to getting it in a full-sized truck or SUV. This helps drive truck sales.

            The Titan and Tundra can’t compete simply because they’re up against entrenched players in the field. And yes, they’re protected. Without CAFE, they wouldn’t exist at all! If no artificial CAFE or tax distortions existed, Toyota and Nissan would simply slightly retool global products for US sale.

            But again… two-edged sword. As the market created by CAFE and low gas taxes makes for vehicles that are nearly unsellable elsewhere.

          • 0 avatar
            DenverMike

            @niky – Can you point to where CAFE has driven the thirst for huge Pick-Ups and SUVs over the years vs small light trucks, suvs or mini-vans? I don’t see it.

            I don’t see how a large fuel tax would help the imbalance, because mid-size pick-ups and suvs are almost as thirsty and sometimes worse than full-size, depending on how they’re equipped and used.

            Don’t forget there’s lots of other reasons consumers prefer full-size like comfort, value, durability and safety, even if perceived.

            It’s true our full-size would be unsaleable on a grand scale on the world market. But there is a market none the less. The problem for US trucks is the US tax on import trucks. World governments (outside of FTA zones) would want an equal 25% tax, but without the loopholes.

            Those loopholes in actual expense to import OEMs are no greater than the 2.5% tariff on import car, unless you know otherwise. OEMs that sell medium duty trucks here aren’t complaining about any chickens and OEMs importing during the mini-truck craze sure weren’t complaining.

            US full-size pick-ups and SUVs could never be more than a niche luxury on the world market, no different than high end German or exotics, but there is a potential market there. However, the world doesn’t need US domestic compact and mid-size cars. They already have those. What the world lacks is what it can use. Mustangs, Camaros, Challengers, Corvettes or any specialty or limited editions. Buicks? Cadillacs? Ford Raptors?

          • 0 avatar
            niky

            Pretty simple. CAFE penalizes large unibody vehicles (not based on weight, but simply by size), while allowing larger trucks to meet lower standards. This creates a market distortion in which ladder-frame truck-based SUVs are relatively cheaper than comparable unibody vehicles that are more fuel efficient. We had this in the Philippines, too, where a utility tax exemption was granted to “ten seat” utility vans, meant to exempt commercial utility vans from higher private use taxes.

            In both cases, you buy a rather large, heavy vehicle which isn’t slapped with a guzzler tax or comparable taxes to a car. Fuel economy is worse than a comparable car, but since fuel taxes are low, you buy them, anyway.

            One simply needs to look at other countries to see the model mix difference. Perhaps the closest you can get to US conditions are Australia and Germany, which have long, straight highways (Australia even more so) but which have a model mix that is smaller and more fuel efficient. The only difference between V8-lovin’ Australia and the US, is Australia has a higher gas tax, with exemptions and tax breaks given to industrial and business users.

            People who need big cars, buy them, and either suck up the costs by using their large vehicles to carry more people, or apply for exemptions for business use. People who don’t simply buy more efficient cars.

            Remember, your model mix, including “midsizers” is still out of step with the rest of the world. Which is why Honda has had a “US Market” Accord that is vastly different from the global Accord. Even “American” globally sold models will differ from their US counterparts. No way are you going to find a 2.4 or 2.5 liter engine in a compact outside the US. Or a 1.8 liter engine in a subcompact.

            This definitely hurts manufacturers. It makes them less able to apply economies of scale to production. Obviously those selling inside the US aren’t complaining. Economies of scale are there because they have enough in sales, or they simply refuse to follow the market up (Honda sells the Civic with the same engines everywhere). Everyone else is shut out.

            Changes to the model mix if a gas tax was adopted early on versus CAFE sleight-of-hand would have more closely matched the global model mix.

            Don’t know what you want me to say, honestly. If you want me to say that CAFE has had no impact on US buyers’ preferences over the decades, that’s obviously as untrue as saying punitive registration costs in the UK have no effect on vehicle purchases, or that incredibly strict Japanese re-certification costs have not created a culture of quick turnover in order to drive car sales.

            Everything that costs the buyers extra money will affect their purchase decisions. In the short term, for the single buyer, it may not look like much of a difference, but over the entire market, the trending is pretty clear. And that’s that.

          • 0 avatar
            DenverMike

            @niky – I agree with your views and how the US auto industry is perhaps corrupted by relatively cheap fuel and stress compacts with snappy acceleration over MPG.

