Automotive Workforce Challenges in Recovery October 8, 2009 - PowerPoint PPT Presentation

Automotive Workforce Challenges in Recovery October 8, 2009 Kristin Dziczek Director, Labor and Industry Group Center for Automotive Research Ann Arbor, MI

Into the Abyss – Ongoing restructuring – Product mix – Low price premium – Energy prices – High cost structure – Credit crisis Total U.S. Sales of Light Vehicles: Detroit 3 U.S. and MI Hourly Employment 1992 - 2009 1978 – Feb 2009 Car MV/CSU/CUV Other Truck/Van Michigan U.S. 20.0 1,050,000 18.0 1,000,000 999,300 950,000 16.0 900,000 Millions 4.6 4.6 4.3 4.1 4.4 4.4 3.9 3.7 850,000 4.4 14.0 800,000 2.6 2.9 3.4 3.3 3.6 4.0 750,000 3.7 12.0 700,000 650,000 2.5 2.6 2.8 3.0 3.1 3.4 3.8 3.8 3.9 4.2 4.7 4.8 4.9 4.8 4.8 6.2 600,000 10.0 2.5 6.1 550,000 500,000 482,000 8.0 5.2 450,000 400,000 6.0 350,000 300,000 8.2 8.5 9.0 8.6 8.5 8.2 8.2 8.8 9.0 8.7 8.3 4.0 201,249 7.8 7.7 7.7 7.8 7.6 7.0 5.36.4 250,000 200,000 150,000 2.0 100,000 50,000 0.0 112,228 0 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 1978 1983 1988 1993 1998 2003 2008 Year Source: Ward’s Automotive Reports 2

GM, Ford, Chrysler, Delphi & ACH U.S. and Canadian Plant Shutdowns Orion – Sep 2009 (Standby) Drayton Plains PC ‐ 2009 Announced and Executed, 2005-2011 Flint North Engine – 2008 Flint North Components ‐ 2010 Lansing Metal ‐ 2006 Oshawa Truck ‐ 2009 NUMMI – March 2010 Saginaw Malleable ‐ 2007 Lansing Craft Centre ‐ 2006 Willow Run Site – 2010 Livonia Engine – 2010 Portland SPO ‐ 2006 Pontiac – Oct 2009 Lansing M ‐ 2005 Pontiac Stamping – Dec 2010 (Standby) Wixom – 2007 Twin Cities ‐ 2011 GM, Ford & Chrysler Shutdowns: 55 Plants Romulus Trans. ‐ 2005 Massena Foundry – 2009 111,398 Hourly; plus Windsor Trans. ‐ 2010 49,176 Salaried Essex Engine – 2007 Windsor Casting – 2007 NUMMI: 1 plant Boston SPO ‐ 2011 4,550 Hourly; Sterling Heights ‐ 2010 850 Salaried; Janesville – 2008 (Standby) Detroit Axle ‐ 2010 1,000 in-plant supplier jobs Kenosha Engine ‐ 2009 Conner Ave ‐ 2009 Maumee Stamping – 2007 Delphi Job Cuts: 27 Plants Twinsburg Stamping ‐ 2010 18,377 in Plant Shutdowns and Selloffs Grand Rapids Stamping ‐ 2009 Parma Comp.– 2010 Brook Park Casting – 2010 ACH Job Cuts: 14 Plants Linden ‐ 2005 21,400 in Plant Shutdowns and Selloffs Wilmington – July 2009 Shutdown Total = 112,612 Newark –2008 Line Trimming, Sold, & Buyouts = 40,900 Baltimore ‐ 2005 Salaried = 46,839 Pittsburgh Metal ‐ 2008 Total Impact = 206,751 Jobs Norfolk – 2007 Lorain ‐ 2005 Mansfield Metal – June 2010 Fontana PDC – 2009 Toledo South – 2006 Ford Shutdowns Columbus SPO ‐ 2009 Chrysler Plant Shutdowns Moraine ‐ 2008 St Louis South – 2008 Batavia Trans. – 2008 Delphi Plant Shutdowns St Louis North – 2009 Muncie Transmission ‐ 2006 Shreveport St. Louis ‐ 2006 Indianapolis Metal – Dec 2011 ACH Plant Shutdowns St. Louis Bulk Center – 2009 Atlanta – 2006 Doraville ‐ 2008 Oklahoma City ‐ 2006 Jacksonville SPO – 2010 Spring Hill – Nov 2009 (Standby) Fredericksburg Comp.– 2010 Updated: Aug 31, 2009

2014 Detroit Three US Manufacturing Footprint 2008 Detroit Three US Manufacturing Footprint Source: CAR Research

The Darkest Part of the Tunnel… Motor Vehicle & Parts Manufacturing Employment 1999 – July 2009 Michigan Indiana Ohio U.S.* 1,130,900 400,000 51% change 1,200,000 350,000 1,000,000 State Level 300,000 320,600 800,000 U.S. 250,000 547,600 72% change 200,000 600,000 58% change 153,500 150,000 400,000 89,600 100,000 105,100 63,600 200,000 50,000 56,800 0 46% change 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Aug 2009 *U.S. Through Aug 2009 Source: BLS, U.S. DOL, Sep 2009

