Tag: Mazda

OM in the News: The Incentives Needed to Land an Auto Factory

Toyota and Mazda’s CEOs make the announcement

Toyota and Mazda’s recent announcement that they have joined together to develop a $1.6 billion factory in the U.S. set off cheers among auto-parts manufacturers and other businesses. But officials in the states and cities that are in hot pursuit of the 1,000 acre plant are holding off on celebrating until the venture makes the critical decision of where to locate the facility and 4,000 jobs. The shortlist includes: Alabama, Florida, Kentucky, Illinois, Indiana, Iowa, Michigan, Mississippi, N. Carolina, S. Carolina and Texas.

Foreign automobile manufacturers have been making cars in the U.S. for more than 30 years, writes The Wall Street Journal (Aug.9, 2017). The southeast has become the preferred location for many because of the business-friendly labor laws of many of the region’s states. Suppliers set up facilities near some of the region’s early plants, like the BMW factory in S. Carolina. “The assembly operations are saying we want suppliers close by,” said a site location expert. “When Toyota comes into a market, they’ll already be there.”

The Toyota-Mazda venture is likely to make its decision in part based on labor force and government incentives. Over the years, state and local governments have provided foreign auto makers a wide range of tax breaks, free land, infrastructure, training programs and other inducements that can be worth hundreds of millions of dollars. Toyota and Mazda are hoping to open the new plant, which will have an estimated production capacity of 300,000 units, in 2021.

Classroom discussion questions:
1. What incentives are usually offered auto manufacturers?

2. List the many factors that auto manufacturers consider in their location decisions.

 

OM in the News: Japanese Auto Makers Drive Into Mexico

Mazda's new Mexico plant will churn out 230,000 vehicles a year by 2016
Mazda’s new Mexico plant will churn out 230,000 vehicles a year by 2016

When three-tiered car haulers packed with Mazda3s pulled out of the dusty Mexican rail yard here last month, they did more than mark Mazda’s return to North American manufacturing after pulling the plug on Michigan production in 2012. They represented the latest volley in a south-of-the-border blitz by Japanese automakers. Within four months, Nissan, Honda and Mazda have opened assembly plants in what is becoming one of the world’s hottest auto hubs. Mexico is on pace to become the world’s No. 1 auto exporting country to the U.S., thanks largely to the addition of 605,000 units of capacity by those three Japanese automakers, reports Automotive News (March 10, 2014).

Japanese manufacturers are poised for a new assault from Mexico because they can:

• Reap fatter margins from lower cost manufacturing, largely a function of cheaper labor.

• Avoid tariffs on car and truck imports into the United States.

• Mitigate exchange rate losses from yen-based Japanese exports.

• Improve product availability with a shorter pipeline to dealers.

With all this new Japanese capacity, Mexico will eclipse Canada and Japan as the No. 1 exporter to the U.S. next year. Labor and logistics savings are expected to be substantial compared with building cars in Japan and shipping them across the Pacific Ocean. Mexican labor costs are 1/9th those in the U.S. But any savings are initially offset by the upfront costs of the new factories. Honda, for example, sank $1.2 billion into its assembly plant and a new transmission line.  And successfully building an export hub in Mexico means developing a network of high-quality local suppliers.

Classroom discussion questions:

1. What reasons are driving the massive Japanese investment in Mexico?

2. What are the advantages and disadvantages of this move from an operations perspective?