The Big Three pressure the foreign automakers on home turf image

Volkswagen, for example, is a prime example of a foreign carmaker that invested heavily in US manufacturing, as it took advantage of the weakness of the domestic manufacturers – General Motors, Ford and Chrysler.

Now, the foreign-owned factories face substantially increased rivalry after the 2009 restructuring of the trio is all but final, judging from what Volkswagen’s Tennessee plant and the Mercedes-Benz factory 180 miles to the south in Tuscaloosa, Alabama, show us.

Jason Hoff, chief executive of Mercedes-Benz US International, which controls the Tuscaloosa plant, says the Detroit Three have made “great steps forward”. But he goes on: “At the same time, we haven’t fallen asleep and relaxed.”

On the other hand Frank Fischer, chief executive of Volkswagen’s US manufacturing operations, battles the fact that his facility remains fully dependent on North American demand for the Passat.

“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.”

Fischer says other car plants in the US south appear to be highly efficient, making 300,000-450,000 cars annually. Such effects can be seen on the Mercedes-Benz production line in Tuscaloosa, which opened in 1997. Demand for the three models it produces here allows the plant to operate at full production capacity. Neither Volkswagen nor Daimler, Mercedes-Benz’s parent, publish individual factories’ profits. But heavily used plants can’t be anything else but profitable.

Via Financial Times