As automobile factories in towns all over America close the shutters and fall silent, new factories are rising to take their place across the ocean.
In the most recent report of this international dichotomy, perpetual Japanese problem child Mitsubishi, orphaned by DaimlerChrysler (NYSE: DCX) late last year when it sold its Mitsubishi stake to Goldman Sachs (NYSE: GS), is heading to Russia and looking for love in the northern capital of St. Petersburg. Executives from the Japanese carmaker visited St. Petersburg earlier this month to scout out possible locations for a plant.
According to Russia's leading business newspaper, Kommersant, Mitsubishi likes St. Pete (or more specifically, the surrounding Leningrad region) in part because the city is quickly reaching critical mass as a hub of automobile manufacturing activity. Ford (NYSE: F), General Motors (NYSE: GM), and fellow Mitsubishi countrymanNissan (Nasdaq: NSANY) are all there. Meanwhile, just up the road in Shushary, Toyota (NYSE: TM) has a plant in the works that should begin churning out cars late next year. While that might make the city seem a bit crowded, Kommersant points out that auto parts manufacturers are expected to follow the big boys to the city to stay in close contact and reduce shipping times and costs. With so many carmakers using mix-and-match parts made by the same parts makers, the arrival of the latter makes St. Pete a natural place for a newcomer like Mitsubishi to set up shop.
It's no coincidence that so many of these new factories are rising out of the swamps of St. Pete. After all, if you listen to Ford and GM execs here in the States, their biggest beef in recent years has been the rising cost of gasoline and its impact on sales of their most profitable vehicles -- gas-guzzling full-size pickups and SUVs. But as gas-hungry as the U.S. is, the eastern stretches of Russia are just as gas- (or rather, crude oil-) rich. And in a real world example of trickle-down economics in action, it seems a fair amount of those Russian petro-rubles are filtering down to the car-buying public -- and car sales are booming.
Mitsubishi says it's still just window-shopping at this point, and hasn't yet decided to make a move to build in Russia. The company says it would need to sell at least 75,000 vehicles per annum in Russia for building a plant there to make economic sense. On the other hand, it sold 55,000 cars there in 2005, and that was an 83% year-over-year increase. If this rate of sales growth keeps up, Mitsubishi could have crested its targeted sales volume almost by the time you finish this column.
Who else is building cars in Russia? Find out in:
And who's not? Just DaimlerChrysler and Honda (NYSE: HMC), from the Big 6. Let's see how long that remains true.
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Fool contributor Rich Smith does not own shares in any company named above.
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