Welcome to GCXmag.com|Saturday, November 18, 2017
You are here: Home » Industries » Automotive » The Driving Forces Of An Economic Resurgence
  • Follow Us!

The Driving Forces Of An Economic Resurgence 

auto 1

 The automotive industry is recovering, reinventing and resurging.

By David Hodes

The regions of economic depression from the failure of the automotive industry beginning in the 1990s — most notably in Michigan but also in Midwestern states like Missouri — seemed at times doomed to a depth that would preclude recovery.

Even when government bailouts propped up auto manufacturers in 2008, economists held their breath to see what would happen next. The automotive industry was going through what turned out to be a cycle of increasing failures that not only signaled the beginning of a slow collapse in other sectors of the U.S. economy, but some feared would be an industry that would not ever come back with the same vitality.

There was tremendous job attrition in the industry during the last 10 years, where Michigan lost 600,000 of what had been a million automaker and auto supplier jobs from 2001 to 2011, says John Austin, director of the Great Lakes Economic Initiative at the Brookings Institution. “But I think we are seeing the rebound of the auto sector.”

The Detroit Big 3 — General Motors, Chrysler and the Ford Motor Co. — have been brought back to a level of performance and sales that is rippling through the supply chain, he says. “The suppliers and many of the auto parts makers are hiring again,” he says. “It’s a long way to make up for the tremendous job losses and dislocations that occurred in Michigan during the last 10 years, but they are 20 percent of the way back.”

There are pockets outside Michigan where the resurgence of the auto industry is bringing back jobs and inspiring new confidence in the industry.

Look at Missouri, for example. Automotive manufacturing is a $4 billion industry in the state. Automotive products represent 18 percent of Missouri’s exports, according to a 2009 report by the Missouri Automotive Jobs Task Force, an initiative that was one of Gov. Jay Nixon’s first executive orders when he took office in 2008.

A second initiative, the Missouri Auto Manufacturing Jobs Act in 2010, resulted in a $1.1 billion investment in the Claycomo Ford assembly plant, and the addition of 1,600 jobs. Just two weeks later, General Motors announced a $380 million investment in its Wentzville facility that will create 1,660 new jobs.

Both companies plan to add second shifts for production of some of their best-selling models.

A bipartisan strategy earlier this year to create new jobs in the automotive supplier industry that came about as a result of Gov. Nixon’s task force, Missouri Works, has begun to pay off as well. TG Missouri, a major supplier of auto parts for Toyota with 1,200 workers, announced a $38.9 million expansion at its Perryville plant. “We are seeing some solid, measurable gains,” Gov. Nixon says.

The GM and Ford deals don’t even count the significant multiplier effect now, Gov. Nixon says, which is the suppliers that are going to expand and collocate near those plants. “With the baseline that we have here, getting these investments that we are seeing with these suppliers, they are going to be hard-wired in to the heartland and to the future of the automotive industry,” he says.

In Columbia, S.C., BMW recently announced a $900 million investment that will generate 300 new jobs. By the end of the year, the plant will employ 7,500 people at its huge 4 million-square-foot facility.

The presence of BMW’s plant has had a tremendous impact not only on the state and the region but also on the U.S. economy, says Sky Foster, manager of corporate communications for BMW Manufacturing. “BMW’s total capital investment in the U.S. operations to date is more than $5.8 billion,” Foster says. “In 2011, BMW became the largest U.S. automotive exporter.”

The plant exports 70 percent of vehicles produced in South Carolina to more than 130 markets worldwide.

It Is All In The Diversification

An important key to surviving during the recovery has been diversification, Austin says, where some suppliers have been exploiting new product lines that are not auto dependent. For example, Cascade Engineering in Grand Rapids, Mich., specializing in large part injection molding for cars, now manufactures a water filter product and a wind energy turbine. That company experienced an almost 50 percent loss in its auto supply business during the last few years, Austin says.

“These companies are not so dependent on one sector that they can’t contribute to their local economic development storyline about driving diverse community,” he says. “They do show how to leverage a lot of the talent and technological skill of our manufacturing base to make things that are part of the coming industries of tomorrow.”

