Others have posted here, about the $350M hit taken by Strabismus and the $1.1B GM lost. A report I was watching last night said Hyundai took a $606M hit.
This is the biggest yet. Considering VW’s volume is quite small in the US, this must be the biggest loss, per car sold, yet. The vast majority of VWs sold in the US are built in Mexico. Only the big Atlas SUV is built in the US.
ouch
Steve
$1.5 billion per quarter. Seems like a fairly large incentive to move some manufacturing to the US. How much does it cost to move a factory from Mexico to the US (ball park numbers)?
DB2
Starting from a dead stop, moving production of one model from one plant to another, based on when FCA moved the Jeep Cherokee from Toledo to Belvidere, a decade ago, costs about $350M and takes a year. GM recently announced they are moving the Equinox, Blazer, and more truck production from Mexico to the US, and budgeted $4B for the job. First production in their US locations will be in 2027.
But GM has plenty of available plant capacity in the US to move the models into.
VW has one plant in the US, in Chattanooga, building the Atlas SUV and the iD4 EV. That plant is currently running two shifts. There is no way they could move production of the Tiguan and Taos SUVs and Jetta sedan from Mexico, into that one plant. Even if they could, almost all of VW’s supply chain is in Mexico, Brazil, the EU, and China, so they will still have a tariff hit.
This is the content information for a new VW Tiguan SUV, built in Puebla.
VW has had a project in the works to revive the old International Harvester “Scout” Jeepish thing, as an EV, and is dropping $2B on a new plant in Blythwood, South Carolina, to build it. That plant is expected to be complete in late 2027, with a capacity of 200,000/year. Last year, VW sold 230,000 Puebla built cars in the US. If they dropped the Jetta sedan, Blythwood would be big enough to build enough Tiguans and Taoses for the US market.
But, I put on my MBA hat: Audis have both a higher ATP and higher GP, than VWs. The Q5 SUV is built in Mexico, everything else is imported from the EU. With EU products bearing a 15% duty, if the “arty deal” materializes, more, if it doesn’t, VAG would have a significant incentive to move Audi production to the US, and, the higher ATP and GP, make Audis more important than VWs. Audi sold just under 200,000 cars in the US last year. The existing Chattanooga plant has a capacity of 268,000/year. The MBA will tell you to drop VW, move production of the best selling Audis into Chattanooga, stop work on the Scout plant, declare force majeure and tear up all the US VW dealer contracts, then pivot the Mexican VW plants to building for the EU.
The cynical MBA would say give the existing Atlas that is built in Chattanooga a quick reskin, and declare it the “new Audi Q7”. That would require the least amount of work and be available the soonest.
Here’s the content label for a new Atlas.
Steve
Ripped from the headlines, minutes ago
Blume said Volkswagen had put a detailed offer to the Trump administration that would see the tariff burden on the carmaker reduced by a dollar for every dollar it invests in the U.S.
I don’t know if the MSN link to the WSJ article will work, or not. Many MSN links do not.
Steve
Seems like a no-brainer for VW. At $1.5 billion/quarter building a new factory from scratch would also seem to make sense. Also, assuming VW USA as a separate company, they can depreciate most of the expense in the same year that its made.
DB2
It’s the time issue, as well as cost. VW announced they were going to build the Scout plant in March of 2023. It is expected to start production in late 27. Building a new plant, from scratch, means VW would not have competitive priced products, outside of the Atlas, for 4-5 years. Could the dealers survive?
Moving a model into an existing plant takes only one year. GM is moving several models into existing plants. And, GM has a deep bench of US built models they can sell in the interim.
Steve
Not so fast there, say the German auto unions.
Audi’s labor leaders are willing to back an expansion in the country only if management gives long-term guarantees for jobs and output at home, said Jörg Schlagbauer, the company’s works council chief.
“We are not refusing to discuss the matter, but for capacity reasons we do not see any need to build a plant in the U.S. at present,” Schlagbauer, who also is Audi’s deputy board chairman, told Bloomberg in emailed comments.
DB2
Tell them that if “himself” gets the bit in his teeth, Audis will be tariffed out of the US market, and the German workers will be laid off anyway.
Keep in mind, that Audi is a division of VAG. VAG already twisted the arm of the VW workers enough to accept the next generation Golf, for sale in the EU, will be built at the plant in Puebla, MX, not Wolfsburg, and thousands of line worker positions in Germany will be eliminated.
Steve
