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Evaluation of the American Automobile Labeling Act

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Evaluation of the American Automobile Labeling Act People Saving People U.S. Department of Transportation http://www.nhtsa.dot.gov National Highway Traffic Safety Administration DOT HS 809 208 January 2001 NHTSA Technical Report Evaluation of the American Automobile Labeling Act This document is available to the public from the National Technical Information Service, Springfield, Virginia 22161. The United States Government does not endorse products or manufacturers. Trade or manufacturers' names appear only because they are considered essential to the object of this report. Technical Report Documentation Page 1. Report No. 2. Government Accession No. 3. Recipient's Catalog No. DOT HS 809 208 4. Title and Subtitle 5. Report Date EVALUATION OF THE AMERICAN January 2001 AUTOMOBILE LABELING ACT 6. Performng Organization Code 7. Author(s) 8. Performing Organization Report No. Juanita S. Kavalauskas and Charles J. Kahane, Ph.D. 9. Performing Organization Naae and Address 10. Work Unit No. (TRAIS) Evaluation Division, Plans and Policy National Highway Traffic Safety Administration 11. Contract or Grant No. Washington, DC 20590 12. Sponsoring Agency Name and Address 13. Type of Report and Period Covered Department of Transportation NHTSA Technical Report National Highway Traffic Safety Administration 14. Sponsoring Agency code Washington, DC 20590 15. Suppleoentary Notes 16. Abstract Congress passed the American Automobile Labeling Act (AALA) to help consumers in the selection of new vehicles by providing information about the country of origin of vehicles and their parts. Passenger vehicles manufactured after October 1, 1994 must have labels specifying their percentage value of U.S./ Canadian parts content, the country of assembly, and countries of origin of the engine and transmission. The evaluation is based on a consumer survey to see if new-vehicle purchasers know about the labels, understand them, and/or use them to help select a vehicle; manufacturer and dealer surveys to learn about their response to the labels; and statistical analyses of the actual trends in U.S./Canadian parts content in new motor vehicles after 1994. Over 75 percent of consumer survey participants, even those that care deeply about "buying American," were unaware of the existence of the AALA labels. Many participants who did read the label said they used the country-of-assembly information, but none said they used the numerical U.S./Canadian parts content score or the engine/transmission information. Overall U.S./Canadian parts content in new cars and light trucks dropped from 70 percent in model year 1995 to 67.6 percent in 1998; however, it increased from 47 to 59 percent in transplants while dropping from 89 to 84 percent in Big 3 vehicles. The trends in parts content are undoubtedly influenced by the 1995 U.S.-Japan Agreement on Autos and Auto Parts and the North American Free Trade Agreement (NAFTA). 17. Key Words ' 18. Distribution Statement American Automobile Labeling Act; AALA; survey; domestic content; NAFTA; trade; import; statistical Document is available to the public through the analysis; evaluation; transplant; econometrics; National Technical Information Service, Springfield, consumer information; market analysis Virginia 22161 19 Security Classif. (Of this report) 20. Security Classif (Of this page) 21. No. of Pages 22. Price Unclassified Unclassified 245 Form DOT F 1700.7 (8-72) Reproduction of completed page authorized TABLE OF CONTENTS Executive summary v 1. Introduction 1 1.1 Evaluation of the American Automobile Labeling Act 1 1.2 Other programs and factors influencing parts content and assembly locations .... 6 1.3 The U.S.-Japan Agreement on Autos and Auto Parts 14 1.4 AALA requirements 17 1.5 Dissemination of AALA information 24 2. Trends in U.S./Canadian content and assembly, 1995-98 27 2.1 The data base for studying U.S./Canadian content trends 27 2.2 Overall trends in U.S./Canadian parts content and assembly locations 30 2.3 "Big 3" vs. foreign-based nameplates 32 2.4 "Domestics" vs. "transplants" vs. "imports" 34 2.5 Cars vs. pickup trucks vs. SUVs vs. vans 40 2.6 Effect of within-group USCan content shifts vs. between-group market shifts ... 43 2.7 By manufacturer 44 2.8 Make-models that gained or lost USCan content 49 2.9 USCan content changes in carryover vs. redesigned vs. entirely new models .... 52 3. Regression of new vehicle sales by U.S./Canadian content and other factors 57 3.1 The data base for the regression analyses 58 3.2 Regression examples and strategy 63 3.3 Regression results 69 3.4 Relationships between USCan content and price 79 4. Import dependence in motor vehicles and parts compared to other consumer products, 1992-98 87 4.1 The data base for comparing import dependence trends in various industries.... 