The healthy automotive sector in the United States

No doubt, the title to this post must sound odd. After all, according to one recent report, foreign automakers now command a majority of the U.S. auto market for the first time ever. However, Daniel Griswold and Daniel Ikenson argue otherwise in a Cato policy brief that looks at the U.S. automotive sector. Their argument is unsurprising for anyone familiar with Cato: The financial woes of a few companies operating in a healthy, competitive market do not justify intervention by Washington policymakers but are the market's way of providing feedback about the decisions of those firms. It is not the role of the government to rescue companies that have made relatively bad decisions. Healthy competition ensures that best practices are emulated, leads to gains in productivity and innovation, and provides American automobile consumers with greater choice, better quality, and more competitive pricing. This argument is unsurprising coming from Cato -- but they do have the advantage of marshalling useful facts to buttress their argument: Although complaints about unfair competition from abroad are less shrill than in the 1980s, foreign producers have not escaped criticism. The chief executive officers of General Motors and Chrysler recently complained that an allegedly undervalued yen gives vehicles imported from Japan an unfair price advantage of as much as $3,000 per vehicle. Sen. Carl Levin, a Democrat from Michigan, charged at a hearing in February that Detroit-based automakers face unfair foreign competition. "They are competing with currency manipulation by other countries, including China, Japan and Korea, which gives their vehicles and other products an unfair price advantage in our market," Levin said in a statement. And the United Auto Workers union, which represents workers at GM, Ford, Chrysler, and several parts' producers, has called for a federal "Marshall Plan" to aid those companies.... In 2004, 16.9 million light vehicles were sold in the United States, of which 2.4 million, or 14 percent, were imported from Asia, while 3.5 million, or 21 percent, were Asian nameplates produced in the United States.5 Of the nearly 1.7 million Toyotas sold in the U.S. market in 2004, nearly 3 of every 4 were produced in the United States, which was a greater share than in the previous year. Over 81 percent of the nearly 1 million Hondas sold in 2004 were produced in the United States, which was an increase from the 78 percent rate attained in 2003. Nissan's U.S.-produced vehicles accounted for 86 percent of its U.S. sales in 2004, which was a big shift from the 66 percent rate of the previous year. In fact, each of the top 10 selling cars and top 10 selling trucks (pickups, SUVs, and minivans) in the first half of 2006 is produced at facilities in the United States.7 Toyota Camry, Honda Accord, Chevy Impala (GM), Ford Taurus, Nissan Altima, Ford Explorer, Chrysler Town & Country, and the other models that round off the most popular 20, regardless of the location of company headquarters, are produced in U.S. plants by American workers who contribute to the local, state, and national economies through their employment, expenditures, and taxes.... Domestic output of motor vehicles and parts has actually enjoyed a healthy increase since 1993 even if employment has not. In 2005, U.S. factories were manufacturing 68 percent more motor vehicles and parts in volume terms than in 1993. That compares with a 56 percent increase in U.S. manufacturing output overall during the same period. The number of workers employed domestically in the production of motor vehicles and parts was 1,098,200 in 2005, down from a peak of 1,313,600 in 2000 but still above average employment levels in the early 1990s. In light of increasing output, any decline in employment in the domestic automobile industry has been because of rising productivity and efficiency in the industry, not because of an overall decline in the industry's fortunes. The biggest beneficiaries of a globally competitive U.S. automobile industry have been U.S. auto-buying consumers. Amen. One small caveat to their argument -- these percentages could change as demand for hybrid vehicles go up. The Toyota Prius, for example, are manufactured in Japan.