Friday, February 11, 2011

Should You Buy An American Car? Probably Not.

Buying a car is a major financial expense.  You should buy the best car for the dollar, and unfortunately, in most cases, that is not going to be an American car.

When I was on the way to work one day at GM back in 1980, there was a commotion at the front gate of the plant.  A group of workers was standing around smashing a Toyota Corolla with sledgehammers.
"What's going on?" I asked.
"We're smashing this cheap piece of Jap crap!  That will show those Japanese!" one of the workers replied.
"Oh, right," I said, "How about getting back to work and not sabotaging the assembly lines instead?"

That was 30 years ago, and not much has changed in "heartland America" where crappy cars are viewed as "just as good" as "rusty Japanese crap".  And many folks still believe the mantra of "buy American" even if the car they are buying was built and designed overseas, or has most of its parts made overseas.

And since then, the chickens have come home to roost in the US car business.  GM had a market share of 60% when I was there.  Since then, it has declined to less than half that - and has gone bankrupt.  And much of this was because they made cars no one wanted - even at steeply discounted prices.  People would rather pay more for a nicer car, and GM never got that.

Buying a Chevy Aveo on the grounds it is an "American Car" is somewhat suspect, when the car is based on a Daewoo.  The truth of the matter is, today, that most cars have international content and chances are, your "foreign car" may have more domestic content than an "American" car.

Both of my BMWs, for example, were made in Spartanburg, South Carolina with many of the components, including stampings, made nearby or supplied by US suppliers.

So who is beating the drum for "buy American" still?  Well, you guessed it, the Unions.  The Unions were responsible for saddling the Big-3 with onerous work rules, high wages, sky-high benefits and other rules, which aided by inept management, bankrupted 2 of the 3 US Automakers and nearly drove the third under.

But regardless of the history or causes of the downfall of the "big 3" you have to look at the products from a logical point of view - which product provides the best overall ownership cost and experience?

And in most cases, foreign makes win, for a number of reasons:

1.  Depreciation:  US Cars depreciate like mad.  Part of this is that they are priced with joke prices on the windshield sticker, that no one ever pays.  When someone offers you $5000 or $10000 off the sticker price of a new car, you have to wonder what they are thinking with their sticker prices.  But even taking into account the lower prices most people pay, American cars are more likely to be worth far less than their foreign counterparts after five years of use.  This means that over time, you will spend more on the car than you would on a foreign car - even if the foreign car costs more.

What does this ad say to you about American vehicle sticker prices?  That GM makes a lot of money selling empty steel boxes lined with cheap plastic.   And yes, a friend of mine has this exact same truck and that is about all it is.

And the reason why this is so is that the market has spoken, with regard to the desirability of US-branded cars in the resale market.  Fewer people want them, as they are perceived as lower quality, unstylish, and having poor gas mileage.  And for the most part, although markets can be dead wrong many times, they are right on all counts here.

A used Toyota is a good value, whereas a used Chevy has its best years behind it.

2.  Quality:  While "great strides" have been made in the quality department since the dark days of the 1970's, no matter how much better the US-makes are, the foreign makes, by and large, seem to stay on top.  So yes, a GM car of today is better than one of 10 years ago.  But that ain't saying much!

Quality matters, as it is an indicia of how much you will spend on a car in repairs, over time, which can be a big factor in the ownership of a car for 5, 10, 15 or 20 years.  One reason many "buy American" types don't understand the quality issue is that they churn their car inventory often.  And this goes back to the 1950's and earlier, when the "big 3" carmakers adopted a policy of planned obsolescence.  The idea was that it was cheaper to build a car than repair it, so why bother trying to make a car last forever?  Just get a new one every 3-5 years and be done with it.  And when a new full-sized Chevy was less than $1000, it made sense.

But today, cars are far more expensive - any reasonable ride is $20,000 or more, often far more.  And so you have to keep a car for 10 years just to justify its cost.  And with a commitment that long, can you afford to take a chance on some dodgy carmaker (no pun intended?).

