Do the Clouds Hovering Over the U.S. Auto Industry Have a Silver Lining?
Steve Stackhouse-Kaelble (Automotive Site Guide 2008)

The feeling is inescapable: automotive manufacturing seems to be an industry that's run out of gas. That's certainly the story that can be gleaned from the business headlines these days. This is the industry that states and local communities have bent over backward trying to woo?

OK, the news right now is definitely bleak, but industry watchers say that's no reason to give up on automotive, or be any less interested in attracting an auto plant to town. It won't be long before the auto industry - shrinking though it may currently be - will be hard-pressed to find enough good help and will be casting kind glances toward communities that can offer qualified workers.

"One of the key issues is that with the retirement of baby-boomers, there will likely be thousands of new jobs in the industry, even though the industry is getting smaller," says David Cole, chairman of the Center for Automotive Research in Michigan. "There will be thousands of new people who are not in the industry now."

Consider the numbers from a study Cole's organization recently released: American automotive manufacturing employment is clearly on the decline - having peaked at 1.13 million in 1999, it had fallen 27 percent to 820,000 by 2007. The trend has hit the traditional auto-making capital, Michigan, particularly hard. Employment there dropped 45 percent, from 316,300 in 1999 to 173,600 in 2007. And it's expected to get even worse. The study forecasts that the Detroit Three - General Motors, Ford, and Chrysler - will shed another 20,000 jobs in the next eight years.

Meanwhile, the international automakers have slowed the pace of their facility building lately, and like the domestic car builders, some of them are doing some retooling as they try to find the right mix of vehicles to please the newly energy-conscious public. The internationals have fought their way to an American market share that's nearly even with the domestics, and they're not eager to give up any gains.

So what's the silver lining? Despite the ominous-sounding trends, the future holds a lot of great job opportunities in automotive design and manufacturing, according to Beyond the Big Leave: The Future of U.S. Automotive Human Resources, the study from the Center for Automotive Research. "Baby Boomer production and salaried employees are leaving (and will leave) in such numbers that the companies such as the Detroit Three must still hire many thousands of new employees in the years ahead," the report states. "This massive replacement of auto labor represents an opportunity for many in Michigan and other Midwest States."

But it also represents a challenge, according to the report. The jobs that are declining are not exactly coming back: "Instead, they will be replaced by different jobs involving different tasks and requiring different qualifications and experience."

No longer will there be good auto-manufacturing jobs for high school dropouts, Cole says. It'll take at least a two-year community-college degree to land the jobs of the future, he says. Communities that recognize this and plan for that future will be the winners of the current shakeout.

"There needs to be significant training for states to be able to compete," says Andy Mace, principal with Cushman & Wakefield Business Consulting.

The size and quality of the work force is the key to success in attracting automotive businesses, Cole agrees. "If I were a community looking at economic development, I'd make sure I understand the demographics of the work force and the education of the work force."

It will certainly be worth all the trouble to do what it takes to land new auto-manufacturing jobs, Mace says. "They are the jewel of manufacturing, because they bring a lot of investment from the supplier base," he says. Communities that spend a lot winning the site-selection battles rarely have buyer's remorse. "You can heavily invest in an auto plant and capture a lot of return for your investment."

"These are jobs that have an extremely high value in a community," Cole agrees. The economic multiplier for auto plants is about 10, he says: "For every new job there, there are nine new jobs elsewhere in the community."

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Economic slowdown and, especially, skyrocketing gas prices are behind the spate of bad automotive news. Almost overnight, automakers that not long ago couldn't build enough pickup trucks and other big vehicles now have too many in stock. General Motors has plans to shut four pickup plants, Cole says, two in the United States and two elsewhere. GM also is eager to unload the iconic Hummer brand that it was equally eager to acquire not that many years ago. And even healthy Toyota is putting the brakes on U.S. pickup production, putting its pickup assembly operations on a long summer holiday.

"A lot of the newer plants were built for larger vehicles," Mace observes. Mercedes-Benz and Hyundai in Alabama are among the examples. Current trends could spell retooling at some point, he suggests.

Not all the automotive headlines carry bad news. Though the pace of new assembly plant development has clearly slowed, there are some exceptions. For example, Volkswagen this summer picked Chattanooga as the site of a billion-dollar assembly operation that will turn out midsize sedans destined for North American consumers. The automaker, which hasn't had a U.S. assembly presence in 20 years, also looked at sites in Alabama and Michigan before landing in Tennessee.

Volkswagen is angling to become the world's number-two automaker, which means it'll have to significantly increase its American market share with the help of the Tennessee factory. It also is working on new factories in India and Russia.

Meanwhile, there was word out of Kentucky this summer that Simpson County will get an $84 million Integrity automotive facility that will manufacture low-speed electric vehicles. The development could mean as many as 4,000 high-paying jobs.

The news out of Tennessee and Kentucky continues the automotive winning streak compiled by Southern states. Assembly, says Cole, "has been steadily drifting to the South, and one of the key elements of this is the issue of right-to-work states." It's a reality that executives rarely admit publicly, but international automakers prefer to set up shop in places where unionization is less likely. Cole notes that the recent American Axle strike that disrupted General Motors' production happened at roughly the same time Volkswagen was making its final site decision.

Cole says that when it comes to new assembly operations, the rumor mill is relatively quiet at the moment. But he can think of at least one source of potential good news at some point down the road. Lots of vehicles continue to cross the ocean from assembly plants in Japan, "and with the strengthening of the Japanese yen, that's a reason that they might consider moving more production here. But we've heard no specific rumors."

Then, adds Mace, there's the question of when Chinese and Indian automakers will act upon their itch to tap into the American market. "They may start to look to the United States to build their market share."

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