A ‘Big Three’ Failure and U.S. Auto Making

Many of the “foreign” cars Americans buy are actually built right here in the United States. And there are quite a few reasons that foreign car companies would most likely expand their production here if they grabbed more market share from the Big Three.

First, labor costs, while important, are not as big an issue as most Americans think. While much of the debate about the auto industry has concentrated on the expensive wages given to unionized workers, labor represents a surprisingly small portion of the cost of producing cars. Only about 10 percent of the cost of building a car comes from direct labor costs, according to Kim Hall, director of the Automotive Communities Program at the Center for Automotive Research (C.A.R. is a nonprofit research center with ties to industry, labor, government and academia).

Second, it’s expensive to ship huge numbers of big, heavy cars around the world, especially when fuel costs are high. Producing here saves companies money.

“All the automotive manufacturers in the world want to produce here because this is where they sell,” says Mark J. Perry, an economist at the University of Michigan-Flint.

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