CAR Newsletter - Q2 2015 - Center for Automotive Research

Center for Automotive Research | April 2015
NEWS&UPDATES
The competitive influence of Mexico and its potential
to impact labor negotiations and North American
capacity cannot be ignored.
Until now, the industry has benefited from the reductions in North American vehicle capacity in 2008–2011, with
strong vehicle pricing and high utilization rates. New assembly capacity in Mexico however may soon result in
over 5.5 million units of total capacity in that country or a 100 percent increase since 2007. This could create an
overcapacity problem in the U.S. automotive markets, especially in passenger cars resulting in falling vehicle
prices and damaging rebates. This will depend to a certain extent on the share of the new Mexican production that
will be sent to non-North American markets. The new Mexican capacity will also affect the forthcoming UAW-FCA,
Ford and GM labor negotiations. As part of CAR’s ongoing research efforts, we will continue to examine the impact
on the North American automotive industry of expanded Mexican capacity and this year’s UAW negotiations.
CAR to undertake comprehensive study of Mexico and its
impact on the changing North American industrial landscape
In recent years, a share of automotive investment
has occurred in Mexico. Since the 2009 recession, Mexico’s share of total new North American
automotive-related investment has risen from 9
percent to 27 percent, while the United States’ share
decreased from 89 percent to 67 percent. In that
same time period, eight automakers announced their
intentions to build new assembly plants in Mexico,
compared to no new assembly plant announcements
in Canada or the United States.
Mexico’s projected vehicle production capacity is
over 5 million units in the coming years. At present,
the country does not have a thorough, multi-tiered
supply base. However, with all the new investment
announcements, this high level of production could
be the critical mass needed to attract higher technology production suppliers, and potentially lower tier
suppliers as well.
Much has been made of the perceived advantages
Mexico has over U.S. and Canadian locations, yet
various anecdotes indicate a downside to locating
facilities there. This study seeks to put fact ahead of
rumors to analyze Mexico’s competitiveness with
respect to the automotive industry. CAR will identify
the opportunities and challenges for companies
continued inside
2015 Automotive Labor Outlook
The quadrennial process of negotiating contracts
between the UAW and FCA-US, Ford, and General
Motors will take place later this year. These are the
first negotiations since the U.S. Treasury exit from
FCA and GM, and provisions such as the “no strike”
clause no longer apply. What’s more, the last four
years have been very good for the three automakers
and the union; sales, production, profits, employment (and membership) are all up, and labor costs
have remained in check. With that as the backdrop,
there are three main questions to be addressed at this
year’s bargaining table:
zz
What will be the future of the two-tier wage
system? The automakers have added nearly
39,000 new workers in the past five years—hiring
that would not have taken place without the entry
level wage. The companies see the entry level wage
as key to remaining competitive, but the UAW
membership is demanding “no more tiers.” Also,
there is a cap on the proportion of entry level
workers at Ford, and currently no cap at the other
two companies.
continued inside
I NS I D E
zz Growth of Chinese
Direct Investment
zz Fuel Economy and
GHG Regulations
White Paper
zz CAR Management
Briefing Seminars
50 th AN NI
VE RS AR Y
MBS
The Growth of Chinese Foreign Direct Investment
Transportation equipment accounts for
63 percent of all exports to China and
26 percent of all imports from China.
At the national level, the U.S.–China
bilateral foreign direct investment (FDI)
has evolved from a one-way street, (primarily U.S. capital flowing into China),
to a two-way investment relationship.
China had $3.8 trillion USD foreign
exchange reserves as of December 2014.
