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"Made in America" Appealing to Foreign Brands

"Made in America" Appealing to Foreign Brands

By Jeff Youngs, March 05, 2012

Every week or so, it seems that another non-U.S.-based automaker is announcing, or hinting at, plans to expand production in North America. Toyota's announcement that it may build its Prius hybrid in North America for the first time is the latest such move. Collectively, these actions will have some appeal to American automotive consumers for at least a couple of reasons.

Of course, the Detroit Three also have been boosting North American output again as their own sales-and the U.S. auto market-have recovered.

Toyota executives told journalists in Toronto last week that it is looking at shifting production of the Prius to Ontario, and at boosting its output of some Lexus models there, because of the sustained strength of the yen, which has added significantly to the cost of building vehicles in Japan. The fact that Toyota and other Japanese automakers had to rationalize their global production systems in the wake of last year's twin natural disasters-the earthquake and tsunami in Japan, and the floods last fall in Thailand-only made it easier for the company to decide such moves.

The same basic logic has applied to other recent announcements, including Honda's move to build a new transmission family at its Ohio operations, and its commitment to build the new Acura NSX there beginning in 2015; Nissan's plans to localize production of up to 90 percent of its North American sales compared with 70 percent today; Volkswagen's decision to add 200 jobs to the existing employment of 2,500 at its new assembly plant in Chattanooga, Tenn.; and recent expansion moves by Mercedes-Benz and BMW at their U.S. facilities.

"We have a corporate philosophy of building where we sell," John Krafcik, president and CEO of Hyundai of America, told Automotion. The Korean automaker also is trying to squeeze as much output as possible out of its facility in Montgomery, Ala. "And it hedges currency exposure because you're denominating costs in the same currency as your revenues that come in. Certainly it's better from a logistics and shipping point of view, especially as energy costs move higher. And you support local markets and the local economy."

Overall, this shift will help foreign-based brands with American consumers for at least a couple of reasons. First, it will help relieve pressures on their profit margins imposed by the costs of production in Japan and Europe, which in turn will help make their vehicles more price-competitive in the United States.

And a significant cohort of Americans still appreciates buying a vehicle that is "Made in America."

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