10 12 14 16 4 6 8 4.9 5.7 7.3 Jan ‐ 08 Feb ‐ 08 Michigan Mar ‐ 08 Apr ‐ 08 May ‐ 08 Jun ‐ 08 Seasonally Adjusted Unemployment Rate Jul ‐ 08 Aug ‐ 08 Indiana Sep ‐ 08 Oct ‐ 08 Nov ‐ 08 Dec ‐ 08 Jan ‐ 09 Feb ‐ 09 Ohio Mar ‐ 09 Apr ‐ 09 May ‐ 09 Source: BLS, U.S. DOL, Aug 2009 Jun ‐ 09 Jul ‐ 09 U.S. 10.8 15.2 9.9 Aug ‐ 09 9.8 Sep ‐ 09

Accumulated Employment Losses as % of Pre-Recession Employment 1948 1953 1957 1981 1990 2001 2008 1.0% 0.0% ‐ 1.0% ‐ 2.0% ‐ 3.0% ‐ 4.0% ‐ 5.0% ‐ 6.0% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Months into the Recession

Cuts are Not Over “GM's hourly employment fell 21% to 49,200 workers as of Wednesday -- about 9,200 short of the turnaround plan's year- end goal.” “GM's U.S. salaried workforce has dropped 18.2% to 24,300 as of Thursday, which is about 1,300 short of the turnaround plan's year-end goal.”

Some Hiring May Be on the Horizon Due to… • Market recovery • Underlying demographics • Labor cost parity possible under 2007 and 2009 agreements with the UAW • Technological changes – Need to meet new fuel economy and GHG mandates – Improved safety – Increased electronics content for safety, connectivity and entertainment …But it may not be much, and it may not be here.

News About Automotive Hiring! “…Chrysler's 25 percent cut in salaried employees last year has left it with too few engineers and designers to get the work done on multiple models…Chrysler managers have spoken with union officials about bringing back laid-off designers, and the person said there is discussion of contracting to hire engineers and other professionals who took buyout or early retirement offers.” Bringing Back Workers “Walker Corp., a 56-year-old Ontario business that makes airbag, seat and audio parts for Toyota…is actually looking to add people with good math and computer skills to its work force of about 180.” “Precision Stamping Inc. in Beaumont will bring back some laid-off employees and put a second shift back to work…”

But…for how long?

Need 3% GDP Growth To Have Positive Sales Growth, US GDP Growth Rate and Vehicle Sales Growth Rate, 1950-2009* 50 Slow growth won’t help 40 30 Sales Growth, % 20 10 0 ‐ 7 ‐ 6 ‐ 5 ‐ 4 ‐ 3 ‐ 2 ‐ 1 0 1 2 3 4 5 6 7 8 9 ‐ 10 ‐ 20 ‐ 30 ‐ 40 GDP Growth, % *AS of First Quarter of 2009

Wild Cards ?

Reasons to Believe in a Rebound • No comprehensive public transportation system • Vehicle miles travelled increasing • Vehicles per household increasing in long-term • Household formation increasing • Vehicle stock decreased sharply and must be replenished • Household wealth indicators stabilizing 14

No Substitute U.S. Principal Means of Transportation to Work Source: U.S. Department of Housing and Urban Development, American Housing Survey, 1989 and 2007, U.S. Census Bureau

U.S. Highway Vehicle-Miles Traveled Monthly data, not seasonally adjusted Source: USDOT, RITA, BTS, August 2009

Number of Households and Vehicles Per Household (adding 10 million households means 20 million+ more operating vehicles by 2016) Vehicles per Household Households Source: U.S. Census Bureau, Current Population Reports, "Families and Living Arrangements“; U.S. Federal Highway Administration, Highway Statistics

Change in Auto Fleet – 2000 to 2009 Net Change in Fleet Percentage Change in Fleet 8 4% 6 3% Number of Cars in Millions 4 2% Percentage Change 2 1% 0 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* -2 -1% -4 -2% -6 -3% Years Source: Ward’s, R.L. Polk and Co. *2009 is forecast using the 2008 Scrap Rate and Light Vehicle sales forecasts from CSM and JD Power

House Prices are Bottoming out House Price and Vehicle Sales Light Vehicle Sales Real House Price Index 300 20 Real House Price Index Light Vehicle Sales 250 15 200 150 10 100 5 50 0 0 1978 1982 1986 1990 1994 1998 2002 2006 Q2 2009 Source: S&P/Case ‐ Shiller Home Price Indices; BEA. Quarterly Sales are seasonally adjusted at annual rate.

U.S. Motor Vehicle Sales 1951 - 2009 20.0 1.0% Growth 0.0% llions in Millions 15.0 3.0% Growth nits in M 10.0 Units 1.03 Veh./Driver 5.0 1.22 Veh./Driver .4 Veh./Driver 0 51 51 54 54 57 57 60 60 63 63 66 66 69 69 72 72 75 75 78 78 81 81 84 84 87 87 90 90 93 93 96 96 99 99 02 02 05 05 08 08 Year Ye ar Source: AAMA Facts & Figures 1998

But Maybe Not a Very Big Rebound… New Long-Term Forecast from CAR + 15.1 M + 3.5 M + 2.2 M ‐ 6.3 M ‐ 11.0 M 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 U.S. Sales (Millions) 10.8 12.5 14.2 15.4 16.0 16.1 16.1 16.0 15.9 15.7 15.4 15.3 May 09 Forecasts 11.0 13.2 15.0 15.9 16.5 16.8 16.7 16.5 16.3 15.9 15.8 15.9 Sep 30 2009

Rebound: Coming, but not huge Not clear where the jobs will be, or how many new workers will be required We do know that the vehicles themselves will be different

Four Main Categories of Automotive Technology Change… • Powertrain • Materials and Forming • Energy and Fuels • Electronics, Software and Controls

What are the consequences of the retirement/SAP “brain drain”?