            CAFE has mostly impacted full-size station wagons and other land yacht autos if not muscle cars. These were, for the most part, replaced by mini-vans, SUVs and pick-up trucks, big, small and mid-size, thanks to CAFE.

            MPG of passenger cars has doubled since CAFE came online, but that doesn’t mean consumers are not driving MORE miles because of it or driving trucks and doing both.

            Full-size pick-up trucks have yet to double their MPG since CAFE, but they’re close.

            Clearly CAFE has shifted buying patterns away from autos, but despite what you’re saying, I still don’t see how CAFE is driving the thirst for Huge Pick-Ups and SUVs over the years, vs small pick-ups and suvs. As far as CAFE is concerned, there’s just passenger cars and light trucks.

    • 0 avatar
      wmba

      You keep on berating the US vehicle industry for not exporting from the US itself. So far as I can ascertain, only Germany and Korea really export vehicles made in their countries, with Japan a distant third and Thailand quickly catching up.

      By this I mean manufacturing far more vehicles than the home market consumes from all makes both internal and imported.

      Branch plants making vehicles suitable for the local market(s) is the common way to go these days. Detroit started that back in the 1920s, if you recall, and is still organized this way.

      If, by some stroke of luck in product mix, factory time availability, and currency fluctuation a branch plant makes vehicles suitable for overseas consumption, then weak exports will follow. If sales really take off then a branch plant will follow.

      The most aggressive exporter is Korea, whose people Herr Scmitt has informed us regard the Japanese as lazy. Their management style is feudal, they are by most definitions xenophobic, and as shown by this post don’t hesitate to “investigate” (ha ha) foreign companies who strut in and take a piece of “their” market. The Japanese just shuffle their feet, look uncomfortable and pretend foreign makes don’t exist, and they all know that US rice is inferior to the homegrown variety whereof every growing shoot is subjected to TLC.

      If it were me negotiating free trade with either of these countries, I’d insist on a constant review process to ensure that bulls**t excuses for lack of imports were squashed at an early stage. And if the excuses kept on, a provision for cancelling the agreement unilaterally would be in any agreement that I would sign. Why sign my own death warrant for folks deliberately planning to play unfair? That is why Ford Europe is calling the free trade negotiations a masquerade.

      • 0 avatar
        Big Al from Oz

        @wmba
        From the outside of the US fishtank and looking in it is obivious globally the US will struggle not just with the motor vehicle industry.

        Your industry needs to restructure. The current model isn’t globally competitive, or you would be exporting, look at the size of your country.

        • 0 avatar
          Big Al from Oz

          @wmba
          I should have added it is restructuring, but at a fast enough pace to take the onslaught of Chinese vehicle that will hit the global market within a decade.

          • 0 avatar
            wmba

            @Big Al from Oz

            Don’t understand your second reply – there must be a word missing. Anyway, I’m Canadian, not American but I simply don’t understand your need to constantly berate the US car industry for not exporting from the US. They own subsidiaries worldwide, including China.

            Perhaps you assume all US companies are run by mental midgets, but overall I’d think they employ strategists with far superior intellect to yours or mine. You go on about looking from outside the US fishtank and seeing obvious problems, as if you were the genius they need to advise them on strategic direction. You flatter yourself.

            Better to advise your own government that like ours has tied its future to digging stuff out of the ground rather than using the intellectual capabilities of its population to maintain its standard of living. Never underestimate the US.

        • 0 avatar
          doctor olds

          @Big Al- wmba has it closer to right.
          Ford and GM established the practice of building where they sell many decades ago. Holden’s is just GM’s Australian business, as are Opel and Vauxhall in Europe for examples. If you look at the real numbers, you will see that American makers, at least GM and Ford, are doing well globally. GM did sell more than any other maker globally in 2011 and was second in 2012. Before you knock them because some journalists think they will fall to 3rd in 2013, bear in mind they will still be running in the top 3, far ahead of #4 and the rest.

          In 2011, (easy wikipedia list) US makers produced 22.4% of the worlds vehicles, second to Japanese makers’ 29.6%, but far ahead of the German’s 16.0% and Korean’s 9.2%. No doubt, the numbers shifted a bit for 2012, but the facts refute your view that they are not competing sucessfully.
          btw- our government has done immensely more harm to our industry than good.

