and Audi are eying U.S. vehicle assembly; just expanded its plant in South Carolina; and Bo Andersson, purchasing chief, calls Alabama the auto maker’s “lowest-cost country.”
Is the weak dollar sparking a U.S. manufacturing renaissance? Unfortunately, the answer is no.
Despite growing interest by European auto makers in the U.S. being spun by politicians and other self-interested parties, there is no silver lining to the dollar being steamrolled by the euro.
The greenback’s withering exchange rate vs. foreign currencies, especially the euro, is creating a temporary windfall by making U.S.-built exports less expensive in global markets and killing profits on imported European cars and components.
But, which already has a big factory in Mexico, is nosing around the U.S. for a vehicle assembly site because it has ambitious long-term sales goals and wants to expand its global footprint, and the U.S. still is the world’s single largest new-vehicle market.
A lousy exchange rate is not forcing VW to locate here, says Dave Andrea, vice president-industry analysis and economics, for the Original Equipment Suppliers Assn.
Companies do not make long-term manufacturing or sourcing decisions based on exchange rate trends, because they know the pendulum eventually swings the other way, Andrea says.
Richard Spitzer, global industry managing partner of Accenture’s Automotive and Industrial Equipment practices, says the tenet of producing where you sell is what usually guides auto makers into making huge plant investments in specific regions.
Currency is given some weight when auto makers consider locating plants in specific regions, but they are more interested in logistics, taxes, skill sets of the prospective work force and supply-chain issues, he adds.
What’s more, the dollar’s relationship with other key currencies, such as the Mexican peso, Chinese yuan and Japanese yen has changed less dramatically than it has with the euro. That further hurts the possibility of the U.S. ever becoming a low-cost manufacturing paradise.
The good news for U.S. manufacturing comes from another source that measures what auto makers have actively been doing to lower costs rather than merely passively benefiting from: Oliver Wyman’s 2008 Harbour Report.
This annual report card on automotive manufacturing efficiency showsLLC moving to the top of its charts, tying with in efficiency for assembly, stamping and powertrain plants combined.
Fifteen years ago, the U.S. Big Three averaged twice as many hours per vehicle as.
Even though Toyota,and continually have improved their efficiency, Detroit-based auto makers now are almost at parity in their ability to produce vehicles with a minimum of labor and waste.
“There’s been more improvement in the last five years than the previous 15,” says Oliver Wyman’s Ron Harbour.
In addition to ratcheting up productivity, Detroit auto makers also will soon realize big improvements in labor and health-care costs, thanks to innovative contracts with the United Auto Workers union.
The bad news is that Detroit auto makers and most of the supply base still are not flexible enough to cope with gyrating market conditions caused by astonishingly volatile fuel prices.
From here on out, flexibility will have to be the goal auto makers fight hardest to achieve. Tomorrow’s successful low-cost producers will be incredibly productive, have a lower-cost wage structure and be extremely flexible. A weak dollar will be of no help at all.