New Sticker Labeling Imports Stirs Up Foreign Automakers
IS that new car you're looking at an import or a domestic? It's more complicated to figure out than you might think, but a controversial new law is designed to make it easier to get the answer.
It used to be a simple matter - just check the nameplate. If it said Ford, Chrysler, or General Motors, it came from an American assembly line. In this era of ``world cars,'' however, that is no longer the case. Ford, for example, assembles its Aspire subcompact in South Korea, and Chrysler builds its wildly successful minivans in Canada. Honda Motor Co. Ltd., though, produces most of its best-selling Accord sedans, wagons, and coupes in Marysville, Ohio.
Sorting things out is the ostensible goal of the American Automobile Labeling Act, effective Oct. 1. According to proponents, the law clearly discloses where a car and its parts come from. But critics fear the new rules are just thinly disguised protectionism.
Every new car sold in the US has in its window a sticker offering consumer-oriented information such as price, accessories, warranty details, and fuel-economy ratings. Under the AALA, the sticker will also include:
* The percentage of the car's parts made in the US or Canada.
* Any country that produced more than 15 percent of the parts in the vehicle.
* The vehicle engine's country of origin.
* The source of the vehicle's transmission.
``We think the law will shed new light,'' says Jeff Bobeck, a lobbyist with the American Automobile Manufacturers Association, a Washington-based trade group that represents Big Three automakers Ford Motor Company, General Motors Corporation, and Chrysler Corporation. ``It will help consumers who have become confused about where their cars are built,'' he says. ``It's information they can use or choose to ignore.''
But the new information may not be nearly as clear as the label might suggest. Chrysler's Canadian-made minivans will carry a ``domestic'' label. Proponents argue that the rule reflects the open border created by the North American Free Trade Agreement. Yet, vehicles and parts coming from Mexico - also a part of NAFTA -
will be counted as imports.
Confused yet? Consider, for example, a wiring harness produced by GM's Automotive Components Group in Mexico. If Toyota Motor Corporation uses the harness on a Corolla assembled in California, the harness is considered an import. But if GM uses the harness at the same California plant - operated as part of a joint venture with Toyota - on its Geo Prizm model, the part is considered domestic. That's because GM gets extra credit because it owns the wiring-harness plant.
And because the law doesn't count the value of labor at ``transplant'' assembly lines, companies such as Honda and Toyota get little credit for building cars in the US. According to Honda's calculations, the Accord has an 82 percent domestic content. But under the new law, the company estimates it will be listed as just 50 percent domestic.
``The law is ridiculous,'' exclaims Walter Huizenga, president of the American International Automobile Dealers Association (AIADA), an Alexandria, Va.,-based group representing import auto brands. ``It's very cleverly written and designed to exaggerate the domestic content of the Big Three,'' he says. ``It's a `Buy America' bumper sticker disguised as consumer information.''
A decade ago, the labeling law might actually have worked to the advantage of imports. The quality of Big Three automobiles had hit rock bottom, and a growing number of buyers specifically wanted an import. When Honda first opened its Marysville assembly plant, it went to great lengths to assure customers that the Accords built there were every bit as good as those made in Japan.
But in recent years, the Big Three have made huge gains in quality and reliability, and the trade deficit has created serious political friction with Japan, spawning ``Buy America'' jingoism. A growing number of motorists now hunt specifically for US-made vehicles. And importers say they fear that the new Labeling Act will encourage that tide.
``We hope so,'' Mr. Bobeck admits. The Japanese are responding on the airwaves with commercials stressing their US roots. Honda designed an entire campaign around its Marysville plant. Mitsubishi Motors Corporation bills its American-made Eclipse sports coupe as ``imported from Illinois.''
Meanwhile, the AIADA has petitioned the National Highway Traffic Safety Administration, the regulatory agency in Washington charged with monitoring the act, to kill or modify it. But it's an uphill fight, since the law has many supporters in Congress.
Proponents insist that importers don't mind distorting numbers. They say that, when calculating the domestic content of cars, one Asian automaker included the cost of uniforms it bought for the factory baseball team.
Given the standoff, the final word may be left to the courts. ``We're studying that option,'' Mr. Huizenga warns, hinting of a lawsuit. ``We can't allow this to remain in law.''