          • 0 avatar
            Big Al from Oz

            @DocOlds
            I look at the politics and from a global perspective. You guys in NA have a large market, but its shrinking comparative to the rest of the world everyday.

            What is going to kill competitiveness in the OECD is artificial demand. We are doing this now. Creating consumption through borrowing is not the best, especially when you can’t pay back what you’ve already borrowed.

            You’ll see I’m correct. Corporate welfare and agri business welfare is a thorn in our side. How competitive are we?

          • 0 avatar
            doctor olds

            @Big Al from Oz- The NA market simply collapsed in late ’08 and is still well below its peak volumes, while the whole world has been developing. That’s a big part of the reason why 70% or so of GM sales are outside of NA.

            The market function always prevails over time. I agree with the political reality that protection of industries doesn’t work for long. We can observe the history of the British auto industry as an example of failure to compete. Another factor is powerful unions, of course.
            I don’t follow your comment about artificial demand, though. Most vehicle purchases have always been financed.

      • 0 avatar
        Big Al from Oz

        @wmba
        Berate? What I’ve been stating is quite true. Look at what is going on outside of the US market.

        Have you read what I’ve wrote about the French industry?

        If you read I always group the older industrialised countries as a group Euro/Japanese and US countries concerning protectionism.

        This site and another site I frequent are US centric or even to a degree NA centric. Hence my comments are directed towards the main users.

        I’ve actually wrote comments concerning Cummins and the new ISF diesel for the Nissan Titan, when forced the US can come up and compete.

        People have to realise globally it is quite competitive and from what I can see the US model has to change quicker. Even Ford sees this, it want to harmonise with UNECE regs.

        It’s not anti US, I do realise the challenges that the Big 3 are confronting. Pickups are the only vehicles keeping them afloat and how much longer can this be sustained with CAFE?

        Look at the US term import manufacturers. How are they fairing? Did they require taxpayer money to prevent collapse.

        So it is blatantly obvious the Big 3 need to reconsider their modelling both internally within the US and globally.

        Just because what I write isn’t attractive to US contributors doesn’t take away from the content of what I’m delivering.

        The Big 3 are trying. But the US is in a position of its own making. Protectionism is good for short term gain, but the world has changed immensely over the past 30 years and the Big 3 haven’t kept up like other global manufacturers.

        If they did would they have needed bailouts? Would most vehicle technology other than pickups and a few performance cars be imported?

        I work on US aircraft and they are the best in the world. Why? Because they have to compete globally. The US auto industry can do the same, if it was allowed.

  • avatar
    DenverMike

    @Big Al from Oz – Right or wrong, the US has been busy building autos that US consumers demand. Our cheap fuel and long commutes demand comfortable autos and this was true long before CAFE. It continued to shaped the US auto industry afterwards.

    CAFE inspired and brought on the mini-truck craze and eventually mini-trucks grew to near full-size proportions. And with full-size MPG and MSRP, no less! By this time, CAFE left it up to the consumer to choose as they’re all considered “Light Trucks” now. That’s exactly what killed the once thriving American mid-size truck class, including our domestic mid-size trucks. Natural selection at its finest.

    You have 11 mid-size trucks to choose from, but that doesn’t mean you REALLY have a “choice”, now does it? Your Australian truck market, just like the US’, is dictated by fuel prices and the potential economy of base stripper global mid-size trucks for those that want them.

    Obviously, fully loaded and decked out global mid-size trucks are pigs in comparison to base stripper mid-size, and depending how they’re equipped and used, they get WORSE MPG than our full-size. But this isn’t about stripper base global mid-size trucks even though those are the one’s you hold against and compare to our full-size.

    If we’re not comparing equal or similar trucks, we’re just talking in circles.

    And you’ve yet to substantiate the “30 MPG” of global mid-size trucks & SUVs. A lot is lost in translation… The Mahindra got 21 MPG when it got to America. Then the Mahindra, which is one of your 11 choices, gets similar MPG to the rest of your mid-sizers.. So what gives?

    • 0 avatar
      Spike_in_Brisbane

      Somebody PLEASE stop @DenverMike and @Big Al from Oz getting into another 500 comment debate we don’t need to read. Guys please apply some restraint.

      • 0 avatar
        Big Al from Oz

        @Spike_in_Brisbane
        If you hadn’t realised I’ve been ignoring him for some time now.

