Is Automotive Sector Really Recovering?

The U.S. automotive industry has been rocked by unsettling trends the past several years. Riddled with formidable challenges such as fading loyalty and catastrophic cash shortages, industry outlooks have been sluggish at best. Manufacturers and suppliers alike have been subject to stark optimism, but, as 2011 draws to a close, there is reason for hope. In fact, signs of growth, albeit slow, are creeping up across the nation.

The significance of the automotive industry to the U.S. economy is undeniable. The U.S. auto industry is the world’s third largest, trailing only powerhouses, China and Japan. According to the International Organization of Motor Vehicle Manufacturers, in 2010 China produced 18.2 million vehicles, Japan 9.6 million and, in the U.S., 7.7 million vehicles were produced. October 2011 statistics from the Bureau of Labor Statistics reported nearly 3.5 million employees in the automotive sector, a 3.67% increase over this time last year. Since the industry’s collapse in 2008, the U.S. economy has followed suit; however, recent industry trends seem to indicate the $34 billion cash infusion of 2008 to two of the Big 3 industry players (GM & Chrysler) is beginning to have a broad and positive impact on the U.S. economy.

Detroit has long served as the mecca for the U.S. auto industry; home to 8 of the top 15 major auto manufacturers. Michigan experienced the loss of more than 162,000 auto related jobs; however, recent sales increases are a breath of fresh air for the ailing region. According to the Center for Automotive research, Michigan boasts 22% more automotive related jobs today than in 2009. The Big 3 auto manufacturers, Ford, GM, Chrysler, as well as Nissan, and Volkswagen are all reporting sales increases when compared to the same time last year. A recently announced $1 billion assembly facility for Volkswagen will give the German company a U.S. presence for the first time in 20 years.

Yet growth in the automotive industry has extended far beyond the major auto makers and Detroit; third quarter revenue for many auto parts suppliers have increased as well. Reuters reports a 24% increase for industry stand out Johnson Controls, Inc. and other manufacturers like Dana Holding Corp. of Maumee, Ohio and Federal-Mogul Corp. of Southfield, MI also reported notable increases in the third quarter. As automotive manufactures gather steam, suppliers have found new life with increased production and employment spreading far beyond the automotive heartland. Gains are occurring in places like North Carolina, which ranks 10th among all states in total automotive cluster employment even though it doesn’t have a single auto assembly plant: 34 of the top 150 North American OEM parts suppliers have a facility in the state. The industry employs more than 17,000 in over 160 companies and plays a vital role to local and regional economic vitality. The resurgence of Detroit is rippling through small cities and towns across North Carolina in areas for removed from the Midwest auto corridor – areas hit hard by the recession where unemployment still lingers above 10 percent.

Home to nearly two dozen automotive suppliers, eastern North Carolina has been one of the hotspots with several auto parts manufacturers announcing plans to expand in the last few months. Keihin Carolina System Technology (KCST) of Tarboro stated it will create 50 new jobs and invest more than $13 million to expand its 370-employee facility that manufactures engine control units and electronic assemblies for Honda, Honda Power Sports and Acura.

In nearby Goldsboro, Cooper Standard, a leading supplier of body sealing, fuel, brake and emissions, thermal management and anti-vibration systems announced in October it will expand its body and chassis facility to accommodate new products and programs. The $17.9 million expansion will create 137 new jobs by the end of 2012. “Given our successful history in Goldsboro, we’re confident in our decision to expand Cooper Standard’s current footprint to meet increasing industry demand for new automotive products and technologies," said Larry Johnson, Vice President, North American Operations. “Leveraging our successful operations is one of our top priorities and North Carolina’s strong workforce and business culture make it an ideal location for this type of expansion."

Carolina Technical Plastics (CTP), a plastic injection molding plant in New Bern, NC serves both BMW and Mercedes; two carmakers with a manufacturing presence in the southeast U.S. CTP has been active in recent months in its response to climbing sales and the addition of new projects. This year alone, CTP has brought on an additional 25 employees and made substantial investments into its plant, ensuring its ability to meet growing consumer demand. Perhaps one of its most striking accomplishments is its status as a strategic supplier for The Brose Group, a mechatronic systems and electric drive maker, supplying more than 50 automotive manufacturers and suppliers worldwide. Due to its strict quality standards and superior technical abilities, CTP has been awarded the opportunity to manufacturer 18 new products for The Brose Group, production that had been housed in Mexico.

The automotive industry’s concurrent relationship to the U.S. economy is certain. Although many analysts encourage caution, it is clear that today’s market shows more optimism than this time a year ago. Just a few years ago it suffered a record downfall, but an infusion of life stemming from a consistent flow of increased demand, improving sales, and new opportunities has permeated the landscape. If short-term lessons from major auto manufacturers and a diverse range of suppliers are any indication of the future, the U.S. automotive industry and the U.S. economy have a genuine basis for confidence.