The 2019 Automotive Outlook: Trade &Labor Relations Issues/media/others/events/2019/... · 2019-06-01 · The 2019 Automotive Outlook: Trade &Labor Relations Issues Kristin Dziczek

The 2019 Automotive Outlook: Trade & Labor Relations IssuesKristin Dziczek – Vice President, Industry, Labor, & Economics (ILE) Group26th Annual Automotive Outlook ConferenceFederal Reserve Bank of Chicago – Detroit Branch

31 May 2019

CENTER FOR AUTOMOTIVE RESEARCH 2

• Sales & Production• Automaker Investments• Automaker Announcements• Trade Update• UAW Discussion

AGEN

DA

3CENTER FOR AUTOMOTIVE RESEARCH

Positive Factors in the CAR Forecast:

• Projected moderate U.S. economic output growth in 2019

• Historically low U.S. unemployment rates

• Relatively low oil prices continue through 2020

• Underlying nominal wage growth continues

• High levels of consumer confidence were reached in Q4 2018, and

• Solid new housing starts and home prices rebounding to pre-recession levels


There are Some Risks to the Forecast that are Difficult to Model…

USMCA Ratification ?

Section 232 Steel & Aluminum Tariffs

Section 232 Auto & Parts Tariffs

U.S.-China Talks

U.S.-Japan Talks

U.S.-EU Talks

U.S.-U.K. Talks

Section 301 China Tariffs

Recession?

China Auto Sales Slowdown

Japan Economic Slowdown

BREXIT

New• Business

Models• Competitors• Technologies

Geopolitical Risks

Consumer ConfidenceInterest Rates

UAW Negotiations/Strike ?


CAR’s U.S. Light Vehicle Sales Forecast 2019-2025

17.4 17.5 17.2 17.2 16.8 16.5 16.416.8

17.3 17.6 17.7

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

U.S

. LV

Sale

s in

Mill

ions

U.S. Sales

Source: CAR Research, January 2019


Are Sales Back?1995 – 2019 YTD (March)

$476.2 billion

16.50 million units

0

2

4

6

8

10

12

14

16

18

20

0

100

200

300

400

500

600

700

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Mill

ion

Uni

ts

Billi

on $

(200

9 do

llar)

In Spending (Billion of 2009 $) In Units

Source: BEA, Table 7.2.6B. Real Motor Vehicle Output, Chained Dollars

Both spending and vehicle sales exceed 2006 level


There’s been a price shift.Light Vehicle Sales and New Vehicle Price Index; January 2004 – March 2019

125

130

135

140

145

150

155

160

8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

New

Veh

icle

Pric

e In

dex

(198

2=10

0)

Light Vehicle Sales SAAR

2004-05 2005-08 2008-10 2011-14 2015-16 2017 2018 2019

D2

D1

S1: Average sales of Jan ’08 – Dec ‘ 09 S2: Average sales of Jan ’12 – Dec ‘12

S2

S1


And a pronounced move toward light trucks –enabled by relatively low fuel prices.Light Truck Sales & Real Gasoline Prices; 1990 – March 2019

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 11.00 12.00

Real

Gas

olin

e Pr

ice

in D

olla

rs

Light Truck Sales (Millions SAAR)

1990-1999 2000-2004 2005-2008 2009-2011 2011-2017 2018-2019

Source: EIA, BEA

9

U.S. automotive employment growth is slowing. Motor Vehicle & Parts Manufacturing Employment; January 2010 – April 2019

CENTER FOR AUTOMOTIVE RESEARCH

*Transportation Equipment Manufacturing Employment**National data follows one month behind State data. Indiana employment is estimated.

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

Jan-

10Ap

r-10

Jul-1

0O

ct-1

0Ja

n-11

Apr-

11Ju

l-11

Oct

-11

Jan-

12Ap

r-12

Jul-1

2O

ct-1

2Ja

n-13

Apr-

13Ju

l-13

Oct

-13

Jan-

14Ap

r-14

Jul-1

4O

ct-1

4Ja

n-15

Apr-

15Ju

l-15

Oct

-15

Jan-

16Ap

r-16

Jul-1

6O

ct-1

6Ja

n-17

Apr-

17Ju

l-17

Oct

-17

Jan-

18Ap

r-18

Jul-1

8O

ct-1

8Ja

n-19

Apr-

19

U.S.

Lev

el

Stat

e Le

vel

Michigan Indiana Ohio Kentucky Alabama Ontario Tennessee* Texas* U.S.

