A number of new plant and job addition announcements are mostly “somewhere else”.
Wayne Gerdes - CleanMPG
- Sept 3, 2012
Chairman of Hyundai Motor Group, Mong-Koo Chung; Secretary of Jiangsu Province, Luo Zhijun; and Secretary of Yancheng, Zhao Peng were on hand at the new Kia plant ground breaking ceremony in Jiangsu Province, China.
Overseas automobile production expansion is growing at an incredible pace with plant announcements from most every major manufacturer last week and this is only the beginning.
U.S.-China Trade Facts
U.S. goods and services trade with China totaled $539 billion in 2011 with Exports totaling $129 billion and Imports totaling $411 billion yielding a trade deficit of $282 billion in 2011.
According to the Office of the US Trade Representative, China is currently our 2nd largest goods trading partner with $503 billion in total (two ways) goods trade during 2011. Goods exports totaled $104 billion; Goods imports totaled $399 billion. The U.S. goods trade deficit with China was $295 billion in 2011.
Late last week Ford broke ground on a new $760 million USD manufacturing facility in Hangzhou, China which will double production capacity in China to 1.2 million passenger cars annually by 2015.
As part of its largest expansion in 50 years, Ford and its joint venture Changan Ford Mazda Automobile (CFMA) will invest $760 million U.S. in the new plant, bringing Ford’s total investment in China to approximately $4.9 billion U.S. since 2006.
The Hangzhou plant is part of Ford’s aggressive expansion in Asia Pacific and Africa, with nine new plants (seven under construction) planned.
The first vehicle will come off the line in Hangzhou in 2015. The new plant further diversifies Ford’s manufacturing footprint in China while giving the company better access to the large customer base in China’s affluent coastal areas.
The Hangzhou plant will further complement Ford’s existing manufacturing base in China. In February, CFMA opened its second assembly plant in Chongqing, which houses a fully integrated facility including stamping, body assembly, paint, trim and final assembly operations.
Earlier in the week, the company broke ground on another new assembly plant in Chongqing, where a new engine plant as well as a transmission plant are also under construction, making Chongqing the largest manufacturing location for Ford outside southeast Michigan. The joint venture with CFMA also has an assembly and an engine plant in Nanjing, China.
We reported on this two weeks ago but with the production of Honda’s “Earth Dreams” engine and transmissions in Ohio, Honda invested $220 million to launch the CVT production for vehicles produced in North America, including $120 million at Honda Transmission Mfg. of America for the new CVT line that started mass production, and nearly $100 million at the Anna Engine Plant for the production of the CVT's high-tech pulley components starting next year.
The expanded production will create 150 US
jobs at the two plants
Late last week, Hyundai broke ground on a new 50-50 joint venture plant in Ziyang City, Sichuan Province, China to produce 150,000 vehicles beginning in first half of 2014.
Sichuan Hyundai is a 50-50 joint venture between Hyundai Motor Company and China’s Sichuan Nanjun Automobile Group Co. (Nanjun Auto), with an investment of approximately $570 million USD.
The new plant will be equipped with advanced full-cycle production facilities of press, welding, painting, assembly as well as an engine plant; the plant will produce China-exclusive truck models. The plant is designed to flexibly expand its capacity up to 300,000 units according to market demands.
China is the world’s biggest commercial vehicle market, with 4.03 million vehicles (3.54 million trucks, 490,000 buses) sold in 2011, a figure that is expected to grow to 4.71 million units by 2017.
Hyundai plans to sell 170,000 vehicles in China to raise its market share to 3.6% by 2017.
Late last week, Kia broke ground on its third plant in China with 300,000-unit annual capacity plant to bring Kia’s total manufacturing capacity in China to 730,000 cars per year.
Kia and its Chinese subsidiary, Dongfeng Yueda Kia held the groundbreaking ceremony for its third plant in the Yancheng Economic Development Zone (Jiangsu Province) officially signaling the start of construction of the automaker’s newest state-of-the art manufacturing facility.
At maximum output, the plant will have an annual capacity of 300,000 vehicles when completed in the first half of 2014. Combined with the current annual capacity from its two existing plants in the Yancheng Economic Development Zone, which have annual capacities of 130,000 and 300,000 units, Kia will be able to produce a total of 730,000 vehicles locally.
