During the recent financial crisis, the U.S. government took strong steps to keep the automobile industry alive.

Question:

During the recent financial crisis, the U.S. government took strong steps to keep the automobile industry alive. These efforts appeared to be a great success story, with record U.S. exports of automobiles in 2014. But U.S. manufactured cars are not what they were even 5 years ago. There has been an explosive growth in imports of automobile parts from outside the U.S. and Canada. Our “U.S. cars” have increasing amounts of foreign content.

Consider the Ford Fiesta. In 2010, 90 percent of the parts in the Fiesta came from parts suppliers in the United States and Canada. By 2015, that percentage had fallen to 55 percent. Other makes and models of cars experienced similar trends. The United Highway Safety Administration regularly reports this data for all light vehicles. As a result of these changes, cars are now more competitively priced for consumers and the U.S. is better able to export its cars and compete on world markets.

Yet, these changes have adversely affected domestic manufacturers of auto parts that now must compete with other countries to supply parts to the automakers. With lower wages abroad and sophisticated transport systems to deliver parts, U.S. parts manufacturers face global pressures, similar to workers in other industries. This is now a familiar consequence of globalization that affects virtually all industries. The automobile industry is not immune from these global pressures. Large manufacturers of auto parts have responded by globalizing themselves and producing parts around the globe.