Recently GlobeSt.com ran an article about several national brokerage houses adding auction services to their line up of available product lines.  After reading the article, I had the opportunity at lunch to discuss the trend with one of the regions most active investment sales brokers.  It was a very interesting discussion as we tried to hash out whether auctions would take off as a trend for institutional level assets, or whether it would be solely reserved for the smaller, private equity transactions.

I’ll fill you in on the results of our conversation later (I don’t want to bias your comments), but I would be very interested in hearing some of your thoughts on Auctions as a buying and selling tool for institutional investors.

So, on with the comments…

I was stuck by this question last month as I watched the Tour de France bicycle race.  Of course, I was cheering for Lance, hoping for a big comeback.  But, I also wanted to cheer for the “American” team.  It dawned on me that there was no truly American team.  Team Garmin Slipstream had the American sponsor, but most of its riders we foreign.  Team Astana had a Spanish sponsor, but a fair number of American riders.  Even Lance lives a fair amount of the year outside of the US.  In the end, I had to settle for nearly-American teams, but it got me thinking…

Today I read another article about a “Buy America” clause being added to a House spending bill that precluded any of the $33b of appropriated funds from being used to purchase cars other than those made by GM, Ford or Chrysler.  Yes, those three are American registered companies.  However, Mercedes, Toyota and many other have plants located in the US that employ thousand of Americans.  A portion of a dollar spent on a Toyota will work its way back to the American workforce.  BMW does a great job of keeping the South Carolina economy humming with their Greenville plant.  Conversely, many of the Ford vehicles are assembled in Mexico or Canada and employ their nationals.

So, what is the tipping point where a company becomes American?  For cars, I’d assume the profit margin to be in the 6-10% range.  That means that 90-94% goes to someone other than the manufacturer.  I know the dealers take 10-20% of the sales price, and we’ll assume they are “American” whether the car is a Honda, Ford or Fiat.  The remaining percentages goes to the raw goods and labor to assemble the car.  In some cases, that’s Americans and it some cases it’s not.  Conceivably, you could buy an American car and have 70% of the money go outside the US.

In this global, flat economy trade-restrictive “Buy American” clauses don’t make much sense.  They do, however, make politicians feel proud enough to wear their American flag lapel pins… (which was most likely made in China).