Post on 05-Jul-2019
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The U.S. Automobile Industry:What Lies Ahead?
Kim HillAssociate Director, Economic and Business Group
Center for Automotive Research (CAR)
The Center for Automotive Research
• An independent non-profit research organization• Don’t pick winners or losers
• A corporate, public sector, and academic interface
• Funded by:• Private companies and organizations (contract research)• Public entities (federal, state & local governments), and• Foundations
• Focused on future trends
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132,400
225,600
68,900
96,100 84,700
113,800
620,100
837,100
50,000
100,000
150,000
200,000
250,000
300,000
1999 2000 2001 2002 2003 2004 2005 2006 2007
April
400,000
500,000
600,000
700,000
800,000
900,000
Michigan Indiana Ohio U.S.
Motor Vehicle Parts Manufacturing1999-2007 April
Sta
te L
evel U
.S.
Source: BLS
- 36%
- 42%
- 25%
- 28%
The Darkest Part of the TunnelThe Darkest Part of the Tunnel……Motor Vehicle & Parts Manufacturing EmploymentMotor Vehicle & Parts Manufacturing Employment
1999 1999 –– 2007 April 2007 April
189,000
316,300
82,200105,100
111,100
153,500
846,900
1,128,400
75,000
125,000
175,000
225,000
275,000
325,000
375,000
1999 2000 2001 2002 2003 2004 2005 2006 2007
April
Sta
te L
ev
el
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
U.S
.
Michigan Indiana Ohio U.S.
Source: BLS
U.S.: -281,500, or -25%
Michigan: -127,300, or- 40%
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Percentage Change in U.S. Sales of Light Vehicles: YTD July 2007 vs. YTD July 2006
-21.2
-2.2
-13.8
3.8
0.5
5.0
-3.2
-13.1
-7.6
-30 -20 -10 0 10 20 30
GM
Ford
Chrysler Group
Detroit 3
Japan
Korea
Int. Domestics
Imports
Total 9,557,516-311,867
2,249,006+106,064(23.5%)
2,488,065+12,122(26.0%)
3,524,531+128,311(36.9%)
4,509,141-723,455(47.2%)
1,472,718-222,155(15.4%)
1,285,086-29,236(13.5%)
1,751,337-472,064(18.3%)
Percentage Change
Updated 8/22/07
Source: Automotive News
498,356-41,099(5.2%)
The Situation is GrimThe Situation is GrimOver $86 Billion in Losses Since 2000!Over $86 Billion in Losses Since 2000!
U.S. AutomotiveU.S. AutomotiveCapacity Utilization and ProfitsCapacity Utilization and Profits
1978 1978 –– 2007/Q2 YTD 2007/Q2 YTD
7560
92
64
80
-8.8
-21.8
9.0
-5.4-4.3 -11.2
-17.9
-12.3
0
10
20
30
40
50
60
70
80
90
100
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Year
Cap
acit
y U
tilizati
on
-25.0
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
Pro
fits
$ B
il.
Cap. Util. Profits
Source: Federal Reserve, U.S. DOC/BEA
4
0.21.9
0.72.9
0.96.5
1.19.3
1.413.5
1.415.6
1.616.1
1.922.8
Too Much Competition?Too Much Competition?New Market Structure?New Market Structure?
U.S. Market Share of Light Vehicle Sales: 1U.S. Market Share of Light Vehicle Sales: 1stst Half-2007 Half-2007
% %
Down Below 50%Down Below 50%Detroit 3 U.S. Market Share*Detroit 3 U.S. Market Share*
1986 1986 –– 2011 2011
45.2
73.772.4
54.8
27.626.3
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Year
Pe
rce
nt
Big 3 Internationals
52.8
47.2
* Detroit 3 North American * Detroit 3 North American ““ownedowned”” production. production.