3. Style:  American cars are plug-ugly, to be sure.  While they are trying to improve this, it will always be the case.  The Big-3 are located in Detroit, which is in the midwest of America, where strip malls, orange cheese, and bad food predominate.  As such, things like opera windows, landau roofs and white wall tires still carry great currency out there - and many folks add this junk to their cars at the dealer, if the Big-3 won't offer it.

Ordinarily, I would say style is far down on my list of important considerations.  But again, if you are going to have a car for 10 years or more, you want it to be stylish.  My fleet of BMWs, which is now down to just two, all were over 10 years old.  Yet when I would show my 13-year-old 1997 cabriolet to someone, they would think it was a new or late-model BMW.

Timeless styling that won't be obsolete in a year or two is relevant if you plan on keeping a car for a decade or more.

The other aspect of style is class, and American cars just don't have it.  If you drive an American car, you will be viewed as slightly stupid or poor.  Yes, that sounds harsh, but it is the hard reality of it.  From a socioeconomic viewpoint, the demographics of American car owners are, well, downscale.  And yes, we are all status-seekers.  American cars simply aren't bought by smart people.
Smart people and wealthy people just don't buy American cars, period.  When I lived in Washington DC, it was funny, as oftentimes sophisticated people would go to work for a think tank or a politician, and because of politics, be forced to buy an American car.  If you work for a US Automotive lobbying firm, it is sort of a job requirement.  And many of these folks talked about the agonizing decision they had to make - trading in a Mercedes for an American car.  It is definitely a downgrade.

4.  Price:  In the old days, back in the 1970's and 1980's, "Cheap Japanese Cars" cost less than American cars.  Disgruntled auto workers complained that they "could not compete" with these cheaper makes, as their overhead costs were more in America.

Then a funny thing happened in the late 1980's and early 1990's.  Japanese cars started becoming more expensive than American cars.  And not only did sales not slow - they took off!  BMW and Mercedes always had higher costs than the Americans, and yet they have had robust sales over the years.  You'd think it would be just the opposite.

You see, Americans are fairly wealthy people and they want good cars.  The Big-3 responded to competition by trying to cut price - and de-contenting cars as a result.  So with an "American" car, you get acres of cheap plastic dashboards, uncomfortable seats upholstered in mouse fur, and just a plain old cheap feel of quality.  You get what you pay for, and what you get ain't a lot.

And it is a common complaint.  The Corvette is a reasonably competitive sports car, and yet every auto reviewer dings the interiors as cheap and tawdry.

Again, the low price feeds into the planned obsolescence thing - pay less for the car, then toss it away after a few years.  But if you want to keep a car for a decade or more, this works against you.

5.  Fuel Economy:  American cars are gas hogs, period.  During the dark days of 2008-2009, Ford, GM, and Chrysler sold cars with really crummy gas mileage - and didn't even offer smaller, more efficient engines.  Since then, they have magically rediscovered the secrets of rational gas mileage, but still lag behind their foreign counterparts.

Again, if you are going to keep a car for a decade, you can't gamble on a gas hog.  As we've seen in the past, $5 a gallon gas can strike, without warning, overnight.  Buying a car is a decision you should not take lightly, and gas mileage is one of the big things to consider.

* * *

Of course, this is not to say that all foreign cars are better buys than all American cars.  You have to research each car, compare it to a comparable counterpart, and make a rational decision.

But that's the key right there - rational decision.  Buying a car because of a jingoistic slogan or "brand loyalty" ("I've always been a Chevy man!") is nothing short of idiotic.  While you may be loyal to a brand, trust me when I say the brand is not loyal to you.  No one at GM runs around wearing a hat with YOUR name on it, so why should you wear one with theirs?

So what kind of car would I buy today?

Despite all the hoopla about "unintended acceleration" Toyota still makes a heck of a car, as does Honda.  Nissan is a distant third, which is reflected in their far lower prices.  Other Japanese makes, like Mitsubishi and Isuzu, I would just plain avoid.

The Koreans are closing in on the Japanese in terms of quality, and many of the Hyundais and Kias (the same company) are fairly well-made cars that are selling for far less than their Japanese counterparts.

