Wednesday, October 24, 2012

Ohio, Obama, and Optics: Chrysler Considers Building Jeeps in China

UPDATE here.

    This week, the Obama campaign released a glossy 20-page booklet laying out the President's second term agenda.  On page 3, there is a section entitled "Reviving American Manufacturing":
Manufacturing and technology are the life-blood of middle-class families and key engines of the American economy, sparking innovation, generating higher-wage jobs, and strengthening entire communities. But we can’t create an economy built to last if America doesn’t make things the world buys.
The backdrop for the page is the following photo:

    The photo was taken on June 3, 2011 at a Chrysler plant in Toledo, Ohio, where the president gave a speech.  That's a Jeep Wrangler in the background.

    In a potentially embarrassing coincidence, the following story appeared at Bloomberg on Monday, the day before the booklet was released:
Fiat SpA (F), majority owner of Chrysler Group LLC, plans to return Jeep output to China and may eventually make all of its models in that country, according to the head of both automakers’ operations in the region.
Fiat is in “very detailed conversations” with its Chinese partner, Guangzhou Automobile Group Co. (2238), about making Jeeps in the world’s largest auto market, said Mike Manley, chief operating officer of Fiat and Chrysler in Asia. Chrysler hasn’t built Jeeps there since before Fiat took control in 2009.
    The story does go on to suggest this would not affect its plants in the United States:
Chrysler currently builds all Jeep SUV models at plants in Michigan, Illinois and Ohio. Manley referred to adding Jeep production sites rather than shifting output from North America to China.
    However, a related story at AutoGuide.com notes [emphasis added]:
Jeep is considering shipping its manufacturing to China in a cost-saving measure on the heels of weak European demand.
Weakness in the European auto market lead to slow sales for Chrysler but strong demand in China buoyed the brand. In fact, business in China is good enough that Chrysler might transplant its manufacturing operations. Should brand execs pull the trigger, it would mark the first time Chrysler built Jeeps in China since before 2009 when Fiat took a stake in the company.
That contradicts what Fiat-Chrysler CEO Sergio Marchionne said almost a year ago amid concerns that Wrangler production might move from its current plant in Toledo, Ohio.
“This plant has been at the heart of what we’ve done. I’ve said publicly that I would never build the Wrangler outside the U.S. and outside of Toledo. These are things that are unthinkable — to assemble a Wrangler somewhere else,” Marchionne said in November, 2011.
But what was unthinkable a year ago might not seem so foreign. Manufacturing Jeep products in China could help the company save money while feeding a growing market with reduced expenses.
Mike Manley, Fiat Chrysler’s COO in Asia, seems bullish of the possibility. “The volume opportunity for us is very significant,” he, said to Bloomberg. “We’re reviewing the opportunities within existing capacity.”
Jeep’s sales in China more than doubled this year to 33,463 units through September, which could encourage the move further.
Despite that, moving all of the brand’s production to China wouldn’t sit well with American consumers.
    Most agree this election will turn on the economy and jobs.  For a campaign concerned about "optics," the timing of this story could not be worse.   And with Ohio's position as the number one battleground state in the upcoming election, the location couldn't be worse, either.

1 comment:

  1. Very deft carve-up. Of course optics are the least of it, but Mr. Obama puts a lot of stock in image. Alas he has been plagued by a history of sloppy staff work. For examples, here, here, and here.

    The other irony is that Mr. Obama's glossy color brochure is supposed to be about a second-term agenda. Is this a clue that Detroit is slated for a second bailout in a second Obama term?