shifting automotive geography and michigan labor markets
TRANSCRIPT
Shifting Automotive
Geography and Michigan
Labor Markets
Automotive Communities and
Workforce Adjustment
Detroit, MI
October 8, 2009
Thomas Klier
Senior Economist
Federal Reserve Bank of Chicago
www.chicagofed.org
Outline
Detroit’s decline
Why geography matters
Labor market diagnostics
Footprint for recovery
Tough times in the auto sector
Light Weight Vehicle Sales {Autos+Light Trucks}SAAR, Mil.Units
05009590Source: Bureau of Economic Analysis/Haver Analytics
22.5
20.0
17.5
15.0
12.5
10.0
7.5
22.5
20.0
17.5
15.0
12.5
10.0
7.5
Light vehicle sales, saar, million unitsLight Weight Vehicle Sales {Autos+Light Trucks}
SAAR, Mil.Units
05009590Source: Bureau of Economic Analysis/Haver Analytics
22.5
20.0
17.5
15.0
12.5
10.0
7.5
22.5
20.0
17.5
15.0
12.5
10.0
7.5
Total Light Vehicle Retail Sales {Imported+Domestic}SAAR, Mil. Units
05009590Source: Autodata Corporation /Haver Analytics
22.5
20.0
17.5
15.0
12.5
10.0
7.5
22.5
20.0
17.5
15.0
12.5
10.0
7.5
Market-share shift accelerates in late-90s
Note: 1955-1979 share of car sales, 1980-2008 share of light vehicle sales
40
50
60
70
80
90
100
19
55
19
58
19
61
19
64
19
67
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
20
06
perc
en
t
Detroit Three U.S. market share
U.S. auto industry goes international
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
1980 '83 '86 '89 '92 '95 '98 '01 '04 '07
Share of light vehicle salespercent
Detroit-3
new domestics
imports
percent
Imports refer to production outside of NAFTA
Outline
Detroit’s decline
Why geography matters
Labor market diagnostics
Footprint for recovery
From 4 to 14 carmakers in 30 years
VW (1) 1978
Honda 1982
Nissan 1983
Toyota 1984
Mitsubishi, Mazda 1987
Subaru 1989
BMW 1994
Mercedes 1997
Hyundai 2005
Kia 2009
Foreign carmakers, by first year of producing in U.S.
(1) Closed in 1989, new plant to open in 2011
Industry map
Auto Alley rules
Thomas Klier, FRB of Chicago
Assembly line density in 1980
Thomas Klier, FRB Chicago
Assembly line density in 2010
Thomas Klier, FRB Chicago
D3 close 19 U.S.
assembly plants
between 2000 and
2010. Competitors
open 6 new plants.
In 1980, there were
53 light vehicle
assembly plants in
the U.S. 52 were
D3 plants.
In 2010, there will
be 40, 24 of these
are D3 plants.
The tyranny of geography
2010Detroit Three
Thomas Klier, FRB Chicago Thomas Klier, FRB Chicago
Others
Industry restructuring since 2000
Restructuring accelerates after 2000: 6 Detroit 3
assembly plants close by end of ’06, 13 more by
end of ’10; 6 new foreign plants since ’00.
Spin-offs of large parts divisions by GM (Delphi)
and Ford (Visteon). Delphi to emerge this month
from CH 11 after 4 years with only 3 of its 33 (in
2005) U.S. manufacturing plants. None of the three
will be unionized.
2007 labor agreement between UAW and D3
establishes trust fund (VEBA) to take on D3 health
care obligations, as well as much lower 2nd tier
wage for new hires.
Outline
Detroit’s decline
Why geography matters
Labor market diagnostics
Footprint for recovery
Michigan employment down 18% since 2000
Total Nonfarm payroll employment, 2000Q1 = 10020001=100
All Employees: Total Nonfarm Payrolls
09080706050403020100Sources: Bureau of Labor Statistics /Haver Analytics
110
105
100
95
90
85
80
110
105
100
95
90
85
80
Non-farm payroll employment, 2000Q1 = 100In
dex
Michigan
U.S.
(LAG63 + LAG61)(thous)
(MILG63 + MILG61)(thous)
05009590
Source: Haver Analytics
1200
1000
800
600
400
350
300
250
200
150
100
Michigan’s key industry is shrinking
Motor vehicle assembly and parts employment (1000)
Michigan
U.S.
-50%
-70%
0
2
4
6
8
10
12
14
16
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009P
erce
nt
Michigan unemployment rate, by gender
Labor market diagnostics (1)
0
2
4
6
8
10
12
14
16
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Per
cen
t
Michigan unemployment rate, by age
55-65
0
2
4
6
8
10
12
14
16
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009P
erce
nt
Michigan unemployment rate, by gender
Female
25-54 Male
Labor market diagnostics (2)
0
5
10
15
20
25
30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009P
erce
nt
Michigan unemployment rate, by education
Less than HS HS
Some College College
Masters & above
0
5
10
15
20
25
30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Per
cen
t
Michigan unemployment rate, by industry
Manufactuing (no Motor Vehicle)
Service
Motor Vehicle Mfg
Manufacturing (ex motor vehicles)
Service Sector
Outline
Detroit’s decline
Why geography matters
Labor market diagnostics
Footprint for recovery
Geography of recovery
U.S. light vehicle production capacity,
2010
11 of all 24 Detroit 3 U.S.
assembly plants in Michigan.
2009 YTD capacity
utilization rate in light
vehicle assembly at 38%.
Sales comeback can easily
be accommodated with
existing facilities. At sales
of 15 million units, current
capacity will be utilized at
about 84%.
Will Detroit 3 market share
stabilize?
Shifting Automotive
Geography and Michigan
Labor Markets
Automotive Communities and
Workforce Adjustment
Detroit, MI
October 8, 2009
Thomas Klier
Senior Economist
Federal Reserve Bank of Chicago
www.chicagofed.org
The End