TRAVERSE CITY, MI – Some suppliers are inclined to shift component manufacturing to the U.S. as a hedge against fluctuating currencies, rising transportation costs and political stability.
That’s the view of Kimberly Davis Rodriguez, a principal and co-leader of the Automotive Services Group of Grant Thornton LLP and a panelist on a Management Briefing Seminars manufacturing session here.
Rodriguez says in the early stages of going global, low labor rates are the chief attraction. Soon, reality sets in as fixed costs such as sales and administration expenses, logistics and currency enter the equation.
Currency, of course, is a 2-headed coin: The weak dollar attracts foreign investment in North America and gives U.S. companies pause in expanding abroad, where it can cost more in dollars vs. local currencies, she explains. A strong dollar makes exports more expensive.
After her talk, Rodriguez saysAG’s recent decision to build a new assembly plant in Chattanooga, TN, was based importantly “on currency issues,” as well as expanding its North American sales. “Your focus may be too narrow if you just focus on labor costs,” she says.
Rodriguez predicts batteries for hybrid-electric vehicles will be sourced in the U.S., rather than Asia, because to do so “is more efficient, quicker and can be accomplished at competitive prices.”
Market stability also looms as an issue in global expansion, she says. “Look what’s happening in Georgia now,” she says, referring to the country’s recent incursion by Russia. “Once you’re manufacturing, you can’t interrupt production.”