Attracting automotive manufacturing a top priority for states

Auto parts suppliers have garnered a lot of attention over the past few years, most of it focused on bankruptcies, and labor and pension problems.

There was a time during the 1990s when capacity utilization remained high and cost containment was a secondary consideration. The Tier One suppliers such as Delphi and Visteon were spun off from their larger parents (GM and Ford, respectively) to provide lower-cost components, and suppliers to these companies got on the bandwagon with them.

It was a short ride, as sales slumped during the early 2000s and the domestic automakers reduced production, while foreign competition increased and commodity prices rose. The pain was felt across the industry.

Still estimable

In spite of this, however, supplying vehicle components remains a huge industry, leading the U.S. manufacturing sector and providing more jobs than any other sector in seven states, according to a study released by the Center of Automotive Research (CAR) for the Motor & Equipment Manufacturers Association (MEMA). The employment contribution associated with motor vehicle parts manufacturing activity in the U.S. is estimated to be about 2.8 million jobs in the private sector (attributed to direct and indirect jobs), and 4.5 million when the expenditure-induced effects are included. Compensation is estimated at about $252 billion annually for all 4.5 million jobs.

According to the study, motor vehicle parts suppliers directly employ 783,100 U.S. workers and every supplier job creates another 4.7 jobs in the economy. These include an additional 1.97 million jobs in industries ranging from steel to plastics that support the supplier industry and 1.7 million jobs supported by the spending of direct and indirect employees.

It’s no wonder, then, that many states are vying for new automotive plants, technical centers, and headquarters buildings of vehicle makers and their myriad suppliers. Seven states have been particularly successful in landing vehicle manufacturing and parts suppliers, including Indiana, Kentucky, Michigan, Missouri, Ohio, South Carolina, and Tennessee. Nine more states are doing quite well in this sector, reporting employment in excess of 15,000 jobs, including Alabama, California, Georgia, Illinois, New York, North Carolina, Pennsylvania, Texas, and Wisconsin.

Kentucky, which has 35,102 employees in the motor vehicle manufacturing sector, has been successful in attracting automotive-related companies. The state is home to a number of vehicle manufacturers and parts suppliers, the biggest of which is Toyota Motor Co., which located its U.S. headquarters in northern Kentucky and in turn is attracting its parts suppliers. In April of this year, Toyota Boshoku America (TBA) announced that the company will locate its North American home office in the CirclePort Business Park in Erlanger, KY, near the Greater Cincinnati-Northern Kentucky International Airport.

TBA, established in 2001, is a premier manufacturer of automotive interior systems which include seats, door trims, headliners, carpets, fabrics, and straps for a variety of customers such as Toyota Motor Corp. and General Motors. Currently, the company has 19 plants throughout Canada, the U.S., Mexico, and Argentina with more than 6000 employees. In Kentucky, TBA owns five major plants as joint ventures, along with 100% affiliates, in Harrodsburg, Bardstown, Nicholasville, and Leitchfield, employing more than 1700.

TBA is expanding operations in the Americas and moving towards regional localization and self-reliance. In Novi, MI, TBA has purchased a new 70,000-ft² office building, tripling the company’s office space there and increasing employment from 140 to 200 people by 2010, with many of the new hires being engineers.

Dan Tobergate, president and CEO of the Northern Kentucky Tri-County Economic Development Corp. (Covington, KY), says that the area is ideal for co-located facilities for multinational companies. Several years ago, Ticona co-located its North American headquarters in northern Kentucky, and in 2005 located an R&D and compounding plant there as well. TBA received approval for $2.1 million in tax incentives under the Kentucky Jobs Development Act on March 29, 2007. The company plans to hire 100 employees over the next two years and open the office later this year.