German automakers bet on U.S. market and win

FRANKFURT, GERMANY – It was only a few years ago that some economists were arguing that Europe was "decoupling" from its long dependence on trade with the United States, and predicting that the Continent's future lay with the so-called tiger economies of Asia.

German carmakers, at least, had a different vision of the future.

The recovery in the U.S. auto market, which produced big earnings growth at Chrysler and Ford in their fourth quarter, has also been a boon for Germany's Big Three: Daimler, BMW and Volkswagen.

Their double-digit increases in U.S. sales last year reflected an overall surge in demand by American buyers for European and, above all, German products. Well-designed vehicles and machinery were by far the biggest categories of European exports to the United States.

As a result, overall German exports to the U.S. rose 24 percent in October from a year earlier, outpacing the 18 percent growth for eurozone exports to the United States.

The German companies are cashing in on years of commitment to the United States.

Volkswagen, for example, has invested $4 billion in the U.S. since 2008, building a factory in Chattanooga, Tenn., that began churning out Passat sedans in 2011.

BMW and Daimler's Mercedes-Benz unit have been making sport utility vehicles and other autos in the U.S. since the 1990s: BMW in Spartanburg, S.C., and Mercedes in Tuscaloosa, Ala.

BMW and Mercedes have also expanded their appeal in the United States by moving carefully into more affordable parts of the market.

All of that has contributed to a sales surge. BMW vehicle sales in the United States rose by 14 percent last year including the Mini brand; sales of Daimler's Mercedes and Smart brands increased more than 15 percent; and Volkswagen's U.S. sales soared 34 percent, including Audi brand cars.

The renaissance of U.S. demand has prompted some companies and governments to re-examine their priorities, and helps explain why EU leaders have been pushing hard for a new European-U.S. trade agreement. A deal would eliminate tariffs and harmonize regulatory requirements for cars and other products.