Jeep, an Obama favorite, looks to shift production to China

the examiner ^ | 10/25/2012 | Paul Bedard

[tobyhill]

In another potential blow for the president's Ohio reelection campaign, Jeep, the rugged brand President Obama once said symbolized American freedom, is considering giving up on the United States and shifting production to China.

Such a move would crash the economy in towns like Toledo, Ohio, where Jeeps are made and supplied, and rob the community of the economic security they thought Obama's auto bailout assured them.

Obama is such a fan of Jeep that he included a picture of himself speaking at the Toledo plant in his newly released second term agenda binder. In his address to the plant in 2011, Obama said, "I just took a short tour of the plant and watched some of you putting the finishing touches on the Wrangler. Now, as somebody reminded, I need to call it the 'iconic' Wrangler. And that's appropriate because when you think about what Wrangler has always symbolized. It symbolized freedom, adventure, hitting the open road, never looking back."

Well it appears that the taxpayer bailed-out Chrysler is looking back and now considering cutting costs by shifting production of all Jeeps to China, which has a strong desire for Jeeps.

[Perdogg]

This is interesting

http://weeklystandard.com/blogs/clinton-obamas-feeling-hurt-over-jeep-ad_658105.html

[goldstategop]

So much for a legendary American automotive icon.

That must hurt Barack a lot. OWWWWWW!

[tobyhill]

“The series of statements in the ad individually may be technically correct, but the overall message of the ad is clearly misleading”

Here's The Washington Compost explanation of claim.

[DJ Frisat]

"Obama is such a fan of Jeep that he included a picture of himself speaking at the Toledo plant in his newly released second term agenda binder."

Binder? I thought Romney was the one with a binder problem! Dog whistle alert! Bwa-hahahahahahahahaha....

[tanknetter]

This has been covered on at least three other threads. The article in the Examiner being cited is second-hand from a Bloomberg article and is extremely misleading.

Jeep is not talking about shifting production to China, but localizing Chinese market production in China.

Original source article can be found here

Two quotes from the original article (emphasis mine):

“We’re reviewing the opportunities within existing capacity” as well as “should we be localizing the entire Jeep portfolio or some of the Jeep portfolio.”

"Manley referred to adding Jeep production sites rather than shifting output from North America to China."

[O6ret]

Just more evidence that the much vaunted Obama bail-out lined the pockets of the unions but did little to address the long-standing structural and financial issues impacting the industry...largely caused by the unions.

[tobyhill]

“The series of statements in the ad individually may be technically correct”

Washington Post.

[tanknetter]

“The series of statements in the ad individually may be technically correct”

The ad isn't the subject of the thread, the Examiner article is.

The Examiner article states that Jeep is planning to shift production. The original source article says that Jeep is looking to localize production and specifically cites the President of Jeep as saying that they're not planning on shifting production.

So the Examiner article is wrong. And, seemingly, based on an ignorance of what "localization" really means.

[PLK]

tanknetter - I hope Romney has stopped using this in his campaign speeches. The original article was VERY misleading and it was only the final paragraph that was clarifying. The leftists online were working their panties into a wad over Romney’s “lie” starting early yesterday morning.

[tobyhill]

You can argue that you believe the article is wrong but just because Obama and Chrysler are backtracking doesn't mean it is.

You can't honestly believe that Jeep is going to be built in China just for “locals” and won't export them?

The ad is based on this report and that's the connection.

[Adder]

Ok...so now Fiat wants to move Jeep production to Italy...

http://nlpc.org/cached/fiat-says-chrysler-jeep-production-may-move-italy.html?q=stories/2012/10/29/fiat-says-chrysler-jeep-production-may-move-italy

And NOT localized...

[tanknetter]

tanknetter - I hope Romney has stopped using this in his campaign speeches. The original article was VERY misleading and it was only the final paragraph that was clarifying. The leftists online were working their panties into a wad over Romney’s “lie” starting early yesterday morning.

