Which, BTW, is exactly what Toyota, Honda and others do. Their home market manufacturing plants in Japan produce both for domestic and export markets. Toyota also exports some US production worldwide. Honda does make a “world” and “US” version of the Accord, but they sell the US Accord in many foreign markets as well, such as Australia.

Market requirements are rapidly converging as the US joins the high fuel cost club already in play in most of the developed world for a long time. The Prius, Fit, Versa and Mini, for example, are all essentially the same cars around the world.

Leading economists expect China to overtake Germany this year though. However, what’s interesting is that – as you pointed out – Germany is a high cost location (plus it’s rather small compared to China, the US or even Japan).

Germany’s strength comes from a highly specialized economy. The car industry is of course one key industry with many big manufacturers but also with many big suppliers like Bosch or Continental.

But apart from that, Germany is strong in many mechanical engineering sectors, especially where know-how is more important than labor costs. German companies are often leading in small, specialized sectors which many of us have probably never ever heard of, e.g. machines for digging tunnels.

High labor costs mean that German companies have to invest more into R&D since the only way to justify the price needed is to build a product that’s ahead of the competition. It’s no coincidence that the best known German car manufacturers are producing luxury cars and even a volume manufacturer like Volkswagen wants to go upmarket because they couldn’t afford their GErman working force otherwise.

That’s probably also one reason, why the Japanese have a much harder time getting their foot into the European car market (especially Germany) than the US. While German cars have always been more expensive, they could also justify the price with higher quality/sophistication.

However, this could turn into a disadvantage (for German car manufacturers) as more and more research is done by the suppliers who make deals with everyone. Bosch for example played an important role in developing the Tata Nano. So with more and more Indian, Korean, Chinese, etc. manufacturers getting more and more fancy technology, it’ll become increasingly difficult to charge the prices needed for domestic car production.

Amazing that most people don’t think that the US exports much besides beef and Boeings. I guess the reason for that is American makers of consumer items have been turning to offshore production for the last forty years. Either that or they remember their last rental Lumina. Basically, in consumer grade commodity items, America cannot compete. But where cost is not the primary factor, America does compete and produces much of the world’s high quality products. Medical equipment, high end electronics, test equipment, electrical equipment, etc are all made here in the USA. We sell enough of this stuff to offset a large chunk of that Chinese import number. Unfortunately most people don’t check the spec plate on the transformer that powers their house. If they checked under the hood of their American car, though, they would be amazed at how much content is pre-assembled in Mexico…

Very true. But the rejoinder to this has been that tastes between the US, EU, and Southeast Asia (if we are to brush with big strokes) are exceptionally different from another.

The US usually gets longer, lower, wider/fatter, and more banal versions of most vehicles. The EU has far more expensive higher end sporty vehicles, more diesel offerings, and a narrower girth. Southeast Asian countries are either very high on the utility and plainness scales (Tata, Kia, Ssangyong, Proton), or are loaded with technology and weirdness that only a fellow coutryman can understand.

With gas prices forcing a convergence of sorts, there is opportunity to make a truly global car with moderate changes to account for cultural tastes and government standards. Unfortunately a world car can sometimes leave all three major markets in the proverbial lurch if the end product doesn’t translate well.

$40/gal gas will change everything. All we need is a fire at a refinery or two; or perhaps an earthquake. A big hurricane in just the right spot? How about some unforeseen event in Africa or the Middle East involving their oil facilities?

What will big oil company profits look like when oil is priced astronomically as a result?

If Ford (for example) had one Focus that it sold worldwide (with minor adjustments to suit local markets) and if each factory could turn out models for all the geographies, then as an agile manufacturer, Ford could add a third shift in locations where currencies are cheapest, and reduce throughput in the most expensive plants.

Then, Ford wouldn’t have to lay off all these workers in some of its least expensive plants in the world. On the contrary, they’d be hiring.

It’s also done to build a loyal customer base that is inclined to support the home team, and to create products that are better suited to the needs and tastes of each specific market.

Still, it’s a benefit to a company to have the option of exporting products between markets in order to utilize production capacity more effectively. The fact that the Big 2.8’s US factories build products that few people outside North America want makes them highly vulnerable to downturns in the North American market. If they had more flexible facilities, they could put their capacity to better use and reduce their overhead accordingly.

When the Euro first began it ran at €1.80 to £1, now the rate is more €1.25 to £1, in the space of 8 years. If a manufacturer, were going by currency rate alone, they’d be upping sticks every 5 to 6 years.

The key is to utilise your plant to serve as close to 100% for the market and its immediate surroundings (i.e Vauxhall UK serves the UK and Europe, sometimes). Even Toyota hasn’t got that right yet……

Ford’s Ranger, for example, is well suited for Thailand. So much so, that they have a Ranger production facility in that country. Even if Thailand had no tariffs, it would still be more profitable to build them in Thailand. As someone else already mentioned, American labor is only cheap in relation to the EU, not in relation to most of the world.

