DETROIT – Although auto makers and suppliers in the Midwest had little to celebrate in 2005 amidst bankruptcies, plant closings and layoffs, automotive analyst Kim Hill advises the region to continue looking for ways to attract and retain automotive investment.
“Don’t stop thinking about automotive,” is Hill’s message for the Midwest, in a seminar for automotive journalists held here on the eve of the North American International Auto Show.
Despite its troubles, automotive still is one of the strongest sectors to invest in, says Hill, who is an assistant director for the Center for Automotive Research’s (CAR) Economics and Business Group, in Ann Arbor, MI.
CAR’s research shows each automotive manufacturing job creates an additional 6.5 jobs in a given region. “Automotive has the highest job creation numbers of any industrial sector,” Hill says.
Additionally, automotive jobs positively impact a region’s wages. A study CAR conducted on 10 different counties shows that counties in which the automotive industry accounts for at least 6% of all the jobs have significantly higher wages.
The problems is while the automotive sector still is strong in the Midwest, many companies have turned their attention to the South in recent years, lured by a lower manufacturing wage rate – $13.10 an hour in Alabama compared with $20.48 an hour in Michigan – plus the South’s close proximity to Mexico and the weakness of unions there.
The South now has 21 automotive manufacturing plants compared with 34 in the Midwest.
Hill argues the South may not be as attractive as first glance indicates. A weak undeveloped infrastructure, lack of an industrial culture and distance from suppliers all are reasons companies may not want to move to the South, he says.
More importantly is the lack of skilled workers in the South.Motor Co. Ltd., after building its plant in Canton, MS, decided to recruit many of its workers from the Midwest because the workers in the Canton region were not qualified, Hill says.
“Southern automotive growth will slow as human resources becomes an obstacle,” he notes. “But that could be rectified with training in five to six years.”
Hill also thinks the union argument does not bear out.
“Look at(of America Mfg Inc.) in Ohio and the Canadian plants in Ontario,” he says. “They are doing fine in union areas.”
Despite the problems in the Midwest, the region still has a strong story to tell, according to Hill. The Midwest has the largest number of skilled and manufacturing jobs. Michigan, alone, has more than 1,600 tool and die shops, a critical component for automotive manufacturing.
Another strong point is that 80% of all of the automotive research and development centers are in the Midwest.
Michigan Gov. Jennifer Granholm recently announcedAutomotive Group will invest an additional $94 million to add 600 more jobs at its Hyundai-Kia America Technical Center Inc., located in Superior Twp., near Ann Arbor.
Opened October last year, (See related story: Hyundai Opens R&D Center)’s initial investment was $68 million, and it originally planned to employ 400.
Hill believes regions where the automotive sector is having problems, especially where plant shutdowns will take place in the next couple of years, should stay focused on automotive.
For example, while St. Paul MN, is grappling withMotor Co.’s decsion to shutter the Ranger pickup plant there, Hill says the city should evaluate other ways to use the facility.
Such opportunities could include Hyundai Motor America, whose sales continue to climb, and Kia Motors America, which is rumored to be searching for a North American plant location.
Also, as some auto makers continue to increase production and build new plants, there will be additional need for new engine plants.
The Global Engine Mfg. Alliance (GEMA) is an example of how a region can create new opportunities with engine plants.
GEMA, a global engine-manufacturing joint venture between DaimlerChrysler AG, Hyundai andMotors Corp., began production in October at its Dundee, MI, plant.
Additionally, hybrids may provide some interesting options for regional investment as their popularity climbs.
“We could say ‘Throw in the towel,’” Hill admits. “But there is an opportunity for (the Midwest) regions to assess their assets. The auto industry is not dying. Sales are only going to increase in the U.S.”