I agree - the writer of the Examiner article is either incompetent (doesn't understand "localization" and overlooks the "not shifting production" part) or a liar (deliberately ignores both to stir up emotions).

There is the question about why Jeeps for China can't be built here and shipped to China rather than going the localization route. The answer is pretty complex, having to do with a combination of tarriffs, competitive wages, the ability to quickly expand production capability and a host of other factors.

In the end tho, making that case would be both ignoring history (Jeeps have been built overseas, including in China, before) and undermining companies like Toyota and BMW that have localized some production here in the US (Sienna Minivans are being made in Georgetown, KY and 300 series Beemers - maybe others - are being built in South Carolina) ... and in RED, union-unfriendly states too boot!

[tanknetter]

You can argue that you believe the article is wrong but just because Obama and Chrysler are backtracking doesn't mean it is.

There's no "backtracking". The original Bloomberg article cites the Jeep President as saying production isn't being shifted. That's not backtracking.

[tanknetter]

And NOT localized...

Now that's an interesting article. And very different fromt he Examiner one. Original source citation that Jeep/Chrysler is thinking about building Jeeps in Italy for export to the US. Which is a different proposition, entirely, and a relevant one, than what's in the Examiner article.

Thank you, I appreciate your posting it.

[tobyhill]

Good! Then Jeeps are being made in China and I don't believe it's just for “locals”, I believe it's being built there for exports.

[Condor51]

Moving Jeep production to China, if true, is one thing. But another article says Jeep may move Jeep production to its Fiat Plant in Italy, and that, is quite another.

A Chinese made/assembled Jeep I may buy. But a Jeep made/assembled by FIAT!, no fricken way. At least in China you know that the workers will actually 'work'. But the lazy socialists in Italy, they avoid 'work' like its soap and water.

There are a couple Italian made cars I would buy ('F', 'L' and 'M'), but not until I win the Mega-Lotto. As even though they're top class cars you still need a mechanic on your staff.

Back in 1977 I (we) almost did buy a Lambo, like this one 'luckily' the dealer was closed.

[Adder]

Your welcome...

Not sure where the Examiner got the China angle but...

It seems Fiat will do something to Chrysler production in some manner. It would certainly help the ailing Italian economy...at our expense of course.

Maybe that was the plan all along...maybe I watch 2016 too intently. :]

[Zhang Fei]

You can't honestly believe that Jeep is going to be built in China just for “locals” and won't export them?

Both GM and Ford have plants in China with local joint venture partners. They manufacture for the local market. The reason you won't see those cars here any time soon is because the Chinese car market is generally lower-end than what we have here. Engines are smaller and crash test specs are not as good, because of fuel efficiency requirements there - not government requirements, but the fact that Chinese wages are way lower, which means gas mileage needs to be really good. Some of these Chinese car buyers are earning $4K a year. While those wages fall below the Chinese income tax threshold, they can't afford to drive gas guzzlers.

[tanknetter]

It seems Fiat will do something to Chrysler production in some manner. It would certainly help the ailing Italian economy...at our expense of course.

For Jeep, the angle of building them over in Europe for export back to the US would be an idiotic move. Someone really needs to explain (s-l-o-w-l-y, using big, monosyllabic words) to the Fiat CEO the whole "New Coke" thing and the risks inherent in mucking around with iconic US brands.

Now a quick disclaimer: I'm ticked at Jeep and have been for years. Between replacing the Cherokee with the Liberty, the Compass/Patriot 'lightweight' lines and then redesigning the Wranger from a perfectly good Jeep (the TJ) into a mini-Hummer they've really lost me as a future customer. And I say this as someone who owns a 96 Cherokee (XJ), and who's family history (parents' cars over the years) includes an 84 Cherokee, 86 Cherokee, 88 Grand Wagoneer, 95 Grand Cherokee and 08 Grand Cherokee.