5
3.5
-2.7
18.0
-9.2
-16.9
-4.0
-11.7
-3.0
-20 -15 -10 -5 0 5 10 15 20
Small Car
Middle Car
Large Car
Luxury Car
CUV
SUV
Van
Pickup
Percentage Change
Segment Breakdown - U.S. LV SalesYOY % Change
First Half 2007
Source: Ward’s Automotive Reports
So . . .So . . .GM will be the size of Ford, and Ford the size of ChryslerGM will be the size of Ford, and Ford the size of Chrysler
and Chrysler will be even smaller . . .and Chrysler will be even smaller . . .2004-2010 Change in North American2004-2010 Change in North American
Vehicle Production CapacityVehicle Production Capacity
6.2
4.3 4.6
3.3 3.1
2.7
0
1
2
3
4
5
6
7
8
GM-2004 GM-2008 Ford-
2004
Ford-
2010
Chrysler-
2004
Chrysler-
2008
Mill
ions
Down about 26% since 2004, or 3.6 mil. units
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Oklahoma City-2006
Lansing Craft Centre-2006
Spring Hill - 2006
Atlanta – 2008
Oshawa 2 - 2008
Moraine - 2006
Lansing Metal - 2006
Pittsburgh Metal - 2007
Portland - 2006
Ypsilanti SPO - 2007
St. Catherine’sPowertrain -2008
Flint Engine 1 - 2008
Baltimore - 2005
Linden - 2005
Lansing M - 2005
Lorain - 2005
GM, Ford, Chrysler, Delphi & ACHGM, Ford, Chrysler, Delphi & ACHU.S. and Canadian Plant Shutdowns and Line TrimmingsU.S. and Canadian Plant Shutdowns and Line Trimmings
Announced and Executed, 2005-2009Announced and Executed, 2005-2009
St. Louis -2006
Doraville - 2008
Wixom – 2007
Batavia – 2008
Windsor Casting – 2008
Ford Shutdowns, +7 More TBD
Delphi Plant ShutdownsACH Plant Shutdowns
GM, Ford & Chrysler Job Cuts:30 Plants and Lines55,790 in Plant Shutdowns19,000 Salaried to start
Delphi Job Cuts: 21 Plants23,000 in Plant Shutdowns and Selloffs600 other salaried
ACH Job Cuts: 14 Plants27,600 in Plant Shutdowns and Selloffs500 other salaried.
Total = 128,220 Jobs
Twin Cities - 2008
Norfolk - 2008
Essex Engine – 2007
Maumee Stamping – 2008
Chrysler Plant Shutdowns
Newark – 2007/2009
Detroit Trans. - 2009
Cleveland SPO. - 2007
St. Louis South - 2008
Warren - 2007
Updated: February 22, 2007
Brook Park Engine – 2009Brook Park Casting – 2009
Why are the Detroit 3 Losing Share in their Why are the Detroit 3 Losing Share in their ““HomeHome”” Market? Market?
• Too many sales and too much capacity in light truck segments:• GM = 57%, Ford = 63%, Chrysler = 69%, Market = 51.0%
• Over-reliance on car “fleet” sales (over 35%) and employee sales (5-10%). Reduces residuals and resale.
• Product models are older and product development is slower.• Quality and productivity has “almost” caught up to best of Japanese
but has not caught them yet. The Koreans have . . .• Technology to design & build modern vehicles has diffused. No
technical barriers. Koreans have caught up, and now . . . China?• Companies are restructuring to their real share of the market where
price can deliver profits – but they must re-negotiate fixed costs....• If 07’ GDP growth below 2.5% - then sales will fall fast. Scrappage
rates are very low. Falling housing prices and tighter credit are havinga negative wealth effect. Fuel and other operating costs at recordhighs. Interest rates higher.
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Stuck on a Plateau or Worse!Stuck on a Plateau or Worse!Total U.S. Sales of Light Vehicles:Total U.S. Sales of Light Vehicles:
1992 - 20071992 - 2007
8.2 8.5 9.0 8.6 8.5 8.2 8.2 8.8 9.0 8.7 7.7 7.7 7.8 8.1
2.52.6 2.8 3.0 3.1 3.4
3.8 3.8 3.9 4.2 4.7 4.8 4.9 4.8
2.6 2.93.4 3.3
4.3 4.1 4.4 4.4 3.9
8.1
7.88.3
2.5
4.03.7
4.4
3.6
4.64.6
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Car MV/CSU/CUV Other Truck/Van
Mill
ions
Year
13.3 13.915.0 14.7 15.1 15.0 15.6
17.0 17.4 16.9 16.917.
2 16.216.8
16.6 16.5
Source: Ward’s Automotive Reports
Not at 12 Million!Not at 12 Million!U.S. Light Vehicle ProductionU.S. Light Vehicle Production
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Mil
lio
ns
of
Un
its
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0P
erc
en
tag
e o
f U
.S.
Pro
du
cti
on
Intl. Prod. as a % of Total Prod.
Intl. U.S. Production
15%
34%
Internationals added 140k a yr. over last 10 years, but 180k a year over last 5 years. Will need to add about 280k a year to replace coming Big cuts in capacity/production.
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North American LV ProductionFord and GM NA production
below recession levels
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
GM Ford Chrysler Group Other
Thou
sand
s of
Uni
ts
Source: Automotive News
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TXMS
ALGA
SC
TN
KY
INIL
MI
MITSUBISHI-NORMAL
TOYOTA-PRINCETON
TOYOTA-SUBARU
HONDA EAST LIBERTY HONDA MARYSVILLE
TOYOTA
SPARTANBURG-BMW
I-65
NISSAN-CANTONHYUNDAI-HOPE HULLHONDA-LINCOLN
TOYOTA-SAN ANTONIO
MERCEDES BENZ-VANCE
TOYOTA-HUNTSVILLE
OH
NISSAN
I-75
Roads Heading …?
