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Automotive News / March 07, 2005

Hit hard by the cheap dollar, European auto executives are scrambling to insulate themselves against future currency fluctuations.

Some companies -- such as Mercedes-Benz --are reconsidering plans to export certain vehicles to the United States. Others - such as BMW and Audi - are making plans to build U.S. assembly plants or expand existing factories.

And nearly all European exporters are scrutinizing their U.S. product lineups with an added sense of urgency, since conventional currency hedging strategies do not offer long-term relief.

Now that the euro is worth more than $1.30, Mercedes has decided not to sell the B-class hatchback in the United States, and it may cancel plans to introduce the Smart brand here. (See stories on Page 31 and Page 6, respectively.)

Meanwhile, BMW has announced plans to produce a new crossover vehicle at its assembly plant in Spartanburg, S.C. (See story on Page 8.) And another German automaker - Audi AG - says it may build a U.S. assembly plant.

Audi AG Chairman Martin Winterkorn says plans are in the preliminary stage and no decision has been made. If Audi moves ahead, it would build a plant in the United States rather than in Pueblo, Mexico, where its sister division Volkswagen has a massive plant.

Shielded by hedging

Audi is shielded by hedging for 2005 against major currency losses, Winterkorn says, "but I do not know what will happen in 2006 and 2007. This is a very difficult decision."

If the plant is built, it would build a product aimed primarily at the United States, not Europe. "We have to build cars there only for the American market," Winterkorn says. "It is very expensive if the cars come to Europe." Audi also must consider how many vehicles it can expect to sell in the United States. This year, Audi expects to sell 80,000 units in the United States, considerably short of a typical assembly plant's output.

Product on the way

But the company expects U.S. sales to grow as it introduces a wave of products. Audi recently rolled out the redesigned A6 and A4 sedans, and it is introducing the smaller A3. Next year, it will begin selling the Q7 SUV that was developed primarily for the United States. And a smaller Q5 SUV will debut in three years.

Audi wants to increase worldwide sales to 1 million units by the end of the decade, up from a projected 800,000 vehicles this year. To do so, the company is focusing on the United States and China.

Winterkorn declined to offer his deadline for a decision on American production. Meanwhile, Audi is cutting costs and looking to buy more components from U.S. suppliers.

"Every day we have pricing discussions," Winterkorn says. "We have big problems and must discuss this issue of the American market very, very intensely."

qfrog@work

arent we lucky!

floorit

reliability already sucks...how much worse can it get and the new A4 sells for 35K+ for the 2.0

Bronze

American plants can be and are among the best world wide, as are the supply base here, and there is plenty of industry data to prove it. In the end, it all comes down to proper specifications and communications between OEM and supplier of requirements.

Bronze

Pls see my comment below.

MasterB

Agreed. My '86 GTI was built in the US, and it was great

A4 Moda

As long as Audi doesn't merge with Dodge or something.. then it'll be a wreck.

PanzerWagon

It's not the worker, it's the way the company runs the factory.