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These parts are supplied from Japan, Taiwan, and China."

This is rarely true in the modern auto industry. Automobiles are manufactured, not assembled. They are not like Dell PCs.

The major parts suppliers must be close to the final manufacturing plant, especially with Japanese maufacturers, because of their use of just-in-time, zero inventory manufacturing.

In and around Tuscaloosa Alabama, home of the Mercedes M3 SUV plant, there are numerous supplier companies. The same is happening in Montgomery Alabama, home of the new Hyundai plant. Numerous Hyundai suppliers are building plants in the Montgomery area.

Obviously some things will be shipped in, however, labor continues to represents the largest cost component of most large machines. In fact, that is why Nissan, Toyota, Honda, BMW and Mercedes came to the US. Our labor is cheaper than Japanese or German labor, and the quality of our workforce is just as good (especially when the UAW is not involved).

VW Group to source parts in China

By Alysha Webb
Automotive News / July 16, 2003

SHANGHAI, China — Volkswagen, which has complained frequently about the high cost of auto parts in China, will follow the example of Ford Motor Co. and General Motors and begin sourcing parts here for its global operations.

Peter Wolters, head of finance for FAW-VW Automotive Co., a joint venture in the north China city of Changchun, has been named head of purchasing--China for VW Group, a new position.

“At the moment, Chinese suppliers are too expensive,” Wolters said in a brief interview. “But bringing in new cars to China on a common platform will achieve economies of scale.”

China is VW’s largest market. It expects to sell more than 600,000 cars here in 2003.

The automaker will boost its production capacity in China to close to 1.5 million cars and light trucks over the next five years by building a new plant in Changchun and adding capacity at Shanghai Volkswagen.

Ford has said it will source $1 billion in parts from China this year, while GM has announced plans to source $10 billion in parts here, without naming a timeline.
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