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How's this for a wake-up call on the state of the dollar: "If the dollar keeps slumping against the euro, the United States could become the next Mexico -- a low-cost manufacturing haven for European automakers and suppliers." With the dollar at $1.38 to the euro as of now, and expecting to drop further, European makes either need to raise prices, move production to "cheaper" countries like the US, become more efficient, or be happy with less profits. Fewer euros in the till isn't really an option, and price wars are already difficult enough to navigate. That leaves relocation or finding cost efficiencies in other markets.

The article in Automotive News goes on to detail how European manufacturers like BMW and Mercedes are actively moving production to their Spartanburg, South Carolina and Tuscaloosa, Alabama factories, respectively. VW is considering its options for an American plant, but will stick with Mexican operations for now. Audi's approach, since it only sells 10-percent of it's European product in the US, has been to find cost efficiencies in markets like China. Other companies looking for such natural hedges include Magna, which recently lost a huge amount of production at its Austrian plant. The Canadian supplier and manufacturer is looking at building a factory in America to ease the pain.

The market is being watched closely, and there are too many factors in play to know who will do what yet, but some analysts think the dollar might drop to $1.50 against the euro. If so, said John Lawson, chief auto analyst for Citigroup in London, "Either the dollar has to change, or the business model has to change."

[Source: Automotive News, sub req'd]



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  • 34 Comments
      • 7 Years Ago
      Now you understand why Japan is the largest currency manipulator in the world. Congress makes a big stink about China, but Japan gets a free pass. The Bank of Japan makes sure the Yen sinks right along side of the Dollar. Here in America, the concept of putting a portion of your paycheck in the bank is unheard of. In fact, a falling dollar is great if you're up to your ears in [fixed-rate] debt. But over in Japan, where the average Joe is a prodigious saver and debt is bad, the falling value of the Yen is horrendously bad. I'm very surprised that Japanese folks are not protesting.

      As it stands, BMW, Mercedes, and Audi are getting squeezed while Lexus and Infiniti are able to "enjoy" a bit of parity with the dollar.
      • 7 Years Ago
      If certain predictions are correct, the US dollar will fall another 35 to 40% relative to other major currencies over the next decade. Before the end of 2008, the Euro should rise to well over 1.50.

      Sure, it would be wise for assembly plants to exist in the US during this currency fall but at some point the dollar will rise again and auto companies will then look at relocating out of the US.

      To look at the US as a destination for assembly isn't ideal since other countries like Mexico have a significantly cheaper currency.

      All this because of growing triple deficits, absurd spending, false reports of low inflation, and oversupply of cheap money.
        • 7 Years Ago
        Barney, to be clear, I'm talking a decade away in that quote. The dollar presently being at an all-time low (around .80 USDX) is only one of many more steps to even lower lows. Some prognosticators have claimed .52 USDX.

        But the point still stands ... when the dollar bottoms (for arguments sake in a decade) and starts it's climb back up, discussion will take place to move plants elsewhere.

        If this link proves to be a necessity (http://www.whitehouse.gov/news/releases/2007/07/20070717-3.html), the US is in for a war before Mr. Bush leaves office that will run many, many years and cost many, many billions.

        Just think, relatively speaking versus most global currencies, the American citizen has lost a significant percentage of their wealth due to the devaluation of the dollar and if .52 USDX is to be achieved, half one's worth will have evaporated (all else being equal).
        • 7 Years Ago
        "Some prognosticators have claimed .52 USDX."

        It don't look good and the Euro will become the new world currency. Americans will still be buyers though. They are now the worlds biggest consumer base and the rest of the world salesmen. A decade is not that long.
        • 7 Years Ago
        I agree.

        I'd like to know what will happen longer-term to stop this rampant money supply by most countries devaluing all of their currencies.

        We need inflation rates higher and/or some sort of gold standard that was abandoned in the 70s.
      • 7 Years Ago
      About a couple of years ago, I figured with housing inflation skyrocketing, and Americans not saving, we will soon have families not able to afford their house and adults moving in with their parents; not unlike extended family dwellings in 3rd world nations. With global warming and more frequent katrina-like hurricanes, we won't be that far from having a 3rd world weather either. Now manufacturing. What fantastic irony!

        • 7 Years Ago
        First off, I hope you're not buying into the global warming hype, as there has never been a more unsubstantiated load of political crap thrust upon the masses. Second, as far as more frequent Katrina like hurricanes are concerned, we had more frequent hurricanes in the 1930's and '50's than we do now.

        As far as people not saving and over extending themselves to buy houses that are more expensive than they can afford- too bad. Where does personal responsibility come into play?

