It is a presidential election year, which is creating a flood of advertisements along with politicians pounding on podiums to convince voters they are the best candidate for the job. Politicians present their plans to turn the United States economy around and create jobs. Both parties discuss plans to invest in small companies and sexy high tech companies such as Facebook, and mobile devices including phones and tablets.
Too often, they fail to discuss plans to attract and retain manufacturing jobs, particularly automotive jobs. I recently had the pleasure to participate in the Center for Automotive Research's (CAR) Management Briefing Seminar, which was recently held in Traverse City, Michigan. During the event, I met with members of CAR and had the pleasure to listen to Mitch Bainwol, President & CEO, Alliance of Automobile Manufacturers.
It was fascinating to learn the economic contribution made by the automotive industry. For example, Bloomberg recently stated the automotive industry contributed to nearly 50% of the GDP growth this year. Polk is forecasting new vehicle sales to achieve 14.3 million units in 2012, which is a 13.5% increase compared to last year. We also predict U.S. sales will reach the 16 million range again by the year 2014 (see graph). As automotive industry sales increase, it will likely continue to be a large contributor to GDP growth and job creation in the coming months. That trend should attract the attention of any politician.
To get another perspective on how the economic recovery is shaping up, see Adam Davidson's recent story covering this topic in the New York Times: http://www.nytimes.com/2012/08/05/magazine/the-dinged-up-broken-down-fender-bended-economic-recovery-plan.html?pagewanted=all.
CAR reported the automotive industry supports over 8 million jobs nationally and 1.2 million jobs in the state of Michigan alone. CAR also stated that for every automotive OEM job created, 9 other jobs were created. That is an impressive multiplier effect.
I suggest politicians seeking election, both federally and locally, consider the importance of the automotive industry and be intentional about creating an environment to attract automotive manufacturers. States such as Tennessee understand the value of the automotive industry and are benefiting from investments made by Volkswagen, Nissan and General Motors.
I understand the importance of a diverse economy and high tech companies that produce cell phones and mobile devices are part of that equation. However, have you ever driven past an iPhone plant in the United States?
Too often, the automotive industry is labeled as a "rust belt" industry with it best days behind it. I believe there is nothing further from the truth. Today's vehicles are highly engineered consumer products that are built to last. This is evident in the fact that the average age of vehicles is now approaching 11 years old.
The automotive industry is also good for the economy. Following is a summary of "quick facts" as reported by the Alliance of Automotive Manufacturers. Perhaps our country's leaders will begin to support the automotive industry more aggressively, similar to the way countries such as China and Germany already do. No other single industry is linked to so much of U.S. manufacturing or generates so much retail business and employment, as these facts show.
Automotive Industry "Quick Facts" from Alliance of Automotive Manufacturers
- Direct Auto Employment: America's automobile industry is one of the largest industries in the country. The industry directly employs over 1.7 million people engaged in designing, engineering, manufacturing and supplying parts and components to assemble, sell and service new motor vehicles.
- Major Customer of Goods and Services: America's automakers are among the largest purchasers of aluminum, copper, iron, lead, plastics, rubber, textiles, vinyl, steel and computer chips.
- Jobs Dependent on Autos: When jobs from other sectors that are dependent on the industry are included, the auto industry is responsible for 8 million jobs nationwide, or about 4.5% of private-sector employment.
- Compensation: The contribution of automotive manufacturing to compensation in the private sector is estimated at more than $500 billion each year.
- Tax Revenues: People in auto-related jobs collectively generate more than $70 billion annually in tax revenues.
- GDP: Historically, the auto industry has contributed from 3-3.5% to America's total gross domestic product.
- R&D: The auto industry invests billions every year in research and development, among the highest of any industry. However, unlike many other industries, only a small portion of R&D – just 1% – is funded through the federal government.
Source: Alliance of Automotive Manufacturers (www.autoalliance.org)
Posted by Anthony Pratt, Director, Forecasting (08.15.2012)