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Do the Clouds Hovering Over the U.S. Auto Industry Have a Silver Lining?

Automotive Site Guide 2008
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Economic slowdown and, especially, skyrocketing gas prices are behind the spate of bad automotive news. Almost overnight, automakers that not long ago couldn't build enough pickup trucks and other big vehicles now have too many in stock. General Motors has plans to shut four pickup plants, Cole says, two in the United States and two elsewhere. GM also is eager to unload the iconic Hummer brand that it was equally eager to acquire not that many years ago. And even healthy Toyota is putting the brakes on U.S. pickup production, putting its pickup assembly operations on a long summer holiday.

"A lot of the newer plants were built for larger vehicles," Mace observes. Mercedes-Benz and Hyundai in Alabama are among the examples. Current trends could spell retooling at some point, he suggests.

Not all the automotive headlines carry bad news. Though the pace of new assembly plant development has clearly slowed, there are some exceptions. For example, Volkswagen this summer picked Chattanooga as the site of a billion-dollar assembly operation that will turn out midsize sedans destined for North American consumers. The automaker, which hasn't had a U.S. assembly presence in 20 years, also looked at sites in Alabama and Michigan before landing in Tennessee.

Volkswagen is angling to become the world's number-two automaker, which means it'll have to significantly increase its American market share with the help of the Tennessee factory. It also is working on new factories in India and Russia.

Meanwhile, there was word out of Kentucky this summer that Simpson County will get an $84 million Integrity automotive facility that will manufacture low-speed electric vehicles. The development could mean as many as 4,000 high-paying jobs.

The news out of Tennessee and Kentucky continues the automotive winning streak compiled by Southern states. Assembly, says Cole, "has been steadily drifting to the South, and one of the key elements of this is the issue of right-to-work states." It's a reality that executives rarely admit publicly, but international automakers prefer to set up shop in places where unionization is less likely. Cole notes that the recent American Axle strike that disrupted General Motors' production happened at roughly the same time Volkswagen was making its final site decision.

Cole says that when it comes to new assembly operations, the rumor mill is relatively quiet at the moment. But he can think of at least one source of potential good news at some point down the road. Lots of vehicles continue to cross the ocean from assembly plants in Japan, "and with the strengthening of the Japanese yen, that's a reason that they might consider moving more production here. But we've heard no specific rumors."

Then, adds Mace, there's the question of when Chinese and Indian automakers will act upon their itch to tap into the American market. "They may start to look to the United States to build their market share."

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