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Changing Dynamics of the North American Automobile Industry:
Crisis or Opportunity for Michigan?
Kim Hill
Director, Automotive Communities Program
Associate Director, Economics and Business Group
Center for Automotive Research
Ann Arbor, MI
2
From the New York Times, January 24, 2006:
"This may not be the end, but it is certainly the beginning of the end of the
automobile industry as we knew it."
Gary N. Chaison, Professor of Industrial Relations, Clark University (Worcester, MA)
3
Some days……….
4
First, some questions:
Is the NA industry dying?
Is all the new investment occurring in the south?
Is the industry moving south?
Is labor a big issue/asset?
Why would new investment come to old “company towns”?
5
An integrated industry
6
Is the North American auto industry dying?
7
Stuck on a Plateau!
Total U.S. Sales of Light Vehicles:
1992 - 2007
8.2 8.5 9.0 8.6 8.5 8.2 8.2 8.8 9.0 8.7 7.7 7.9 8.0 8.1
2.5 2.6 2.8 3.0 3.1 3.43.8 3.8 3.9 4.2 4.7 4.8
2.6 2.93.4 3.3
4.3 4.1 4.4
9.0 8.9 9.0
7.88.3
2.5
4.03.74.4
3.64.64.6
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Car MV/CSU/CUV Other Truck/Van
Mil
lio
ns
Year
13.3 13.9
15.0 14.7 15.1 15.0 15.617.0 17.4 16.9 16.917.2 17.116.8 16.6 16.9
8
Truck sales headed…
in the right direction??
9
8.08.1
8.28.4
9.0
8.48.5
8.0
8.58.38.4
9.7
8.6
8.4
9.0
8.7
8.3
8.9
9.5
9.3
9.19.1
9.7
9.5
9.0
9.6
10.0
8.3
0.50
1.00
1.50
2.00
2.50
3.00
1999-I
1999-III
2000-I
2000-III
2001-I
2001-III
2002-I
2002-III
2003-I
2003-III
2004-I
2004-III
2005-I
2005-III
Gas
oli
ne
Pri
ces
$
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
Lig
ht
Tru
ck S
ales
SA
AR
(M
illi
on
s)
Light Truck Sales
Nominal Gasoline PricesAll Grades All Fuels
Sources: EIA, Ward's Automotive
Peak $2.62
Employee deal for everyone is over now for trucks!
10
3,878,451
592,875
2,196,592
2,853,762
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Year
MA
V, C
UV
, CS
UV
2,000,000
2,100,000
2,200,000
2,300,000
2,400,000
2,500,000
2,600,000
2,700,000
2,800,000
2,900,000
All
SU
Vs
MAV, CUV, CSUV
All SUVs
SUVs & CUVs
Source: CSM, JD Power
11
Can’t understand why sales have tanked?
12
2004-2008Change in N. American vehicle production capacity
6.2
4.34.6
3.3 3.1
3.2
0
1
2
3
4
5
6
7
8
GM-2004 GM-2008 Ford-2004
Ford-2008
Chrysler-2004
Chrysler-2008
Source: AutoData
Mil
lio
ns
4.0
13
Oklahoma City-2006
Lansing Craft Centre-2006
Spring Hill - 2006
Atlanta – 2008
Oshawa 1 - 2006Oshawa 2 - 2008
Moraine - 2006
Lansing Metal - 2006
Pittsburgh Metal - 2007
Portland - 2006
Ypsilanti SPO - 2007
St. Catherine’sPowertrain -2008
Flint Engine 1 - 2008
Baltimore - 2005
Linden - 2005
Lansing M - 2005
Lorain - 2005
GM & Ford shutdowns: Retreat to the core?
