Supply Chain News Bites - Only from SCDigest
 

-April 17, 2007

 
 

While US Auto Companies Retrench, Japanese OEMs are Building New Factories at Home

 
 

Is Idea that You Must Manufacture in Local Markets Fading?

 
 

SCDigest Editorial Staff

 
 

While Ford, GM, and Chrysler are struggling in the U.S., with many factories shuttered and more closings on the way, Japanese manufacturers are adding capacity in their home country. The changing fortunes are partly due to current market trends, but it also has some observers wondering if the idea that Japanese manufacturers need to produce cars in the U.S. is running out of steam.

Honda is opening its first plant in Japan in 30 years, while Toyota is adding significant new capacity there to produce engines for its high end vehicles worldwide. Even Nissan, which has struggled more than its two Japanese rivals, is also expanding domestic production capacity.Behind the changes are at both ends of the market spectrum. At one end, there is increased consumer demand for both small, fuel efficient vehicles, which Toyota and Honda make primarily in Japan. There is also increased demand for luxury vehicles such as Toyota’s Lexus and Nissan’s Infinity, which are also made primarily or exclusively in Japanese factories. Most transplant factories make more middle-of-the-line models.Is it possible after more than a decade of Japanese OEMs building factories in the U.S. to serve the market here that they may be rethinking this strategy, at least in part?Some believe so. The Associated Press recently quoted an executive from Nissan as saying they view things differently now than they did a few years ago, when the main operational goal was to build cars locally. The goal was simplicity. Now, Nissan’s Thierry Viadieu says multinational manufacturers need to be more sophisticated in their production strategies, coordinating production among factories across the globe. Others say that high end and new technology vehicles need to be produced in Japan to perfect the advances and maintain high quality levels.

The combination of weaken U.S. OEMs in Detroit and this “insourcing” back to Japan will continue to put pressure on U.S. auto workers and parts suppliers.

 
     
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