A deeper look into our auto industry: the Detroit Region continues to maintain its edge as one of the top manufacturers of cars and car parts in the United States.Here's the big picture: The motor vehicle industry is the largest manufacturing sector in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , and it has a huge economic impact on every segment of on our nation's economy--from construction to retail. It goes without saying, of course, that no region in the United States feels that impact more strongly than the Detroit Region. [ILLUSTRATION OMITTED] As the undisputed center of the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. automotive industry The automotive industry is the industry involved in the design, development, manufacture, marketing, and sale of motor vehicles. In 2006, more than 69 million motor vehicles, including cars and commercial vehicles were produced worldwide. , we feel this industry can make or break our economy. With so much dire news about Ford Motor Co. and General Motors Corp. recently--and, in fact, the entire industry--just how is that playing out on our entire economy? First, lets take a look at production. Over the last 10 years, motor vehicle production in the Detroit Region has actually increased by nearly 5 percent. This is double the increase in auto production experienced by the United States as a whole. Clearly, our perception of the demise Death. A conveyance of property, usually of an interest in land. Originally meant a posthumous grant but has come to be applied commonly to a conveyance that is made for a definitive term, such as an estate for a term of years. of auto production in this region is overstated o·ver·state tr.v. o·ver·stat·ed, o·ver·stat·ing, o·ver·states To state in exaggerated terms. See Synonyms at exaggerate. o , if not totally false. Now let's take a look at employment. In 2005, the transportation equipment manufacturing companies (includes automobiles, trucks, motorcycles, aerospace and marine) directly employed nearly 158,000 people in the Detroit Region. With total regional employment around 2 million, companies engaged in the manufacturing of transportation equipment supply close to 8 percent of the region's private sector jobs. And these employees pumped over $11 billion into our economy last year. Manufacturing jobs, and more specifically automotive industry jobs, are known for their high "multiplier effect Multiplier Effect The expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends on the percentage of deposits that banks are required to hold on reserves. ." When an auto manufacturer purchases supplies and services from other companies this creates jobs. When that same manufacturer pays its employees, those employees turn around and spend that money in a variety of ways, also creating jobs. This multiplier effect trickles down to all sectors of the economy. Estimates of multipliers are complicated as a portion of this spending, particularly for goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. used during the manufacturing process, occurs outside the region. Estimates of the multiplier effects in the auto industry range from 2 to 10--for every manufacturing job another 1 to 9 additional jobs are created or sustained. These days we seem to worry most about all the volume of products we're importing or the number of jobs we're exporting. And while these trends are definitely a concern, Michigan Michigan (mĭsh`ĭgən), upper midwestern state of the United States. It consists of two peninsulas thrusting into the Great Lakes and has borders with Ohio and Indiana (S), Wisconsin (W), and the Canadian province of Ontario (N,E). does export a significant amount of automobiles and automotive supplies. In 2005, Michigan companies exported over $37 billion worth of transportation equipment. This is down 2 percent since 2000 but still accounted for 50 percent of the state's export activity. In contrast, only 38 percent of Ohio's exports, the next largest auto-producing state after Michigan, consist of transportation equipment. In 1997, the manufacturing of cars and car parts made up 10 percent of Michigan's Gross State Product. In 2004, that number had dropped to 9 percent. This trend is not unique to Michigan, however. Of the top 10 auto-producing states only Indiana Indiana, state, United States Indiana, midwestern state in the N central United States. It is bordered by Lake Michigan and the state of Michigan (N), Ohio (E), Kentucky, across the Ohio R. (S), and Illinois (W). and South Carolina South Carolina, state of the SE United States. It is bordered by North Carolina (N), the Atlantic Ocean (SE), and Georgia (SW). Facts