What’s going on here?
The beloved American icon, the Camaro–marketed with the slogan “From the country that invented rock ‘n’ roll”–is made in French-speaking Canada.
And what about all that fine German engineering being put to good use by Alabamians making Mercedes-Benzes in a plant surrounded by the farm fields near Tuscaloosa?
Honda’s Passports are made by Isuzu and Subaru workers in–gasp!– Lafayette, Ind.!
And the latest version of America’s consummate luxury car, the Cadillac Catera, is actually made in Germany by German auto workers employed by Opel.
Ja, it’s true.
What is going on here?
The internationalization of the world’s auto industry is making national borders disappear as automakers strive to find the best ways to make their cars.
Fifteen years ago, any car unloaded from a seagoing freighter and onto an American dock was subject to jingoistic attacks by the nation’s auto industry, which claimed that imports were driving them out of business.
Led by then-Chief Executive Officer Lee Iaccoca, Chrysler pushed the fight against the imports.
Today it’s harder to tell which vehicles are imported. And, symptomatic of today’s global auto industry, Germany’s Daimler-Benz is acquiring Chrysler in a $37 billion deal. If the deal, which Chrysler shareholders approved this month, goes through, Jeeps and all of Chrysler’s well-recognized American cars will actually come form a German company.
It further blurs the question: What’s an American car?
“If you ask the average German: `Is Opel a German car company?’ `Well, or course,’ he’d say,” said Philip A. Hutchinson Jr., president and chief executive of the Association of International Automobile Manufacturers, an Arlington, Va.-based trade association representing foreign automakers. “You ask someone in Ohio: `Is Honda an American car company?’ And they would say no. But it is an American car. It’s built in America by American workers.”
Lured by strong infrastructure, political and economic stability and a robust economy, foreign automakers are building auto plants here like crazy.
Mercedes-Benz opened its M-Class factory in Vance, Ala., in 1993, and BMW’s Spartanburg, S.C., plant opened in 1994. There are 10 assembly plants in the U.S. operated by “foreign” car makers. Those plants crank out 2.3 million cars a year; the number is expected to hit 3 million when they are up to full speed.
Compared with the 12.2 million cars and light trucks made in North America by the Big Three (Ford, General Motors and Chrysler), the foreign transplants’ production volume may not seem like much. But the gap is closing.
Between 1986 and 1996, Big Three passenger-car production fell at an average annual rate of 5.6 percent. In contrast, production by international automakers in the U.S. rose 12.9 percent a year.
In the peak times of Japanese imports in the 1980s, Japan eclipsed the U.S. as the world’s largest single producer of autos. But thanks to all the production done by the transplants, the U.S. is on top once again, said Hutchinson.
Of the cars sold in the U.S. by the Big Three, about 25 percent are made elsewhere, generally in Canada and Mexico. By contrast, of the cars sold by international manufacturers in the U.S. 64 percent are produced at plants here.
“Part of this globalization is the disappearing boundaries of nations. You lose distinction between what’s a U.S. company and what’s a foreign company,” said David Cole, industry expert and director of the Office of Automotive Transportation at the University of Michigan.
Companies are going wherever their potential sales will take them, say analysts and spokesmen for the car companies. The movement of manufacturing facilities all over the world is just another part of carmakers’ attempts to increase efficiencies and cut costs.
General Motors Corp. is trying to figure out a way to do better in the face of global competition.
After decades of declining domestic market share, GM wants to increase its non-U.S. sales to 50 percent from slightly more than 30 percent in the next few years, and is opening plants in Argentina, China, India, Indonesia, Poland, Russia and Thailand.
“Auto manufacturing is one of the first truly global industries,” Hutchinson said. “All of the companies are competing against each other around the world. Nationalism has no place in the automobile industry any more.”
With competition comes change. Some may lament the loss of Chrysler from the roster of U.S. companies. But others say its long-term health and the hundreds of thousands of jobs it provides are more secure by combining with Daimler-Benz, which has a much larger global presence.
George Magliano, an industry analyst with New York-based WEFA Group, said there are lots of reasons for companies to build plants in the U.S.
“They come here because it’s the best place to produce,” he said. “From the top down, the U.S. has what they need: the economy, the politics, it’s the most stable place to produce. You don’t have to worry about massive swings in the economy and the politics. Labor costs are lower than Europe. We have a highly trained work force, and a strong supplier network.”
Decisions to build in the U.S. haven’t always been made purely for business reasons. In the late 1970s and early 1980s, Japanese carmakers, seeing the huge potential for growth in the U.S., were facing consumer backlash and perhaps protectionist action by a riled Congress.
The first foreign automaker to build cars here was Volkswagen AG, which began producing Rabbits out of a former Chrysler factory in Westmoreland County, Pa., about 20 years ago.
It was the success of Honda’s central Ohio plants, opened in 1979, that paved the way for others to follow and helped to soften the outcry against Japanese carmakers who had been shipping cars into the U.S. and shipping out the profits.
Now, the decision to build in the U.S. is pretty much based on economic reasons.
For example, before BMW decided to build its plant in Spartanburg, it examined more than 250 sites over three years.
“South Carolina was chosen for several reasons: an available work force whose training was provided by the state; a pro-business climate; easy access via the deep water port at Charleston; a major airport; a modern rail and road system as well as the availability of a foreign trade zone,” the company said, adding that the location allows for easy distribution to East Coast markets.
U.S companies are not standing still in this effort.
For example, of the 6.6 million vehicles made by Ford Motor Co. last year, 2.8 million, or about 42 percent, were sold outside the U.S., said Ian Slater, Ford’s international spokesman.
Ford has plants in Argentina, Brazil, Venezuela, South Africa, Germany, Poland, Spain, the Czech Republic, France, Portugal, Australia, Taiwan, New Zealand, India, Turkey, Japan and China. The company has 22 plants in Britain alone.
“Ford’s philosophy is to produce vehicles where we sell them,” Slater said. “Markets in the U.S. and in Europe are saturated. The percentage of sales in other markets will increase and the potential for new growth is largely in the underdeveloped markets.”
Increasingly, moving manufacturing facilities closer to the markets is more important than where the company’s headquarters is, said Hutchinson.
“These are all global car companies,” he said. “Some happen to be headquartered here, and some are headquartered elsewhere. But they are all global.”
