“Buy American Trucks” – Hypocrisy At It’s Finest
Jason | Aug 28, 2009 | Comments 48
We’ve all heard someone say that you shouldn’t buy a Toyota because “all the profits go to Japan.” Talk about hypocrisy. People think it’s wrong to support a global car company that’s spent $20 billion building plants in the USA over the last 20 years, yet they willingly fork over their dollars to bankrupt GM and Chrysler so they can “buy American.”
Here’s a newsflash for all you “buy American” hypocrites: Toyota’s profits on one truck sale pale in comparison to the amount of money YOU send overseas every year. The fact is, we’re all sending thousands of dollars a year in profits to foreign companies – regardless of the type of vehicle in the driveway. Take a look:
First, let’s talk about the Tundra. If you buy a new Toyota Tundra for $30k, here’s where the money goes:
Toyota profit as a percentage of vehicle revenue.
The auto dealership keeps about 4%, or $1200. [NADA average dealership profile May 2009]. The people who ship the vehicle from the plant to the dealership pocket some money, there are some miscellaneous document fees, some gas to buy, etc., and we’ll say that stuff only costs $800 (the bulk of which is a destination charge). That leaves $28,000 in revenue for Toyota.
For argument’s sake, let’s ignore the fact that Toyota (like most automakers) lost a fortune last year and look at numbers from 2005 instead. Toyota earned $12.1 billion in profit in 2005, so let’s use those outrageously profitable numbers to figure out how much money could go overseas in a worst-case-for-America-best-case-for-Toyota situation.
According to Toyota’s 2005 financial report (see page 12), 10.8% of revenue went to general administrative and selling costs (i.e. marketing and advertising), 78.2% went to the actual production costs, and then another 4.7% went to miscellaneous expenses like interest payments, taxes, etc. In 2005 – the best year in the history of Toyota – only 6.3% of revenue was actually “profit.”
In other words, based on the best-case scenario $1,764 of our $30k Tundra is profit for Toyota…but really that’s only a guess. Toyota’s average numbers (as reported above) include every vehicle sold, from their super cheap micro cars sold in developing markets to their mega-expensive Lexus products. For the sake of argument, let’s go ahead and round our estimate up and say that Toyota makes $3000 on every Tundra they sell.
Now don’t tune out yet. According to Toyota’s most recent stockholder overview (shout out to commenter Brian for finding that link), 24% of Toyota stock is held by non-Japanese entities. 35% of Toyota stock is held by big banks – including JP Morgan Chase, State Street Bank, and Mellon New York. If we assume that about 20% of Toyota stock is held by American-owned companies (a guess, but it seems reasonable), then really only 80% of the profits go to Japan…20% comes back to US mutual funds and stockholders.
That means that a new Tundra – in the best Toyota sales year of all time – likely only nets Japan $2400. Considering that the average American buys a new car every 5-7 years, that’s about $400 per year that we send to Japan when we buy a new Tundra truck (give or take). Sound like a lot? Check this out:
The average American household spends more than $1200 a year on foreign-made electronics.
1) The average American household spends $1200+ on consumer electronics every year. We all know that few (if any) electronics are made in the USA, so a big chunk of that money definitely leaves and never comes back. For arguments sake, let’s say that half of that amount is captured by retailers in the US and that only $600 a year is sent overseas on consumer electronics…that’s more than a new Tundra.
bebe designer jeans retail for $99 (or more) and are made in Mexico
2) The average American household spends $1881/year on clothing and apparel (cool chart, btw). Much like electronics, almost no clothing is made in the USA. Some estimate that 97% of all clothing is made outside the US. If we assume only 30% of the amount spent on clothing goes overseas and never comes back, over 5 years the average American household sends more money overseas buying clothes (more than $2,800) than they would have sent buying a new Tundra.
3) The average American household spends $2,384 per year on gasoline and motor oil. Guess where oil comes from? Overseas. If we assume that only half of that expense goes to Venezuela, Mexico, Canada, Nigeria, Saudi Arabia, etc., after 5 years the average American household will have sent more than $6,000 overseas buying oil.
Toyota's San Antonio plant from the air.