They might get me back if they were to bring back the TJ, or rework the Patriot into something more Cherokee/XJesque (from the original pictures I thought the Patriot was going to bring me back to Jeeps. Then I saw one in person ...). But for now I think the next vehicle I buy is going to be a Toyota FJ Cruiser.

[bert]

-—— ‘iconic’ Wrangler——

Both of my next door neighbors have wranglers.

One weighs over 350 and seldom goes anywhere except to work. He keeps it in the garage except to got to work and to wash it

The other neighbor has an old one. It was red but now is primer black. Once in a while he takes off the top and drives it on Saturday chores.

Both of the icons represent rugged individual wannabe’s

[green iguana]

Right now, Jeep sells about 50,000 vehicles a year in China. They’ve sold over 34,000 so far this year thru September. All Jeeps are currently made in the US, so those are made here and exported to China.

When production of Jeeps for China starts up in China, we’ll no longer be expeorting those vehicles to China. That’s 50,000 vehicles a year that we won’t need to make here.

I’d say that’s quite a few jobs heading to China.

[kimtom]

I agree. I have worked 20 years in auto industry. In engineering. I have followed it thru the ups and downs. got downsized in 2008. Adder makes a fair point, but don’t believe for a second, China nor Italy will not only build but also EXPORT. the Germans did it and nearly ruined Chrysler. The goal of any manufacturer is profit. EXPORT brings cash in and creates jobs. US has been exporting all right.....Jobs!!!

[kimtom]

good point! And it will be cheaper to build there and then ship them here. (without protective tariff's! HA!) Boy the Unions shouls love that! well the per Jeep may drop, americans love cheaper prices! (sarc)

[Scutter]

So glad I sold my Wrangler and bought an American-made Ford F-150. I’m getting 5 MPG more from a vehicle that is superior in almost every way (not a better off-road vehicle, but other than that...)

[CPOSharky]

...his newly released second term agenda binder comic book.

There, fixed it.

[Candor7]

The Chrysler bail out by Obama compells Jeep to remain in the United States?

Buahahahahahahahahahahahaha!

Americans soon will not have enough money to buy a pot to pi$$ in , let alone expensive vehicles , and who would want a US gov necessitated electric jeep anyway?

Better to go to communist China where there is more capital and the economy is freer than it is in the USA, with no environmental regulation, labor problems, or government intervention if the raising of capital.And a gasoline powered vehicle is not politically incorrect in
China.

GO JEEP GO!

[kimtom]

Right, production will be for locals, but it is not difficult to ALSO build for export specs. If it is true that Jeep currently exports to China, then producing locally will increase profits for Jeep and create jobs in China. WE (US) will lose those production jobs. If China builds (eventually) for export, (to US) then domestic production will go DOWN or cease altogether. Of course Jeep can “create” a copy , call it something else, import to US and appear righteous.

[kimtom]

I agree that Jeep is an American Icon. But! The US automakers (big 3) sold US out, who can blame them. As legacy cost go up profit margins go down. The cost of manufacture goes up. Overhead is up. It is attractive to build elsewhere and import. NAFTA removed the barriers from building in Canada and Mexico Profit up, quality down. The US has the capacity, the know how,the capability to build, build and EXPORT. But for some reason CEO and Politicians interfere....Uhmmmmmmmmmmm (sarc)

[central_va]

The cost of labor per vehicle in the USA averages about 10% of the sticker price. Even if the cost of labor was zero(think communist slave labor) the sticker would only go down 10% at most. That’s is assuming the manufacturer passes on the savings.

[Zhang Fei]

If it is true that Jeep currently exports to China, then producing locally will increase profits for Jeep and create jobs in China.

China levies a 25% tariff on assembled vehicles. For that reason, Jeep sales in China, although 100% imported, are negligible. Here are some stats from a Bloomberg article:

Jeep sales rose 63 percent last year to 19,013 -- less than three days worth of China sales for General Motors Co. (GM), the top foreign automaker in the market. Detroit-based GM has 2,900 dealers -- more than 24 times the Jeep number -- that sold 2.55 million vehicles last year, mostly Buick, Chevrolet and Wuling models.

