Foreign Auto Brands Look to Expand US Manufacturing Footprints

By: Dale Buss, BrandChannel

There remain obstacles in doing it, but there’s no denying the strong rush of foreign upscale automakers that are announcing plans to expand production in the United States these days.

Toyota is expected to confirm on Friday morning that it is moving production of its Lexus ES from southern Japan to Georgetown, Ky.; Nissan is looking to build a second US plant for its Infiniti brand, which already makes the JX SUV in Tennessee; and German luxury automakers each in their own ways are expanding American manufacturing footprints that used to be mainly afterthoughts. Mainstream players are participating in the trend too, such as Subaru, which is set to expand US production, presumably at its existing plant in Indiana.

For Toyota, one of the keys to its Lexus decision was several years of appreciation in the value of the yen, which made Japan manufacturing cost-prohibitive. Another key in the Lexus decision was recognition that, after decades of closing the gap, the quality standards apparent in US manufacturing by all brands, and by American workers, finally rivaled those established by Japan in the 80s.

For Nissan, one factor contributing to the decision to aggressively expand production in the US was its expansive plans to acquire more sales and market share under new chief Johan de Nysschen, who recently came over from Audi of America.

The German companies have been persuaded by currency differentials, by the continuing deterioration of their home European markets, by the relative continued robustness of US vehicle sales and by opportunities to integrate American plants into their global production systems.

So BMW, Mercedes-Benz and Audi are looking abroad even more eagerly for opportunities for sales and production in the United States and other promising “local” markets, also including China. Such rewards appear to be offsetting what they perceived as the traditional benefits for their brands of “German engineering” that presumably segued into positive perceptions of “German manufacturing.”

Thus BMW already has become among the largest US car exporters and will begin producing the new X4 crossover at its factory in South Carolina, in addition to three other SUVs it makes there. Daimler is expanding the Mercedes-Benz plant in Alabama and Audi is building a $1.3-billion factory in Mexico.

Huge risks remain for a movement of this size. For example, the yen has very lately been weakening dramatically under the deflation-busting policies of Prime Minister Shinzo Abe, the Wall Street Journal pointed out. Still, the case for making cars closer to where they are sold outweighs such relatively short-term currency concerns, Masahiro Fukuda, a researcher at Fourin Inc., told the newspaper.

The other risk to any expansion of North American production is personified in Danny Glover. That’s right: The actor has become a public face of the slowly building effort by the United Auto Workers union to finally succeed in unionizing a foreign-owned auto-assembly plant in the United States. The union has been thwarted for 30 years by a number of factors, ranging from adequate wages and benefits paid by the non-American companies to the plants’ strategic locations in the South, away from the union’s northern base.

“This is something I feel very strongly about,” Glover said during a recent visit to Nashville, home of Nissan and Infiniti in the US, according to Automotive News. The UAW already has struck out twice in attempting to organize Nissan’s US operations. Maybe Glover thinks he can help make the third time the charm.

 

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