4) Let’s go back to our Tundra profit figures. In 2007 Toyota (and affiliated suppliers) made a total investment in San Antonio of more than $1.2 billion (see timeline). How much profit is Toyota really making on the Tundra? The San Antonio plant has made somewhere between 300,000 and 350,000 trucks over the last 3.5 years…there’s no conceivable way that Toyota has recovered their $1.2 billion investment yet.
So here’s the bottom line:
1. People advocating that we should all “buy American” don’t understand global economics. If they did, they would recognize the problem isn’t with the Tundra…it’s with foreign oil and our society’s infatuation with consumer products we really don’t need (flat-screen TVs and designer jeans, for example).
2. Toyota is a global company. Despite the fact their name is Japanese, they make cars in the USA, they have US workers, and the Tundra is actually “more American” than the Dodge Ram or the Chevy Silverado.
3. A lot of the “buy American” sentiments are based on fear. Toyota isn’t bad for the U.S. economy – no company that builds 1.1 million cars and trucks in the USA is bad for America. If you want to call out Toyota because “all the profits go to Japan,” you need to call out yourself too.
Comments?
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Filed Under: Auto News
I saw the bebe jeans ad and forgot what I was supposed to be reading! Good article, Jason. I agree that America has raped herself of the textile industry. The last Levi’s Jean Factory in the U.S. closed a few years ago (it was based in San Antonio, TX…wonder how many of those employees now work at TMMTX?). It is unfortunate that cheap labor overseas has forced American complanies to outsource jobs. So it is reassuring that in fact Toyota, a Japanese company, is actually CREATING jobs in America while most are laying off (NUMMI closure notwithstanding). However, I would have loved an analysis of how much profit from Ford, GM, and Fiat-Chrysler go overseas fora more complete comparison.
Great article. I couldnt agree more. It really is hypocrisy at its finest, and a waste of time whining and complaining when there is a lot of good that comes out of buying japanese!
Brian – Thanks man. What started out as a simple breakdown of some math from the link you gave me ended up being a 1000 word blog post – thank you. I like your idea of putting together one massive comparison too – especially if I factored % domestic content into the mix…
I feel the need to go buy more jeans.
Looks like Toyotas reinvestment back into America is more than modest. Toyota has a very large stake riding on Americas success as a market.
Jeremy: You are right, my friend! North American sales made Toyota the number one company in sales globally! Success or failure in America means success or failure globally. Just look at GM! Success in China, but failure in America = bankruptcy. Jeans anyone?
The more money we send ‘over seas’ the less we have in our economy for ourselves. think of it as two airtanks under water if we graudualy give air to one tank over the years the second will soon run low. Also if the air (money) is low there will be less and less hiring in America such as we see today. Our Economy has never been the same since the 50’s when made almost everything for ourselves and keeped the money in the US. A family could be supported from one job that a guy could get out of highschool. No more of that becuase our econmy is getting smaller every day, we can only print so many dollars before they all have no value.
Even more so, America is about FREEDOM, and that includes freedom to choose to drive whatever vehicle you want that is available for sale. America is about free markets and fair competition (however the gov’t has been known to hinder free markets). So I agree that it is totally American to buy a Tundra, or an Audi, or a Bentley or whatever the heck you, as a tax paying FREE AMERICAN decide that you want to buy. After all, if no one was buying foreign cars, the domestic manufacturers would have no reason to improve their products.
Very bad example. Let me fix that for you. You have 2 air tanks under water.
The American Tank and the Japanese tank. There are hundreds of air hoses some have no leaks, some have bad leaks. If I use the Tundra hose it puts 100 cfm worth of air into the tank but the hose leaks 6 cfm of that air into the Japanese tank. Whose air tank gets the bigger boost? Oh, btw, The Japanese tank put in 50 cfm of Japanese Tank air so that the tundra air hose could be built. Honestly, it is STILL a bad example but it is closer to reality.
The US Economy is shrinking due to many reasons but Foreign cars made in the USA is not one of them. The real economy runs on employed people and small businesses. If vehicle b is made by Americans who work…it boosts the economy. If car b is made by Mexicans with American made parts it is a a small boost due to the parts being made here but if domestic content is too low it could be a drain. If the car is made in JApan with Japanese parts by Japanese people and it is bought here it is a drain on our economy.
