Tell Them the Yanks are Coming
US-made vehicles are a crucial part of the federal government's push aimed at
increasing exports and creating more jobs
By International Trade Administration
US Department of Commerce
Agencies across the federal government have been working together under the National Export Initiative (NEI) to create jobs by expanding exports. The objective of the NEI is to double exports by the end of 2014—an increase that will support 2 million additional jobs in the US. Given that the automotive industry is the largest manufactured goods export sector, the success of US automotive manufacturers in increasing their exports is critical to the success of the NEI.
Several factors, such as a favorable trade environment and a favorable exchange rate, currently make the US a logical export base for vehicle manufacturers, which can help achieve the goals of the NEI. In addition, in June 2011, the SelectUSA Initiative was established to supplement the NEI by supporting private-sector job creation. The goal is to enhance economic growth by encouraging investment in the US. Business investment by both domestic and foreign firms leads to economic growth by impacting US jobs and exports. Creating a favorable investment climate will encourage US production by foreign automakers, who, in addition to the Detroit Three, contribute to US employment and exports, both directly and indirectly.
The automotive (vehicles and parts) industry has traditionally been one of the largest employers in the US, and, therefore, the industry’s recovery has been a great contributor to increases in employment and the overall US economic recovery. The US motor vehicle and parts manufacturing industry directly employed 738,400 workers at the end 2011. That is almost a 5% increase from the beginning of the year when employment was 702,400. In January 2010, when the NEI was announced, employment in the sector was down to 690,000. As the data and examples below demonstrate, it appears the industry foresees continued growth in employment and US vehicle exports.
In 2011, the top five export markets for vehicles assembled in the US were Canada, Mexico, Germany, China, and Saudi Arabia. Exports to each of these markets increased in 2011 in comparison to 2010. While exports to Canada increased a modest 2.4% to 736,501 units, the remaining destinations all had double-digit increases. Exports to Mexico increased 13.6%, exports to Germany increased 50.7%, exports to China increased 36.6%, and exports to Saudi Arabia increased 14%. Exports to non-NAFTA countries have already more than doubled since 2009, rising from 375,679 units to 804,660 units in 2011.
Both China and Saudi Arabia illustrate the dramatic growth in US exports over the last decade. These two countries are dramatically different in terms of market size and unique preferences, yet they both have a strong and growing demand for US vehicles. This helps demonstrate the worldwide demand across diverse markets and provides a likely indicator of success in the future in other wide-ranging markets for US vehicles. Given the growth in Chinese demand for vehicles, US exports to this particular market should continue to increase. In 2011, US exports to China were nearly five times higher (136,222) than they were in 2009 when the US exported 28,757 vehicles to China. This has been a rapid ascent for manufacturers in the US given that exports to China were less than 1000 units as recently as 2003. While many international automakers established plants in China to help meet the demands of this large and growing market (the largest in the world), it is clear from these trends that there remains an interest in US-made vehicles in China.
While less dramatic in overall size, the Saudi Arabia market, which has no indigenous auto production, has proven to be a strong market for vehicles built in the US. The US exported over 130,000 vehicles to Saudi Arabia in 2011. Saudi Arabia is the second-largest market for American sport utility vehicles (SUVs), behind only the domestic market.
Given the favorable factors that make the US an attractive base to manufacture and export vehicles, a number of automakers have either made recent investments in the US or have announced plans to invest in the coming years. These investments range from the Detroit Three expanding their US operations, to others expanding or building new plants in the US for new products to be exported to the world, to manufacturers, such as Ford, in-sourcing manufacturing jobs from Mexico back to the US.
The Detroit Three
According to the American Automotive Policy Council, Chrysler, Ford and GM, together, exported more than 800,000 vehicles produced in the US in 2011.
Chrysler—The country’s number three automaker is currently investing $500 million in its Toledo, OH, plant to expand Jeep production for the US and overseas markets. As part of this investment, the factory will add about 1100 jobs. Part of this effort is devoted to a new Jeep Liberty SUV that would be exported. According to Chrysler CEO Sergio Marchionne, Jeep is engaged in an active marketing campaign in Europe and sales are doubling every 12 months. Chrysler is also planning to build and export a new Maserati Kubang SUV at Chrysler’s Jefferson North plant in Detroit. Production is expected to begin in 2013 and Chrysler is aiming for 20,000 global annual sales of the Kubang.
Ford—Ford hopes to take advantage of the ratification of the Korea-US Free Trade Agreement (KORUS FTA) by increasing annual sales in Korea from 4184 units in 2011 to around 6000 in 2012. Under the provisions of the KORUS FTA, manufacturers such as Ford are allowed to sell up to 25,000 units in Korea that meet US standards rather than Korean standards. Therefore, there is an opportunity for Ford and other US-based automakers to increase their exports in future years. Ford is looking to increase its 4% share of the Korean market and is also expanding the number of products available in Korea. Ford will launch its hybrid offering in Korea, the Fusion Hybrid, and its first diesel offering in Korea, the Focus Diesel. In addition, Ford will be offering EcoBoost versions of the Explorer, Taurus, Escape, Fusion, and the new Escape.