Common estimates are that two-thirds
of the total is held in US dollars. The
United States remains a major target of
Chinese outbound investment activity,
with $12 billion worth of deals completed
in 2014. This represents 24 percent of
global Merger & Acquisition spending by
Chinese firms. The fastest growing industry in FDI since 2008 is manufacturing.
in the 1980s and 1990s. However, the
Chinese auto industry began to enter
the U.S. market in an even bigger way
in 2000. Chinese automakers continue
to look to expand globally. Direct
investment from China is becoming an
important piece of U.S. gains. China has
invested in more than 100 deals-- or more
than $2.2 billion in the U.S. automotive
industry. Michigan is the top destination
for China’s automotive-related spending,
attracting $1.3 billion China’s FDI or 60
percent of the U.S. total. Of all Chinese
FDI in Michigan, 80 percent is automotive-related (Table 1). Currently there are
more than 200 Chinese companies of
scale in Michigan.
Historically, the U.S. – China automotive
exchange began when automakers and
suppliers entered the Chinese market
Economic ties between Michigan and
China have grown substantially over the
past decade. China is Michigan’s third
Investment
State
China has invested $1.3 Billion
in Michigan
Value (million USD)
Total
Auto
Total
Auto*
Auto %
Michigan
62
42
$1,600
$1,282
80.1%
California
269
9
$5,600
$200
3.6%
8
3
$2,900
$149
5.1%
20
2
$2,000
$131
6.6%
5
1
$439
$92
21.0%
55
8
$3,900
$88
2.3%
2
1
$60
$50
83.3%
Texas
89
10
$5,200
$39
< 1%
Ohio
28
8
$191
$31
16.2%
New York
73
1
$3,800
$22
< 1%
964
101
$47,500
$2,152
4.5%
Missouri
Massachusetts
Wisconsin
Illinois
Kentucky
U.S. Total
Table 1: Chinese M&A in the United States (*ranked by auto value)
(Source: CAR & Rhodium Group, 2014)
largest market for exports, which grew
616 percent from $640 million in 2004 to
$4,582 million in 2013.
A good example is the Beijing-based
Pacific Century Motors which purchased
Nexteer Automotive. Located in Saginaw,
Michigan, the company, from General
Motors for $450 million in 2010. The
company produces advanced steering and
driveline systems for more than 60 automakers worldwide with $2.4 billion in
global sales in 2013. This acquisition kept
5,000 jobs in Michigan. Chinese supplier
conglomerate Wanxiang Group acquired
the automotive and grid assets of former
bankrupt Livonia-based lithium-ion battery maker A123 Systems LLC for $256.6
million in January 2013.
There are many opportunities for Chinese
partnership and investment in Michigan.
At the same time, Michigan is in a
unique position to influence the future
Chinese automotive industry and market
trends by providing policy guidance
to the Chinese government, enhancing cooperative research and building
stronger private sector relations. The CAR
Management Briefing Seminars (MBS) to
take place August 3–6, 2015 in Traverse
City, Mich. will include a session focused
on “The Maturing of China’s Auto
Market”. This session will bring together
distinguished industry experts, analysts,
and policymakers from the United States
and China to discuss the Chinese auto
market and its global implications. Topics
will include business strategies, industry
collaborations, and policy implications.
For more information, please contact Dr.
Qiang Hong, Senior Research Scientist,
Transportation Systems Analysis at
[email protected] or 734-929-0490.
Automotive Labor Outlook
continued from front page
zz
Will the parties remain committed to the model of flexible
compensation? UAW members have pocketed between
$16,800 and $47,000 in total lump sums and profit-sharing
checks over the past four years. However, while entry level
workers won base wage increases in the last contract, those
workers hired before 2007 have not had a base wage increase
in ten years—and they want one.
that goes into effect in 2018. It is not clear how many UAW
plans will be subject to the tax, but it will be challenging for
the UAW to maintain, improve, and enhance health care
benefits for its members without incurring large financial
consequences for the automakers.
The current agreements covering more than 136,000 hourly
employees expire on September 14, 2015.
zz
How will the 2018 federal excise tax on high cost health
care plans affect negotiated benefits? The Affordable Care
Act is funded in part by a 40 percent tax on high cost plans
Look for a CAR Breakfast Briefing on this topic in June, and for
a summary report on the content of the new agreements in the
fourth quarter this year.