The Tundra is a boost to our economy.
Great article Jason! Keep it up.
I still feel as though I need more jeans. This is odd.
And I agree with Brians first statement. I would love to see a “Where the Moneys Goes” comparison for the major automakers.
IF I can’t see that I would like to see the rest of the Bebe Jeans Ads. Large format. High Def.
Very good Jason. That about sums it up.
It is said as one would expect to see so many products MADE overseas and shipped INTO the USA. At least the Tundra is made in the USA unlike so many other vehicles like chevy silverado’s built in Mexico or Canada. I work for a very large mail order company part time and just 10 years ago the company and so many of the sub-companies spin offs of the main company made FOOD made right here in WI making up about 75% of their sales base. Now, about ONLY 20% of sales is FOOD based made right here in WI and surrounding US cities and ABOUT 80% sales/product is NON-FOOD and NOT MADE IN THE USA, BUT CHINA/INDONESIA/SINGAPORE/THAILAND, etc. and shipped to our building in WI to sell. If people stopped buying this crap that is so cheaply made and junk, then hopefully the food side would increase as it should since the food is good quality and the non-food clothing is crap that people must be buying because it sells and makes the company profitable. It turns my stomach that so much non-food overseas made product is selling so well here in the USA, but I guess without it, I would not have a job. It does not make me happy, but at least it is a job for what it is worth.
very few silverados are made in mexico the mojority are made in Flint Michiagin. Also even though the tundra is made in the US the price of the Tundra includes paying for the labor and is included in the price of the truck so it is not bringing money to the US in fact buying anthing foreign sends money out of our economy.
damikco – Crew cab Silverados are produced in Mexico and Canada while extended and regular cabs are produced in MI. The majority of non-contractorvehicles (personal trucks of which most people buy crew cabs to haul their kids, and what I would personally want to meet my needs) then would be assembled in Mexico or Canada. Buying a Tundra sends money out of our economy? Tell that to the 2,000 employees at TMMTX where all Tundras are produced, or the employees at Bodine aluminum where engine blocks, transimission housings, and other parts are made, or TMMAL where the engines are produced… See my point? Lots of American jobs, and Americans with jobs buy things in America which stimulates the American economy. How many Ford, Chevy, and Dodge engines/trannys are made outside U.S. borders? Here’s a look: http://www.gminsidenews.com/in.....gine_Guide and here http://www.gminsidenews.com/in.....rans_guide
Jason – thanks for the shout outs! Would love domestic content factored into the mix on a follow-up comparison! Check out this website: http://www.levelfieldinstitute.org/ Its pretty easy to blow holes in this website’s claims, but it might give you a look at how the other side views domestic Toyota/Honda/Nissan production. Like I said, it has TONS of inaccuracies on it. It is interesting nonetheless…
Damikco, repeating it doesn’t make it a fact. Let us test your method. The sky of a weasel. The sky is a weasel. The sky is a weasel. LEt’s go check…..NOPE…still blue. Wait….OH NO..BLUE WEASELS!!!!!
You are the definition of Epic Fail. The labor cost for the Tundra GOES TO AMERICANS. That is the point. Buy Hooked on Phonics and READ the facts. The fact that ANY of the silverados are made in Mex is a HUGE black mark against GM. I didn’t know GM was building the trucks outside the US. NONE of the Tundra’s are made outside the US and the Domestic parts content is HIGHER than the Silverado. MORE money stays HERE.
Damikco you still didn’t explain you have more foreign built parts than the Tundra. So again along with Mexico as a builder of your truck you have money going outside of the good ole USA. Now who is the hyprocrit? 30% of your parts are foreign. That with Mexico building some of your trucks how much do you think is going to a foreign country?
Damikco – Did you read the article? We show you exactly how much money leaves the USA as a result of one Tundra sale. They we show you that it’s less than most people send overseas buying electronics, clothing, and far less than what people send overseas buying gasoline. The point here is really simple: compared to what YOU AND I are doing everyday, buying a Tundra isn’t too bad.
Thanks Mickey, Jeremy, Brian, and everyone else. As requested, I’ll start working on a big “where the dollars go” truck-to-truck comparison. It will take a little time to put together, but I think it will be fun.
