Foreign automakers exporting from the U.S. (weak dollar or better conditions?)

Discussion in 'Politics' started by Euroconservativ, Mar 7, 2012.

  1. Euroconservativ

    Euroconservativ Member

    Dec 5, 2011
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    By Dale Buss December 13, 2011

    When Fiat and Chrysler CEO Sergio Marchionne announced recently that Fiat would be plunging $1.7 billion into a new version of the Jeep Liberty, including $500 million to upgrade and expand the Jeep operations in Toledo, Ohio, the ramifications could be felt like a mini-Vesuvius all the way to Italy. To an extent that few would have predicted just two years ago, Fiat currently is hurting from the economic implosion of Europe while Chrysler keeps picking up speed thanks to its proven opportunism amid a slowly-building recovery in America. And when it comes to most effectively exploiting the advantages of a transatlantic alliance of automakers that is making a run at long-term survival, it turns out that one of the optimal uses of capital may be to invest in a U.S. plant to produce a new version of an old Jeep model not only for the American market – but also for an export push that symbolizes a potential new era for the United States as an auto-export base.

    “The horrible thing about Jeep is that it’s never had the chance to be exploited internationally,” Marchionne told reporters in Toledo. “We’ve started a very active marketing effort in Europe now with Jeep, and we’ve had phenomenal results. Sales are doubling almost every 12 months.” That assessment suggests that very soon, perhaps as early as next year, the export volume of Jeeps built in Toledo will rise significantly from 2011.

    By turning Chrysler’s Toledo operations increasingly into a base for export from the United States, and the hot Jeep brand into a sine qua non in select foreign automotive markets, Fiat is taking a page from European competitors BMW AG and Daimler AG’s Mercedes-Benz, both of which have spent the last several years focusing on the export-production potential of their growing operations in the United States. More recently, Volkswagen has built a U.S. plant in Chattanooga, Tenn., which could eventually serve as that German automaker’s export base. At the same time, Asian rivals increasingly are bolstering their manufacturing in North America as they cope with factors pushing and pulling them in that direction, ranging from their highly-appreciated currency to natural disasters in the Asia region that have the United States looking like some sort of safe haven from the ravages of Mother Nature.

    Scratching For U.S. Output
    Toyota Motor Corp. President Akio Toyoda said that the company may export Corollas from its newly opened plant in Mississippi to countries that have free-trade agreements with the United States, such as South Korea. The company already confirmed it will export its Sienna minivan and Camry midsize sedan to South Korea. Although Toyoda considers Japanese origins key to the identity of the company and the brand, the enterprise founded by his grandson is a multinational operation where its factories compete internally for vehicles to produce and markets to ship them to. In this era of a strong yen and a North American market that continues to demonstrate the most sustained strength among Western economies, he said, “It is very possible to consider exporting [from Mississippi] to countries” like South Korea, which just reached a new free-trade pact with the U.S.

    Already, Toyota exports Avalon full-size sedans from its Georgetown, Ky., plant; Sequoia full-size SUVs made at its plant near Princeton, Ind.; and Tacoma and Tundra pick-up trucks manufactured in San Antonio. Indiana-made Siennas soon will be exported to South Korea, because of the new Korean trade pact, “the first time [that vehicle] will be exported outside North America,” according to Toyota spokesman Javier Moreno. Overall, he said, Toyota-built units exported from the United States already account for about 10 percent of the company’s annual American output of about one million units.

    Hyundai Motor America would like to do something similar to the gambit that Toyoda described for Corolla exports from the U.S. but is more constrained at this point by its ability to supply vehicles from its U.S. manufacturing operations in Montgomery, Ala. “We’d love to have the capacity to build here and send to other global markets, but our No.1 priority is filling demand for U.S. and North American dealers,” said John Krafcik, president of Hyundai of America. “And we’re still short.” Hyundai has been able to squeeze production of about 330,000 vehicles out of its U.S. facilities this year instead of its originally projected 300,000, as the brand moved to take advantage of much more severe supply problems faced by Japanese rivals, yet the brand still has only about a 21-day inventory in the American market, Krafcik said, “the lowest in the industry – even lower than the Japanese.” Krafcik said that Hyundai’s “corporate philosophy is to build where we sell,” so it has been adding production facilities in all its major markets around the world,” and that this would remain the emphasis.

    German Leadership
    In any event, expect more announcements like Toyoda’s. “At this point, I can envision exports [of vehicles] from the United States to Japan could reach their highest level since World War II,” said Bernard Swiecki, senior project manager for the Center for Automotive Research, based in Ann Arbor, Mich. “But [Toyoda’s comments show] that you’re not necessarily limited to that kind of development. Something previously built in Japan and sold in Europe now could be built in the United States and sold in Europe” as well as South Korea. “These exports don’t necessarily have to go to the home country of the currency, like the yen, that made the difference.”