Celebrating its 50th Anniversary:
CAR Management
Briefing Seminars
August 3–6, 2015
Grand Traverse Resort & Spa
Traverse City, Michigan USA
For 50 years, the
Management Briefing
Seminars have been
part of the automotive
Y
IV ER SA R
50 A N N
landscape, providing
MBS
opportunities for
stakeholders to better understand the
future of this important industry in an
environment well-suited to fostering
networking and business opportunities. Industry leaders presented
thought-provoking company visions
and discussed the strategic issues of the
day—insight which has contributed
greatly to the success of the event.
That tradition will continue at the 50th
anniversary of the CAR Management
Briefing Seminars (MBS) August 3–6,
2015.
th
This year, the CAR MBS will welcome
back David Cole, chairman emeritus
of CAR. Dr. Cole’s first MBS presentation was on the
Wankel engine,
in the early 1970s.
He also created
the Automotive
Strategy sessions
at MBS which
he led for many
years, engagDavid E. Cole
ing senior level
leadership in panel discussions. Dr.
Cole credits the event’s success with its
ability to cross boundaries amongst a
variety of organizations and the neutral
setting allowed for a focus on “what
was coming down the road.” Media
coverage was—and is—very important
to the event.
The visionaries who came to Traverse
City over the years helped create one
of the most visible and respected
events in the industry. More than 1,000
attendees are expected this year as the
50th CAR MBS, will highlight the past,
and the bright future, of this important
industry.
For more information on this event,
visit www.cargroup.org/mbs.
Fuel Economy and GHG Emissions Regulations—
A New CAR Whitepaper
Driven by the interest from CAR’s
Coalition for Automotive Lightweighting
Materials (CALM) and Powertrain
Thought Leadership Roundtable, CAR is
actively involved in informing the industry on important matters surrounding
the 2017 to 2025 U.S. Corporate Average
Fuel Economy (CAFE) and Greenhouse
Gas (GHG) emission regulations. As
part of this research, CAR is producing
a white paper to summarize, in a concise
format, these important matters. CAR
will summarize:
zz
the agencies and their roles in shaping
the regulations;
zz
how each manufacturer’s regulatory
targets are determined based on their
fleet characteristics;
zz
flexibilities that are available to the
industry, how they will change over
time, and the impact those changes
will have on the industry;
300
zz
how different fuels are impacted by
these regulations (see the chart below);
zz
and the impact on real world fuel
economy.
CAR continues to keep stakeholders
abreast of how the industry is evolving
to meet these increasingly stringent standards through CALM and the Powertrain
Thought Leadership Roundtable.
Discussions include the rate at which
manufacturers must improve fuel economy to meet the standards, how certain
changes in the fleet improve a manufacturer’s position, and the technologies that
are under consideration.
CAR will release the white paper for full
distribution in May. For further details
on the white paper or working groups,
please contact: Greg Schroeder, Assistant
Director, Manufacturing Engineering &
Technology at [email protected]
or 734-929-0476.
EPA CO2 Requirements
70
60
250
=
200
150
100
2010
50
40
30
20
50
0
Requirements Expressed in MPG
10
2015
2020
2025
Figure 1 The estimated fuel economy required
to meet the Environmental Protection Agency
(EPA) GHG standards for different fuels
MBS Speakers Over the Years
The long list of speakers at MBS is incredibly impressive, especially from the automakers, and includes:
GM: Dan Ammann, Bo Anderson, Mary
Barra, Cathy Clegg, Grace Lieblein, Bob
Lutz, Mark Reuss, Roger Smith, Bob
Stempel, Diana Tremblay, Rick Wagoner
Ford: Bill Ford, Mark Fields, Alan
Mulally, Joe Hinrichs, Sue Cischke, John
Fleming, Allan Gilmour, Harold “Red”
Poling, Sham Rushwin, Jim Tetreault
FCA (Chrysler): Sergio Marchionne,
Ben Bidwell, Francois Castaing,
Frank Ewasyshyn, Scott Garberding,
0
2010
2015
Gasoline
2020
Diesel
2025
CNG
E85
Lee Iacocca, Scott Kunselman, Tom
LaSorda, Bob Lee, Nancy Rae, Harold
Sperlich, Tom Stallkamp, Dieter Zetsche
Toyota: Akio Toyoda, Fujio Cho,
Gary Convis, Jim Lentz, Simon Nagata,
Steve St. Angelo
VW: Jonathan Browning, Jan Spies
Nissan: Hidetoshi Imazu, Yoshimasa
Yamamoto
Honda: Shoichiro Irimajiri, Nobuhiko
Kawamoto, John Mendel, Hiroyuki
Yoshino
Competitive Influence of Mexico
continued from page 1
in their decisions to locate in Mexico.
