Back to Detroit: Time to "Reshore" the American Auto Industry
A company that makes iron using a process that uses a lot of natural gas is building a plant in Louisiana now—10 years after it dismantled a similar one in the same state and sent it to Trinidad. U.S. Steel is talking about putting bringing plants home to the U.S., too, and Methanex (a maker of methanol fuel) is pulling up stakes in Chile and relocating to the American south.
They call this “reshoring.” Companies that have repatriated some operations recently include Team Technologies (medical devices), Reverie (beds), Apple Computer, Kennedy Valve, RF Micro Devices, Peerless (audio/visual racking), Sleek Audio (headphones), Pequea Machine (agricultural equipment) and Trellis Earth Products (disposable forks). Since the recession ended, American manufacturers have added half a million jobs here, and reshoring is a major reason.
Notice that there aren’t any carmakers on that list. But the ready availability of dirt-cheap made-in-U.S.A. natural gas (as well as affordable domestic steel) is one reason auto honchos should think about rebuilding the car industry on American soil. Not only does Chinese steel have to be sent halfway around the world, but there is an increasingly loud chorus about quality problems with it. Rebuilding San Francisco's Bay Bridge with Chinese steel led to huge cost overruns.
I just read Charlie LeDuff’s book Detroit: An American Autopsy, and it contains a vivid vignette about the ruins of the once-magnificent Packard assembly plant, now a haunt of dope dealers and vagrants. Imagine the rebirth of that derelict 3.5-million-square-foot plant, closed in 1958. Imagine it once more open for business and providing jobs. Imagine Detroit out of bankruptcy and once more a vibrant city.
Of course, it’s complicated. The Big Three ignored rising foreign competition, and that’s one reason they lost market share and closed all those plants. Stephan Richter writes in an op-ed piece for the New York Times today: “In the 1970s, for example, American car manufacturers began facing competition on their home soil for the first time. Belittling the Japanese and their funny little cars was not an effective competitive response, though not for want of trying.”
But American automakers have learned that lesson through bitter experience, and today produce cars and trucks that stand up to anything made abroad. So maybe they can start making more of them here. After all, Mercedes, Honda, Volkswagen, Toyota, Subaru and many others are thriving with American assembly plants—which benefit from positive exchange rates, cheap energy and cheap steel.
To really get the scale of the Packard plant, watch this drive-by video. Note the railroad tracks, once used to export cars far and wide:
Car Talk asks, "What do you think? Are cheap energy and steel enough to bring American auto manufacturers back home, and spur a revitalization of the rust belt?" Share your thoughts below.