European cars are a mixed bag.  Mercedes and BMWs are complex cars and not for the faint of heart.  BMWs in particular are a boutique car and are made in small numbers.  Volkswagen has long had a quality problem with its reputation. However, their 100,000 mile warranty and improved quality has offset this somewhat.

But what about the Americans?  What about them?  I try to get excited about American cars, but it is akin to faking an orgasm.  The new Taurus is an utter load than looks like a loaf of bread going down the road.  The Ford Fusion is a big seller, but nothing that excites me personally or would turn me away from a comparable Camry.  The new Ford pickups look better and get better mileage than the older ones.  But that's not saying much.

GM really has nothing interesting to offer.  While the Cadillac line is trying to go after BMW, their bizarre slab-sided and creased styling is a love-hate affair.  And cars like Camaros and Corvettes just reek of disco nights and gold chains.  The Camaro in particular is a disappointment, as it looks like a portly 50-year-old trying to fit into his high school prom tux, with all that implies.  It may have 400+ HP, but it is a heavy, large car (the other retro muscle-cars, the Mustang and Charger, suffer from the same problem - they are huge, heavy, slow, and handle poorly.  Throw in crappy build quality and a cheap plastic interior and what's not to like?)

The Chevrolet Cavalier/Cobalt/Cruz has always been a fairly reliable small car from GM, but it is a small, cheap car, perhaps good for only 150,000 miles or so.  While it is not a bad car, a Toyota Corolla, while more expensive, would probably be a better choice.

Buick has an attractive-looking SUV, also available in Chevy and GMC trim (with the Chevy being the ugliest of the lot, apparently to intentionally distinguish it from the Buick as a lesser make).  But I am not sure I want to plunk down 30-40 grand on a corporate 3.8 V-6 and the "same old, same old" under the hood.

GM used to have an interesting twin-cam inline six with variable valve timing - an engine that could have come out of a BMW.  But of course they killed it off, along with the Trailblazer (the only car they though it would work in) due to cost concerns.  GM went back to its old ways - and its generic 3.8 liter corproate V-6, and engine designed to be built inexpensively.

And don't get me started on Dexcool.  Google Dexcool and "Class Action Lawsuit" sometime.

Of course, GM used to have a lot of brands - and they were all discontinued and not because they were too popular.  Oldsmobile, Pontiac, Saturn, Hummer (ugh!) are all gone now, and most of the cars made in the last few years were forgettable clones of Chevies.  We stopped believing that the brands were any different long ago.  In fact, GM has been selling "clone cars" since the 1950's.  "Brand Engineering" they call it - adding a doo-dad to an Oldsmobile to make it "unique" from a Chevy.  It never worked.

Q:  What's the difference between a BMW and a Pontiac?

A:  They still make BMWs.
I am not being flippant with that joke - it illustrates the problem with GM.  During the last two decades, Americans showed that they wanted better cars, and sales of foreign makes, including high-end Mercedes and BMWs took off.   BMW remains the most profitable car maker on the planet, selling very expensive and esoteric cars.  People WANT good cars, not cheap ones.   GM, meanwhile, decided to "de-content" their cars and make them cheaper and sell them on a price point - often to rental car fleets.

If you went into an American car showroom with $50,000 to spend on a luxury car, chances are, they didn't have anything that expensive - or anything that nice.  And as many of us learned, a used Mercedes was often a better bargain (and a nicer car) than a new American anything.

GM's response to the threat of imports was to put plastic body cladding on a Chevrolet and add a faux BMW grill and sell it as the "we build excitement" car.  Unfortunately, as a front-wheel-drive econobox chassis, most of their cars handled horribly and were poorly made.

The one possible exception was the Pontiac G8, which was a real contender into 5-series territory.  But few people would venture into the Pontiac showroom to look at one, given the nature of the rest of the cars.  And moreover, GM's proclivity to boy-racer hood scoops and body cladding gave the car a juvenile air.  It was one of those "what if?" kind of cars.