It's not surprising they're looking at local assembly given that the tariff barrier is the tip of the iceberg - coupled with the non-tariff barriers, the prices for imported Jeeps in China are staggering:

The Jeep Grand Cherokee starts at 575,900 yuan, or $91,064. In the U.S., it starts at $26,995, according to company websites. The 2012 Grand Cherokee SRT8 version costs at least 1.2 million yuan, or $189,750, compared with $54,470 in the U.S., according to Edmunds.com.

[kimtom]

“..Better to go to communist China where ....”

Yep, just wait a few more years (decade) and you'll get your wish!!!
(sarc) Ha!!

[kimtom]

Ah Yes! That is true!!! Labour is only a small part of over costs. But materials and overhead is added as well. In 2007 the average “cost” per vehicle was around $12,000 (I worked for supplier then) so the margins of “profit” per vehicle are really low for low end models , but the manufacturers make up for it in the top end models (i.e. profit margins). That is why when I negotiate pricing with a dealer, they don't flex much on $1,000-2000 (low end)vehicles but will move $4,000-$8,000 on the top end models.
And remember, even at dealer “invoice” (ha) auto manufactures “have” to make something (?)

Thanks for Reply

[kimtom]

Thanks for your reply,
Yes tariffs are barriers, but remember that it is determined by China’s government (or US) on imports for various reasons (note).
Tariffs do HURT consumers. It is also a POLITICAL tool to force manufacturers to build locally. (cool trick huh?) The US did it to Japanese auto makers.
I personally have no problem with companies setting up plants locally to supply local markets. (Japan has help employ people here in US and create jobs competition, etc.).
I don’t believe US auto makers really take domestic workers into consideration though when making these decisions.
Our (US) Government does not take domestic workers into consideration (and consumers) in long run with TRADE and tariff imbalance.
I regret that Chinese consumers pay high prices, but I am surprised Some can afford US imports at all!!!!
It is said China manipulates it’s currency, and that effects price!.
Thanks Again for your polite reply.

[kimtom]

“.....if the cost of labor was zero(think communist slave labor) the sticker would only go down 10% at most...”

My bad, I should have replied; Because of currency manipulation, tariff adjustment, material, and overhead cost, (not to mention , just plain undercut pricing- Korea)in China, I believe the vehicles COULD be sold for less in US market. Even with Jeep keeping margins the same (most likely NOT though).
Thanks again...

[Zhang Fei]

It is said China manipulates it’s currency, and that effects price!. Thanks Again for your polite reply.

Not that it's relevant to the discussion, but I'm not Chinese. As a long-time Japan and then China watcher, it's kind of interesting watching these guys put up tariff and non-tariff barriers. Ultimately, though, trade barriers don't give a country a competitive industry. Only superior products do. The Japanese have tariffs and non-tariff barriers on just about anything imported, but they're now also-rans in consumer electronics. AFAIK, every country outside of the US has heavy tariffs on auto imports, but only Japan, Korea and Germany have become export powerhouses.

[Zhang Fei]

Even if the cost of labor was zero(think communist slave labor) the sticker would only go down 10% at most. That’s is assuming the manufacturer passes on the savings.

Now that Japanese production is coming back on-line, GM and F have been making a 5% pre-tax profit margin. 10% is 2x that number. Since raw materials costs are set by the global markets, there's nowhere else to cut but labor which, increasingly, is also set by the global markets.

[central_va]

That’s why we need to tariff incoming manufactured goods. I would say a 10% tariff would be about right. It would raise probably 100 to 200B and eliminate the “slave labor” factor.

[UnbelievingScumOnTheOtherSide]

The cost of labor per vehicle in the USA averages about 10% of the sticker price

Maybe final assembly - not mine to finished product.