87 4.2 Basic statistics and trends, 1992-98 93 4.3 Before vs. after the AALA labels: 1992-94 vs. 1995-98 96 4.4 Short-term change: just before AALA (1994) vs. just after AALA(1995) 98 4.5 Longer-term change: 1992 vs. 1998 98 ill 5. Survey background and methods 103 5.1 Objectives of the data collection 103 5.2 Preparatory steps 103 5.3 Consumer survey 104 5.4 Manufacturer survey 110 5.5 Dealer survey 112 6. Consumer survey 115 6.1 Purchasers, planners and subgroups 115 6.2 Values: importance of vehicle content/"buying American" 117 6.3 Knowledge of where vehicles are assembled 120 6.4 Awareness of the AALA law and label 126 6.5 Understanding of the AALA label 128 6.6 Influence of the AALA label on past and future purchasing decisions 128 6.7 Influence of demographic factors 130 7. Manufacturer survey 133 7.1 Dissemination and perceived importance of the labels 133 7.2 Factors that affect decisions where to locate facilities or buy parts 135 7.3 Cost of AALA to manufacturers 138 8. Dealer survey 147 8.1 Description of the sample 147 8.2 Dealer awareness of the label 147 8.3 Dealer advertisement of the label 148 8.4 Dealers' perceptions of customer response to the labels/buying preferences . 148 8.5 Sales staff knowledge, training and presentation of the labels 151 Discussion of findings : 155 References 161 Appendix A: USCan content, registration, price and assembly data for cars and light trucks 163 Appendix B: Listing of the data file for the regression analyses 173 Appendix C: Request for public comment on proposed collection of information 187 Appendix D: Consumer survey questionnaire 191 Appendix E: Manufacturer survey questionnaire 213 Appendix F: Dealer survey questionnaire 229 IV EXECUTIVE SUMMARY The American Automobile Labeling Act (AALA) was enacted in October 1992 in order to aid potential purchasers in the selection of new passenger motor vehicles by providing them with information about the country of origin of vehicles and their parts. The AALA provides that new passenger cars, pickup trucks, vans and sport utility vehicles manufactured on or after October 1, 1994 have labels specifying the percentage value of the U.S./Canadian parts content of each vehicle, the country where the vehicle was assembled, and the countries of origin of its engine and transmission. On July 21, 1994, the National Highway Traffic Safety Administration (NHTSA) published a new regulation to implement the AALA (Part 583 of Title 49 of the Code of Federal Regulations). The Government Performance and Results Act of 1993 and Executive Order 12866 require agencies to evaluate their existing regulations to see if they are achieving their objectives and to assess their impacts. This report evaluates the AALA from two aspects. First, since AALA is an information program, NHTSA surveyed 646 consumers in 1998 who had bought or leased a new vehicle during the past six months or were planning to buy or lease within the next three months to find out what percentage had heard of the labels, read them, understood them, and/or used them to help select a vehicle. Because if nobody reads, or nobody understands, or nobody uses the labels, they are not achieving their objective of providing information to potential purchasers. The survey investigated how many consumers think the country of origin of vehicles/parts is critically important information and if these consumers in particular are reading and using the labels to assist their purchasing decisions. NHTSA also surveyed manufacturers and dealers to learn about their activities and costs to produce and disseminate the labels. The principal rinding was a disconnect between consumers' ignorance of the labels and their belief in the importance of buying a U.S./Canadian product. The great majority of consumers were unaware of the existence of the labels, only 7 percent had read the label at a dealership, and not a single person explicitly stated they had used the numerical parts-content score on the AALA label to comparison-shop among make-models according to their percentages of U.S./Canadian parts content. In fact, the only data on the label that a substantial number of consumers called influential was the country of final assembly. • (Actually, country-of-assembly information was available to consumers before the AALA, but not necessarily in a standardized and conveniently accessible form like the AALA labels.) Yet, one-sixth of the survey participants, a proportion that would extrapolate to 2,500,000 new- vehicle sales per year in the United States, rate it critically important that vehicles be made in the U.S. or Canada and, more generally, always try to "buy American" when they go to a store. But even this group is no more cognizant of the labels than the average consumer. They mostly "buy American" simply by acquiring any Big 3 vehicle assembled in North America. They are not using the numerical parts-content scores to comparison-shop for models with the highest U.S./Canadian parts content.
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