and Figures Area, 31,055 sq mi (80,432 sq km). Pop. (2000) 4,012,012, a 15. have experienced a growing percentage of their GSP GSP Good Scientific Practice GSP Generalized System of Preferences GSP Gross State Product GSP German Shorthaired Pointer (dog breed) GSP Geometer's Sketchpad (KTP Technologies geometry software) GSP Georges St. attributable to the manufacturing of cars and car parts. When adjusted for inflation, the automotive manufacturing portion of Michigan's GSP grew by 22 percent in the last seven years. At the same time, the state's total GSP grew by only 8 percent. Many other auto-producing states experienced double-digit growth in their automotive sector's contribution to state GSP, but Georgia and Illinois actually experienced much lower growth than Michigan, and Kentucky actually saw a decline in the importance of this sector to its economy. Much is made of the foreign auto manufacturers setting up shop in the southeastern United States. But as one drives around the Detroit Region, you can't help but be struck by the number of foreign-sounding company names gracing the sides of area buildings. According the Detroit Regional Economic Partnership Research & Information Center more than 900 foreign-owned subsidiaries are located in the Detroit Region. Data from the U.S. Bureau of Economic Analysis confirms that U.S. affiliates of foreign companies continue to invest heavily in this region. Among the top auto producing states, only Illinois tops Michigan for capital investment by foreign affiliates. And among this same group of states, none tops Michigan for growth in capital investment by foreign-owned firms since 1997. When touting touting the making of personal representations by a veterinarian to persons who are not clients in an attempt to solicit their business. the Detroit Region to auto-related companies throughout the world, the business development professionals at the Detroit Regional Economic Partnership refer to this region as the Automotive Brain Center of the United States. To date, the Partnership has identified over 200 technology centers operated by auto suppliers in the Detroit Region. This is why Michigan is the No. 1 state for vehicle-related R&D and also No. 4 in industrial R&D intensity (the ratio of R&D dollars to Gross State Product). Over 40 percent of U.S. transportation equipment R&D is performed in Michigan. [ILLUSTRATION OMITTED] The State of Our Economy Regional Detroit Business Index jumps nearly 13 points Business across the Detroit Region must be seeing the light at the end of the tunnel, judging by the latest Regional Detroit Business Index compiled by the Detroit Regional Economic Partnership. The Index rebounded by nearly 13 points to reach 81.5 in the fourth quarter of 2006 vs. 68.6 in the second quarter. (Third quarter 2005 = 100). [ILLUSTRATION OMITTED] The depressed second-quarter results were largely the result of rising gasoline gasoline or petrol, light, volatile mixture of hydrocarbons for use in the internal-combustion engine and as an organic solvent, obtained primarily by fractional distillation and "cracking" of petroleum, but also obtained from natural gas, by prices, negative news in the auto industry and jitters jitters 'Butterflies' Psychology An episode of nervousness or anxiety that often precedes a public event; jitters is a type of performance anxiety which may affect actors in a stage production–stage fright or soloist musicians; it may respond to anxiolytics over the looming looming: see mirage. midterm mid·term n. 1. The middle of an academic term or a political term of office. 2. a. An examination given at the middle of a school or college term. b. midterms A series of such examinations. elections. Those factors diminished di·min·ish v. di·min·ished, di·min·ish·ing, di·min·ish·es v.tr. 1. a. To make smaller or less or to cause to appear so. b. in the fourth quarter, with holiday sales in full swing, the election over, gasoline prices holding steady and not quite so much bad news from the automotive industry. Area businesses still feel much less confident about current and future business conditions in the region as a whole than for their own business. Not surprisingly, they are also less confident about Regional Detroit business conditions than for the United States. However, area businesses are slightly more optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about future conditions for their own businesses and for the region than for the United States. More than three-quarters of area businesses feel that business conditions in the region are either "very bad" or "bad" while only 3 percent feel they are "good" or "very