St. Louis - 2006Doraville - 2008
Wixom – 2007
Batavia – 2008
Windsor Casting – 2008St Thomas – 2008
Nine more Ford shutdowns TBD
14
TXMS
ALGA
SC
TN
KY
INIL
MI
MMM-USA
TOYOTA-PRINCETON
SUBARU-TOYOTA
HONDA EAST LIBERTY HONDA MARYSVILLE
TOYOTA
SPARTANBURG-BMW
I-65
NISSAN-CANTONHYUNDAI- HOPE HULLHONDA-LINCOLN
TOYOTA-SAN ANTONIO
MERCEDES BENZ-VANCE
TOYOTA-HUNTSVILLE
OH
NISSAN
I-75
Roads heading south!International supplier and manufacturer locations
KIA-WEST POINT
15
Transplant assembly facilities as of 2005
Company LocationEmployment as of
2004
Total Investment-through 2005
($ million)
Actual Capacity as of 2005
BMW
CAMI-GM
Spartanburg, SC
Ingersoll, ON
4,600
2,775
2,200
500 (original investment)
200,000
250,000
Honda Lincoln, AL
Alliston, ON
East Liberty, OH
Marysville, OH
4,300
4,375
2,230
4,315
1,200
1,500
920
3,200
300,000
390,000
240,000
440,000
Hyundai Hope Hull, AL 2,000 1,100 300,000
Mercedes-Benz Vance, AL 4,000 2,200 160,000
Mitsubishi Normal, IL 1,900 850 240,000
Nissan Canton, MS
Smyrna, TN
4,100
6,700
1,430
1,600
400,000
550,000
NUMMI-GM Fremont, CA 5,715 1,300 370,000
Subaru Lafayette, IN 1,315 1,350 262,000
TMM-Canada
TMM-Indiana
TMM-Kentucky
Cambridge, ON
Princeton, IN
Georgetown, KY
4,342
4,659
6,934
2,400
2,600
5,310
250,000
300,000
500,000
Total 5,152,000
Source: Automotive News, Harbour Report, CAR research64,260
16
New International assembly facilities: 2006-2008
Source: Automotive News, Harbour Report, CAR research
Company Location EmploymentInvestment
($ million)New Capacity
TMM-Texas
TMM-Texas (Addition)
TMM-Canada
TMM-Canada (Addition)
Toyota-Subaru
Kia
San Antonio, TX
San Antonio, TX
Woodstock, ON
Woodstock, ON
Lafayette, IN
Troup County, GA
2,000
-----
1,300
700
1,000
2,500
800
50
650
300
230
1,200
150,000
50,000
100,000
50,000
100,000
300,000
New Vehicle Total 750,000
7,500
17
Major automotive investments from 1993-2005
Source: Book of Deals, CAR
18
U.S. / Canada production by region
63%
37%
64%
36%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
1998 2004
ACP Non-ACP
ACP: Ontario, Michigan, Ohio, Indiana, Illinois, Missouri
Non-ACP: Rest of Canada and United States
19
Automotive manufacturing in the Great Lakes region
Automotive Communities Program
20
Why North:Tool & Die facilities compared to other automotive states
Source: 2002 Census Bureau
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800
Michigan
Ohio
Tennessee
North Carolina
Kentucky
South Carolina
Georgia
Alabama
Arkansas
Mississippi
21
Why North: Large numbers of mechanical and industrial engineers
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000
Michigan
Ohio
Alabama
Arkansas
Kentucky
Mississippi
Tennessee
Mechanical
Industrial
22
Michigan: The Automotive Research & Development Center
65%-75% of Annual U.S. Auto R&D
$10.7 billion (2003)
55,000+ jobs
23
Major automotive investment has an enormous economic and employment impact on the regional economy.
Why should we care?
24
2003 average annual salary (U.S.)
$26,902
$31,661
$33,075
$44,675
$63,825
$40,506
$34,919
$0 $10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
Non-Farm PrivateSector
Financial activities
Manufacturing
Durable Goods
Insurance carriers
MV Parts
Light Trucks & Autos
25
TypicalAssembly Plant
2,000 Jobs
.56 Powertrain Plants or 560 Jobs
.56 Stamping Plants or 850 Jobs3,800 Parts & Component
Jobs or a Total of 7,210 Manufacturing Jobs!
…and another 7,700 Non-manufacturing jobs for a total of 14,910 jobs.
Vehicle assembly is a huge driver of economy
26
7.5
Approximate National Automotive Manufacturing Multiplier
OR:
6.5 additional U.S. Jobsfor each Job at a U.S. Motor Vehicle Firm
Source: Average of many studies conducted by the Center for Automotive Research, including: Contribution of the U.S. Motor Vehicle to the Economies of the United States, California, New York, and New Jersey, Center for Automotive Research, 2003, Contribution of Toyota to the Economies of Fourteen States and the United States in 2003, Center for Automotive Research 2005
Automotive plant closures (and openings)
affect regional economies
27
Automotive jobs drive all wages up
Grant County (Indiana) example — 10 county region:
A county with significant automotive industry employment (>6%) has higher salaries in all industries.
On average all jobs in a county will pay between 15% and 18% more than a similar county with low automotive industry employment.
This is true even in fields unrelated to manufacturing or the automotive industry.
28
Bottom line
Retain and attract automotive investment
Look to attract suppliers to the new domestics
Emphasize assets (supplier infrastructure, educational levels, etc.)
Automotive R&D concentration
Competition for new sectors — Bio/Nano/Homeland — is fierce
49 other states want a piece of that pie
Once a strength, always a strength
Is Massachusetts attempting to attract auto?
Highest job impact numbers of any industrial sector
6.5 jobs nationally for every one job in an assembly plant
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