Research will include literature searches,
interviews, economic and financial analyses, mining of both governmental and
commercial databases that reflect current
industry activity in Mexico, as well as
travelling to Mexico to see firsthand
the situation on the ground. The final
report will discuss the overall investment
landscape in Mexico and findings related
to specific areas, such as workforce, labor
rates, suppliers, logistics, etc.
As the industry rationalizes its geographic
footprint in North America and begins
to leverage the emerging expertise in
Mexico, many regions of Canada and the
United States are feeling the pressure to
compete. How these regions respond to
the evolving industry footprint will, to a
great part, determine their future.
If you or your company has insightful
information to assist with our study, we
would like to speak with you. Contact
Valerie Sathe Brugeman at
[email protected] or
Kim Hill at [email protected].
CAR introduces Technology Advisory Council (TAC)
In February 2015, CAR hosted the first
meeting of our newly formed Technology
Advisory Council (TAC). This committee
of advisors with expertise in engineering,
manufacturing, product development
and supply chain will provide CAR
researchers with valuable insight into
issues that are critically important to the
industry from an auto manufacturer’s
perspective. A dozen individuals have
generously agreed to provide support as
unofficial technical advisors to CAR to
help advance our knowledge and focus
our resources and efforts, especially
with the Manufacturing, Engineering,
and Technology Research Group (MET)
Research Group.
These professionals help CAR to carry
out our mission as a 501(c)(3) research
organization by helping to inform and
facilitate greater connections and understanding of the challenges and future
opportunities for the automotive industry.
The advisory council, which will meet
several times each year, kicked-off its
initial meeting with a focus on a range of
activities involving regulations and manufacturing issues impacting lightweighting
and powertrain technologies. Topics
reviewed by the TAC included:
zz
Coalition for Automotive
Lightweighting Materials (CALM)
group projects and priorities
zz
lightweighting analyses and a review of
CAR’s mass reduction study to identify
hidden and real costs
zz
addressing nine key barriers to
lightweighting
zz
the impact of automotive safety regulations on manufacturing
zz
powertrain technologies, pathways and
pain points to achieving fuel economy
and greenhouse gas regulations by 2025
The group also provided important
perspective for several key topics at the
CAR Management Briefing Seminars,
which celebrates its 50th Anniversary this
August.
zz
Michael D. Regiec, Manufacturing
Chief – Body Manufacturing
Engineering Product Interface, General Motors – Retired
zz
Doug Richman, VP Engineering
and General Manager – Automotive
Castings, Kaiser Aluminum
zz
Jay Sackett, General Manager,
Body Design Engineering, Toyota
Engineering & Manufacturing North
America
zz
Clemens Schmitz-Justen, President,
CSJ Schmitz-Justen & Company, former President of BMW Manufacturing
zz
Ankil Shah, General Manager,
Engineering Design, Toyota Motor
Engineering & Manufacturing North
America
zz
Dr. -Ing. Manfred Sindel, Quality
Manager, Audi AG
zz
Franz Storkenmaier, Head of
Lightweight Construction and Vehicle
Weight, BMW
zz
Dr. Mark White, Chief Engineer
Body Complete Business Unit, Body
Engineering, Jaguar Land Rover
Product Development
zz
Tom Williams, Executive Vice
President of Business Development,
DieTech North America
CAR sincerely appreciates the insight and
support of these individuals:
zz
zz
zz
John K. Catterall, Global Technical
Lead – Underbody Structure, General
Motors, Body – Advanced
Development
Dr. Imtiaz Haque, Director of
Industry Relations and Global
Engagement for the Clemson
University College of Engineering and
Science
Dr. James Morgan, President, EMC
Network, Former Director, Global
Body Exterior, Safety, and SBU
Engineering at Ford Motor Company.
