Filed under: Euro, Plants/Manufacturing, BMW
BMW spending another billion in the U.S. to expand
Heavy fluctuations in the value of the U.S. dollar versus the Euro has made building vehicles in the U.S. a very attractive proposition for European automakers. BMW is looking to expand its U.S. operations by spending over $1B to increase capacity at its South Carolina plant, add more parts distribution centers, and expand its U.S. headquarters in New Jersey. The majority of the money, about $750M, will be spent on increasing production at its plant South Carolina plant from 160,000 units to 240,000 by 2012. The move makes abundant sense given the fact that the German automaker is taking a massive hit by shipping vehicles from higher cost Europe to the lower cost U.S.
BMW is spending $100M on expanding its headquarters and another $170M to increase parts distribution centers, which should be welcome news for BMW owners who can face high wait times for parts. BMW has been tearing up the sales charts in the U.S. for quite a while, and with an added $1B getting spent on facilities Stateside, it looks like the Germans want the good times to continue to roll.
[Source: Automotive News - sub. req'd]
Reader Comments (Page 1 of 1)
Buzz Skyline 1:18PM (6/13/2008)
Who are those people on the $1B bill?
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Fritz 2:15PM (6/13/2008)
Alice Cooper.
mwallhausser 1:53PM (6/13/2008)
So what happens in 10 years or so when the dollar evens out again? A lot of car companies are jumping to move production to the USA right now, but why not move it to a location that is truly low cost, and not just in recession? (like Mexico)
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iceblue 2:00PM (6/13/2008)
Because consumer aren't stupid. They won't pay BMW a premium for it's cars if BMW exploits cheap labour in Mexico. In other words, consumers won't pay $100 for a car that only cost BMW $1 to make. It's an exagerated example, but you get the point.
Egon 2:21PM (6/13/2008)
Actually, I wouldn't give consumers that much credit. Cadillac owners don't seem to mind paying a premium for their 'Sclades despite some being assembled south of the border. I think most 'import' automakers are knocking on the door because the dollar is currently getting sand kicked in its face. Maybe 10 years from now the tide will going back out.
phoenexius 1:58PM (6/13/2008)
So the Germans want more worldwide market share:
Forget spending 1 Billion on plants & manufacturing
Spend it on importing selling loss leaders like the 318, C180, A4 1.8 - economic luxury vehicles
I call them loss leaders because they have been too expensive to import to US at the moment.
sure they may say the don't sell "slower" vehicles in N/A because of dilution and decrease brand value - it's gonna happen anyway if BMW, MB, and Audi all increase their worldwide market share by 50%
Profit is erroding for the luxury Germans at the moment, they have to hit these volume targets to make profits in the future
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Judy Zik 10:25AM (6/14/2008)
I think you are missing the point. It is quite the opposite. With the high Euro and low Dollar it is costing them more to build the vehicles in Europe and they are getting less in return from sales in America. This means they are making less profit on their existing higher end vehicles. It is not that they have more money to throw away it is that they are trying to find a way to protect their erroding margins. Not the kind of market conditions that would lend themselves to bringing any kind of lower margin vehicles over. Instead they invest in upgrades in their American infrastructure. Since they are spending Euro's in the US they will get more bang for their buck and producing the cars in the market they are destined for protects them from future currency fluctuations. Under current market conditions it would be difficult for BMW to bring over a lower entry level vehicle unless it was actually built here.
Eric 2:06PM (6/13/2008)
Does that mean more choices? I love beemers but i want something more fuel efficient. Give us those small turbo diesel engines! If i could get the 120d hatch here, i would buy it in a flash.
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Bryan 2:32PM (6/13/2008)
Its a smart investment because I'm sure they realize that the US will bounce back and $1 Billion spent today gets them a lot more than $1 Billion spent in 5-10 years. It gets their foot in the door. Hopefully it will benefit us too with some cheaper parts, maybe cheaper cars, and as phoenexius pointed out perhaps we'll get some cars that aren't normally imported here.
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jg 3:59PM (6/13/2008)
'perhaps we'll get some cars that aren't normally imported here.'
Not at the expense of their image. We won't see the cars that make people declare either BMW or Mercedes the 'Chevy' of europe.
Chris 2:47PM (6/13/2008)
This is also a reaction to the posturing some politicians are making concerning NAFTA and other trade arrangements. Let alone manufacturing arrangements where certain politicians are demonizing anyone with the audacity to sell products here and not make them.
In other words, with all the trade protectionist crap being spewed by certain people it only makes sense to expand what you can here to avoid whatever misguided penalties the powers the will be will try to put forward.
People lambaste Bush for his war in Iraq haven't seen the world leaders scream until a protectionist takes root here. Interfere in another country like Iraq with military force is one thing, throwing up trade barriers will really get them incensed.
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bruno 5:01PM (6/13/2008)
The weak dollar means it's getting to the point where soon BMW will not be able to profitably sell their cars here, at least the lower end ones, which make up the bulk of volume.
It's a silver lining in the dollar's fall that it causes capital to flow here and our nation to once again become a producer, not just a consumer, of goods and services.
The question is, by the time equilibrium is reached, will enough Americans be able to afford a BMW?
We're in about inning 3 of a 9 inning game. Don't expect "happy days are here again" anytime soon.
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