ford_gyron

The American, International Automobile Market

Image: The Ford Gyron Concept Car 1961 from oldconceptcars.com

Who Doesn’t Love a Cool Car?

Every January, the global automobile industry comes home to the Motor City at the North American International Auto Show (NAIAS). Detroit has played host to this celebration of power and mobility innovation since 1907, interrupted only by World War II, when the city functioned as the capital of the “Arsenal of Democracy.” Car people flock to Cobo Hall to see the latest concepts, while manufacturers from around the world use the global reach of NAIAS to announce their most significant initiatives.

The Best of Everything

NAIAS is a remarkably appropriate name for the industry it represents because auto production is at once North American and international. The United States remains the world’s leading destination for international investment, a fact more evident than ever in the car and truck business. Transportation equipment accounts for $144 billion in international capital stock invested in the United States.

Firms throughout the sector utilize advanced manufacturing and research, requiring high-skill employees throughout its operations. This industry is “where the robots are,” according to the Brookings Institution. But it’s also where global capital and technology meet American ingenuity and know-how. This is the marriage of assets that offers consumers vehicles of superior quality and value while employing thousands of Americans along the entire production network, from research and development (R&D) and design to final assembly.

Honda Accord: Made in Ohio for 35 Years

The 2018 NAIAS Car of the Year is the Honda Accord, a car assembled in Ohio for the last 35 years. Honda Motor Company opened the first Japanese “transplant” assembly plant in 1982 in Marysville, Ohio.

Today, the Japanese-brand automakers operate 24 manufacturing facilities and 43 R&D or design facilities in 20 states, with the manufacturing plants producing nearly 4 million vehicles a year. Manufacturers headquartered in Europe and South Korea made similar investments over the last two decades. On NAIAS “Press Day,” January 11, the Wall Street Journal reported that in the first quarter 2018, foreign nameplate manufacturers were set to produce more vehicles in the United States than the “Detroit Three,” GM, Ford, and Fiat Chrysler. Today, the North American auto business is international.

North American Know-How

What is the driving force for this investment? Yes, the North American consumer market for vehicles is large and growing. Certainly, regional trade rules in the North American Free Trade Agreement (NAFTA) have fostered the development of efficient, globally competitive production networks.

In principle, successful globally engaged firms tend to have a clear idea of their strengths relative to competition, and they actively develop networks of specialized partners that complement their in-house competencies. In short, it’s a story of comparative advantage and specialization. Investing in North America enables global manufacturers to leverage local know-how, a clear competitive advantage in the North American market.

The Story of “Mr. K” and the 1971 Datsun 240Z

How does “local knowledge” factor in? Consider the example of automotive design. Even though most cars on roads throughout the world are built by a relatively small number of global companies, driver interests, needs, tastes, and driving conditions differ all over the world. The first to exploit this edge was a Nissan executive, Yukata Katayama, who was sent to Los Angeles in 1960 to establish a foothold in the U.S. market. “Mr. K” led the development of cars tailored to U.S. tastes, including the dazzling 1971 Datsun 240Z.

Today, Southern California is home to more than 15 corporate automotive design studios. Why Southern California? World-class talent sources like the Art Center College of Design in Pasadena are a part of the story. California is also home to leading firms in entertainment, fashion, computer, and interior design. And the natural environment of Southern California is a factor. Tom Matano, the Mazda designer behind the original Miata sports car (introduced in 1990), thinks the car could not have been designed in Japan. “Designers there commute by train each day, so how could they come up with the Miata?”

Toy Model of 1971 Datsun 240z

Image: modeltoycars.com, Maisto makes a 1/18 scale model of the 1971 Datsun 240Z if you want a snow day project with the kids.

California Concept, Ohio Built, American Driven

The history of U.S. investment by foreign-nameplate automakers is a story of the mutual gains from exchange. As long as the United States stays committed to policies that improve competitiveness, it will continue to be a desirable destination for high-quality investment. These U.S. operations have an enviable record of creating well-paying jobs, building a skilled workforce, and giving back to their communities while making products of excellent quality and value for American drivers.

It would be difficult to find a better expression of this principle that the latest from Honda in Marysville: the Acura NSX, the company’s most sophisticated road car ever made. The car’s lead designer? Michelle Christensen, born in California. Designed, developed and assembled in North America, the NSX is an icon of what America, and Americans, gain from foreign investment.