        I think he found Robert Ryan attractive for the past few days as he directed comments to him.

        Today I must be the apple of his eye.

        Don’t worry the guy follows me around on other sites.

        Every now and then I snap and respond to him, which I regret.

        Sorry to the other readers and I do apologise for DenverMikes actions.

    • 0 avatar
      niky

      Interesting question. Let’s look at a place where both the Mahindra and global pickups are sold.

      http://www.greenvehicleguide.gov.au

      In Australia, the “combined” economy of the Mahindra 2.5 5MT is 23.7 MPG / 26.4 for “extra-urban”

      Ranger 3.2 6AT 4WD: 26.4 MPG / 30.1 MPG – fully loaded Supercab

      Ranger 2.2 6MT 2WD: 31 MPG / 34.5 MPG – basic dual cab

      Other cars, for comparison:

      Dodge Nitro 3.7 4AT AWD: 18.9 MPG / 25 MPG
      Honda CR-V 2.4 5AT AWD: 27 MPG / 35 MPG
      Escape 2.3 AWD 4AT: 24 MPG / 29.4 MPG
      Focus 2.0 GDI DCT 35.6 MPG / 46 MPG
      Fiesta 1.6 DCT 38.5 MPG / 47.9 MPG

      Via fueleconomy.gov, (except Mahindra, which comes from press)

      Mahindra Pickup: 19 (comb) / 21 (extra) – diff: -24.7% / -25.7%
      Dodge Nitro: 17 / 21 – diff: -11% / -19%
      Honda CR-V: 25 / 30 – diff: -8% / -16%
      Focus 2.0 DCT: 31 / 38 – diff: -15% / -21%
      Fiesta 1.6 DCT: 33 MPG / 39 MPG – diff: -16% / -22%

      What stands out immediately is the Mahindra figures are pretty low at the start, and worse in the US. This is for two reasons… one is differences in testing regimens, and two is that the Mahindra was tested with a four-speed automatic. Australian variants get the manual. For a good reason. 4ATs on Asian diesels are geared very low, and it was likely screaming on the US highway test. And a 4AT plus very little power is terrible for fuel economy in the city test.

      From the other cars, we can estimate the percentage difference for the Ranger would be around 10-15% / 16-20%.

      Ranger 3.2 4WD 6AT: 23-24 MPG / 25 MPG – 26 MPG
      Ranger 2.2 2WD 6MT: 27-28 MPG / 28.7 MPG – 29.7 MPG

      versus:

      F150 (base trim) 3.7T 6AT: 18 MPG / 22 MPG

      That’s not bad at all. It’s possible the Ranger can meet CAFE requirements until the end of its model life. Its footprint is just 10 square feet smaller than the F150.

      Which is why you will never see it over there. Uncomfortably close.

      • 0 avatar
        Big Al from Oz

        @Niky
        Your Ford Ranger figure with the 3.2 is quite accurate as I own a high end BT50 which is the sibling of the Ranger.

        The thing to note is at much higher and continuous speeds of arounnd 80-85mph I’m getting over 20mpg. My trip computer shows consumption at about 12-13 litres per 100kmph.

        The Mahindra in Australia is a rough as guts vehicle that a farmer would buy instead of a quad style vehicle.

        I can see the 3.2 being dropped here eventually and the 2.2 becoming the only option. The 2.2 has the potential to develop more power and torque while maintaining its current fuel economy. That is the good aspect of diesel development, it is responding better to development than gasoline.

        • 0 avatar
          niky

          With direct injection, yes. But gasoline direct injection is still catching up. When it does, I wager we’ll see many of the same benefits as diesel direct injection.

  • avatar
    danio3834

    I’m not convinced elimination of the chicken tax would affect the truck market much. Foreign makers have made their own attempts at penetrating the US truck market and haven’t made much of an impact except for compact SUVs. The trucks they do sell here are already built in North America and avoid this tax and NA (Mexico incl.) is already pretty competitive place to build these vehicles in comparison to most of the alternatives.

    Even if the tax never existed, it’s doubtful they would bother to make a competitive US trucks and export them to the states from somewhere else as trucks that are truly successful in the US really aren’t global platforms.

  • avatar
    thelaine

    Maybe they should just eliminate CAFE, eliminate the chicken tax and leave the gas tax where it is?


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