San Francisco Bay cargo ship, by Flickr user Bernard GaronEnlarge Photo
A few years ago, economists lamented the death of the U.S. manufacturing sector. They lay the blame on several factors, including the high cost of U.S. labor compared to elsewhere on the planet, stringent government regulations, an unskilled workforce, and a general trend toward sales and service jobs.
Today, those analysts may need to rethink their arguments. According to Detroit News, America now exports a record number of vehicles -- 2,000,000 in 2013 alone.
Why the increase? There are two key reasons:
The return of the American auto market: U.S. auto sales are strong, meaning that automakers have an influx of capital to expand their manufacturing facilities. That's something that car companies elsewhere in the world (looking at you, Europe), really can't afford to do now. The vehicles built at those facilities are shipped to growing markets like China, where the number of U.S. imports has surged almost 600 percent since 2009. That, in turn, boosts sales, which provides U.S. automakers with even more capital for expansion.
The shrinking cost of doing business: Many critics of the 2009 bailouts of General Motors and Chrysler thought that the restructurings would kill the U.S. auto industry by giving an upper hand to unions. But in fact, the bankruptcy created a new wage structure, which makes it cheaper for Detroit's Big Three to do business here at home.
WHAT DO THE NUMBERS MEAN?
The auto industry remains America's biggest manufacturing sector. (Aerospace comes in second.) Last year, plants in the U.S. created 1.8 million vehicles for export, totaling $132.7 billion.
Also impressive: though U.S. auto imports still outweigh exports, the trade deficit is shrinking. According to the U.S. Department of Commerce (PDF), imports outweighed exports by more than $109 billion in 2006. The Great Depression knocked that figure down to around $78 billion, and it appears to be slowly declining.
And there's a third factor that may suggest continued strength in the export market: auto exports to Canada and Mexico are dwindling. Though those two countries still receive 49 percent of the vehicles exported from the U.S., just ten years ago, they accounted for 80 percent of those cars and trucks.
But while the U.S. auto industry and its exports seem to be on a roll, the doctrine of "build where you sell" could slow the export trend. That wouldn't necessarily put a crimp in Detroit's profits, but, for example, as Jeep begins building vehicles for China in China, it will have an effect on the manufacturing cycle here in the U.S.
What kind of effect, exactly? We'll keep you posted.