A trade war over frozen chickens between the U.S. and Western Europe in the early 1960s prompted the blustery Lyndon B. Johnson to establish a 25-percent global tariff on imported pickup trucks. That tariff still exists, and one of the only ways around it is to build plants in North America.
Okay, say the Asian companies still descending with relish on the North American market. But they’re not the only ones, as the Big Three’s investment plans have been awakened by their own snoring.
An October 2003 survey by the United Nations Economic Commission for Europe, in cooperation with the International Federation of Robotics, sheds some interesting light on the industry, dominated as it is by industrial robots. After faring pretty well (only an 8-percent dropoff) during the global dropoff of 12 percent in 2002, the U.S. is leading the charge back in 2003, showing a 35-percent gain in robot orders during the first half of 2003. Even more striking, however, is the fact that automotive final assembly robot orders nearly doubled over the previous year’s first half – to 3,434 – with component makers’ orders showing a calmer 30-percent rise.
Even the general U.S. corporate alarm at offshore outsourcing is beginning to have a flip side. Sure, General Motors has invested $21 million in its first offshore R&D facility in Bangalore, while Asian automakers continue to invest in U.S. facilities. And a September 2003 survey by A.T. Kearney revealed that 90 percent of 40 senior automotive executives were planning to move certain non-manufacturing business processes to low-cost offshore locations. But in November, the same GM announced that it had reached an agreement with China to export some $1.3 billion in parts and components over the next two years – a sum equal to what it had exported there over the previous seven years. Separate Chinese agreements were reached with Ford Motor Co. and DaimlerChrysler that will result in the export to China of nearly 10,000 vehicles in 2004.
So the low-cost steel that made its controversial way to the U.S. will make a return trip. And as the West looks East for some operations and growth markets, the East looks West for the same.
In some ways, new plant announcements – and their just-in-time schedules – have come to be part of overall marketing schemes. The odd paths travelled by such projects came full circle in Texas, when Toyota announced that it had bought the naming rights to the new arena for the NBA’s Houston Rockets, some 200 miles east of San Antonio, where the company had chosen to build an $800-million truck plant. Among the reasons cited by a Toyota spokesperson for the name purchase was the marketing potential back in China of the team’s Chinese star Yao Ming.
Northern states vs. southern states, Far East vs. West, OEM vs. OEM. In the North American automotive sector, the game of chicken is still on. New plants and new models are making their debut at an unprecedented speed, waiting to see who swerves first.