Kim Hill, the director of sustainability and economic development strategies for the Center for Automotive Research (CAR) in Ann Arbor, Mich., says some of the suppliers who stayed in business got to the point where they were able to hold their own or even make money at a lower sales volume. “And that is playing out right in front of us now,” he says. “Some companies appear like they could certainly use a new production facility, but they are adding a third shift or getting their workers to work creative hours instead.”

Suppliers who couldn’t hold their own either failed, merged with other companies or just shut down, Hill says. According to a CAR report, closed automotive facilities were found in 28 states, and 65 percent were concentrated in Indiana, Michigan and Ohio.

The CAR report also found that 267 of the 447 auto making manufacturing plants that were in operation as of 1979 are now closed. Of those, 128 have been at least partially repurposed or are in the process of being repurposed. Some are still dedicated to manufacturing but others became schools, health centers or residential developments. “One of the take-away lessons for communities with these available properties that used to be plants was that you certainly want to try to remain on good terms with the folks who own that land,” Hill says.

Some of the former plants are now brownfield sites that just need an investor to come along and start building very quickly, he says.

As the auto industry regroups and transitions it is focused more on the next big thing than ever before, with groups of chemists and engineers beginning the collaborative process of achieving goals for next generation auto manufacturing — better mileage, sustainable fuels and a newer, lighter weight, cleaner car — mass produced and priced for mass marketing targets.

To that end is the Coalition of Automotive Lightweighting Materials (CALM), launched by CAR to support efforts by auto manufacturers to aggressively down-weight vehicles with the goals of improving performance, fuel economy and safety.

CALM has claimed the mission of being the first organization to bring together the strengths and knowledge bases of the metals industry and the plastics industry with technology providers in design and fabrication with mixed-material solutions to reduce vehicle mass.

The CALM partnership includes such stakeholders as 3M, Altair, BASF, EWI, Material Sciences Corp., PPG Industries and others, all focusing on the future of car design and the materials used to build them.

Dr. Jay Baron, president and CEO of CAR, who leads the manufacturing engineering and technology group, says there are two major technologies that have been identified for achieving high levels of fuel economy: electrification and lightweighting.

Electrification is getting attention with hybrids and electric vehicles, Baron says. But the technical community is abuzz about lightweighting — trying to figure out how to get lightweight materials in to a vehicle. “One of the interesting things is that the complexity of the vehicle’s materials is increasing because of the mix of materials that is now available,” he says. “But you can’t put steel and aluminum touching each other or it will corrode. And how do you join plastic and steel or even aluminum and steel? You can’t just use spot welding.”

Then there is the issue of big industry pushback. With composites and aluminum now playing a bigger role in the manufacturing of new cars, the steel industry has stepped up their game. “Their biggest bargaining position is trying to develop high-strength steel,” Baron says. “But that costs more.” Added to that is the difficult process of forming high-strength steel.

After all is said and done, the biggest unknown is the economic opportunities that using — or trying to use — these new materials present. “There are a lot of new plastics and composites, but they are still used in specific areas of the car — the door panel, or the armrest, for example,” Baron says. “They have never claimed any one specific part of the car where they dominate.”

Times have been tough on one of the country’s legacy industries. But little by little, opportunities are forming that are led, as always in this industry, by technological advances. Now the challenge will shift to getting a skittish market to invest in the big picture of what’s next on the road to a revived economic prosperity — and the automotive manufacturing industry’s role in it.

David Hodes is a business freelance writer for several business publications. He is based in Arlington, Va., and can be reached by e-mailing dhodes11@gmail.com.

For complete details about the organizations featured in this article, visit:

Brookings Institution

www.brookings.edu

Center for Automotive Research

www.cargroup.org

Coalition for Lightweighting Materials

www.centerforautomotiveresearch.com/CALM

Great Lakes Economic Initiative

www.brookings.edu/about/projects/great-lakes

Missouri Department of Economic Development

www.ded.mo.gov

South Carolina Department of Commerce

www.sccommerce.com

Related posts:

About the author: David Hodes

David Hodes is a freelance writer living in Washington, D.C. He can be reached at dhodes11@gmail.com.

More posts by