CAR Hosts Automotive Cybersecurity Breakfast Briefing
In the latest installment of the CAR
Breakfast Briefing Series, a panel of
experts discussed how the auto industry
is responding to new demands in vehicle
cybersecurity. Recent reports have called
attention to the threat of “vehicle hacking.” Panelists were quick to point out that
vehicle owners have no reason to panic.
While it may be possible to hack into a
vehicle, it is generally quite difficult. In
fact, there are no known instances of a
vehicle being maliciously hacked “in the
wild.”
While today’s risks are often overstated,
CAR’s panel of experts highlighted the
growing importance of automotive cybersecurity. The expanding digital world is
creating multiple connections between
vehicles, devices, and supporting backend services and data systems. The expansion of vehicle connectivity may lead to
an increasing motivation for hackers.
Each additional point of connectivity can
create an “attack surface” through which
the vehicle systems and data may
This educational event was moderated by
CAR’s Richard Wallace. Speakers included:
be accessed. In the near future, it may
be possible to use a vehicle itself as an
attack surface to gain access to systems or
devices that connect to the vehicle.
Stakeholders have recognized that current approaches to cybersecurity must
be improved to protect future connected
and automated vehicle platforms.
Safeguarding the vehicle of the future will
require vigilance and coordination across
the supply chain and regulatory regime.
Nevertheless, it is clear that the industry
has recognized the challenge. Experts are
optimistic that automakers can continue
to provide high-value technology solutions that are safe and secure.
zz
Dr. Andrew Brown Jr. – Vice
President & Chief Technologist, Delphi
zz
Brett Hillhouse – WW Engineering
Solutions Executive, Internet of
Things, IBM
zz
Praveen Narayanan – Research
Manager, Automotive &
Transportation, Frost & Sullivan
zz
Shawn Slusser – Vice President,
Automotive Business, Infineon
Technologies Americas
zz
Dr. Anuja Sonalker – Lead Scientist
and Program Manager, Battelle
Presentations from all speakers are
available to view or download at
www.cargroup.org
Four Interns Join CAR
CAR has recently been experiencing a period of rapid growth
and the offices are certainly getting more crowded with new staff
members and, of course, interns! The most recent students to
join the CAR ranks in 2015 include:
Terni Fiorelli: Terni is a junior
Interdisciplinary Studies major at
Michigan State University, where she also
minors in Italian and Economics. She
loves to travel and catch up with friends
whenever she has the opportunity. Terni
enjoys the non-profit aspect of working at
CAR and the ability to provide unbiased
industry research. In the future, Terni
hopes to continue to work in the automotive industry either in
Human Resources or Economics.
George Ross: George is a senior at the
University of Michigan studying economics. Originally from the Chicago area, he
will be moving back to the Windy City for
full-time work after he graduates. George
is an avid hockey player and golfer whose
dream job is to be an NHL head coach.
He has worked in the automotive industry
before his current position at CAR and is
excited to explore it further during his internship.
Estefania Jurado: Estefania is a native
of Mexico who now lives in Melvindale,
Mich. and studies international business
and supply chain management at Eastern
Michigan University. Now in her senior
year, she joins CAR to help the SEDS
research group with economic analyses.
One day Estefania hopes to become a
supply chain executive. Estefania is fluent in Spanish and English and is currently learning Korean.
She enjoys watching TV shows and documentaries in all three
languages during her free time.
