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The auto industry has long been concentrated in southern Michigan, northern Ohio, and other traditional Midwestern climes.
A shift began a quarter century ago, though, when Honda Motor Co. chose central Ohio as its first U.S. location. Toyota Motor Corp., BMW AG, Nissan Motor Co., and others followed with auto plants even further away from Detroit s influence.
Now that foreign automakers are taking market share from the Big Three car makers, jobs are being trimmed from assembly and parts plants in Michigan, Ohio, and Indiana, posing a structural threat to what was once the core of the nation s auto region.
The heartland s hurting, said Thomas Klier, senior economist for the Federal Reserve Bank of Chicago, who recently wrote an article outlining the changes.
U.S. production of cars and light trucks has been stable in recent years, but since 2000, General Motors Corp., Ford Motor Co., and DaimlerChrysler AG have collectively lost market share of more than 6 percentage points to foreign-brand vehicles made here or elsewhere. The Big Three s U.S. market share was 73.2 percent a decade ago, but last year stood at 58.7 percent, a record low, Mr. Klier said.
The latest threat to both the Big Three and Midwestern jobs comes from Hyundai Motor Co., which will begin building Sonatas next month and at full production will have 2,000 employees in Alabama, a state chosen over Ohio and others. Such operations also prompt suppliers to open factories nearby, such as Toledo s Dana Corp., which has a number of southern parts plants.
There s no question in my mind that the U.S.-born auto companies are still losing market share to other parts of the country and to other parts of the world, said Dana Johnson, chief economist and senior vice president for Detroit s Comerica Bank.
As the state most dependent on the auto industry, Michigan is faring slightly worse than Ohio and Indiana, Mr. Klier said. Michigan s unemployment has been running at least 1 percentage point more than the Midwest average for the last couple of years, he said.
Ohio s unemployment rate was 5.9 percent in December while Michigan s was 7.3 percent, according to the latest figures available. Michigan tied with Alaska for the nation s worst jobless rate that month.
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Michigan lost 60,400 auto-related jobs between 2000 and 2003, a 19 percent decline in that work force, according to the U.S. Bureau of Labor Statistics. Ohio lost 27,000 jobs, an 18 percent decline.
While Ohio gained about 100 auto assembly jobs overall during that time period, thanks to GM adding 1,500 jobs in Lorain, Michigan has lost 4,290 such positions, Mr. Klier s research shows.
Currently, a shift of the domestic automotive industry away from the upper Midwest toward the mid-South poses the most likely structural threat to the region s economy, the Chicago Fed said in a report this month.
The industry s large size and broad scope make its performance and location critical to the continued stability of the region s manufacturing sector, the report said.
Other factors besides market share declines, such as increased productivity, play into Big Three job losses, said David Cole, chairman of the Center for Automotive Research in Ann Arbor.
In the face of intense competition, GM, Ford, and Chrysler have increased productivity by decreasing the number of people needed to do production, engineering, and other jobs, Mr. Cole said. The three automakers also have worked to standardize components, such as using one engine for multiple models, he said.
Changes are needed to survive, Mr. Cole said.
It s like an antibiotic, he said. You take an antibiotic or you die.
Still, the Big Three haven t abandoned the Midwest.
Chrysler, which is faring better than GM and Ford in terms of market share, is in the midst of a $2.1 billion expansion of Toledo Jeep Assembly that will double the number of vehicle models made to four and includes having supplier factories onsite. Other suppliers, such as Johnson Controls Inc., are looking to expand local operations or open factories here.
New plants, however, typically need fewer workers, Mr. Cole said. In the case of the 4-year-old Toledo North Assembly Plant that replaced some Jeep Parkway buildings, for example, roughly 1,000 fewer employees are needed to make Jeep Libertys than its predecessor, the Jeep Cherokee. The newest expansion project is not expected to add more Toledo Jeep jobs.
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Foreign automakers have shown some interest in the Midwest.
Chrysler s joint venture with Hyundai and Mitsubishi Motor Co., called the Global Engine Manufacturing Alliance LLC, is building two engine factories and an office in Dundee that eventually will employ nearly 600.GM and Isuzu Motors Ltd. opened a joint venture factory in Moraine, Ohio, a few years ago to make diesel engines.
It s too early to tell whether such efforts are the start of a reversal trend, but it s unlikely, said Mr. Klier of the Chicago Fed.
I don t think you re going to see this across the board, so they are isolated incidents, he said. I would be very surprised if this took hold overall.
Ohio does have an advantage because Honda has plants here, some experts agree. Michigan, meanwhile, has an assembly plant in Flat Rock owned by Ford and Mazda Motor Corp., and Indiana s assembly operations include Toyota.
State officials are pleased Honda, along with the Big Three and various suppliers, is expanding or opening operations in the state, not to mention adding vehicles, said Bill Teets, spokesman for the Ohio Department of Development.
We ve been seeing lots of investment, and we think that s good news, he said, citing Jeep, Honda s plans to add an Acura sport-utility vehicle, and Dana s nearly 1.5-year-old technical center in Maumee, which employs 500.
Although Michigan is losing production, it has strengthened its role as a center for headquarters and technology operations among auto suppliers and automakers, Mr. Klier said in his report. Toyota is planning a technical center near Ann Arbor that could have more than 1,000 employees.
Michigan officials recognize the auto industry is changing and have focused on strengthening research and development efforts, said Paul Krepps, a spokesman for the Michigan Economic Development Corp.
In Michigan, $10.3 billion was spent on auto-related research and development in 2002, more than what is done in all other states combined, he said the latest statistics show.
We don t apologize for Michigan s automotive strength and heritage we leverage them, he said.
Comerica s Mr. Johnson said the region needs to focus on making laws, taxes, and other conditions favorable for businesses to locate and grow here. The Midwest has a well-educated, skilled workforce with a solid work ethic desired by employers, but other sectors besides manufacturing will end up driving economic growth, he said.
There s every reason to believe that jobs, new enterprises, will emerge, Mr. Johnson said.
Contact Julie M. McKinnon at: firstname.lastname@example.org or 419-724-6087.