A Logistics Story

Last month Nanjing Automobile Corp., which claims to be the oldest carmaker in China, announced that it will build a new assembly plant and parts distribution center in Ardmore, Oklahoma. The Ardmore factory will assemble the MG TF Coupe, a rear-wheel drive, two-seater. Those who follow the auto industry may recall that Nanjing acquired the MG brand and remaining assets of MG Rover Group Ltd. after Britain's last domestic automaker imploded in 2005.

A Chinese manufacturer will build a historically English brand in the heart of the U.S.A. The story gets better.

When the factory is built—they are supposed to break ground in early 2007—it will be the first Chinese-owned automotive factory in the United States. That's why Nanjing's announcement set off alarm bells for a lot of people. The company's move harks back to the early 1980s when U.S. automotive executives challenged the Japanese car importers to set up factories in the United States and see if they could compete on a level playing field. They did. And today's market share numbers speak for themselves.

Nanjing's plan for the MG brand goes beyond Oklahoma. The company has announced that it will be manufacturing three MG sedans, presumably for export, at its factories in China. It will also build an MG roadster at the former MG Rover Longbridge assembly plant near Birmingham, England.

Ardmore itself is a little more than 100 miles north of Dallas, and about 100 miles south of Oklahoma City, which is where the Chinese automaker has said that it will establish its global headquarters for sales, marketing and distribution outside of Asia. It also plans to set up a research and development facility near the University of Oklahoma in Norman.

After the Ardmore factory starts manufacturing vehicles in the middle of 2008, the company could eventually employ upwards of 500 people in the state. While that's great for Oklahoma, it's not enough to make up for the 2,400 direct jobs lost earlier this year when General Motors closed it's plant in Oklahoma City where it used to assemble the Chevrolet TrailBlazer and GMC Envoy sport utility vehicles.

A Chinese automaker invests in Oklahoma after the world's largest automaker, based in Detroit, pulls out. And here's the final twist to this story.

A partnership with the Chickasaw nation, one of Oklahoma's 39 Indian tribes, could provide additional tax breaks and financial advantages to the Chinese company, reports Duke Hale, CEO of MG Motors and a former executive at Mazda, Isuzu and Lotus.

"Ardmore and the airpark truly is a logistical distribution dream," says Hale, which is the angle the popular press missed in reporting this story. The new MG factory will be immediately adjacent to a 7,200-foot runway. It will also have rail access. Site blueprints call for a $15 million, 1,800-ft. extension to the runway, allowing it to accommodate larger cargo aircraft. Also in the works are a new taxiway, additional access roads, upgraded utilities and a new Burlington Northern Santa Fe spur. Total infrastructure investments, which will benefit both MG Motors and other tenants, will exceed $30 million. Other companies with distribution facilities in the Ardmore area include Best Buy, Dollar General, Circuit City, Dot Foods, and Michelin of North America.

Why does an automotive factory need access to a runway? That's the question I asked Wes Stucky, president of the Ardmore Chamber of Commerce and the Ardmore Development Authority, which owns the Ardmore Airpark and several other industrial locations in the area.

"It's flexibility that they wanted," said Stucky. "The rail is more critical. Some things will come by ship to the Port of Houston, and then be moved by truck or rail." The Chinese manufacturer hasn't made any specific supply chain decisions, but it has said that body panels, engines and transmissions will be built elsewhere and shipped to Ardmore for assembly.

Nanjing's plans are ambitious. It will need more than flexibility to succeed in a glutted world automotive market, even with the help of the recognized marque of MG. But you have to give the company credit for starting big by investing in some of the markets where it hopes to sell cars, rather than importing product from China. It will be an interesting story to watch.

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