        Manufacturing jobs are coming back into the US and people are upset.
      • 7 Years Ago
      Peter, BINGO!
      • 7 Years Ago
      No problem, just ask our Commander and Chief, our third Secretary of the Treasury, the dwarf who replaced Alan Greenspan (no offense to dwarfs) and the RNC (the Party of National Security) what to do. Think about it ( are we still allowed to think?) now every car can be as badly made as American cars.
      If only praying to Jesus was enough!
        • 7 Years Ago
        lol. I echo your sentiments, but put on a flame suit and be prepared to get blasted.
      • 7 Years Ago
      wow....i guess this is where Cheney's 17% and Bush's 20 something % supporters hang out! :) And all this time I thought you didn't really exist.


      Oh yea and..... a weaker dollar with inflation, higher fuel costs, higher food costs, higher health insurance costs don't do anything for the "few" jobs that will be created if and when the USD tanks like the Mexico.

      I'm not sure what's more asinine, the existence of Bush supporters or those lauding the continued weakening of the USD, those welcoming the Mexican financial state, or the one guy who seems to be following PetroChemical Industry Reports refuting the existence of global warming and the link to human fossil fuel consumption.
      • 7 Years Ago
      Hey felipe, et al -

      Just to restate your logic -

      Mfg. jobs leaving USA = bad
      Mfg. jobs coming back to USA = badder.

      Which is it?

      Times up.
      • 7 Years Ago
      "the next Mexico".... and whos to thank for the marvelous state of the country, your President and his bastard friends. if you dont see it you are not watching.
      • 7 Years Ago
      I'm guessing the percentage of posters here who have actually studied macroeconomics enough to understand WHY the dollar is losing value vs the Euro is less than 5%. The reasons why go back for many years, many administrations, and to lay it on a single guy is pretty ignorant.

      But I love it. I own gold.
      • 7 Years Ago
      "In the long run, I think the we in the west (USA,Canada,Europe,Austrailia) are in for an ongoing decline in standard of living. "

      We'll be able to purchase goods at lower prices. So in absolute terms, our standard of living as measured by number of goods should increase. Note that there will be some folks worse off, but on average trade generally helps. We should use some of the gains to help the worse-off folks to retrain or get other jobs.

      However, the disparity of standard of living between the West and Asia will decline. Meaning, we have $100 today, and will have $110 tomorrow. China has $50 today and will have $75 tomorrow. We're better off, but it doesn't feel like it since the disparity between the US and the rest of the world is less. Life is graded on a curve. Hopefully we can look beyond the lessening disparity and enjoy the better selection of goods.
        • 7 Years Ago
        Who cares if a $110 is worth only 65 Euros? We don't buy jack from Europe anyways, or atleast we are not limited to them, and for the rest of the world it will be cheaper to buy from the US rather than Europe, or other countries for that matter. We buy stuff from China, Japan, Canada, and oil from the Middle East, and it seems as if it is one way trade with those countries right now. The weaker dollar against the Yen, Yuan, CAD, etc. will mean that they will want to buy more stuff from America, thus exports will go up and it will give American companies more competitive leverage against companies from other countries.

        Also as of now America's buying power is overinflated by cheap and free money that we borrow from other countries. Once that well dries up, our buying power is naturally going to tank no matter what we do. A weaker dollar is better.
        • 7 Years Ago
        It is much worse than that you have $100 today worth 100 euros. You may have $110 tomorrow, but it will be worth 65 Euros.

        If you don't produce many items and run a continual trade deficit it won't be so beneficial. The buying power of the US$ will continue to fall and that will lead to a real drop in buying power and a real drop in standard of living, not just a relative one.
      • 7 Years Ago
      This is silly nationalism. I may live in America, but I invest in Europe and Asia, vacation in France, buy German cars, will probably retire in Tuscany, do most of my business with Japan, have parts made for my company in Taiwan.

      If all you are is just an American then you're in pretty sad shape. Wake up! It's a global economy and there's no reason to owe loyalty to a single country. Being a citizen of the world is the future.
      • 7 Years Ago
      I too am confused by the statements 1-4.

      In a state that has been abandoned by the textile industry, the automotive sector has been a refreshing area of new investment. BMW, Michelin, Bosch, DaimlerChrysler (Freightliner), and more than 39 smaller parts suppliers - not including some textile corps that now produce a high percentage of the fabrics that end up in autos.

      The rail system carries a steady stream of BMWs and MINIs in and out of the Port of Charleston, making it the 5th largest port in the US according to value of product carried.

      So please quit your childish whining about a politician you don't like, and recognize further investment in the US by foreign companies does not make us "Third World", but has measurable benefits for American workers as well.

      As far as quality - you may not be aware that all BMW Z4s (including the M variants) and all X5s are built in SC.
        • 7 Years Ago
        Mercedes-Benz is rumored to be looking for property near BMW's manufacturing facility in Spartanburg. It's close the GSP International airport, located in an area with dozens of parts manufacturers, and nearby Greenville is home to Clemson University International Center for Automotive Research.
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