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Is It Ever Going to Stop?

By: Kevin H. McKervey, CPA

On Sunday morning December 5, 2004 I rolled out of bed and went to the mailbox to get my Sunday paper. Even though we have three dogs I still can't seem to get any of the dogs to bring back my Sunday paper intact. A morning of leisurely drinking coffee and catching up on the weekend's sports activities was quickly abandoned when I found something much more vital to read ... THE FRONT PAGE. There in bold print was the headline that we all knew would eventually be coming "India wants to lure U.S. auto supply jobs".

To be sure, this was not a surprising revelation. We have all read that India is one of the fasted growing countries and many of its citizens are highly educated. Many jobs have migrated to India and it's not unusual to deal with a call center that is staffed in India to resolve issues we may have in our daily lives. Given the growing activities in Asia and Eastern Europe it was only a matter of time before India would set its sights on the automotive industry.

Back in the 70s, when I was in college, we all became well aware of the influence of global competition as the U.S. sought alternatives to deal with a serous oil shortage that caused light wallets and long lines at the gas pumps. Fuel efficiency was hot and Japan saw an opportunity to bring their products to a new market.

In the 80s and 90s we saw transplants continue to access the U.S. market in an effort to grow their operations and develop relationships with the Big 3. German automotive companies expanded their efforts to grow in the North American market and eventually the influence of Mercedes, BMW and Volkswagon grew in the north, and most recently, in the south.

As the Big 3 struggle with legacy costs we now have other countries seeking to grow and stabilize their economies by becoming major players in the automotive industry. Mexico, Korea and most recently China have devoted substantial resources to the production of automobiles. Now India is not only saying that they want to have a bigger piece of the production pie but that they also want to shift the center of the automotive universe out of Detroit. Is this quest to grow outside the boundaries of the Atlantic and Pacific likely to end in the near future? I think we all realize that the answer is no.

This is why the team at Clayton & McKervey prepares continually to support our present and future clients as they deal with the realities of global competition. For instance, all of our shareholders and managers have attended outside training over the last year to learn more about the complex tax issues companies face as they expand globally. We continue to align ourselves with other professionals so that we can refer our clients to individuals that can help them meet the challenges of global competition. Recently we started the Entrepreneur's International Roundtable to discuss the nuts and bolts of how companies are impacted by the pressures of international trade. If you haven't had a chance to sign up for our next roundtable that will take place on January 13, 2005, please visit our website and sign up today.

Some things don't change. For instance, I doubt that any of my three dogs will ever bring me the Sunday paper so that I can enjoy a leisurely cup of coffee while thumbing through the hot deals and sports section. In other parts of our lives we expect, and often look forward to, change. Unfortunately, we are often not prepared for the reality of the headlines that we must read. We encourage all of our clients to prepare for tomorrow's headlines and want you to know that we are here to help.

If your business is involved in international transactions and you would like more information related to a specific transaction or country, please contact Kevin McKervey at 248.208.8860.

248.208.8860 | 2000 Town Center, Suite 1800 | Southfield, MI 48075

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