“As their Chinese operations stall, they’re going to become more dependent on their U.S. operations for income,” he said. “The same thing has happened with Honda and Toyota over the years, where their North American operations have been a source of profitability for those companies.”
Chinese auto glass manufacturer Fuyao formed Fuyao Glass America Inc. in 2014, buying 1.4 million square feet of a former General Motors plant off West Stroop Road to build what company leaders say will become the world’s largest standalone producer of auto glass in the world.
The company has more than 400 workers today and is on its way to hiring an expected 1,500 when the plant is fully operational in a few years.
“It’s going to end up being a case study on how transparency and being disbursed geographically can provide stability for the owners of the company,” Hill said.
Fuyao leaders could not be reached for comment Monday.
Positioned to ride out ‘correction’
Terence Lau, a University of Dayton marketing and management professor and associate dean, said Fuyao’s domestic operations will be as strong as the domestic auto market — and so far, this is shaping up to be a good year for automakers.
”I don’t think what’s happening to the Chinese stock market or to the U.S. stock market is going to have any long-term impact on Fuyao,” Lau said.
Fuyao’s U.S. operations are thoroughly American, Lau said. Fuyao in Moraine will reap profits — and pay costs — in dollars, he said.
The company bought a Mount Zion, Ill. plant last year as a source of its raw material, float glass. The glass from Mount Zion will be refined, shaped and readied in Moraine for installation in autos. And the Moraine plant will serve U.S. customers.
Where Fuyao may be hurt is at home in China, Lau said. There, the economy is cooling and its auto market may retract a bit, he said.
But he thinks, given the company’s size and scale, Fuyao is well positioned to ride out today’s economy.
More broadly, the fundamentals of the U.S. economy remain strong, Lau said. Ohio employment is healthy. Unlike September 2008, no Lehman Brothers or similar firm is going underwater.
Lau called today’s situation a “correction.”
“This is no 2008,” he said. “This is not even close to a 2008.”
America remains competitive
One local manufacturer was also reacting to Monday’s markets as the Dow fell 588.47 points, the eighth-worst single-day point.
Chinese wages have been rising and other costs inherent to overseas manufacturing — the Pacific Ocean hasn’t gotten any smaller in the past six years — haven’t shrunk. For those reasons, Steve Staub, president of Staub Manufacturing Solutions in Dayton, believes American manufacturers are still competitive with China.
“The people I’ve been talking to haven’t been” concerned, Staub said.
“With the cost differences these days compared to what it was, I think part of the reason China is slowing down is because more manufacturing is being done in the United States,” he said.
Staub, past chairman of the Dayton Region Manufacturers Association, has watched China’s attempts to make its products less expensive in America by devaluing its currency, the Renminbi.
“They’re changing their currency, they’re trying to keep up because people are realizing it’s more economic to make things here in the United States than it is in China these days,” Staub said.
Robert Premus, a professor emeritus of economics at Wright State University, sees no reason for panic.
“This is certainly something nobody likes to see, but these kinds of corrections occur quite frequently,” Premus said. “And this is one of them.”
Although growth has been slow, the U.S. economy “still looks solid,” Premus said.
“We’ll be able to buy things on the world market at a lower cost,” he said. “That’s the positive side of the stronger dollar.”
As the Chinese currency — also informally called the “yuan” — is devalued compared to the U.S. dollar, Chinese products become less expensive in the United States, while American products become more expensive in China.
Chinese valuation of its currency has been a sticking point in U.S.-China trade relations.
“What’s going to happen is: The supplies they bring in that are priced to the Renminbi are going to be cheaper,” OSU’s Hill said of Fuyao’s U.S. operations. “Their profits, though, are going to be in dollars, which means it is going to be even more important to the Chinese company as a source of earnings.”
Patience over panic
Dave Kudla, founder, chief executive and chief investment strategist at Mainstay Capital Management in Grand Blanc, Mich., distinguished between what’s happening in Chinese stock markets and what happening in China’s overall economy. China still reports economic growth at about 7 percent, although there is skepticism about that now, he said.
“We’re clearly in a cyclical downturn,” Kudla said.
Like others, however, he still sees strength in the U.S. economy.
“Our economy is expanding,” he said. “It’s not strong growth, but it’s growth all the same.”
The American auto market is near historical peaks, he said. Outside of Greece, Europe is generally on the mend, as well. Even Japan is trying to address its deflation. “The real concern right now is China,” he said.
Said Kudla, “That’s the concern right now — that it (China) can have a hard landing.”
He advised investors to take a deep breath.
“The worst thing that can hurt is that people turn on the TV, panic and sell (equities) at or near the bottom,” he said. “The key is that we don’t see the start of a bear market in the U.S. It’s an ordinary garden-variety correction.”
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