America: The Low-Cost Producer

Yahoo! News ^ | March 21, 2005 | Rich Smith

[Toddsterpatriot]

A funny thing happened on the way to dollar devaluation -- America, apparently, has become a source of cheap labor at least in currency exchange-rate terms.

According to a report from Thursday's Wall Street Journal, Japan's Nissan plant in Canton, Miss., will begin producing Quest minivans for export to -- get this -- China. Ha! And Nissan isn't even the first Japanese automaker to be producing cheap goods in the new Third World, for export abroad. Toyota and Honda are playing this game as well, producing thousands of cars in the U.S. for export to Europe, every year.

The Japanese majors -- as well as minor players like Mitsubishi (OTC BB: MMTOF - News) and Fuji Heavy Industries' (OTC BB: FUJHF - News) Subaru, both of which also expect to export from the United States -- cite various rationales for their actions. First, there's the low value of the dollar in recent months, which makes vehicles a bit more economical to produce here than used to be the case. Then there's the general belief that, after years of seeing GM , Ford , and DaimlerChrysler practically give their cars away, the near future may be a tough time to move product in the States. Better to produce some cars here and keep the plants up and running, the Japanese investors figure, than let them sit idle. And finally, there's the practical consideration that some Japanese models -- such as the Quest -- aren't even built in Japan. To sell them in China, you need to ship them from where they are built. Here.

All of this makes it harder and harder to remain a dyed-in-the-wool jingoist. I mean, do we want foreign companies to produce all their stuff abroad and export it to us? Or do we want them to buy and build assets in the United States, employ American workers, and buy auto parts here for local assembly? It seems like only last week that we were complaining about the former, yesterday about the latter, and sometime around breakfast this morning about U.S. companies sending U.S. jobs offshore. Now it's the job-stealing foreigners who are saving the day by hiring Americans to produce cars here, for sale elsewhere?

It's getting to where a Fool has to wonder whether it's even possible to "buy American" anymore. Perhaps -- just perhaps -- we should abandon the increasingly fictional notion that it can be done and just buy whoever makes the best stuff for the best price, for the sake of ourselves and our portfolios.

Fool contributor Rich Smith owns no shares of any company mentioned in this article.

[expat_panama]

I hear you saying that foreigners are intentionally selling their stuff to us at a loss so as to lower the value of the American dollar.  Is there any chance you might have:

   --- the actual name of a foreigner or foreign company that was selling a good or service at a loss,

   --- the price the foreigner paid and the price he was selling (to show a loss)

   --- some statement or other showing that the intent was to sell at a loss so as to lower the dollar's value.

   --- the date(s) that the sales were made so I can check to see how the exchange rates changed those day(s).

[Brilliant]

I'm not saying they are trying to reduce the value of the dollar. I'm just saying that they ARE reducing the value of the dollar vis-a-vis their own currency. Clearly they are absorbing a loss because when the value of the dollar goes down, there is virtually no reduction in the price that they charge for a new Nikon camera, even though the value of the dollar has declined. Since they are getting the same number of dollars, and the dollar is worth less, they are absorbing the loss. They think they are helping themselves by doing that, but in fact they are just assuring that the dollar will fall further, adding yet again to the loss they must absorb in order to avoid increasing their prices.

[q_an_a]

that was certainly an interesting time, but was not the role of America much similar to Canada today or the third world countries where we exported raw materials for finished goods? even the cloth factories of New England had a much later start with the first one opening in 1789 and the hay day 30 years later.

[RightWhale]

Canada was similar although not so gifted with great farmland. They had a monstrous seaway with the Saint Lawrence River. The Lousiana Territory the same with the Mississippi River. Both those territories denied the use of the waterways to the US, which was one of the reasons Jefferson went ahead on his own as Chief Exec to acquire the Lousiana Territory when it was available. The Lousiana Territory had earlier experienced a massive economic failure called the Mississippi Bubble, the first Bubble so called, which destroyed the investment economy of France and contributed to Montesquieu's thinking that was later partially adopted in writing the Constitution.