One more thing – if you guys like this post, please bookmark it on Digg, Delicious, Stumble, and any other “social bookmarking” site you like to use. Feel free to start a thread on TundraTalk, TundraGeeks, TundraSolutions, or any other forum that you frequent. Anything you can do to boost readers will make it easier for me to devote more time to this site! Thanks!
Will do……………….
Don’t envy you in researching all that stuff. I’m sure we will get a great debate over it. Looking forward to it.
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Thanks man! It’s fun, but it’s a killer on my time…not that I’m complaining!
Jason, we all appreciate what you do. You rock!
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Thank you!
Great article, as always, J! And great feedback from the posters. Another point to make on buying non-American….a lot of the food we eat is imported. There’s no reason we cannot have a global economy. Think of it as a 5-yr note on food at $30K total…..what’s worse? A Tundra or everyday food consumption?
Good call TXTee. I looked into produce, but I had a hard time finding concrete numbers…I would imagine that several hundred dollars a year go out the door of the average American home for fruits and vegetables grown on foreign soil, but I couldn’t find any evidence.
BUY AMERICAN KIWI FRUIT! and BANANAS. And Televisions! Doing anything else is a Socialistic evil murder to Lady Liberty.
HA HA AH HA
Couldn’t get it on Tundratalk.net. Got banned last week after being on there for 2 years and 10,000 posts. I will go on there if I have to under an alias.
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That’s sad that you were banned from TT. I can’t think of anyone I know of being banned here. Jason is more of a free speach and let ideas flow kinda guy. That is a good because I’m a Free mocking kinda commenter. If he started banning the idiot trolls my life would lose all meaning….from 9 to 11 most nights. To get banned here I think you would have to post a video of killing someone on the hood of a Tundra then write “Toyota Sucks” in their blood on the side of the truck. Nah, That would probably get the video removed, a stern warning, and a friendly visit from the local Police. 20 to life is close enough to banned.
There is but one true key to lasting success. If you find it, PLEASE let me know what it is.
Jason I guess they Un-Banned me so I got you covered on 8773 and on IBTO 8701.
Mickey – Awesome man – thanks for doing that.
Jeremy – I’m a let if fly kind of guy. Mark likes the crazyness too, but he doesn’t like to comment.
Jason you are getting great comments on this subject in both clubs. Alot of them in TT. No one actually knew about it so the comments are coming in. A few of them even printed it out to show their buddies who drive Ford’s and Chevy’s. So you know how that will go.
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When I started reading this I was under the impression you were going to prove the profits of Tundra sales were not going to Japan. After reading this I’m now led to believe the profits of 6.3% do indeed go to Japan. Now I’m really confused. Does anyone know if Ford profits stay in the USA or do they go elsewhere?
Mickey – Thanks to your hard work a lot more people know about the post – thank you!
Chosuke – Two things. First, the 6.3% is a best-case figure. If you read the article again, you’ll see that it’s far more likely that buying a Tundra results in little or no profit for Toyota. Second, even if our best case estimate is correct (we rounded the 6.3% figure UP to more than 12%), it’s not that much money compared to the amount that a typical US family sends overseas every year. If it’s bad (and who’s to say), it’s not THAT bad.
Jason put it out on another Tundra club #8800.
Mickey – Good work man – thank you.
OK Jason, Thanks.
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Jason, they are at it again. Check this out from CNN.
http://money.cnn.com/2009/10/1.....tm?cnn=yes
Yes there it is – the Tundra being compared to the Chevy…and the Tundra has more domestic content. Weird!
You cant get mad because Toyota makes a great all around truck! Everything about the IFORCE is amazing. Its just as Econimical as a Ford F 150 with the 5.4, but has a 5.7! Toyota’s last forever. I still have my 92 4 runner with 385000 miles and it dont miss a beat. I have owned a F150, Ram 1500, and a Sierra 1500. They all let me down. weather it was the Triton V8 or the Vortec.
And before you start talking about giving other countrys more money, think about where fords and chevys, and dodges are built. Yes, Manufactured in the US, but where do they get there forged metals?, there plastics?, just about everything on those trucks are made from parts which were made in other countries.