U.S.-based auto suppliers benefitting from weak dollar

Filed under: Plants/Manufacturing, Earnings/Financials

For years, automakers have attempted to shift production of components and cars from the U.S. to so-called low cost countries, typically in Asia. China and India have been particular beneficiaries of these efforts. Things, however, now seem to be changing. During a dinner at the LA Auto Show last November, GM Vice Chairman Bob Lutz declared that with the U.S. dollar so low against the Euro and other currencies, the U.S. was now officially a low cost country.

Over the past two decades, Japanese carmakers that have built assembly plants elsewhere have increasingly sourced parts from supplier plants in the United States. Now German automakers are following suit. BMW and Mercedes-Benz already have assembly plants in the U.S., with Volkswagen likely to follow soon. Until now, the Germans have tended to bring most of their parts over from European suppliers. The exchange rate is now causing them to look for parts from suppliers that would charge them in dollars instead of Euros in order to save money. This disparity opens the doors for companies like TRW, Lear and Johnson Controls that operate in dollars. TRW has already enjoyed this benefit in its 2007 financials. The Livonia, MI-based supplier saw a 70% jump in profits last year that came almost entirely from exchange rate benefits on parts it sold in Europe.

[Source: Automotive News, sub. req'd]

 

Read | Permalink | Email this | Comments

---