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More "Made in America" Vehicles Now Headed Abroad

More "Made in America" Vehicles Now Headed Abroad

By Jeff Youngs, March 05, 2012
It's one thing for American auto manufacturers to add production and jobs in the United States to supply the domestic market, which they're now doing at the strongest levels in a generation. But the bigger potential story is that automakers are actually expanding employment and output in North America in part so they can export U.S.-built trucks, SUVs and even cars to other countries around the world.

So vastly have the tables turned for General Motors, Ford and Chrysler in terms of labor costs, greater manufacturing flexibility, currency differentials and other factors that they have briskly moved this idea to reality. They're joined by German, Japanese and Korean rivals manufacturing in America whose executives also would like to turn their U.S. plants into export bases.

"This is becoming the low-cost place to build, and this trend could go a long way," said Ron Harbour, partner in the automotive practice for Oliver Wyman, a manufacturing consulting firm. "As long as the dollar remains relatively weak, the potential for exports from this country are all the more attractive."

A few crucial factors will determine whether the traditional Detroit Three mount any kind of export drive. One of them is the mix of vehicles they choose. Some uniquely American models are exported in relatively small numbers now, such as Jeep Wrangler s made in Ohio and GMC Yukon  SUVs made in Texas. As these traditional "domestic" automakers entertain the idea of higher-volume exports, Harbour believes that larger and unusual vehicles still must predominate because the small-car market in Europe and other likely export targets already are flooded.

With export potential as a growing consideration, each of the Detroit Three is plunging with some fervor into revitalizing its North American manufacturing infrastructure. Prodded by the Obama administration in the wake of the federal bailout, for instance, GM invested $545 million to convert its Orion Township, Mich., plant from production of midsize sedans to output of the new Chevrolet Sonic  subcompact. Expecting to export these cars is nothing short of revolutionary. Long ago, GM had given up on U.S. production of its least-expensive cars and filled out that position in its product line with the Chevrolet Aveo , made in Korea. It was looking to China or Mexico as possible sites for later small models.

But on October 14, 2011, there was South Korean President Lee Myung-bak standing in the Michigan plant with Obama, wearing a Detroit Tigers baseball cap and touting a new U.S.-South Korean trade pact that will help make Sonics saleable in Korea by cutting tariffs in half. "Given the right mix of content in those vehicles, GM could actually make a few dollars on them," Harbour said. And overall, GM is in the process of pouring $2 billion into 17 of its U.S. plants in eight states, promising to retain or create 4,200 jobs in the process.

Likewise, Ford's contract with the UAW spells out much of the company's increasing investments in its U.S. plants-up to $16 billion in new products and additional plant capacity-in part to stage jobs now being imported from Europe, China, Japan and Mexico.

Chrysler struck a chord with its "Imported from Detroit" marketing positioning this past year, but the company also is backing up that slogan in some very real ways. Most notably, Fiat CEO Sergio Marchionne committed to building and exporting a new Maserati SUV at Chrysler's Jefferson North assembly plant in the heart of Motown, where the new Grand Cherokee  already is built. Beyond that is Chrysler's thoroughgoing refurbishment of all of its other North American facilities.

And finally, there's the formidable reality that foreign-based manufacturers also continue to augment U.S. manufacture and have the capability-and perhaps even greater urgency-to take advantage of the same factors favoring U.S. output by the Detroit Three. "The low dollar screws them up," said Oliver Wyman's Harbour. "Every motivation is for them to build here."

Honda, for example, as part of its outflow of capital from manufacturing in Japan, is making $355 million in upgrades at its plants in Ohio, where the company became the first major Japanese manufacturer to establish a broad U.S. production base, nearly 30 years ago.

Toyota Motor Corp. President Akio Toyoda said that the company may export Corolla s from its newly opened plant in Mississippi to countries that have free-trade agreements with the United States, such as South Korea. Hyundai can't make vehicles at its U.S. plants, nor expand the facilities, fast enough. Some foreign manufacturers in the United States also have been exporting for a while and so have a lead in executing in this game. BMW exports cars from South Carolina to 135 countries.  Daimler derives nearly one fifth of its global revenue from selling the output of its plant in Alabama, which boasts 800 robots.

After years of watching jobs being outsourced to foreign countries, the United States manufacturing sector-at least in terms of automobile production-is enjoying a renaissance, of sorts.
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