good." In six months, 68 percent expect business conditions to be "very bad" or "bad" but only 9 percent expect conditions to be "good" or "very good." Some companies still hiring The overwhelming majority of area businesses are maintaining current levels of employment. Eighteen percent have hired in the last six months while 26 percent have had to reduce their workforce in the past six months. Regional Detroit businesses are cautious about the future when it comes to hiring. Nearly 62 percent expect their employment levels to stay the same in the next six months. But 28 percent expect to do some hiring in the near future while only 10 percent plan on reducing the number of people on payroll in six months. While the majority of area businesses (33 percent) saw their sales remain relatively unchanged in the last six months, an almost even number of businesses experienced slightly worse or slightly better sales over the same period (28 percent each). Coincidently co·in·ci·den·tal adj. 1. Occurring as or resulting from coincidence. 2. Happening or existing at the same time. co·in , the number of survey respondents In the context of marketing research, a representative sample drawn from a larger population of people from whom information is collected and used to develop or confirm marketing strategy. reporting "substantially worse" or "substantially better" sales in the past six months was also tied at 6 percent each. Six months from now nearly half of those surveyed felt their sales would improve. Only 15 percent were pessimistic pes·si·mism n. 1. A tendency to stress the negative or unfavorable or to take the gloomiest possible view: "We have seen too much defeatism, too much pessimism, too much of a negative approach" about their future sales prospects. In the last business confidence survey, it was obvious that manufacturers were feeling gloomy gloom·y adj. gloom·i·er, gloom·i·est 1. Partially or totally dark, especially dismal and dreary: a damp, gloomy day. 2. about their future prospects in the Detroit Region. In the most recent quarter, wholesalers and retailers were feeling the pinch pinch, n a small amount of chewing tobacco (snuff) an individual takes to use the substance for its desired effect. A “pinch” is called a quid in Britain. . Holiday sales can either make or break an entire year, so it's interesting to note that these companies were not expressing much optimism about their current and future prospects this year. The fifth Regional Detroit Business Confidence Survey was conducted online from Nov. 27-Dec. 6, 2006 by the Detroit Regional Chamber Research & Information Center. The sample of 200 respondents was representative of the industrial and size makeup makeup In the performing arts, material used by actors for cosmetic purposes and to help create the characters they play. Not needed in Greek and Roman theatre because of the use of masks, makeup was used in the religious plays of medieval Europe, in which the angels' faces of the region's business community as a whole. Third quarter 2005 = 100. For more information contact Melissa Armstrong at (313) 596-0383 or e-mail: marmstro@detroitchamber.com.
Total Motor Vehicle Production
Detroit Region Michigan
2000 2,706,040 3,108,350
2001 2,162,930 2,499,630
2002 2,364,634 2,918,788
2003 N/A 2,783,839
2004 2,282,517 2,598,421
2005 2,311,700 2,517,188
Source: U.S. Bureau of Labor Statistics
U.S. Car & Truck Production, 2005
State Motor Vehicles
Michigan 2,598,421
Ohio 1,740,631
Missouri 1,226,300
Kentucky 1,162,681
Source: Automotive News
Percentage of Gross State Product Represented by
Automobile and Automobile Parts Manufacturing
State 1997 2004
Michigan 9.9% 8.7%
Indiana 5.0% 6.3%
Kentucky 7.4% 4.7%
Ohio 4.3% 3.8%
South Carolina 1.6% 2.8%
Tennessee 2.7% 2.3%
Source: U.S. Bureau of Economic Analysis
Property, Plants and Equipment Owned by Foreign
Affiliates in the United States, in millions
State 1997 2004 Percent Change
Michigan $21,170 $43,790 106,8%
Indiana $18,301 $32,966 80.1%
Kentucky $17,075 $28,102 64.6%
Illinois $33,676 $47,000 39.6%
Georgia $24,940 $29,261 17.3%
Ohio $35,019 $37,578 7.3%
Source: U.S. Bureau of Economic Analysis
Current Business Conditions
Your Company [down triangle]
Detroit Region [up triangle]
United States [up triangle]
Business Conditions Six Months From Now
Your Company [right triangle]
Detroit Region [up triangle]
United States [up triangle]
Hiring [right triangle]
Sales [up triangle]
About the Author Melissa Armstrong is senior director of the Research & Information Center at the Detroit Regional Chamber and the Detroit Regional Economic Partnership. |
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