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

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

[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.