Core 193 Globalization/IB 241
Spring 2020
Assignment One
212612020
The primary purpose of this assignment is to see that you can identify important information and express it
clearly, precisely and briefly. Use precise and focused language. Good business writing gets to the point
quickly with precision and clarity. Be as thorough as possible but write no more than one page per article.
There are two parts to this assignment and you should do them for each article on one page (single
spaced).
1) Read each article and describe all relevant information. Describe it in significant detail.
2) At the end of each article write a concluding paragraph telling the main thing you take away from
the article and how it applies to globalization.
Articles:
"Steelmakers Press Luck on Pricing," Wall Street Journal, April 20, 2017. Due Date: February 27,
2020.
Global Car Industry Runs on NAFTA," Wall Street Journal, November 11, 2016. Due Date: March
17, 2020.
Strong Dollar Forces Factories to Lose Flab," Wall Street Journal, January 25, 2015, Due Date March
24, 2020.
2
GLOBAL CAR INDUSTRY RUNS ON NAFTA
Auto parts come from multiple producers and can cross borders several times; jobs shift to overseas plants
BY DUZLET ÁLTHAUS is
AND CSTINA Rocas
QUERÉTARO, Medico-Jody Fled-
derman is one of five original employ-
ees at the auto parts factory his father
founded in rural Batesville, Ind. He
also spends a lot of time at the com-
pany's 97000-square-foot plant in
central Medico.
The two operations have expanded
together as automotive production in
both countries boomed. Mr. Pledder-
man credits the success of Batesville
Tool & Die Inc., where he is president,
in part to the addition of a Mexican
plant 15 years ago that helps service
Honda Motor Co., Nissan Motor Co.
and other clients on both sides of the
border.
"We have three or four clients back
in Indiana that we wouldn't have had
if we weren't here," Mr. Fledderman,
54 years old, said in an interview at
the plant in Querétaro
President-elect Donald Trump has
said that in his first days in office he
will reopen talks on the North Ameri-
can Free Trade Agreement, which con-
nects Canada, the U.S. and Medico,
and leave the pact if Messico doesn't
agree to improved terms for the US
He blames unfair trade, in particular
with Mexico and China, for the loss of
millions of factory jobs
Ending the 1994 trade pact is rela-
tively easy. The US. legally can pull
out of Nafta six months after Mr.
Trump as president notifies Mexico
and Canada of his intention to do so,
Please see NAFTA page A12
such
according to a September study
by the Peterson Institute for In-
ternational Economics in Wash-
ington. Imposing tariffs on im-
ports lies within the authority
of U.S. presidents
For the auto industry, as Mr.
Fledderman's business shows,
a change would be sub-
stantially more complicated, be
cause of the multilayered con-
nections between U.S. and
foreign suppliers and assembly
points. The tens of thousands of
parts that make up any vehicle
often come from multiple pro-
ducers in different countries
and travel back and forth across
borders several times.
This is a tenet of modern
manufacturing: Where a prod-
uct is ultimately assembled in-
creasingly has little bearing on
where its component parts are
made.
Assembly plants are prized
engines of local economies be-
cause they tend to pay better
than most factories. Mr. Trump
has repeatedly criticized Ford
Motor Co.'s plan to move as-
sembly of its Focus compact its value, according to the Mo-
from Wayne, Mich., to Mexico, tor & Equipment Manufacturers
vowing to impose a steep tariff Association, a trade group.
on the car if Ford follows U.S. assembly plants vary on
through. Ford executives have the amount of U.S.-made com-
said moving the Focus to Mex- ponents they use. A Chevy Sil-
lco won't result in American job verado pickup built in Indiana
losses and that the company re- has 51% parts content from
mains committed to producing Mexico, according to the win-
in the US
dow sticker, while Ford's exclu-
But more than half the parts sively U.S.-assembled F-Series
in the focus today are made truck, the country's top selling
outside the US and Canada, in- vehicle for 39 years straight has
cluding 20% in Mexico. Ford 70% U.S. and Canadian content.
also ships in some of the car's "This industry, particularly in
engines from Spain and trans- North America, has integrated a
missions from Germany. lot," said Thomas Klier, an econ-
Similarly, only 10% of the omist at the Federal Reserve
parts that go into the 200,000 Bank of Chicago who specializes
BMW luxury crossovers built on automotive supply chains.
each year in Spartanburg, S.C.,
come from U.S. and Canadian
plants, according to US govern-
American made
ment data. The rest are im- Such integration poses a
ported from Europe and else- challenge for anyone wanting to
where. BMW in turn exports buy an entirely U.S.-made vehi-
most of the Spartanburg plant's cle
production around the world. "You can't buy an American-
made car anymore. You can buy
Where a product is
an American-assembled car,"
said Loren Baisden, 32, a 13-
assembled has little
year veteran of Ford's assembly
bearing on where its line now working at the com-
pany's heavy-truck chassis plant
components are made. in Avon Lake, Ohio.
Auto makers and many pri-
mary suppliers have moved
By contrast, 70% of the com- some high-tech production to
ponents in the Honda CR-Vs as- Mexico and elsewhere. Lower-
sembled in Guadalajara, Mex- tier suppliers typically relegate
ico-the production of which labor-intensive production such
soon will be moved to central as assembling wire harnesses or
Indiana-are currently made by sewing materials for seats to
US and Canada-based factories, low-wage Mexico plants while
data show,
keeping more highly skilled and
The parts that make up a car automated tasks at their US.
or truck, from bolts to motor factories.
blocks, window lifts to oil fil- That strategy allows auto
ters, account for two-thirds of makers and their suppliers to be
cost competitive with Asian and
European imports, analysts say.
