From: hsd@swl.msd.ray.com (HERBERT DASILVA)
Subject: Re: What's the deal with Chrysler and Mitsuibishi
Organization: Raytheon Company, Tewksbury, MA
Date: Tue, 10 Nov 1992 18:09:36 GMT

smorris@sumax.seattleu.edu (Steven A. Morris) writes:

>In article <147520034@hplsla.hp.com> garyw@hplsla.hp.com (Gary Wong) writes:
>>
>>>  The Diamond Star cars are assembled in the U.S. from parts made in Japan,
>>>  like some Hondas and Toyotas.  Starting in '94, the Diamond Star cars
>>>  will have Chrysler built engines and transmissions in them.
>>
>>According to an "Automobile Magazine" article, a Diamond Star car gets 60% of
>>its parts from US suppliers.

>Yes, but be aware that Chrysler SOLD it's share of ownership in
>Diamond Star, and Diamond Star is now completely owned by
>MITSUBISHI... so, in order to raise short term cash, Chrysler sold
>it's future chare of profits on these cars, and when you consider that
>DIAMOND STAR will make the replacement for the LeBaron, they will make
>a significant share of the DODGE, PLYMOUTH, CHRYSLER and EAGLE models.

>Steve Morris, M.A.    : Internet: smorris@sumax.seattleu.edu

  I'm not sure I understand this line of reasoning.  Chrysler has sold
  their stake in Mitsubishi.  Chrysler is selling several products made by
  Mitsubishi and Diamond Star.  Chrysler just signed a $1.2 billion
  contract to supply engines and transmissions for Diamond Star cars (which
  will raise their domestic content over 80% and classify them as domestic,
  BTW).  Diamond Star will be building the new LeBaron and Daytona, which
  will actually have Chrysler engines and transmissions in them.  Chrysler
  will still be making a profit off each Diamond Star vehicle sold, as will
  the selling dealership.  So I don't understand how Chrysler sold its
  future profits.

  When we talk about the profits "going back to Japan", the water gets
  muddy.

  - When you talk about a Honda that is assembled here of mostly Japanese
  parts, the bulk of the cost of producing that vehicle, and the company's
  profit for selling the vehicle stays in/returns to Japan.  Not much of
  the actual cost of making/selling the car stays here.

  - When you talk about a Geo or Colt, again the bulk of the cost of
  producing that vehicle stays in Japan, but some of the profits from the
  sale benefit the domestic company.

  - When you talk about a car that is built here (> 80% domestc content) by
  a foreign company, the bulk of the cost of producing that vehicle stays
  here, but the profits from the sale may go overseas to the parent
  company.

  - Now, in the case of a Diamond Star car with a Chrysler engine and
  transmission, you have a complete split.  Some of the cost of producing
  the vehicle is incurred by each company, and may end up in the company's
  country of origin.  Each company gets to sell the vehicle and make a
  profit from it.

  Remember, a large part of the equation is the HUGE amount of cash
  required to design a vehicle and its sophisticated components.  If the
  vehicle is designed overseas, that money is employing and paying their
  college-educated labor force.  If the parts are made overseas, it is
  their machine tooling, steel stamping, and manufacturing base that
  profits.  If the car is simply assembled here, that is very small part
  of the whole cost.  And THAT'S the big push to have only vehicles with a
  certain percentage of domestic content be labeled "domestic", so that
  American design, manufacuring, and assembly jobs are preserved (or better
  yet, created), and so that a foriegn company can't design and manufacture
  all the parts overseas and then assemble it here and label it "Made in
  the USA".

  I may have strayed from the original intent of this posting, and this
  isn't a flame, but this import/domestic issue has gotten grayer and
  grayer over the past few years and doesn't appear to be getting any
  easier.  If you want to know where your dollars are going, you need to
  find out a lot more than where the parent company is from and where the
  cars are assembled.  End of tirade. :-)

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