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by Staff Writers Detroit, Michigan (AFP) Jan 11, 2012 Asian carmakers are boosting their production in the United States after disaster-caused production bottlenecks abroad and disadvantageous exchange-rate shifts have helped erode their market shares in the country. Falling wages in the US industry, a byproduct of the industry's crash in the 2008-2009 recession, are also making it more attractive to produce cars destined for the US market inside the country. Toyota, Honda and their compatriots found their supply chains in Asia broken last year after the devastating earthquake and tsunami in Japan last March, and the widespread flooding in Thailand in the second half of 2011. The supply disruptions ultimately meant US dealers of Japanese models were unable to restock inventory last year and so the manufacturers lost valuable market share to their US and European rivals. Nissan chief Carlos Ghosn said at the Detroit auto show this week that Nissan ran into supply bottlenecks that made it hard to keep up supplies of the company's popular electric Leaf. He singled out the break in the availability of batteries from Japan. "We are going to have to solve this problem by producing the Leaf and its battery in the United States," he said. There is also the currency factor: the Japanese yen has jumped against the dollar to post-World War II record highs, making it far more expensive than before to sell a Japan-made vehicle or Japan-made parts in the US. The yen has risen 54 percent against the dollar in the past five years, and 8 percent in the past year alone. That makes it more attractive to produce components and cars aimed at the US market inside the United States. A third incentive is that wages for workers in US auto plants have fallen since the economic crisis three years ago, boosting the domestic industry's competitiveness. The changes "have made it very uneconomic to manufacture something in Japan and ship it to the US," said David Cole, director of the Center for Automotive Research. "The whole idea is to neutralize those very volatile exchange rates by producing where you sell," he told AFP. That was the idea behind Volkswagen's new plant in Tennessee, with the Europeans also having suffered a strong euro for the past five years, and extreme volatility in exchange rates over the past two years. Ghosn confirmed that the strong yen is a challenge. "It is a problem for Japan more than for Japanese carmakers, that can ship production overseas," he said. Currently, Nissan makes locally 70 percent of the cars it sells in North America. That could be pushed up to 90 percent quickly. The group is developing its production in Mexico and Brazil, where it has opened plants. But it is hiring 1,300 more workers in the United States. Honda says it will boost its North American production capacity by 15-20 percent by 2015. It will add a new plant in Mexico in 2014, and increase its US workforce as well. It is still cheaper to produce in China or South Korea, but Cole says the transport costs outweigh the savings. US workers are more productive as well. US factories "have become more automated and are software-controlled," he said. "Much higher skilled workers are needed. Before you could be a high school dropout; now you need a minimum two years of college education." He gave the example of the Chevy Sonic. It used to be made in South Korea and shipped to the US market. Now, the Sonic is manufactured profitably in the United States.
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