InternationalSupplierAndManufacturerLocations
KIA-TROUP COUNTY
HONDA GREENSBURG
TOYOTA-BLUE SPRING
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Source: Automotive News, Harbour Report, CAR Research
International Assembly Facilities in U.S. & CanadaEmployment Investment Capacity
(Thru June 2006, Millions $)South 32,634 15,580 2,410,000North 31,626 15,420 2,742,000TOTAL 64,260 31,000 5,152,000
Employment Investment Capacity(2006 - 2009, Millions $)
South 6,500 3,350 650,000North 3,500 1,800 450,000TOTAL 10,000 5,150 1,100,000
EXISTING
FUTURE
They Bring Their Friends…
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AZ
MS
LATX
AR
MO
IA
MN
ND
SD
WY NY
FL
NM
OK
KS
CO
UT
NV
CA
WA
OR
ID
MT
AL
CT
DCDE
GA
IL IN
KY
MI
NC
NE
NH
NJOH
PA
RI
SC
TN
VA
WI
WV
ME
Parts suppliers are located in all 50 states:Parts suppliers are located in all 50 states:(over 783,000 direct employment)(over 783,000 direct employment)
Top 5 Employer
Top Employer
(Ranked by Size Compared to Other Industries in State)
Parts suppliers are top employer in 7 states,Parts suppliers are top employer in 7 states,top 5 employer in 12 other statestop 5 employer in 12 other states(over 3 percent of workforce in the 17 states)(over 3 percent of workforce in the 17 states)
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7.5
Motor Vehicle Manufacturing Multiplier ofMotor Vehicle Manufacturing Multiplier of
6.5 additional jobs for each job at aU.S. Motor Vehicle Firm
Source: Contribution of the U.S. Motor Vehicle to the Economies of the United States, California, New York, and New Jersey, Center forAutomotive Research, 2003,Contribution of Toyota to the Economies of Fourteen States and the United States in 2003, Center for Automotive Research 2005,Contribution of the Motor Vehicle Supplier Sector to the Economies of the United States and Its 50 States, Center for Automotive Research 2007
5.7
4.7 additional jobs for every one job at a parts making company
Motor Vehicle Parts Supplier Multiplier of
Total Impact From Supplier Direct EmploymentTotal Impact From Supplier Direct Employment
4.5 million total jobs impact
Ten states have 150,000 or more employees impacted by the suppliersector
Fifteen states have 100,000 or more impacted
Thirty states have 35,000 or more impacted
For the nation as a whole this industry impacts 3% of the labor force,and for 17 states, this industry represents 3 percent or more of theworkforce
However, threats to U.S. manufacturing and jobs are and will alterlandscape
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79%
70%
However, more parts are imported.......However, more parts are imported.......
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Pending Legislation in the U.S. CongressPending Legislation in the U.S. Congress
Source: Alliance of Automobile Manufacturers, Presentation on 8/8/07
They Will Be Small . . .(but where are they built?)
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Source: EIA, Ward’s Automotive, BEA
Gas Prices Triple, and Truck Sales Begin to SlideNominal Price Per Gallon and Quarterly Light Truck Sales (SAAR)
Through May 2007
0
2
4
6
8
10
12
2000-II 2001-IV 2003-II 2004-IV 2006-II
Lig
ht
Tru
ck
Sa
les
SA
AR
(M
illi
on
s)
100
150
200
250
300
350
Ga
so
lin
e P
ric
e $
Light Truck Sales
Nomnal Gasoline Prices
(All Grades)
The U.S. Market: Mature but GrowingThe U.S. Market: Mature but Growing
16.2
16.0
16.7
17.1
17.3
17.5
17.9
15
16
16
17
17
18
18
19
2007 2008 2009 2010 2011 2012 2013
Year
Sa
les
(M
illi
on
s)
Source: CSM Worldwide
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Source: CSM
North American Production—Forecasted2007 – 2012
4.2
2.9
1.8
4.0
2.8
1.9
4.1
2.7
2.1
4.2
2.5
2.4
4.5
2.3
2.5
4.5
2.4
2.7
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2007 2008 2009 2010 2011 2012
GM Ford ToyotaU
nits
(Mill
ions
)
In Conclusion....• U.S. sales market will recover by 2009 and then grow . . .• International producers will take 50% of the market in 07’, 50% of
production in ‘11.• Detroit 3 will fall below 50% market share, “retreat to the core” and
move some production off-shore.– Fuel economy requirements could hasten off-shoring
• Less total workers in motor vehicle and parts manufacturing segmentsas productivity improvements and size rationalizing among Detroit 3continues
• States in some regions of the country will fare better than others• Sales of vehicles will go up, but where will they come from?????
– As housing sales go up, houses will be built here, cars may not be built here.