For years, the Port of Portland has been the largest importer of Asia-made vehicles on the West Coast. In a deal announced in early 2012, the port will now begin exporting cars built in the US to overseas markets. Ford began exporting the Fusion Hybrid to Korea and is looking to eventually export as many as 10,000 units per year to Korea. While the initial shipment arrived in Portland carrying Hyundai vehicles, it returned in January carrying Ford vehicles.
General Motors—GM, which manufactures in 30 countries, sold a total of 9,025,942 vehicles globally in 2011 and improved its market share to 11.9%. Sales were up in North America, South America, the Middle East and Europe. Its sales in China, GM’s largest market, were up 8.3% in 2011 from 2010, with over 2.5 million vehicles sold. In 2011, GM exported 276,000 vehicles from the US, with Canada being its largest export market.
Press reports state that approximately 50,000 Cadillacs were exported from the US to 37 countries in 2011. China is the brand’s largest overseas market, accounting for more than half of Cadillac’s overseas sales. Currently, GM exports Cadillac’s CTS, Escalade and SRX models, and there are plans to export the new ATS and XTS sedans in 2012.
In early 2012, the automaker commenced exporting its extended range electric vehicle, the Chevrolet Volt/Opel Ampera, to Europe. The vehicle is produced in Hamtramck, MI. GM is hoping the high gasoline prices in Europe will lead to strong demand. The automaker also began exporting the Volt to China in 2012, where it is sold through 13 dealerships in eight major cities. GM is also exporting the Volt to Canada, with future plans to export to Australia.
The US is re-emerging as a competitive market to manufacture vehicles for both domestic sales and for export throughout the world. Partially due to the competitiveness of the dollar in relation to the yen, Japanese-based manufacturers all have plans to increase their US exports. According to the Japan Automobile Manufacturers Association, in 2010, US car exports from US auto plants of Japanese-based firms equaled 145,236 units, up from 94,162 in 2009. US truck exports from Japanese-based company plants in the US totaled 146,454 units, up from 76,399 in 2009.
Honda—According to the Detroit News, Honda exports Acura and Honda SUVs and other large vehicles to Russia and other countries where consumers’ tastes are similar to those of Americans. Honda increased 2010 US exports of 36,000 to over 48,000 vehicles in 2011. Mexico is the largest export market for US-made Honda products, followed by Latin America/Caribbean and then the Middle East.
Honda is also looking to increase exports from the US, due in part to the yen. Honda CEO Takanobu Ito told Automotive News, "We are asking the US to take on a lot of our productions, and exports, as well. Already, they have been doing some exports to the Middle East, but we are asking them to do more exports around the world."
In October 2011, Honda announced a second shift at its plant in Greensburg, IN. This second shift doubled its workforce to 2000 people and increased the plants’ production to its full 200,000-unit capacity. The Honda Manufacturing Indiana, LLC (HMIN) facility began operations in 2008 with the Civic sedan, and in 2009 it began producing the Civic sedan for export to Mexico and 22 Latin American and Caribbean nations and US territories.
Mitsubishi—Mitsubishi announced plans to double production at its Illinois factory to 70,000 vehicles per year. The plant currently produces the Galant, which is being discontinued at the end of the 2012 model year. Once it is discontinued, the plant will begin production of the 2013 Outlander Sport. Mitsubishi aims to begin exporting the Outlander to markets ranging from Latin America to Russia beginning this summer.
Nissan—This year Nissan introduced its new luxury Infiniti JX for sale in the US and export throughout the world. The Infiniti JX is assembled at Nissan’s Smyrna, TN, plant. It is the first Infinity built at the plant and is also the first luxury vehicle built in Tennessee. Nissan has said it will add up to 1000 new jobs and add a second shift at the Smyrna plant in order to assemble the JX.
Toyota—Toyota currently exports the Tundra, Tacoma, Camry, Sienna, Sequoia, Venza and Avalon to 19 countries, including Mexico and Canada. Toyota is planning to use North America as an export base, shipping worldwide to countries ranging from Saudi Arabia to South Korea. Thus the company will increase production at its US plants to fill the export pipeline. Toyota exported 16,700 vehicles from the US in 2010. The company began exporting the Indiana-made Sienna minivan to South Korea in 2011, and it plans to export as many as 6000 Camrys from its Kentucky plant to South Korea as a result of the KORUS FTA.