Chrysler has always been viewed as the least of the big-3, and that is quite a stigma.  Dodges are cheap and the people who buy them are poor, so they tend to like things that make a lot of noise, look tough, come in loud colors, and sound like they go fast.  Yeee-Haw! Dodges are cars right out of The Marching Morons.  (That Sci-Fi story describes a dystopian future where most of the nation is reduced to the level of idiocy, due to the fact that poor people breed more.  Flashy loud cars with speedometers over-calibrated to make them seem to go faster than they are, are sold to the great masses, who whoop it up over their loud tailpipes and gaudy chrome trim.  Sounds like a design spec for Dodge, no?).

And sorry, no.  I don't want to own a "Yee-Haw!" car at this point in my life.  But that doesn't mean I want a beige Malibu either.  The Big-3 seem to offer nothing in-between.

These are the sorts of idiots who buy a crew-cab dually Ram pickup to commute to work in and then bitch about the price of gas.  These are the sorts of idiots who will buy a car if you put a "Hemi" badge on the side of it, even if they don't really know what it means.  And unfortunately, Chrysler has the worst quality reputation of the big-3. Dodges just don't stay on the road.  With the buyout by Fiat, they may come up with better platforms down the road, however they do have a branding issue.  Mainstream America just isn't going to buy a car that Brandeen in the trailer park thinks is "real nice".

The Chrysler mini-van once defined an entire market segment.  And while Chrysler has struggled to keep up (after Ford and GM dropped out) Toyota and Honda have both taken that market segment to a whole new level.

The Jeep, of course, is an iconic vehicle, and they are fun and well made, for the most part.  But as I noted in another post, they are small, cramped, uncomfortable, expensive and have atrocious gas mileage.  A fun toy, yes, but a practical car to own, not really.  Think carefully before you impulse-purchase a Jeep.

If this sounds like I am down on American cars, it is because I am.    And if that sounds harsh or offends you, well, sorry.  But I can't pull punches in this blog to try to be "nice" and sugar-coat things.  Buying an American car is just a horrible financial mistake, and I say this out of years of experience and having owned 30 or more cars.  In every case, the Japanese cars I bought depreciated little, were highly reliable, and had a better fit and finish than their American counterparts.  And in nearly every case, every American car I've had has been a mistake from the get-go, depreciating rapidly and not running reliably.  And since I work on my own cars, I can see, when taking them apart, the difference in Engineering between a Toyota, a Chevy, a Ford and a BMW.  And unfortunately, the American makes lose every time.

The next time you are in a parking lot, look at the size of the brake rotors on any American car - even a Tahoe or a Corvette.  Then look at a BMW.  BMWs and Mercedes have real brakes!  The brakes on the American car look tiny and cheap because they are - and that says volumes about where the priorities are in the construction of American cars.  Maybe it is just me, but larger brakes beats "on star" any day.

American cars are just boring, ugly, poorly made gas-hogs.  American carmakers are still biased toward the highly profitable SUV and mini-SUV type vehicles (Dodge converted their entire lineup to this type of car, just prior to bankruptcy).  While an SUV can be handy on occasion, one does tire of driving around in a big empty box and getting crappy gas mileage.  And let's face it, very few of us really need four-wheel-drive.

Unfortunately, both the Americans and the Japanese have abandoned the "station wagon" market, leaving it to largely the Germans (VW in particular).  IN this regard, the Japanese are following the sins of the Americans, by offering nothing but sedans and SUVs, with nothing in-between.  And as the Japanese have gone "mainstream" in the US, their product mix has become increasingly more like the big-3, with larger cars, bigger engines, and worse gas mileage (a Toyota Tundra gets 13 mpg in the city!). I blame it on Toyota's entry into NASCAR.

But even then, the Japanese still offer better value than their American counterparts - at least at the present time.

I hope not to have to buy a replacement car for 5-10 years or more.  At that time in my life, my car needs may change dramatically, as I will need only one car, perhaps a small wagon to get around, travel, and occasionally haul things.  American carmakers don't make that - at the present time.

And what will be on the market in 5-10 years will be anyone's guess.  But whatever it is I buy, I will likely have it for 10 year or more, so it will be a very careful decision I make.  And I suspect as more Baby Boomers approach retirement, they too will be scrutinizing this decision very carefully.  No one can afford to just buy a car on impulse anymore, I think.  The stakes are too high.