• Oct 2nd 2007 at 7:33PM
  • 15
With the U.S. dollar's decline against the euro, the Wall Street Journal's crystal ball gazers have determined that the price of vehicles shipped over from the old world are set to rise in the next year. European manufacturers have been able to lock exchange rates by buying contracts that keep currency fluctuations at bay, but for some automakers abroad, that's about to change. Those contracts are set to expire soon, and that means either prices will rise or European automakers will have to begin producing their wares in the Land of the Free.

Profitability may be sustained in the short term by BMW and Mercedes, as U.S.-built products are used as a tourniquet to slow the financial bleed. Volkswagen is supposedly in good shape through next year, but the idea of building more vehicles here in the States has been mentioned numerous times. Plus, there's always the option of building in China, something that's inevitable given the "flat" world in which we're living.

[Source: Wall Street Journal]

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    • 1 Second Ago
      • 7 Years Ago
      That new Caddy CTS just keeps getting better and better looking all the time.
      • 7 Years Ago
      Thanks a million (or should I say 100 triliion) illegal unconstitutional federal reserve.
      • 7 Years Ago
      Why should the dollar rise? No one wants to lend US money anymore. We can't pay it back, and fed has re-affirmed weak dollar policy through a recent rate cut, and there is a possibility of another this month provided if October job numbers disappoint (which they will). As I had mentioned earlier, not only is it the account deficit, but also mortgage backed securities which have created major turmoil in foreign banks. So why lend to US? Sure short-term rates might be low, but creditors will charge high long-term rates to compensate for the risk.

      Peter Schiff sticks to principal economic fundamentals and sums it up pretty nicely (president of Euro Pacific)

      "As the dollar falls, far fewer foreign products will be imported into the United States, and more domestic products will be exported from the United States. A reduction in the domestic supply of goods will offset the diminished demand brought about by the recession, causing consumer prices to rise. So while Americans will indeed buy fewer products, they will pay much higher prices for those that they do. The bottom line is that consumer prices will be headed much higher, not just despite the recession, but as a direct result of it!

      Many economists acknowledge that a falling dollar will put upward pressure on import prices, but few consider its effects on domestically produced goods. For one thing, a weak dollar by definition raises the prices of globally traded, dollar-denominated commodities, such as oil, causing raw material costs for domestic manufacturers to rise. Also, as a weaker dollar causes foreigners to demand higher interest rates on the money they lend us, domestic capital cost will rise as well.

      Further, a global market allows domestic producers to sell their products to the highest bidders, wherever they may reside. For example if a lobster fisherman in Maine can get a better price for his catch in Europe, he will sell to Europeans. A weaker dollar simultaneously makes domestically caught lobster more affordable in Europe as it makes them more expensive here. As domestic demand falls, foreign demand picks up. The result is that fewer Americans will eat lobsters, and those who do will be forced to pay more for the privilege.

      In addition, many of the products that we export will not be manufactured, adding little to our GDP and creating few jobs in the process. These products will include used consumer goods, such as cars, appliances, consumer electronics, furniture, etc. Poorer Americans will be forced to sell such possessions so they can afford to buy other goods they will need more, such as food and heating oil. Of course, armed with more valuable currencies, foreigners will have lots of extra purchasing power with which to buy those used consumer goods Americans can no longer afford to keep, as items such as food and heating oil will be a lot cheaper for them. In other words, they will be repossessing all the stuff they sold us on credit."
        • 7 Years Ago
        Thanks greenspan ... thanks for the worlds biggest ponzi scheme ever. Thanks for the wild roller coaster ride that has basically screwed America. And with no savings, and a rapidly devalued dollar a lot of people in this country will be in trouble ... I'm in the banking industry and I can assure you there are people who make 500k+ who are essentially broke. Too many people of this country live just like the government .... basically broke with a facade of wealth and living off of credit and loans that will take forever to payoff. The weak dollar will be great for all of our manufacturers who sell overseas... oh wait, china already wiped most of them out. Thanks wal mart. And I'm with you, noidor, on Schiff. He is laughed at and ridiculed whenever he's on CNN or Fox but he's brilliant and speaks the truth.
      • 7 Years Ago
      Well that sucks.
      Especially considering that German cars have their most offerings in North America ever.

      Good Luck VW being in the big three in North America.
      • 7 Years Ago
      When the popular media says such-and-such security is going to do X, you can usually bet it will do the opposite.

      Wall St. journal says the dollar is going to fall more? That is a good bet we're at the bottom and the dollar will actually rise. Despite low interest rates. (hint: ECB will be cutting rates there too)
      • 7 Years Ago
      What should be happening in the board room is plans to export North American manufactured vehicles. Don't laugh, they could undercut the competition while mining margins.
      This may be in the cards and will be revealed after UAW negotiations. How else could they guarantee production to the UAW ???
      If the Yen would strengthen as it should... GM, Ford, & Chrysler would be in the driver's seat.
      • 7 Years Ago
      How is it that no one saw a weak dollar coming? Account and trade deficit? Foreclosures? Weak consumer spending? No manufactured exports?

      This country is so greedy, expects to get everything for nothing, and in turn is willing to whore itself out. Pathetic. Strong dollar policy my butt, lowering interest rates shows the exact opposite logic.
      • 7 Years Ago
      GM should try to dominate China and India and get it's business back on track. Why let some rinky dink companies grow in those countries. Come in with your superior products, sell for ultra low prices, corner the market, then once the competition is dead, raise prices.
      • 7 Years Ago
      Wtf how do i log in?!?!!?!
      • 7 Years Ago
      The front of that Beemer looks like an animal from the early Star Wars movies.

      • 7 Years Ago
      The weak dollar is both a product of our prosperity and a means to it, driven by our tendency to purchase imported items as our wealth increases, though relative interest rates play no small part.

      It ends up helping our balance of trade by encouraging foreign investment and encouraging domestic spending as it reaches equilibrium. More money entering the country and staying there is a good thing, in my opinion.

      Does it make it more expensive to buy foreign products? Yes, but it makes our products that much more attractive to foreign buyers. A weak dollar really only hurts our ego.
      • 7 Years Ago
      @ Rene Curry:

      You miss the point that someone's got to buy those exported vehicles in Europe and elsewhere. Just like the US buyer wouldn't buy a POS Chinese car, they won't buy a POS US built car. Check out programs such as Top Gear and Fifth Gear. Every time they get a US car on the show they always comment on the appalling build quality, bouncy ride and cheap plastics.
        • 7 Years Ago
        We don't just have to export manufactured goods. Top Gear loves Fords and you gotta do the financing somewhere :D.
        • 7 Years Ago
        @ Chris

        Why do people think the opinions of those on Top Gear are like some automotive gospel? I don't care what they say. Use your own mind. The only opinions that matter are the individual consumers' opinions. I buy the car I want, not the one a clever writer says I should buy. Keep in mind that those Top Gear reviews are of smaller vehicles that cost twice as much as some larger ones here. They wouldn't be able to compete in N. America on price. You get what you pay for and they pay a hell of a lot of money for a 1.3 L four seater hatchback.

        And if American products were so bad, then everybody would be buying European and Asian products but that's not the case.
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