"The free flow of compo-
nents is integral to the supply
chain in auto manufacturing
Steve Arthur, an automotive an-
alyst at RBC Capital Markets,
said Thursday. It is a situation
not easily or inexpensively re-
versed"
Still, with so much final as-
sembly moving to Mexico, the
LE
Dual Citizen
The components in American vehicles can be made from elements
manufactured all over the world. Seat-maker Adient incorporates
pieces from four states and four Mexican locations into products
it makes in the Midwest, and then sells on to major car makers.
Fabrics
South Carolina
Leather
Saltillo, Mexico
Headrest/Armrest
Saltillo, Mexico
Fabrics
South Carolina
Fabric Trim Covers -
Juárez, Mexico
Leather
Saltillo, Mexico
Leather Trim Covers-
Julirez, Merce
Final Assembly
at Adient Plant
Foam Pads
Pulaski, Tern
Stampings
Athens, Tenn
Frames (backs, cushions)
Ramos, Mexico
Battle Creek, Mich: Athens, Tenn.
Plastics
Michigart: Tennessee
Manual Seat tracks
Illinois
Power track rails-Power Seat tracks
Matamoros, Mexico Holland. Tenn
Batesville growth
Some components, including
engine hood hinges, oil filter
seals and air bag parts, are
made on both sides of the bor-
der to be closer to customers
who demand quick and reliable
delivery of parts
The plant in Batesville, a
town of 6,000 staked amid the
com and soy fields of hilly
southern Indiana, also handles
product design and employs ro
bots and a 3-D printer to make
more intricate or larger parts.
The Batesville factory has ex
panded five times in recent
years as the company's North
American business has surged.
The company now employs 800
people, evenly divided between
its two factories, and has annual
revenue of $130 million, up
from $8 million in 1989, when
Mr. Fledderman took over
"You don't make any money
producing things that every
body in every corner of the
world can make," said Mr. Fled-
derman, who recently returned
to Indiaria from his latest tour
of Eastern Europe, where he
sniffed out opportunities. "If it's
not Mexico, then it's Poland or
Vietnam or wherever. We're not
the low-cost country in the
world."
Auto production in Mexico
by U.S., Asian and European
auto makers has boomed in the
past decade, nearly doubling to
reach 34 million light vehicles
last year.
Despite the surge in Mexico,
nearly 60% of the 17.5 million
light vehicles sold in the U.S.
last year were assembled within
a so-called auto alley that runs
from the Great Lakes to the Gulf
of Mexico, said James Ruben-
stein, a geographer at Miami
University of Ohio who writes
extensively about the industry.
Imports from Nafta partners
Mexico and Canada, which con
tain a heavy mix of North Amer-
ican made parts, account for
much of the rest. The auto parts
industry alone accounted for
about 14% of the $531 billion in
U.S.-Mexico trade in 2015, ac
cording to U.S. government
data.
"In this day and age, when so
much manufacturing has left
the US, the auto Industry is a
striking exception," Mr. Ruben-
stein said. "It's not a win-lose
situation. It's dividing up the
growth. Mexico is winning, but
so is auto alley."
Source Mint PLC
THE WALL STREET JOURNAL
epicenter of North American duces, primarily to Mexico, US and Canada-based facto
auto production, which for more company president Todd Murries shipped nearly $29 billion
than a century has been deeply ray said.
rooted in the Midwest, is mov- The company is losing two 2015, according to INA, the
worth of parts to Medico in
ing an average of 14 miles to product lines to suppliers lo- Mexican auto parts industry's
ward the Southwest annually, cated near his customers' Mex national association. Mexican
according to a 2014 analysis by ico plants, he said.
IHS Markit Automotive Advi-
plants in turn sent more than
"That scares me," said Mr. $61 billion worth of parts to the
sory, the consultancy, Murray, 47, whose company two Nafta partners, accounting
The neighboring small Indi: opened a plant in China 11 years for much of the trade surplus
ana cities of Anderson and go to win business there. "I see Mexico has with the U.S.
Muncie, which straddle Inter that competition) becoming
About a third of Mexico's
state 69 less than hour's drive more aggressive in the years to 1,300 suppliers, which employ
north of Indianapolis, have been come."
some 720,000 people, are U.S.
suffering that migration for Mr. Murray said Wednesday owned, according INA. Mexican,
more than three decades, as that if a Trump administration Asian and European companies
General Motors Co. and its sup- overhauls or scraps Nafta, and make up a growing share of
pliers have decamped for the gets tough with China, it could U.S.-based suppliers, which the
south. The cities collectively ultimately help him fend off that US. Labor Department says pro-
have lost tens of thousands of competition.
vide jobs for nearly 600,000
high paying factory jobs. In the short run, he said, the Americans
Mursix Corp, a family-owned healthier operating margins
Mr. Fledderman's Batesville
supplier company on the edge available to companies produc- Tool & Die produces an array of
of Muncie, has been under in-ing in Medco will outweigh any
components for the automotive,
creasing pressure to move some new U.S. Import duties. With appliance and other supply
operations to Mexico to be the right policy mix, including chains. The 38-year-old com-
closer to big Japanese and U.S. lower corporate taxes, Mr. Mur pany is a primary supplier to
firms located there. The maker ray said, any profits from Mex Honds and makes parts for
of switches, connectors and cooperations could be invested Swedish air bag maker Autoliv
other electronic components to create cutting-edge technol- AB, currently its biggest Medico
ports about 60% of what it pro oy Jobs in the US.
customer.
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