[Candor7]

Yes, I am looking forward to seeing the 2016 Model Jeep
Langler from Fuchow Zia Men.

Jeep is a division of Klysler Motors, your “bairout” money at work.

[kimtom]

I do not watch foreign trade much,But was employed in auto industry for about 20 years (German, US, Japanese auto suppliers) until the BIG layoff 2008.
I agree trade barriers do not help. Japan is feeling the pinch of stiffer competition. They feel the pressure to cut cost, maintain quality. (they use Chinese labor as well) I admire Japans Mfg capabilities and eye for detail, but not Germany's. USA has good designs and capability, but usually chooses the cheaper (quality) route. But that's another topic. Thanks for your input

[kimtom]

“...2016 Model Jeep...”
Try 2018-2020 US Mfg can't seem to launch new products as fast as Japan.
But where does Fiat come in? (and how did Fiat get control anyway?)

[Zhang Fei]

USA has good designs and capability, but usually chooses the cheaper (quality) route.

I've always maintained that the UAW wage package and UAW work rules increase its labor costs so much, relative to the competition, that Detroit has had to remain price competitive by reducing parts costs. This means substituting weaker materials or skipping steps in materials processing, thereby causing phenomena like the second set of powertrain components failing after being installed even while Japanese cars with the same mileage are running, smooth as silk, on the original powertrain without problems. As the yen went from 250 to $1 to $80 to $1, Japanese manufacturers have chintzed out on trim components, but generally not skimped on powertrains.

[Zhang Fei]

That’s why we need to tariff incoming manufactured goods. I would say a 10% tariff would be about right. It would raise probably 100 to 200B and eliminate the “slave labor” factor.

Wikipedia has an interesting primer on the history of tariffs here.

[CatOwner]

Chrysler states they are not moving production to China.

http://www.reuters.com/article/2012/10/30/us-chrysler-jeep-idUSBRE89T15X20121030

[Candor7]

Chrysler Corp bought Fiat in 1987.

The interesting thing is that Chrysler Corp makes really great vehicles for Japan and other Asian Countries..... Cars that should be marketed here but they do not pass EPA muster or Vehicle Safety Muster in the USA. I saw many Chysler ME4s in Japan in 2009, not the turbio version, but a mid engined 4 cylinder version that was shockingly beautiful .

Chysler has done a good job entering the Asian market , using Fiat inspired designs I applaud the fact that Jeep is headed for China. Its a winning decision for the division, dictated by economics.If the economy here in the USA were not facing 20 years of deflationary non growth, Jeep would be staying. You can blame the Obama regime and the left for the fact that the Community Reinvestment Act caused a huge international mortgage debacle and the taxpayer funded TARP bailout which brought those economic conditions about. Folks still have a hard time here getting it. I mean in 2007 you could get a $250,000 mortgage from just about any bank without even submitting a tax return.So many high risk mortgages with adjustable rates could not last and the democrat leftist , a house for every person house of cards fell, ruining the West's ecomomies.

I hope Jeep does well in China. We can buy them here as imports, just like we do many other vehicles.

Xe, Xe.

[Randy Larsen]

My finances are finally settling down after retirement and I NEED a vehicle that I can trust in snow.

The Jeep was my first choice but if they move to China...no longer.

[Homer1]

As anybody wh works in IT can attest, adding offshore resoures is how you start a larger move. zonce the production lnes are set up, those workers in Toledo will have dirct competitors inside their own company. That is the larger and more important point. The same issues which put the auto industry in trouble were not resolved, only postponed.

[Homer1]

As anybody wh works in IT can attest, adding offshore resoures is how you start a larger move. zonce the production lnes are set up, those workers in Toledo will have dirct competitors inside their own company. That is the larger and more important point. The same issues which put the auto industry in trouble were not resolved, only postponed.

[dalereed]

Complete distortion!!!

They only intend to shift production of vehicles sold in China to be produced there!

They are going to expand domestic production!!