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Automotive Industry: Better Days Ahead?

As U.S. automakers actively restructure their companies - under the guidance of the federal government - expect, and be ready for, an automotive rebound in the months ahead.

Apr/May 09
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Another possibility making its way through the auto analyst rumor mill is the potential that GM's Spring Hill, Tennessee, operation might be among the plants slated to be closed. "There might be an opportunity for another manufacturer to pick up a plant," says Handler. For example, that plant could be a nice complement to Volkswagen's new, billion-dollar Chattanooga assembly operation. Handler says there has been talk that the company's Audi subsidiary is considering U.S. assembly.

Meanwhile, Mercedes-Benz has been making plans to expand its assembly operations in Alabama. The company filed tax abatement requests with local authorities, proposing a $290 million investment that would increase the operation's capacity, but has not made further details available. Plus, GM is said to be in talks with Toyota to determine a new product that would be produced by the automakers' joint venture, New United Motor Manufacturing Inc. And GM is trying to stimulate domestic sales through recent moves by its GMAC Financial Services to cut borrowing costs and resume making loans to subprime borrowers.

"The Koreans' presence in the U.S. is going to continue to grow," says de Lorenzo. He is impressed with the gains made by Korean automakers and expects them to continue to give Toyota and Honda a run for their money in the American marketplace. In fact, he says, "I can see a point where Hyundai will add another plant in the U.S. at some point."

Looking to the Future
Will the American industry rebound? According to de Lorenzo, there's too much talent and too many resources for it not to. While it's impossible to predict exactly what the industry will look like down the road, it's a safe bet that technological innovation will be more important than ever. "Let's not forget that the American automotive industry is the source of a large chunk of this country's R&D work," he says.

The government's vision for the salvation of American auto manufacturing complements its goals for prosperity through energy innovation, particularly advances in powertrains and batteries. "That will demand that these companies continue to do R&D," says Belzowski. "That's where the growth is. Areas that can promote a good microcosm for R&D for these new technologies will have an opportunity for some quality jobs."

Already, many communities are searching for ways to put themselves on the map when it comes to energy-related auto innovation. Texas has in the past benefited from alliances that built the computer-chip business, and now is working on similar strategies for getting into advanced battery manufacturing. Indiana has pulled together its existing manufacturing and R&D base to launch the Indiana Energy System Network, an effort to fuel a hotbed of cutting-edge R&D in advanced transportation and energy systems. Michigan and Kentucky are seeing a flurry of activity, and so are many other places.

Don't be surprised to see new names jump into the mix - not just established automakers. For example, Anderson, Indiana-based Bright Automotive recently unveiled its fleet-oriented IDEA, a 100 mile-per-gallon plug-in hybrid electric. The company has raised millions of investment dollars and hopes to put its vehicles on the roads within about three years. "We're going to be seeing a lot of that," says de Lorenzo. "New enterprises are going to pop up with their latest take on the technology." The big players are active as well. The electric Chevy Volt is one of the more talked-about entries, but Toyota also has some new ideas in the works, including a small hybrid designed to compete against the Honda Insight hybrid.

"This is a really exciting time, because the government is in support of this," says Belzowski. "A lot of companies are trying to put their ideas into physical form. That kind of entrepreneurism will be alive and well, for alternative powertrain technology in particular."

Layoffs, Then Labor Shortages?
"I think there's going to be a fair amount of skilled labor unemployed in a lot of parts of this country," says de Lorenzo. Certainly, that's what the automakers have promised. But even if there's not a flurry of new automotive plants in the near term, Cole believes that communities interested in hosting automotive production need to keep preparing for a future when - believe it or not - there will be a shortage of auto workers. Waves of retirements remain foreseeable, and tomorrow's auto jobs aren't going to be filled by just anybody. "It has to be people with a minimum of a two-year community college [degree]," he says. "If you don't have that in your community, you're not going to get the expansion when it happens."

It may seem counterintuitive right now, but Cole says forward-thinking communities will keep work force issues in mind as the economy sorts through its problems and potential retirees starting thinking again about retiring: "What we're really concerned about the most is an educated work force. The one thing that can really hurt a community is a lack of an educated work force."

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