    Of course, the German makers have been the pioneers of this approach. At Mercedes-Benz’s U.S. International plant near Birmingham, Ala., slightly more than half of its 2010 output of 125,000 vehicles – 52 percent – were exported outside the United States, Canada and Mexico. Top markets varied for the M-Class, R-Class and GL-Class vehicles built there, but the top five overall generally were the United States, Germany, China, the U.K. and Canada. The plant’s output in 2009 was 91,000 vehicles. To beat the previous year’s output again this year – as Mercedes-Benz battles BMW for the brand luxury-sales crown in the U.S. market, for instance – employees “have been working significant overtime,” said Mercedes-Benz spokeswoman Felyicia Jerald. “Overall, [the plant] has a very full plate right now.”

    So does BMW’s sprawling complex in Spartanburg, S.C., which has emerged as the model for how to turn a U.S. manufacturing site into an export base for the world. The plant started production in late 1994 as BMW’s only global production site for the new Z3 roadster, and so the company’s trailblazing strategy of using the United States as an export center already is about 20 years old. “We would be the only plant that would produce that model and its variants,” recalled Max Metcalf, communications manager for BMW of North America. And while other factors such as currency-exchange rates since have coalesced to make BMW’s initial decision even smarter, there were other considerations at play in the early Nineties.

    Home In Carolina
    “We have very good [logistical] access to the deepwater port of Charleston, allowing us to reach markets around the world by being only 3 and a half hours from the terminal by truck,” Metcalf explained. “We knew we had a winning vehicle with one of the first roadsters in the market in that premium segment. The key was: Could we get access to all of the markets worldwide where that vehicle could be successful?”

    Clearly the answer was yes: From the 1990s through the mid-2000s – when the notion of using the United States as an export base for all but the largest and most unusually “American” vehicles wasn’t even being considered by other automakers – BMW in Spartanburg exported close to half of the vehicles it built. Over the last few years, that proportion has grown to a whopping 70 percent or more, which have been shipped to more than 130 different national markets. And the number of vehicles exclusively produced there has grown to include the X3, X5 and X6 utility vehicles; meanwhile, the next generation of the roadster, Z4, left Spartanburg for German production in 2008.

    BMW’s strategy has advanced to the point where export markets now are sometimes getting new Spartanburg-built vehicles even before American customers have access to them. For example, the new-generation X3 crossover initially was launched in 2010 and exported outside the United States beginning in October of that year, while it wasn’t available to American buyers until late January of this year. And clearly, BMW was advantaged by this strategy during the Great Recession in the United States. “During 2008 and 2009, it was good for us because we were a global-production plant while the U.S. market was dropping off more than some other markets were,” Metcalf said. “Being able to export helped us manage our production system better.”

    More To Come
    Certainly the currency differentials that now favor U.S. production are a factor arguing for further expansion of production in Spartanburg, though Metcalf noted that “we’ve gone through three currency cycles since the original decision to put the plant here.” Perhaps a more important factor for the long term is the supplier base that BMW has been able to build up in the United States, especially relatively close to the plant. About 60 percent of the content of Spartanburg-produced vehicles comes from the U.S., Canada or Mexico, from a total of about 170 suppliers – including 40 in South Caroline alone.

    In any event, Spartanburg is certain to continue to benefit from a burgeoning dedication by top management of BMW to reduce their dependence on Germany as a production base. In 2002, BMW produced about 70 percent of its vehicles in Germany, where it currently has eight plants. By the end of last year, that figure was down to 62 percent, and now it has come down to 58 percent. BMW executives predict they’ll continue their shift toward a 50-50 split just with production expansion that already is underway at Spartanburg and at plants in China. By 2020, the BMW Group wants to sell two million cars globally, up from 1.46 million last year. And there’s a good bet an outsized portion of that extra output would come from Spartanburg. “We have three models being built here now with great global appeal,” Metcalf said of Spartanburg. “And our export strategy has worked, and probably grown more than people expected it to on the front end.”
  2. Wacky Quacky

    Wacky Quacky Gold Member

    May 16, 2011
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    One, a weak US dollar may be good for business, but it's horrible for the middle class. The middle class' wages don't mean shit because the dollar doesn't buy as much as it used too.

    Two, of course they want to setup shop here. They know if something unforeseen happens that our government will bail them out claiming they're "too big to fail". That's not a good thing.

    I'm happy to see any manfuracturing jobs coming here, but significantly less happy when they're coming over for these reasons.

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