A predicted powertrain revolution could cost the nation between 38,000 and 207,000 jobs in coming years, as an influx of hybrids and advanced diesels (HAD) flood the U.S. marketplace, a new study says.

The study, produced by the University of Michigan’s Office for the Study of Automotive Transportation (OSAT) and the Michigan Manufacturing Technology Center (MMTC), suggests a $1.1 billion federal credit over the next five years could stem the bleeding and better prepare the Big Three and its domestic supply base for the predicted shift in consumer demand.

Study: Powertrain shift will cost jobs.

As many as 1.8 million HAD vehicles are predicted to be sold annually by 2009, Michigan-based researchers say in their “Fuel-Saving Technologies and Facility Conversion” report, which was designed to highlight the costs and benefits of fuel-saving technologies and the potential for government incentives to spur the U.S. auto industry.

The report was prepared for Washington’s National Commission on Energy Policy and the Michigan Environmental Council, based in Lansing, MI, and recently released to Ward’s.

If the study’s most-optimistic findings hold true, hybrids and advanced diesels will own 11.1% (6.3% hybrids, 4.8% diesels) of a 16.6 million-unit market in 2009, excluding vehicles weighing more than 8,500 lbs. (3,856 kg). Low-end estimates call for a share between 2.7% and 6.9% in 2009, with hybrids populating the majority of the mix.

Regardless of the scope and timing of the predicted move to tomorrow’s powertrains, Detroit’s auto makers and the domestic supply base likely will trail European and Japanese firms better suited to producing hybrid and diesel powertrains in their home markets, researchers say.

The U.S. won’t completely fall behind. Its share of hybrid and advanced diesel vehicle assembly is expected to be as much as 40% by 2009.

The figure may sound healthy, but the gains made by importers actually would deal a severe blow to the job market. In particular, it would hit the final assembly headcount of U.S. auto makers and suppliers, which would see much of the market advantage they currently hold deteriorate as they become minority players in an emerging segment.

While many of the advanced vehicles are seen coming from U.S. plants, as much as 79% of needed components will be imported, down from 100% in 2003. The study notes many potential advanced diesel and hybrid suppliers are headquartered outside the U.S.

In the ’04 model year, nearly 14 million cars and light trucks were built domestically for the U.S. market, many of which carry engines assembled in U.S. plants, according to Ward’s data. Traditional gasoline engines dominate nearly the entire mix of U.S. light-vehicle sales, not including about 631,000 pickups carrying large-displacement diesels built by Big Three suppliers.

Ford Motor Co. is the only U.S. auto maker currently producing full hybrids in the U.S., albeit relying on Japanese nickel-metal hydride (NiMH) batteries supplied by Sanyo Electric Co. Ltd. The NiMH batteries cost more than $2,000 apiece, representing nearly 50% of the total cost of a hybrid powertrain, the study says.

Ford publicly has committed to building a domestic hybrid supply chain. But it doesn’t project volumes beyond the 20,000 Escape Hybrids it plans to produce in 2005 in the U.S., although Ford does have plans eventually to build hybrids at its Hermosillo, Mexico, plant, theoretically furthering the threat to U.S. jobs, OSAT’s Patrick Hammett, a co-author of the study, tells Ward’s.

Additionally, General Motors Corp.’s Allison Transmission Div. is developing hybrid technology said to be on par with Toyota and Ford, which will show up on fullsize SUVs in 2007.

By then, Toyota plans to have 300,000 hybrids on the road flowing from at least two Japanese plants – the majority of which may be destined for the U.S. if the market’s demand curve remains consistent with 2004’s spike in consumer interest.

European auto makers, notably Volkswagen AG, say they will be ready to meet the U.S.’s stringent 2007 Tier II Bin 5 diesel requirements if customer demand proves adequate. VW currently does not build engines in the U.S. (See related story: Pischetsrieder: VW Ready for Tier II; Are Consumers?)

In addition to reduced assembly headcounts, many yet to be created “opportunity” jobs will be lost due to a lack of innovation on the part of U.S. firms. These losses could impact many of the states and business sectors not traditionally affiliated with the auto industry.

OSAT and MMTC propose a solution: A $1.1 billion credit over five years from 2005 to 2009, squarely aimed at positioning “the United States to gain share in the hybrid and advanced diesel markets.”

The objective of the funding would be shifting 25% of the HAD vehicles – currently projected to be built offshore – to domestic production (saving 15% of jobs); cause half the powertrain components to be made in the U.S. rather than abroad (saving 10% of jobs); and save between 27,659 barrels and 117,265 barrels of oil per day, “assuming that fuel savings will not be cancelled out by manufacturers backsliding in other vehicle segments,” the study says.

“We believe such credits would prove attractive to manufacturers despite the allure of off-shoring labor because at least two-thirds of the value of vehicles and parts sold in the United States are made in the United States. Because this proposed tax credit policy would be made available to both foreign and domestic manufacturers around the world, we also think it is unlikely to run counter to international trade laws.”