By Adrienne Roberts and John D. Stoll
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 11, 2018).
Toyota Motor Corp.'s announcement Wednesday of Alabama as the
home for a shared factory with Mazda Motor Corp. highlights a major
shift in U.S. vehicle manufacturing: Foreign auto companies soon
will build more cars and trucks in America than the Detroit
giants.
In the first quarter of 2018, foreign makers are expected to
produce 1.4 million vehicles in the U.S., WardsAuto.com projects,
equaling their American rivals for the first time. That's a leap
from the same period last year, when foreign companies trailed
Detroit auto makers by more than 100,000 vehicles, or roughly
10%.
In coming years, General Motors Co., Ford Motor Co., and Fiat
Chrysler Automobiles NV are likely see their dominance in vehicle
production entirely evaporate as rivals such as Toyota and
Mercedes-Benz boost their American workforces and add new
factories.
Already, the Big 3 are being outsold by non-U.S. rivals, as
their share of American sales dwindled to 44% in 2017.
A series of developments have fueled the shift. Japanese and
other foreign companies -- unencumbered by unions and decades of
financial obligations to retired workers, and lured by U.S. states
offering incentives -- see an opportunity to bulk up their market
share and localize production to mitigate risk. Meanwhile,
executives at Ford, GM and Chrysler are prioritizing profits over
revenue, scaling back production of low-margin compact cars and
sedans in favor of pricier and profit-rich trucks and sport-utility
vehicles.
Detroit makers, which once had considerable political sway
because they employed the bulk of the nation's auto workers, are
losing influence at a time when state and national lawmakers
consider legislation that will affect fuel economy, autonomous
vehicles and the way cars have been bought and sold for a
century.
President Donald Trump has intensified the spotlight on American
manufacturing. During the 2016 campaign and the early days of his
administration, car makers were routinely challenged by Mr. Trump
to boost U.S. output and back away from shipping in so many cars
from Mexico.
In a Twitter post on Wednesday night, Mr. Trump cited the two
auto makers' new Alabama factory as a sign that "companies are
coming back to the U.S. in a very big way."
Toyota's and Mazda's $1.6 billion plant investment, outlined at
a news conference Wednesday, is the latest in a series of
big-dollar expansions by Asian and European car companies in
Southern states. The investment also is the first all-new auto
factory announced since Mr. Trump took office. Meantime, Volvo Cars
is set to open a $1.1 billion factory in South Carolina this year,
while BMW AG and Daimler AG are expanding existing plants in the
region.
States from Tennessee to Georgia to Texas have lured vehicle
makers from Japan, Germany and South Korea in recent decades with
their willingness to offer attractive tax-incentive packages,
cheaper labor and a lack of threats by labor unions such as the
United Auto Workers. In a speech Wednesday in Alabama, Toyota
President Akio Toyoda said Alabama laid the groundwork to create
"another made-in-America success story," although specific
financial incentives weren't disclosed.
Four of the most-recent foreign commitments alone are expected
to add 10,000 jobs and hundreds of thousands of units of U.S.
production by 2021. Nissan Motor Co. and other foreign makers have
said they are considering expanding their U.S. footprint. Several
companies, including big players in China and India, have said they
could start building cars in America within a half decade.
"Any resurgence in the automotive space, or in any other space,
is driven by the ability to attract" foreign companies to the U.S.,
Nancy McLernon, president of the Organization for International
Investment trade association, said Wednesday. Since the financial
crisis, hundreds of thousands of automotive jobs have opened, many
provided by foreign car makers or parts suppliers.
Meanwhile, Detroit's car makers -- long stung by costly overhead
and a capacity glut -- will become more reliant on lower-cost
countries in coming years as executives seek to avoid being overly
exposed to their American workforce. Once nearly entirely dependent
on Midwestern plants, GM and Ford are boosting the share of
vehicles they import from China, Mexico or even India.
While the three companies have made commitments to update
certain U.S. factories to accommodate product redesigns or
market-segment changes, executives say the days of domestic car
companies building new plants in the Rust Belt or elsewhere are
over.
GM, Ford and Chrysler are retooling certain factories to replace
slow-selling sedans or compact cars with trucks and SUVs that are
expected to help shore up market share.
But it will be hard for them to offset the hundreds of thousands
of additional units planned by Toyota, the German auto makers and
others. Even though factory downtime burns cash, executives at
domestic car companies have been pulling back on production to
boost near-term profits and keep inventories in check.
Many of the investments by foreign players are long in the
making, and are a confirmation that auto executives see the U.S.
market remaining a profitable place to build and sell.
"We have been in the U.S. for 60 years and we need to make a
very clear signal towards our retailers and towards our customers
that the U.S. is our market," said Lex Kerssemakers, former head of
Volvo's U.S. operations, in an interview in 2017 at the location
where the company will soon build cars. "You can't make a stronger
statement towards our retailers -- we're not going to
disappear."
In June, BMW said it would add 1,000 jobs at its plant in South
Carolina by 2021, part of a $600 million investment to produce more
SUVs at the factory. The SUVs are shipped globally.
"The U.S. is our second home and we look at what portion we can
sell in the market locally, not just by export, but what is the
biggest market in terms of local market," said Harald Krüger,
chairman of the board of management of BMW. "The U.S. is still the
second biggest market for us in the world. It will only grow in the
future, so that's why having a plant in the U.S. is strategic for
us."
Write to Adrienne Roberts at Adrienne.Roberts@wsj.com and John
D. Stoll at john.stoll@wsj.com
(END) Dow Jones Newswires
January 11, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.