The D3 don’t need to concern themselves with exporting beyond NA. Just stopping the loss of NA market share will be all they can handle for the next several years.

We don’t do small cars well and that will hurt us. But there is room in the premium/executive category for improvement, for sure.

Interesting side note: in a recent edition of the Economist, on the back page they listed the worlds largest exporters, by dollar volume. #1 was not China, but Germany, with $1.2 trillion worth of exports, and China still behind them (interestingly, the US was #3 and not that far back from China). Germany, by all measures, is a high-cost manufacturing location.

Nissan has a manufacturing plant in the USA. Hmm….

Exactly!

The author may have somewhat misstated his point, but the sentiment is sound. Every major player that participates in the US auto market assembles at least some of its vehicles in the NAFTA zone.

If there is going to be a US or North American export auto market of any importance, it’s probably going to be led by these “foreign” players, and not by the Big 2.8. The claim often made by the domestic defenders, that trade barriers create an unlevel playing field that shut out US goods, is really off the mark. If we don’t want these cars, what makes us think that somebody else will?

Fact check time:

The author is correct when saying “Every car manufacturer has a facility in the U.S.”. A facility doesn’t necessarily have to be a manufacturing plant – how about Nissan’s U.S.A. headquarters or VWoA’s headquarters?

Hmm….

For the most part you are correct—-although I am seeing a ton of new Ford Foci drving around. I expect Ford to continue this trend with the next gen Focus and new Fiesta. Note—I have seen no such permission to believe from GM or Chrysler.

As noted, it goes back to product: Detroit products not only misses the mark domestically, but they also aren’t suitable for export. The product deficiency would be a problem for any company, let alone an automobile manufacturer. If customers don’t like the products, they’ll just buy something else.

Clearly, Detroit had no Plan B for a change in American consumer tastes toward smaller vehicles. This creates a perfect storm for the Big 2.8, because their best small cars are made overseas but the falling dollar makes mass importation cost prohibitive, and differences in American tastes make it unlikely that those compact imports would succeed here, anyway.

Honda and Toyota have figured out how to make smaller vehicles that Americans want. Detroit hasn’t. This deficiency could be ignored when gas was cheap and we liked SUV’s, but it can’t be ignored now.

http://en.wikipedia.org/wiki/Automaker

Fact check time. The world’s 4th largest automotive company is Volkswagen, which has no US manufacturing yet. Honda, by contrast, is #5. PSA Peugeot Citroën ranks 6th and Fiat is in 11th place. Neither of them have US manufacturing at this time. Well known BMW is #16 and Daimler #13. So while it is true that the majority of global auto manufacturers have a US manufacturing presence, it surely isn’t all of them.

US Heavy Metal exports continue to be strong into the Middle East, and even Toyota is getting in on that party by shipping Indiana Sequoias there as well as some minivans. But don’t expect the US to ever be competitive exporting cheap and cheerful World Cars to the masses. Even the weak dollar isn’t enough to be competitive against low cost countries like Brazil, Thailand, Mexico, Turkey, China, etc..

Ford and GM did the right thing many, many years ago and established a global footprint to design and manufacture cars and trucks in their final markets. The Japanese are working hard to copy this model and are in many ways doing it better than the leaders did, but strategically there is nothing wrong with the fact that Ford and GM are completely ingrained in markets around the world with so much local design and manufacturing that people there don’t really think of them as foreign companies any more, just as US consumers don’t think of Shell, Freightliner, Mack, Bayer, Norelco or Nestle as foreign companies.

Not really true. If it were, the big three Japanese manufacturers would be ramping up their capacity to wherever the low cost area lies.

There is a lot more to this than just the proverbial retool and ship out. First, you have to have the ships. Then you have to move in all your suppliers, and build your supplier base in the new factory in order to make it successful.

The truth is no manufacturer can move their production quickly enough to capitalize on temporary currency fluctuations. The very act of moving in the first place requires a nine figure investment and many years of establishment in order for it pay out.

But the bottom line is the lack of manufacturing flexibility…Honda develops slightly different variations of it’s Civic, CR-V, and to a larger extent, Accord for sale in world markets. Over the years they have always been able to move their manufacturing of each model around quickly in response to global economic situations. If I recall correctly, the CR-V used to be exported from both England and Japan to the US. Then it was made solely in Japan for the US market. This year they started building them in the US, and I believe they will start making them in Mexico before long, also. This, in light of all the different safety and emissions standards required for each market. This is an admirable flexibility that the Big 2.8 are too insular to employ. If GM had this level of flexibility, the Saturn Astra would be made in the US or Mexico right now, and would probably be marketed more and sold more effectively, because they wouldn’t be taking it on the chin so bad with each sale.

It seems that Ford is catching on to this a bit, though, with the C1 Focus and the new Fiesta.