In November 2011, Toyota opened Toyota Motor Manufacturing, Mississippi (TMMMS), its new $800 million plant that assembles the Corolla. Toyota estimates that the plant will employ 2000 individuals eventually. In late 2011, Toyota Motor Corp. President Akio Toyoda stated that it is possible in the future that Corollas manufactured at TMMMS could be exported to countries that have a free-trade agreement with the US, such as Korea.
Toyota is also planning to increase production of the Highlander SUV by 50,000 units at its Indiana plant in late 2013 for both the US and global market. At the Chicago Auto Show in February 2012, Yoshimi Inaba, President & COO for Toyota Motor North America, announced that Toyota would be investing $400 million in its Princeton, IN, plant to accommodate the increased production. This is in addition to the Sequoia and the Sienna that are already built at the plant. Inaba stated that this investment will create 400 jobs at the factory.
BMW—European-based automakers are also using their US facilities to export vehicles. BMW has been using its Spartanburg, SC, plant as a base for exports since the mid-1990s. The plant is the sole location for production of its X3, X5 and X6 Sport Activity Vehicle models. BMW exported approximately 50% of the vehicles it built at this plant for many years. However, in recent years, exports of vehicles from the Spartanburg plant have grown to 70% or more, and vehicles are exported from this plant to 135 countries.
BMW announced in January 2012 that it is investing $900 million over the next three years to expand its South Carolina plant. With these new investments, production will rise to 300,000 units by the end of 2012 and up to 350,000 units by 2014. The company also plans to add 300 US jobs.
In early 2012, BMW announced that over 192,000 vehicles were exported from the plant and the export value of its passenger vehicles through the Port of Charleston in 2011 was $7.4 billion. In 2011, the plant produced 276,065 vehicles, a 73% increase versus 2010. Frank-Peter Arndt, BMW Group board member, has stated that the new BMW X4 will be manufactured at the Spartanburg plant.
Mercedes-Benz—Mercedes-Benz has a manufacturing plant in Birmingham, AL, that produces the M-Class, R-Class, and GL-Class vehicles for 135 worldwide export markets. The facility employs 3000 people. In 2010, 125,000 vehicles were assembled at the plant, and 52% of these vehicles were exported outside the US, Canada, and Mexico. Other top markets for the vehicles include Germany, China, and the United Kingdom.
In January 2012, Manager magazine reported that Daimler plans to build a new Mercedes plant in either the US or Mexico. The new plant will be operational by either 2017 or 2018 and will build the new small A-Class model. The new plant is part of Mercedes’ goal to beat its rivals BMW and Audi to become the largest manufacturer of luxury vehicles.
Volkswagen—Volkswagen invested $1 billion in its assembly plant in Chattanooga, TN, which began production in 2011. The plant assembles the Passat, which is currently being exported to Mexico and Canada. From the time the plant began production in May 2011 through March 9, 2012, the company exported 2540 vehicles to Mexico and 3015 vehicles to Canada. The Passat made its debut at the Qatar Motor Show in early 2012, where Volkswagen announced plans to export the US-built vehicle to the Middle East. Volkswagen also has plans to export between 4000 and 5000 units of the Chattanooga-made Passat to South Korea per year to take advantage of implementation of the KORUS FTA.
Hyundai—Hyundai of America President John Krafcik has said the US branch of the Korean-based company would like to export more from its Montgomery, AL, plant, which manufactured about 330,000 units in 2011 to meet strong demand in the US and North America. While Hyundai may not currently be able to use the US as an export hub to the extent it would like because of capacity constraints, the company still managed to export 49,511 vehicles to Canada from its US plant in 2011.
While the majority of automakers tend to "build where they sell," there obviously are opportunities across the globe to export US-made vehicles. As mentioned earlier, the goal of the NEI is to double the value of 2009 exports within five years in order to support US jobs. A look at the export data shows that the auto sector is well on its way to achieving this goal. In 2009, 1,067,516 new light vehicles were exported from the US. In 2010, exports grew 38.8% to 1,481,498 units. Growth continued in 2011 with 1,700,636 vehicles exported.
Therefore, in only two years vehicle exports have grown 59.3%, which leaves three years to reach the remaining 40% goal of doubling exports. In terms of the value of exports, US vehicle exports were $25 billion in 2009. By 2011, the value in US vehicle exports had increased over 72% to nearly $44 billion.
In addition, a rise in US vehicle exports inevitably has a positive impact on US auto parts exports, specifically aftermarket parts. Total US auto parts exports (no distinction is made between original equipment and aftermarket parts in the statistics) grew from $42.7 billion in 2009 to $67.2 billion in 2011. The combined total of auto and auto parts exports, $111.2 billion, represents 7.5% of total US commodity exports. These trends illustrate that the US automotive industry is on track to make a significant contribution to the success of the NEI.
This article was first published in the 2012-2013 edition of the Motorized Vehicle Manufacturing Yearbook.