Danielle Mathiesen: Danielle is a freshman at Eastern Michigan University
studying Actuarial Science and
Economics. When not working at CAR
or in class, she uses every spare minute
to enjoy the outdoors, perfecting her
tennis game, riding her bike, or kayaking.
Danielle has always been fascinated by
the complexity of the automotive industry
and is excited to explore it more during her time with CAR. Her
dream job is to be a decision maker in higher level management,
utilizing her risk analysis and actuarial skills.
CAR Affiliates & Spring Event
More than 70 organizations share in CAR’s mission for a strong
and viable automotive industry and support CAR through the
Affiliates Program. Affiliate contributions enable CAR’s independent research, public service and education on topics such as
economic impact, U.S. sales, production and employment forecasts, fuel economy, emission credits, lightweighting, connected
and automated vehicles, powertrain technologies and what to
expect at the Mid-term Review.
views on current labor topics and Kristin
Dziczek, Director, Industry & Labor Group
at CAR will preview the issues to watch
with upcoming negotiations. Our agenda
will also include an economic outlook
presented by Dr. Sean McAlinden, CAR’s
Executive Vice President of Research and
Chief Economist.
Affiliates enjoy exclusive access to research, networking events
and opportunities to guide CAR’s future research, conference
activities and more.
This event is exclusive to CAR Affiliates and invited guests who
will join us for an evening of networking and industry insight
including an opening reception, dinner, and the opportunity for
Q&A with the presenters.
Our next event, CAR’s Spring Industry Briefing & Affiliate
Dinner will take place May 14 in Dearborn, Mich. CAR will
welcome guest speaker, UAW president Dennis Williams. This
year will mark significant contract negotiations between FCA,
Ford, General Motors and the UAW. Williams will share his
For more information on becoming an affiliate, contact Brian
Esterberg, Director, Affiliates Program at 734-929-0466 or
[email protected].
CAR 2015 Affiliates
3M
Chevron
HELLA
Nissan North America, Inc.
AAA
Continental Automotive Systems
Henkel Corporation
Pittsburgh Glass Works
AISIN
Dassault Systèmes
Hewlett Packard
PPG
Alcoa, Inc.
Delphi
Hexion, Inc.
PTC
Alliance of Automobile
Manufacturers
DENSO
Honda
Ricardo, Inc.
Dow Automotive Systems
IPG Photonics
Rifast Systems
Altair
Dow Corning
J.D. Power
Rio Tinto Alcan
Aluminum Association
DuPont Automotive
Johnson Controls, Inc. (JCI)
Robert Bosch LLC
American Automotive
Policy Council
Eastman Chemical Company
KOSTAL of America
SABIC
Eaton Corporation
Macomb Community College
SAP
American Axle & Manufacturing
EISENMANN
Magna International Inc.
Schuler, Inc.
American Chemistry Council
EWI
McKinsey & Company, Inc.
Shiloh Industries
AP&T
EY
Michelin
Sika
ARaymond Automotive
Faurecia
Axalta
Fiat Chrysler Automobiles
Mitsubishi Electric
Automotive America
Steel Market Development
Institute
BASF
Ford Motor Company
Mitsubishi Motors
Toyota
Bayer MaterialScience
Freudenberg-NOK
Trexel
Böllhoff, Inc.
General Motors
National Automotive
Center U.S. Army
BorgWarner, Inc.
GfK Custom Research
North America
National Renewable
Energy Laboratory
Volkswagen Group of America
Braskem America
3005 Boardwalk, Suite 200
Ann Arbor, MI 48108-5218
Tel: 734.662.1287
Fax: 734.662.5736
www.cargroup.org
Ubisense
ZF
The nonprofit Center for Automotive Research is focused on a wide variety of
important trends and changes related to the automobile industry and society
at the international, federal, state and local levels. CAR conducts industry
research, develops new methodologies, forecasts industry trends, advises on
public policy, and sponsors multi-stakeholder communication forums.