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Evolving Geography of Automobile
Manufacturing in North America
Global Economic Forum San Antonio, TX
June 30, 2014
Thomas Klier Senior Economist and Research Advisor
Federal Reserve Bank of Chicago [email protected]
www.chicagofed.org
Outline
• Three layers of auto industry geography
– North America
– U.S. relative to Canada and Mexico
– Industry footprint within the U.S.
• Recap: Chrysler and GM Rescue of 2008/2009
• Vehicle assembly – a primer
• Summary
Vehicle production in North America 2013
Thomas Klier, FRB Chicago
Parts and vehicle assembly co-locate
Thomas Klier, FRB Chicago
Most vehicles produced where sold
NAFTA
Asia
Europe
U.S. light vehicle sales by major production region
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
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Within N. America, gains for Mexico
Country 1990 2007 2013
Canada 16 17 15
Mexico 6 13 18
U.S. 78 70 67
N. America 100 100 100
Share of light vehicle production
Exports drive Mexico’s growth Mexico’s light vehicle exports
Pe
rce
nt
Annual exports have increased by 2.3 million units since 1985
0.0
0.5
1.0
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Mill
ion
s
Other OEM's exports Detroit 3 exports export share of production
Those exports go north and south
Region
2012 export share
NAFTA 71%
Latin America 16%
Europe 9%
Africa 2%
Asia 2%
In 2013, 82% (2.38 million units) of Mexico’s LV production was exported.
Vehicle exports from Mexico by destination
Mexico’s assembly plants
Emergence of auto alley in U.S.
• Two main factors:
– Detroit carmakers abandon the “branch plant”
assembly system.
– Overseas-headquartered carmakers enter the U.S. and Canada as producers.
From manufacturing belt…
1985
Thomas Klier, FRB Chicago
…to auto alley
2013
Last year, auto
alley captured
nearly 90% of
U.S. light vehicle
production.
Thomas Klier, FRB Chicago
Where to locate a new assembly plant?
Thomas Klier, Federal Reserve Bank of Chicago
Example: Toyota
decision in 2007
Close-up of auto alley
Thomas Klier, FRB Chicago
Production share and geography
U.S. light vehicle production share
97%
53%
6%
3%
41%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1980 2013
Detroit 3
Europe
Asia
From 4 to 14 producers in 30 years
VW (1) 1978
Honda 1982
Nissan 1983
Toyota 1984
Mitsubishi, Mazda 1987
Subaru 1989
BMW 1994
Mercedes 1997
Hyundai 2005
Kia 2009
Foreign carmakers, by first year of producing in U.S.
(1) Closed in 1989, new plant opened in 2011
In 1985 Detroit dominates
Thomas Klier, FRB Chicago
Today: two distinct footprints
Thomas Klier, FRB Chicago
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Southern half
Growth concentrated in the South
Auto alley share
U.S. light vehicle production within auto alley
Northern half
Note: North = WI, IL, MI, IN, OH South = KY, TN, AL, MS, GA, SC
D3 share:
72%
19%
Percent
Recap: Emergency industrial policy
December 2007
Key: Significant restructuring for Detroit
Source: Klier and Rubenstein, FRB Chicago
Capacity reduction
GM -31%
Chrysler -22%
Ford - 8%
Detroit 3 close 15 assembly plants, 13 of those in the U.S.
Profitability followed
-$4,000
-$3,000
-$2,000
-$1,000
$0
$1,000
$2,000
$3,000
2006 2007 2008 2009 2010 2011 2012
Source: McAlinden and Chen
Toyota & Honda
Detroit 3
9 months
Profit per vehicle, North America
Source: McAlinden and Chen, Center for Automotive Research
0
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Is “flat” the new normal? U.S. light vehicle production, annual shares
Detroit 3
YTD
Asia
Europe
Percent
Assembly of vehicles
Assembly of vehicles
Assembly of vehicles
Supply networks are regional
Summary
• North America remains a viable location of light vehicle production.
• Within North America, Mexico has been gaining vehicle production share. Currently, re-shoring from Asia to North America leads to Mexico, especially for small cars.
• Within the U.S., auto alley dominates vehicle production geography. Growth within auto alley is linked to the fortunes of carmakers.
Evolving Geography of Automobile
Manufacturing in North America
Global Economic Forum San Antonio, TX
June 30, 2014
Thomas Klier Senior Economist and Research Advisor
Federal Reserve Bank of Chicago [email protected]
www.chicagofed.org
