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, making it the first Chinese automaker to assemble vehicles in the United States.
The company, joining a wave of Chinese automakers looking to sell cars in the United States, said it plans to assemble vehicles at three locations: an all-new plant in Nanjing, China; the now-closed Longbridge assembly plant near Birmingham, England; and at a U.S. assembly plant to be built in Ardmore, Oklahoma.
The MG brand, which was discontinued in April 2005 after a financial collapse, would first be relaunched in the UK in 2007 and would hit U.S. showrooms in May or June of 2008, company executives told reporters on a conference call.
Nanjing plans to locate its headquarters for MG sales, marketing and distribution in Oklahoma City, 90 miles north of Ardmore, while research and development would be done in Norman, near Oklahoma City, at the University of Oklahoma, it said.
Nanjing is one of several Chinese car makers, including Geely Automobile Holdings Ltd. <0175.HK> 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 SpA, but has struggled to make headway against bigger rivals that tied up with top brands General Motors Corp.
The company said it plans to offer a full range of MG sports cars and sedans to consumers, including its TF roadster and the new TF Coupe.
Three sedans would be built at Nanjing's facilities in China, while the MG TF roadster would be built at the factory in Longbridge and a newly designed TF Coupe would be built at the Oklahoma facility, the company said.
However, Erich Merkle, analyst with automotive consulting firm IRN Inc., said there could be a lot of challenges to the relaunch of MG brand, including quality issues and setting up of a dealer network.
I don't think from an organization or quality perspective they are going to be on par, he said. The quality was never there with MG to begin with.
EXPORTING OKLAHOMA-MADE TF COUPES
The new company, called MG Motors of North America, would 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 the MG brand in Britain and Europe, followed by the relaunch of MG in North America.
Hale said the company decided to build a U.S. plant to differentiate itself from other companies, like Geely, which are planning to export vehicles from China to the U.S. market.
And tax breaks from Oklahoma have made manufacturing in the United States competitive, he added.
We may have tax advantages in Ardmore that will allow us to build the car, believe it or not, almost as competitively as China, Hale said.
Hale also said the company plans to export the Oklahoma-made TF Coupes to Europe.
He said the company will not restrict itself to being a niche player either in Europe or U.S.
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.
Britain's Transport and General Workers Union was surprised and concerned about Nanjing making MG cars in the United States.
There have been some concerns about Nanjing revising its plans downwards in respect of Longbridge, said Dave Osborne, the union's national secretary for the car industry. Taking these together, the T&G is calling for an urgent meeting with the company to find out exactly what they are now planning for car making in the UK.