The new plant will be located in the Yancheng Economic Development Zone only 3 miles away from Kia’s second plant, enabling utilization of various existing infrastructure facilities and thereby maximizing synergies among all three plants.
In addition to state-of-the-art press, body, painting, assembly and engine module processes, the plant will house a technology research center and 1.2 mile high-speed test track. A flexible layout of the third plant will give the automaker the freedom to expand annual capacity by 100,000 to upwards of 400,000 units if a continued increase in market demand occurs.
Dongfeng Yueda Kia has recorded significant growth in the Chinese market, tallying sales of 432,518 units in 2011 for a 326% increase versus 2007 (101,427 units). So far in 2012 (through May), thanks to the popularity of locally produced models like K2 (China-specific version of the B-segment Rio), C-segment Forte (known as Cerato in some markets) and Sportage CUV, sales reached 185,543 units for 16.7% year-on-year growth, which exceeds average industry demand in China of 6.0% for the same period.
Meanwhile, Dongfeng Yueda Kia’s market share has grown from 1.9% in 2007 (18th in the industry) to 3.6% last year (8th in the industry). And so far this year, its market share has remained at 3.6% while its industry rank has gained a spot to 7th place in China.
Toyota announced earlier today that its Manufacturing facility in Russia (TMMR) has added a second shift to increase production of the Toyota Camry model.
The decision was made this past April and follows the 54% increase in Camry sales CYTD compared to 2011 within the Russian market. Since the announcement, 600 new people have been hired and trained in accordance with practices of Toyota manufacturing companies globally. New employees were trained in fundamental skills required for car manufacturing, essential quality principles of the Toyota Production System and enjoyed operating experience at several working places.
In February of this year, TMMR announced plans to add stamping and resin-molding processes to its production during 2014. These expansion plans aim to further promote localization in Russia, a market promising continued sustained growth.
Late last week, Volkswagen expanded its production network in China with the announcement of a new transmission plant in Tianjin.
The plant in Tianjin is designed for an annual production capacity of 450,000 units. Over 1,500 new jobs are to be created at the new site. Investment in the first stage of the plant totals approx. $290 million USD. Production is scheduled to begin at the end of 2014.
Volkswagen will also be joining up with the best local vocational schools to set up a competence center for tooling technology in Tianjin to train teachers with a view to meeting demand for technically trained and specialized skilled employees in the medium term. This project includes the introduction of a dual vocational training program modeled on the German system.
The People’s Republic of China is the largest sales market for VW. In 2011, the company delivered 2.26 million vehicles to customers in the country. In the first seven months of this year, deliveries rose by 17.1 percent to 1.51 million units.
Similarly, the company announced production expansion in Russia as they signed contracts to build a new engine plant in Kaluga, Russia with an investment of some $315 million USD.
The new location is supposed to build the all-new and advanced EA211 1.6L gasoline engine by 2015. The capacity is set at 150,000 engines a year. The engine plant is being built directly next to the Volkswagen vehicle plant in Kaluga.
Volkswagen is investing approximately 250 million euro in the 325,000 sq. ft. facility in Kaluga Russia. Crankcases, cylinder heads with assembly integrated, crankshafts as well as the complete engine assembly are all part of the planned scope of production.
With the construction of the engine plant, Volkswagen is on its way to meet an industrial commitment to Russia by fulfilling the targets agreed with the Russian government at the end of May 2011 that by 2016, at least 30 percent of vehicles produced in Russia will be equipped with engines that were manufactured locally.
Investments by the Volkswagen Group in Russia up to now have totaled approximately $1.5 billion USD. In order to meet the expected strong demand of the Russian automotive marketplace in the future, VW is planning to invest a further $1.2 billion USD in Russia for the development of new market-driven products, the further localization of production as well as the construction of the new engine plant in Kaluga as was agreed today.
The Saga Continues
Expansion to meet local demand is standard fare but most of the above corporations continue to sell more vehicles in the US market then they do in China and Russia yet are building more plants in those countries and continue to import into this one with the onerous trade deficit shown above. Projected demand is one thing, excessively free trade agreements at the expense of the US worker is something else all-together.
So much for “Labor Day” here in the US with an announced 150 new jobs in Ohio when it is actually “Labor Week” in both China and Russia with tens of thousands of jobs elsewhere in order to meet trade commitments negotiated with the host countries.