Volkswagen, for example, is one of a number of foreign carmakers to have invested heavily in US manufacturing, against the background of what was until recently the weakness of the domestic manufacturers – General Motors, Ford and Chrysler.
But the foreign-owned plants face substantially increased competition after the 2009 restructuring of the trio is almost complete, as differing positions of Volkswagen’s Tennessee plant and the Mercedes-Benz factory 180 miles to the south in Tuscaloosa, Alabama, illustrate how plants that can run at full capacity – as a growing number of the Detroit Three’s do – have powerful advantages.
Jason Hoff, chief executive of Mercedes-Benz US International, operator of the Tuscaloosa plant, acknowledges that the Detroit Three have made “great steps forward”. But he goes on: “At the same time, we haven’t fallen asleep and relaxed.”
For Frank Fischer, chief executive of Volkswagen’s US manufacturing operations, the key concern is that their plant remains entirely dependent on North American demand for the Passat, which has nearly stopped growing after a surge in 2012.
“If we can sell more Passats, we are of course happy to build any Passat which the market demands,” Mr Fischer says. “But it always makes sense to have at least two different models in one plant, so that when one model is in less demand, the other model may be in higher demand.”
Mr Fischer says other car plants in the US south appear to be reaping efficiencies, producing 300,000-450,000 vehicles a year. Such scale effects are at work on the Mercedes-Benz production line in Tuscaloosa, which opened in 1997. Demand for the three models it produces here allows the plant, which also exports some production, to operate three daily shifts five and sometimes six days a week – in effect full capacity.
Neither Volkswagen nor Daimler, Mercedes-Benz’s parent, publishes individual factories’ profits. But heavily used plants do tend to be far more profitable.
Via Financial Times
) - Monday, October 21st, 2013 - filed under Industry
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