GM & Hyundai/Kia To Invest In U.S. Plants; BMW Balks

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Giving into pressure from incoming President Donald Trump, GM and Hyundai/Kia announced plans to invest in more manufacturing plants in the United States instead of building plants in Mexico.  This after Toyota, Ford, and Fiat Chrysler recently agreed to scrap plans to build cars and parts South of the border.

In an official company statement, GM said:

General Motors announced that it will invest an additional $1 billion in U.S. manufacturing operations. These investments follow $2.9 billion announced in 2016 and more than $21 billion GM has invested in its U.S. operations since 2009.

The new investments cover multiple new vehicles, advanced technology and component projects. A combination of 1,500 new and retained jobs are tied to the new investments. Details of individual projects will be announced throughout the year.

The company also announced it will begin work on insourcing axle production for its next generation full-size pickup trucks, including work previously done in Mexico, to operations in Michigan, creating 450 U.S. jobs.

“As the U.S. manufacturing base increases its competitiveness, we are able to further increase our investment, resulting in more jobs for America and better results for our owners,” said GM Chairman and CEO Mary Barra. “The U.S. is our home market and we are committed to growth that is good for our employees, dealers, and suppliers and supports our continued effort to drive shareholder value.”

GM’s announcement is part of the company’s increased focus on overall efficiency over the last four years. With a strategy to streamline and simplify its operations and grow its business, GM has created 25,000 jobs in the U.S. − approximately 19,000 engineering, IT and professional jobs and 6,000 hourly manufacturing jobs – and added nearly $3 billion in annual wages and benefits to the U.S. economy over that period. At the same time, GM reduced more than 15,000 positions outside the U.S., bringing most of those jobs to America. During that period, the company moved from 90 percent of its IT work being outsourced to an insourced U.S.-based model.

GM has also been facilitating its supplier base to do the same. The company has been executing a strategy to create supplier parks adjacent to its U.S. manufacturing sites (already accomplished at GM’s Fairfax Assembly Plant in Kansas, Spring Hill Assembly Plant in Tennessee, Fort Wayne Assembly Plant in Indiana, and Lordstown Assembly Plant in Ohio), and will continue to expand this effort. Supplier parks locating near assembly plants result in significant savings from reduced transportation costs, higher quality communications and continuous improvement activities as suppliers are located closer to the final assembly location.

In addition, GM is confirming that another supplier has committed to make components for GM’s next-generation full size pick-up trucks in Michigan, moving 100 supplier jobs from Mexico to the U.S.

Meanwhile, Hyundai and its sister company Kia unveiled their own investment plans. The automakers said they will spend $3.1 billion in the U.S. in the next five years.

The planned U.S. investment by South Korea’s two largest automakers is nearly 50 percent more than the $2.1 billion they spent in the previous five-year period, Hyundai Motor President Chung Jin-haeng said from Seoul, Korea earlier this week. The group is considering building a new factory in the U.S. and may produce Hyundai’s upscale Genesis vehicles and a U.S.-specific SUV in this country. 

“We expect a boost in the U.S. economy and increased demand for various models as President-elect Trump follows through on his promise to create 1 million jobs in five years,” Chung said. “We will actively consider introducing new models that have increasing demand and profits.”

Automakers are eager to cooperate with the incoming administration as they prepare to ask for favors including weaker fuel economy rules and lower corporate taxes.

Hyundai and Kia will invest about 30 to 40 percent of the $3.1 billion on new technologies such as autonomous driving and green cars. The rest will be spent on facilities and adding new models, according to the company.

Kia parent company Hyundai has been considering expanding its plant in Montgomery, Ala., which produces the Sonata, Elantra sedans and Santa Fe crossover. The factory is running at its top capacity of 370,000 cars a year. Kia’s factory in West Point, Ga., is also running at full speed, producing 360,000 of the Optima sedan and Sorento SUV a year.

Kia opened a new $3 billion, 200,000-vehicle-a-year production line in Mexico two months before the U.S. presidential election, with plans to increase capacity there to 300,000 units this year and to 400,000 vehicles by the end of 2018.

Hyundai and Kia have no additional plans to invest in Mexico and will not transfer production or jobs from the U.S. to Mexico, according to a company spokesman.

“The U.S. market is strategically a very important market for us and success or failure there is a barometer of our success globally,” Chung said. “Our interest in the U.S. market is consistent regardless of the government of the day.”

For now, BMW is not backing down on investing in Mexico.  BMW plans to finish construction of a $1 billion plant in Mexico undeterred by threats from Donald Trump that he will impose a 35-percent tariff on cars imported into the U.S. from Mexico.

BMWs plan calls for an annual production of up to 150,000 units of the next-generation 3-series sedan in San Luis Potosi, central Mexico, starting in 2019. When making the decision to produce its best-selling model in Mexico, BMW said that production should follow the market. As a result, the carmaker’s South African plant will cease exporting the 3-series to the U.S. in 2019 and start building the X3 crossover instead.

Earlier this week, a German newspaper posed a question to Trump about BMW’s plan for the new Mexico plant, to which he replied: “I would say to BMW, if they built a factory in Mexico and want to sell cars in the U.S. without paying a 35-percent tax, then they can forget it. What I am saying is that they should build their factory in the U.S.”

Currently, the BMW assembly plant in Spartanburg, SC is the companies’ biggest assembly plant in the world, producing 411,000 SUVs in 2016, many of which were exported out of the US.

Editorial credit: Gino Santa Maria / Shutterstock, Inc.

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