full: _http://findarticles.com/p/articles/mi_hb5730/is_/ai_n29162755_ (http://findarticles.com/p/articles/mi_hb5730/is_/ai_n29162755) A disconnect emerges between auto industry sales and employment in Midwest auto states _Manufacturing & Technology News_ (http://findarticles.com/p/articles/mi_hb5730) , _Feb 22, 2005_ (http://findarticles.com/p/articles/mi_hb5730/is_4_12) by _Thomas Klier_ (http://findarticles.com/p/search?tb=art&qa=Thomas+Klier) Light vehicle sales in the United States have continued at very solid levels over the past several years, averaging 16.7 million units since 2001. Yet the unemployment rate in Michigan--the country's most auto intensive state--has stayed above the national and Midwest average for more than four years. What is the reason for the recent break in the relationship between motor vehicle production and the auto region's employment? What seems to be driving this development is a continued market share loss for domestic producers to foreign nameplates, an increasing share of which is being produced within the United States. For example, Chrysler, GM and Ford have lost over 6 percentage points of domestic sales to foreign producers since 2000, resulting in an all-time low market share for the Big Three of 58.7 percent in December 2004, a drop from 73.2 percent in 1995. Related Results _Trust, E-innovation and Leadership in Change_ (http://jobfunctions.bnet.com/abstract.aspx?docid=162452&tag=rel.res1) _Foreign Banks in United States Since World War II: A Useful Fringe_ (http://jobfunctions.bnet.com/abstract.aspx?docid=115831&tag=rel.res2) _Building Your Brand With Brand Line Extensions_ (http://jobfunctions.bnet.com/abstract.aspx?docid=162427&tag=rel.res3) _The Impact of the Structure of Debt on Target Gains_ (http://jobfunctions.bnet.com/abstract.aspx?docid=167650&tag=rel.res4) _Project Management Standard Program_ (http://jobfunctions.bnet.com/abstract.aspx?docid=55353&tag=rel.res5)
Assuming a minimum efficient scale of about 200,000 units for a modern assembly plant, that corresponds to the capacity of about 10 assembly plants. Four Big Three assembly plants have been closed in the U.S. and Canada since 1995 and another four are set to close within a year. In the context of the geography of the U.S. car industry that is an important trend, because the production facilities of foreign assemblers tend to be located outside the traditional auto-producing states of Michigan, Indiana and Ohio. The economic importance of this geographic shift is magnified by the tight linkages between auto assembly and production of parts and components. On average, for every auto assembly job in the U.S. there are six in related parts and production, as well as ancillary jobs in services and transportation. More importantly, supplier plant locations tend to remain proximate to assembly plants because of just-in-time production requirements. Accordingly, the majority of an assembly plant's suppliers are typically located within one day's driving distance, which corresponds to about 450 miles. All of this suggests that the erosion of Michigan's role in the auto industry--both assembly and related parts--is being driven by the ongoing loss of market share rather than by cyclical factors. How has this recent adjustment played out in terms of employment? The industry shed over 155,000 jobs between 2000 and 2003. The vast majority of these are concentrated in the auto supplier segment of the industry rather than in assembly operations. Michigan, Indiana and Ohio as a group fared worse than the rest of the country, losing 16.7 percent of their parts industry jobs, compared with 10.7 percent for the remaining states. Among these three states, Michigan has fared the worst during the past three years, losing more than 20 percent of its auto supplier employment. Plant-level data can be used to trace the job losses for auto assembly plans and their "captive" suppliers (facilities owned and operated by the assembly companies, such as stamping or engine plants). Assembly plant employment fell by just over 2 percent overall between 2000 and 2003. That loss of jobs can be entirely accounted for by employment losses at domestic assembly facilities. The assembly plants of foreign companies added employment, most of it, however, outside the core auto region. A much bigger employment adjustment took place among the so-called captive parts plants, which are almost exclusively domestic captives of the Big Three. These plants shed 35,0000 jobs between 2000 and 2003, more than one-quarter of their employment. There are two main factors behind that rather dramatic number. Plant closures (including plants for which closings have been announced but not yet implemented) account for 28 percent of these job losses. The remaining 72 percent is attributable to job reductions at existing plants, representing productivity improvements as well as efforts of greater outsourcing of parts production to non-captive suppliers, many of which are operating production facilities outside the United States. At the same time, a small number of U.S.-based foreign captives grew, but off a very small base. Unfortunately, there are no reliable time-series data available on plant-level employment in the independent auto supplier sector that would allow a similar analysis for that piece of the industry. But the aggregate numbers for independent suppliers show a relative smaller loss of jobs in the non-traditional auto states as well. So the changing fortunes of domestic and foreign assembly plant customers appear to be profoundly reshaping the regional distribution of supplier employment. At the same time, the globalization of parts production has been slowing output growth from the U.S. overall. U.S. auto parts production grew by 12.8 percent between 1997 and 2002, but during the same time, imports of auto parts grew by 52.1 percent. In 2003, the largest source countries for auto parts remained Canada and Mexico. Together these two countries accounted for 55.7 percent of all parts imports. Imported parts from Asia represented 29 percent. Within that group, Japan's share has dropped by 6 percent to 18.2 percent in the past 10 years. Imports from China have more than tripled, but off a very sm all base. China now accounts for 4.1 percent of all auto parts imports. **************Make your life easier with all your friends, email, and favorite sites in one place. Try it now. (http://www.aol.com/?optin=new-dp&icid=aolcom40vanity&ncid=emlcntaolcom00000010)
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