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Discussion Starter · #1 ·
UPDATE 2-China's Nanjing to build MG cars in Oklahoma

By Poornima Gupta

DETROIT, July 12 (Reuters) - China's Nanjing Automobile Group, which took control of Britain's collapsed MG Rover last year, on Wednesday said it would build MG-brand cars in Oklahoma, joining a wave of Chinese automakers looking to sell cars in the United States.

The company said it plans to assemble vehicles at three locations: in Nanjing, China, at an all-new plant, at the now-closed Longbridge assembly plant near Birmingham, England,and at a new U.S. assembly plant to be built in Ardmore, Oklahoma.

Nanjing plans to locate its headquarters for MG sales, marketing and distribution in Oklahoma City, while research and development will be done in Norman at the University of Oklahoma, it said.

Nanjing Automobile is one of several Chinese car makers, including Geely Automobile Holdings Ltd. (0175.HK: Quote, Profile, Research) and Chery Automotive Co., hoping to crack the global car market amid a slowdown in demand at home.

It has a small joint venture in China with Italy's Fiat (FIA.MI: Quote, Profile, Research), but has struggled to make headway against bigger rivals that tied up with top brands General Motors Corp. (GM.N: Quote, Profile, Research)and Volkswagen AG. (VOWG.DE: Quote, Profile, Research).

The company said it plans to offer a full range of MG sports cars and sedans to consumers, including the TF roaster and the new TF Coupe.

Three sedans will be built at Nanjing's facilities in China, while the MG TF roadster will be built at the factory in Longbridge, and a newly designed TF Coupe will be built at the Oklahoma facility, the company said.

The new company, called MG Motors of North America, will create more than 500 jobs in Oklahoma, the Oklahoma Department of Commerce said.

Construction of Nanjing's Oklahoma plant is scheduled to begin early next year, with production starting by late 2008. Oklahoma put together an incentive package, which includes tax breaks, for the company to locate there.

Nanjing said capital investment would be more than $2 billion, to be funded by state and local governments in Oklahoma, the state's development agency and private investors.

Nanjing hired Duke Hale, who previously worked at Volvo, Mazda, Isuzu and Lotus, to be the new company's president and chief executive officer.

The company said Hale would be responsible for the revival of MG brand in Britain and Europe, followed by the relaunch of MG in North America.

"We looked at a lot of different locations around the country, but none could equal the overall appeal of Oklahoma," Hale said in a statement. "Oklahoma also provides an ideal geographic location to support our distribution efforts for the North American market and for exporting products abroad."

Nanjing Automobile, one of China's oldest auto makers, surprised the motoring world when it outbid top Chinese car maker Shanghai Automotive Industry Corp. to buy MG Rover out of bankruptcy for $98 million (53 million pounds) in mid-2005.

Earlier this year, it took a 33-year lease on the former MG Rover plant at Longbridge in central England.
Why is Nanjing taking unnecessary risks????
 

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Discussion Starter · #4 · (Edited)
Nanjing is forming a new company to run MG operations outside Asia. It will be 49 per cent owned by the Chinese and 51 per cent owned by an investment consortium led by Oklahoma Sovereign Development and Davis Capital.

Construction of the Ardmore factory will begin next year and MG is hoping to start production in 2008. About 60 per cent of its 12,000 to 16,000 forecast sales will be in North America and the rest in Europe.
They do have the sales projection numbers correct, but is the annual unit sales of 12K ~ 16K enough to justify a US plant, when it would be far cheaper to just build them in China and then ship out?

And the state of Oklahoma was desperate enough to be fooled by the Chinese, they are actually spending at least $300 million of their own money to build the factory that offers 500 jobs while other southern states are offering similar amount to host transplants that create at least 4,000 jobs. And if the Nanjing plant does poorly, then Oklahoma tax payers will have to foot the bill to make up for the red ink.

This is the worst foreign transplant hosting deal signed by a US state ever.
 

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Real_I_Hate_China said:
They do have the sales projection numbers correct, but is the annual unit sales of 12K ~ 16K enough to justify a US plant, when it would be far cheaper to just build them in China and then ship out?
If I remember rightly, you told us it only costs 700 usd in labour to make a car in america, and the costs of bringing cars from china is more than this, so chinese made cars can't compete with americans.

Now that a chinese company suggests that they build cars in america you think they should be bringing them from China.

You just like arguing. That's fine, it's a useful skill.
 

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Discussion Starter · #6 · (Edited)
If I remember rightly, you told us it only costs 700 usd in labour to make a car in america, and the costs of bringing cars from china is more than this, so chinese made cars can't compete with americans.
When the worker efficiency is 100~125 cars/worker like the latest Toyota and Hyundai plants, yes.

When the worker effciency is 40 cars/worker like this proposed Nanjing plant, no. Not only does the wage goes up by 2.5~3 times, but you never achieve the economy of scale and everything costs more. I suspect that a US assembled MG TF coupe will cost $10,000 more than if it was assembled in China.

In fact, GM got into its present day troubles because its worker efficiency is around 40 cars/worker.
 

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Real_I_hate_China I think that the Nanjing MG operation needs to be looked at differently to most other Chinse ventures. For a start no other Chinese car maker has a Brand as powerfull in the US and Europe as MG. So this makes Nanjing a player. Building a small assembly plant for low volume sportscars in the US isn't really the key story here. The big story is that MG is going back to the US with a US based sales and distribution arm. This will be the Bridgehead for the Chinese based business and to a lesser extent the UK based company.

The other key part of the story is that it sounds like MG will be a joint venture between Nanjing and US based finance companies. This is turning into something of an international effort with the bulk of R&D being done in the UK, finance and some management coming from the US and volume car production occuring in China.

Anyway tomorrow we are going to find out what Nanjing have planned for the UK part of the business so keep your eyes open for some major news....
 

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Real_I_Hate_China said:
They do have the sales projection numbers correct, but is the annual unit sales of 12K ~ 16K enough to justify a US plant, when it would be far cheaper to just build them in China and then ship out?

And the state of Oklahoma was desperate enough to be fooled by the Chinese, they are actually spending at least $300 million of their own money to build the factory that offers 500 jobs while other southern states are offering similar amount to host transplants that create at least 4,000 jobs. And if the Nanjing plant does poorly, then Oklahoma tax payers will have to foot the bill to make up for the red ink.

This is the worst foreign transplant hosting deal signed by a US state ever.
What, you think folks down south can only raise cows??? I'm sure the state of Oklahoma has at least 1 or 2 CPAs who actually graduated from business school.
 
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