Saturday’s Detroit automotive news reports the high velocity of an auto industry that’s on an unprecedented rebound. At the center of that rebound is several foreign owned multinational auto manufacturers, including the Chinese. Honda and Toyota were the first Japan based auto makers to manufacture in the U.S. and have never looked back.
Despite what you may have read or watched on C.N.N. and Fox News as to a decline in foreign investment in the U.S. and Canada, the Federal and many state governments welcome foreign investment, subsequent jobs created and generated tax revenue.
To date American Honda Motor Company has manufactured more than 17 million cars and light trucks in North America and look to increase auto exports from North America by 100,000 units in 2015. America's number one Auto brand in 2013 was Toyota with Honda earning the # 1 spot in the light car and small sedan sector with the Civic and Accord.
The year was 2008... As President Barack Obama pledged to return manufacturing to U.S. shores few listened, and even fewer believed him; as the U.S. and World economy melted into the deepest depression experienced in decades.
Since the introduction of affordable foreign manufactured sub-compact cars to U.S. markets in the 1970s, we had witnessed the accelerated collapse of Detroit and North America based auto manufacturing.
Demographic and debasing economic trends mandated the rapid development of cheaper, smaller, fuel efficient cars and trucks. Detroit had hesitantly answered the call for change, as an unprecedented rise in the cost of union sanctioned labor tied to unsustainable medical and retirement benefit packages would kill the U.A.W...
A mid decade spike in the cost of raw materials and fuel caused buy unprecedented demand in developing economies, would prove to be the nail in the domestic auto industries coffin as A.I.G. , Citibank and Morgan Chase Stanley called in the note on Chrysler, Ford and G.M..
The nation’s largest automotive based manufacturer; G.M., Delco and subsidiaries would fold into Bankruptcy, laying off thousands of U.A.W. sanctioned skilled laborers and shuttering countless suppliers and jobbers.
The majority of auto workers would never return to what they and family believed to be life- time jobs. Those that would return to the “new” G.M. and Chrysler would do so under halved pay rates and reduced medical, retirement benefits.
As the national and international press corp. spun a story of unimaginable decade spanning horror, this writer and countless others would reach out to the Obama administration, emphasizing the importance of sustainable job creation through a resurrected “on-shore” manufacturing sector.
While Obama’s vision for rebuilding America’s economy was linked to the repair of road infrastructure, bridges, schools and fiber optics enabled internet access for “all,” the so-called “shovel ready” construction projects touted by the administration failed to materialize, as the U.S. economy reacted to socioeconomic events unfolding in Asia and Europe.
The “free enterprise” system as we knew it was broken… Obama couldn't fix it and yet the infrastructure for U.S. based mega- manufacturing was in place, as was a well trained labor force waiting for “world -wide" product demand to spark the sleeping monster that was the U.S. manufacturing sector. The forgotten “Made in America” slogan of the 1970s would come back with a vengeance.
International and domestic markets for big ticket durable goods had all but disappeared, as an economy wrecked by deregulated mega- financial gambling, through commodity derivative trading failed to quickly rebound. The Fed would financially bail out big banking, housing, Insurance and auto manufacturing. But at what cost?
The detractors of the president’s stimulus act painted a grim picture of prolonged generations- long debt that would drown the nation in a whirlpool of inflation, stagflation or economic implosion.
The nation was told to be patient by a president that was quickly loosing credibility among the loyal as national unemployment numbers approached 12% or higher. Some claimed much higher. At the height of the recession 30 million Americans would be unemployed. As millions of co-workers, family and friend extended their dwindling unemployment compensation into a two and three year wait, millions would never return to work.
The first decade of the new millennium would come and go as a seemingly endless recession would regretfully extend into 2010 and the first quarter 2011.
With the recession came a decline in the demand for expendable perishables and inexpensive consumer goods. With this development the Chinese import manufacturing sector would retract, losing measurable export capacity. This would lead to a waning in China’s insatiable demand for North American produced or recycled raw materials. Subsequently steel prices would drop in the U.S. and Canada, as would the wholesale and retail price of petroleum, oil based fuels. These developments would prove favorable as to supporting the return of cost effective U.S. based manufacturing.
Toyota would become the number one automotive manufacturer on the planet, the # 1 brand in the U.S and would sell 1.7 million units in the North America in 2013.
The Japan, Korean and European owned auto manufacturers were not impeded by decades long U.A.W. mandated health and retirement funds. Nor, were they financed and insured through Citibank and A.I.G...
In-fact, American Honda Motors claims no melt-down related layoffs in North America during the depression, nor did they participate in the Fed underwritten T.A.R.P. bailout. Honda has been manufacturing in the North America for more than 30 years. Toyota? Longer…
As we fast forward to January 2014, the United States has regained world-wide dominance in heavy manufacturing. Recognition for quality, timely and in many cases superior and cost efficient manufactured goods. And, in no sector is this superiority more prevalent than the Japan and Korean owned U.S. manufactured auto industry.
The number one and two auto manufacturer's in the World, Toyota and Nissan, as well as Subaru, Honda and Korean giant Hyundai have increased manufacturing activity in the U.S. and North America to record levels,while increasing exports from the U.S. to Asia and South America.
No fewer than 4 million Japan or Korean brand automobiles will be manufactured in North America in 2014, up 17% from 2012 and projected to grow no less than 13% in 2014.
Taking the example of Honda, management has vowed to increase world-wide auto manufacturing to 6 million units no later than 2016. North America is Honda's top market with 1. 4 million autos and truck-like vehicles produced in the U.S. and Canada in 2013.
90%+ of all Honda products sold in North America is manufactured in Canada, the U.S. and now Mexico.
The trend continues.
Honda looks to increase exports from the U.S. to Asia, Central and South America. As the 9th largest auto maker on the planet builds a new CVT (transmission,) automotive manufacturing plant in Mexico. Honda joins G.M and other multinationals in an attempt to bolster profitability by eliminating oceanic shipping costs, import terrifies and possible future trade embargo.
While logic would dictate that it is less expensive to manufacture goods in the same region as the intended market, globalization dictates that a manufacturer also takes steps to minimize and off-set the effect of fluctuating currency, import and excise tax.
This is where the stabilization of the U.S. dollar against the Yen comes into play.
This is part 1 of a 2 part series.
Parks R. McCants 2014 All rights reserved.