Weekly Recap: Mercedes, Volkswagen spend big as import automakers invest in North America
Plus: Jeremy Clarkson Is Out, Kurt Busch Is Back In And GM Fends Off Activist Investors
That was evidenced this week when Mercedes-Benz announced plans to build a $500-million factory to produce the Sprinter commercial van, and Volkswagen confirmed a whopping $1-billion investment to expand its massive plant in Mexico. Meanwhile Jaguar Land Rover reportedly wants to build a factory in North America, but not for at least three years, and Hyundai is said to be expanding in the southern United States.
The common thread in all of this expansion? Trucks, time and money.
Mercedes wants to capitalize on the burgeoning work van segment in the United States and will break ground in 2016 on a 200-acre site in Charleston, SC, to build the next-generation Sprinter. The site will have a paint shop, body shop and an assembly line, and 1,300 people will be employed when production ramps up.
Why do this, when Mercedes has immense van operations in Germany? It's cheaper to build in the US for the US market. Building locally allows Mercedes to avoid import taxes, forego a complex shipping process that involves partially disassembling German-built Sprinters and naturally, reduces the time it takes to deliver finished trucks to their buyers.
"This plant is key to our future growth in the very dynamic North American van market," Volker Mornhinweg, head of Mercedes-Benz Vans, said in a statement.
He was speaking about Mercedes and vans, but another German automotive giant, Volkswagen, had similar motives for its mammoth expansion plans in Puebla, Mexico.
The added space and production capacity will allow VW to build a three-row version of the Tiguan, and provide another crossover for its US lineup that's light on SUVs. The current Tiguan has two rows. The factory will be able to churn out 500 units daily of the larger variant, and they will be sold in North and South America. It will arrive in the US in mid-2017, a spokesman told Autoblog. VW also plans to build another crossover, a midsize seven-passenger vehicle, at its growing Chattanooga, TN, site.
"Localization has become key to safeguarding our competitive position on the global market, and manufacturing the Tiguan in Mexico will bring production closer to the US market," Michael Horn, CEO of Volkswagen Group of America, said in a statement.
Jaguar Land Rover's plans are more vague, but Automotive News reports the company could make a decision on a North American factory in three years. Like other import automakers, JLR's potential factory would likely make a crossover. It's a similar situation for Hyundai. Sources tell Reuters the Korean automaker wants to expand capacity in the South to meet demand for more SUVs. Hyundai builds the Sonata and Elantra cars in Alabama and the Santa Fe SUV at sister company Kia's Georgia factory.
Other News & Notes
Top Gear host Jeremy Clarkson suspended
The BBC suspended Top Gear host Jeremy Clarkson this week after he reportedly punched a producer who works for the popular television show. This week's episode, scheduled to air Sunday, was canceled. The last three episodes of the show's 22nd season have also been dropped.
Controversy has consistently followed Clarkson. Last year, protests forced Clarkson and co-hosts James May and Richard Hammond to flee Argentina after a car used in an episode had a license plate some thought referenced the 1982 Falklands War – in which the United Kingdom defeated Argentina. Clarkson has also drawn ire for his tweets and comments – though even in the wake of his suspension, he was still making light of the situation on Twitter. He remains popular with his fans, however, and an online petition to return him to the show generated hundreds of thousands of signatures this week. UK Prime Minister David Cameron – a friend of Clarkson – has even publicly expressed his support.
Kurt Busch returns to NASCAR
Meanwhile, another of the car world's bad boys, NASCAR driver Kurt Busch, was reinstated to the series and will be eligible to compete for the Chase for the Sprint Cup, if he can qualify. He remains on indefinite probation with NASCAR. He had been suspended in the wake of domestic violence allegations from ex-girlfriend Patricia Driscoll, though authorities in Delaware have since declined to pursue them.
"We have made it very clear to Kurt Busch our expectations for him moving forward, which includes participation in a treatment program and full compliance with all judicial requirements as a result of his off-track behavior," Steve O'Donnell, NASCAR executive vice president and chief racing development officer, said in a statement.
GM to buy back $5 billion in stock
General Motors announced it has reached a deal with an investment group led by ex-Obama advisor Harry Wilson to buy back $5 billion in stock in exchange for Wilson agreeing to no longer seek a seat on GM's board. Wilson's group pressured GM in February, arguing the automaker should buy back $8 billion in stock to drive up share prices.
Not coincidentally, GM reiterated its financial strategy this week. The company will spend $9 billion this year on future plans, which includes speeding up new vehicle launches. GM also said it "expects to return all available free cash flow to shareholders," something Wilson's group had sought.
Though the move keeps Wilson and his investors at bay, industry watchers have questioned if the buy back is the right strategy for GM. The Harvard Business Review called it a "Pyrrhic Victory" for the automaker, while Moody's said it could push back a possible credit rating upgrade for GM until late 2016.
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