Which vehicle is more Americana Chevrolet Silveradoassembled in Mexico or a BMW made in South Carolina?Today, the typical motor vehicle sold in North America ismade of components and assemblies imported from manycountries. A vehicle assembled in the United States mayhave an engine from Canada or Hungary or a transmissionbuilt in China, plus a body, chassis, interior and subsys-tems coming from yet other countries. For vehicles madeand sold in North America, component parts and assem-blies can cross borders several times. Each of these exam-ples is real, and they are endless. The country-of-origindoes not depend on whether you view the manufactureras an American company or not (after all Chrysler/Ramis owned by the Italians, Volvo by the Chinese, Jaguar andLand Rover by the Indians, Italian Lamborghini by theGermans, and many global automakers have an ownershipinterest in a foreign partner). Every company thinks andacts globally, is relying more on global platforms for itsvehicles, and builds its factories accessible to internationalsupply chains and close to its customers. This is evidentin the trend away from smaller, local or regional origi-nal-equipment manufacturers and toward a reliance onlarge global OEM companies that supply parts, assemblies,and automotive systems on a worldwide basis.

a. What factors do you think might influence a modernautomotive company in determining a location for anew plant? Access to low wages? A productive laborforce? Shipping costs? Political risk? Trade barriers?Discuss.

b. Assume the United States and Japan are unable toresolve a trade war over trade in automobiles and autoparts. Acting unilaterally, the United States imposes a35 percent tariff, or higher, on imported componentsand on vehicles with a final assembly outside theUnited States. What do you think the reaction wouldbe by foreign governments?

c. In the above question, who is being affected? Localmanufacturers? Dealers? Consumers?

d. Given that it can take billions of dollars and severalyears to build a modern automotive plant, how mightglobal manufacturers respond? Who might bear theimmediate costs?e. If U.S. tariffs were high enough to protect U.S. auto-motive manufacturers over a long period of time, howdo you think this might affect the long-term health and competitiveness of the industry? Could you seeany impact on the U.S. lead in innovation, design, andquality? Discuss