Yamaha Expands U.S. ATV Production on Weaker Dollar, Higher Transport Cost

May 18, 2011 9:02 AM ET

Yamaha Expands ATV Production in the U.S. as Dollar Falls

Yamaha Motors’ decision highlights an emerging trend, as U.S. southern states become “some of the cheapest locations for manufacturing in the developed world,” according to a report by the Boston Consulting Group on May 5. Photographer: Daniel Garcia/AFP/Getty Images
Yamaha Expands U.S. ATV Production as Dollar Falls

The company will announce plans to make 80 percent of its all-terrain vehicles at its Newnan, Georgia, factory, said Mike Martinez. Source: Yamaha

Yamaha Motor Co. is expanding U.S. production of all-terrain vehicles as a weaker dollar and higher transport costs make manufacturing the off-road products in their biggest market more enticing than building in Japan.

The company announced today plans to make 80 percent of its all-terrain vehicles at its Newnan, Georgia, factory. Remaining production will move to the U.S. from Japan in the next two years.

“We wanted to put the production into the market” with the biggest demand, Mike Martinez, general manager for ATVs for Yamaha Motor Co. USA, said in an interview before a ceremony at the plant. The move, initially disclosed in February 2010, is unrelated to the magnitude-9 earthquake that crippled parts of Japan after March 11, he said.

Yamaha Motors’ decision highlights an emerging trend, as U.S. southern states become “some of the cheapest locations for manufacturing in the developed world,” according to a report by the Boston Consulting Group on May 5.

“As a result of the changing economics, you’re going to see a lot more products ‘Made in the USA’ in the next five years,” Harold L. Sirkin, a partner at the firm, said in a statement accompanying the report. “For some, the economics have already reached the tipping point.”

Yamaha Motor of Iwata City, Japan, is the world’s second- biggest maker of power-sports products such as motorcycles, watercraft and snowmobiles. It’s made products in the U.S. since 1986, and began manufacturing ATVs in 1998.
Hiring Workers

At the factory about 40 miles (64 kilometers) southwest of Atlanta, the move will “save” 90 jobs and may lead to 200 workers being hired back, Martinez said. The U.S. is the world’s biggest market for the four-wheel, off-road vehicles, used for hunting and backwoods transport or sport.

Higher commodity prices, a strong yen and mounting research costs will result in smaller-than-anticipated profit for 2011, President Hiroyuki Yanagi told reporters in Tokyo on Feb. 15. The company’s first-quarter net income jumped 79 percent to 13.4 billion yen ($165.6 million), according to a filing to the Tokyo Stock Exchange May 12.

Martinez said rising gasoline prices and a falling dollar made it more expensive to import fully built all-terrain vehicles into the U.S., which represents 80 percent of global off-road vehicle sales. The company will continue to import Japanese-made engines, while the rest of the parts are made by 125 different suppliers in the U.S., he said.

The yen gained about 13 percent against the dollar since the beginning of 2010. The currency broke through 80 per dollar this month for the first time since speculation that Japanese investors would repatriate funds drove it to a record 76.25 on March 17 after the earthquake.

Yamaha Motor shares rose 39 yen (48 cents) to 1,530 yen ($18.85) on the Tokyo Stock Exchange at 8:35 p.m. local time.