No, Mr. Romney: Jeep Is Not Moving All Its Factories to China
Republican presidential candidate Mitt Romney told a crowd in Defiance, Ohio, on Thursday that Chrysler was considering moving "all production" of its iconic Jeep lineup to China.
That's the kind of line that you can expect to fire up a crowd on the campaign trail, especially a crowd in a town like Defiance, which is home to a General Motors (GM) factory.
There's just one problem: It's not true.
Yes, Chrysler Might Build Jeeps in China. But ...
Here's what is true: Chrysler is indeed considering a plan to make Jeeps in China. But it's not planning to send those Jeeps to the U.S. to sell -- and it's definitely not planning to close the factories that currently make Jeeps in Michigan, Illinois, and Ohio.
Why would Chrysler want to make Jeeps in China? Lots of reasons, but one big one in particular: China places heavy taxes on imported cars and trucks. Non-Chinese automakers that want to do business in China's booming auto market are almost always better off building their cars and trucks locally.
Nearly all of the automakers you've ever heard of are either building cars in China already or making plans to do so.
Build Globally, Sell Locally
Ford (F), for instance, has recently invested about $5 billion to build several new factories in China. A couple of those plants are already open and thriving. The Ford Focus, for example, has become one of China's best-selling cars.
Yes, Ford builds the Focus in China -- and in Russia, Thailand, and Germany. But the Focuses you see at your local Ford dealer here in the U.S. were all built in Michigan. That's because Ford, like many automakers, finds it cost-effective to build its cars close to the people who will be buying them.
This is exactly what Chrysler is talking about doing with Jeep. Chinese consumers have been hot for SUVs lately, and Jeep -- perhaps the world's best-known and most iconic SUV brand -- would love to be able to capture a big piece of that market. And that means building Jeeps in China.
A Little Problem of Reading Comprehension
Romney's confusion (or his staff's) apparently arose from a recent Bloomberg article discussing Chrysler's plans. The beginning of the article is, indeed, a little confusing. But later on in the piece the writer makes it clear that Chrysler's plans involve adding factories in China, rather than shifting production away from the U.S.
Chrysler reacted to Romney's remarks with indignation. The company released a statement late on Thursday that made it clear that "Jeep has no intention of shifting production of its Jeep models out of North America to China." (Those are Chrysler's italics.) Chrysler's PR folks also appeared to chide Romney with this remark at the end of their press release: "A careful and unbiased reading of the Bloomberg take would have saved unnecessary fantasies and extravagant comments."
A Small Gaffe in the Grand Scheme of Things
As gaffes go, Romney's probably doesn't even make the top 10 list for this presidential campaign. In all likelihood, some staffer working quickly made a mistake, and Romney simply ran with it.
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It's understandable, but it's also important to set the record straight. Doing business in China -- for any automaker -- doesn't mean giving up on the idea of making cars and trucks in the U.S.
Chrysler is making good profits here in the U.S. Through September, the automaker's U.S. sales were up almost 24% -- proof that its overhauled line of made-in-North-America products is doing well with customers.
Chrysler would love to find new customers in China. Don't be surprised if Chinese buyers learn to love Jeeps the way Americans do. But Chrysler's not going to change what's working so well here at home.
At the time of publication, Motley Fool contributor John Rosevear owned shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of General Motors and Ford.
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