Source: BLS, U.S. DOL, Statistics Canada

10

Assembly & supplier overtime hours are steady.Average Weekly Hours of Production and Nonsupervisory Employees; 2007 – March 2019


35363738394041424344454647484950

Jan-

07

May

-07

Sep-

07

Jan-

08

May

-08

Sep-

08

Jan-

09

May

-09

Sep-

09

Jan-

10

May

-10

Sep-

10

Jan-

11

May

-11

Sep-

11

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

Jan-

15

May

-15

Sep-

15

Jan-

16

May

-16

Sep-

16

Jan-

17

May

-17

Sep-

17

Jan-

18

May

-18

Sep-

18

Jan-

19

Hour

s per

Wee

k

Vehicle Assembly Parts Supplier 12 per. Mov. Avg. (Vehicle Assembly) 12 per. Mov. Avg. (Parts Supplier)

Source: Employment, Hours, and Earnings from the Current Employment Statistics survey (National), BLS


Automotive labor productivity falls before (and during)a recession.Recessions & U.S. Automotive Productivity; 1960 - 2018

83

101 100103 104 106

102

110

115

91

127

144 142137

123120

60

70

80

90

100

110

120

130

140

150

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020

Prod

uctiv

ity In

dex

(200

0 =

100)

*Automotive Productivity Index consists of SIC 3711/3714 and NAICS 3361/3363. 2000 is the base year.

Source: CAR Research based on Data from U.S. Department of Labor, Bureau of Labor Statistics and Wards Auto


CAR’s U.S. Light Vehicle Production Forecast 2019-2025 11.7

12.1

11.2 11.2 11.310.9 10.6

11.111.6 11.7 11.7

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

U.S

. Veh

icle

Pro

duct

ion

(mill

ions

)

U.S. Production


+4.7

%

+4.5

%

+0.9

%

0.0%


CAR’s N.A. Light Vehicle Production Forecast 2019-2025

18.0 18.117.5 17.2 17.1 16.8 16.6

17.217.8 18.1 18.2

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025N

.A. V

ehic

le P

rodu

ctio

n (m

illio

ns)

N.A. Production


+3.6

%

+3.5

%

+1.9

%

+0.6

%

14

N.A. Announced Automaker Investment by Region2009 to Q1 2019

Region Investment Amount ($USD)

Canada $8.2B

United States $98.2B

U.S. Great Lakes $63.1B

Michigan $32.8B

South $22.3B

Mexico $24.8B

Total $131.2B

Note: U.S. Great Lakes includes: IL, IN, KY, MI, MO, and OHSouth includes: AL, FL, GA, MS, SC, TN, and TX

6%

75%

19%

CENTER FOR AUTOMOTIVE RESEARCHSource: CAR Book of Deals, Q1 2019

15

Automotive investment announcements peak every four years, & have been slower between Q4 2015-Q1 2019.Quarterly Automaker Announced U.S. Investment; 2010 to Q1 2019


0

2

4

6

8

10

12

14

16

18Q

1 20

10

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Billi

ons

Source: CAR Book of Deals, 2019

FCA = 90%

x ̄ = $3.4B/Quarter x ̄ = $3.4B/Quarter x ̄ = $1.5B/Quarter


FCA Announcements FCA Q1 2019:$3.5 Billion (6 announcements)• Mack Ave Engine: $1.6B• Jefferson North: $900.0M• Warren Truck: $500.0M• Sterling Heights/Warren (Stamping):

$400.0M• Dundee Engine: $119.0M• Auburn Hills (Components Plants): $12.6M

FCA-R Merger?


Ford Restructuring Ford: eliminating about 7,000 salaried positions (10% of global salaried workforce) by the end of August

• In North America:• 500 employees will leave involuntarily this

week; majority of cuts completed by May 24th

• Ford expects 800 total layoffs by the end of June 2019

• Globally:• Restructuring process expected to be

completed in Europe, China, South America, and International Markets Group by the end of August

18

GM Announcements


Plant Products End of Production

Employment Union Local

Detroit/Hamtramck

LaCrosse, Volt, CT6, Impala

June 1, 2019January 2020

1,542 UAW Local 22

Lordstown Cruze March 1, 2019

1,618 UAW Local 1112

Oshawa Impala, XTS, Silverado,Sierra

Q4 2019 2,900 Unifor Local 222

Warren Trans. 6 Speed Trans August 1, 2019

335 UAW Local 909

Baltimore Ops.

Pickuptransmissions

April 1, 2019 310 UAW Local 239


YOY Change in U.S. Passenger Car Market Shares2013 – 2018

-25%

-20%

-15%

-10%

-5%

0%2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

YOY

% C

hang

e

All Automakers All But D3 D3 GM

Source: IHS Markit


GM Vehicle Production Capacity and Capacity Utilization by Country, 2015-2018, 2019-2025(f)

Source: CAR analysis of LMC Automotive data

0

1

2

3

4

5

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Mill

ions

Production Capacity

United States Canada Mexico

0%

20%

40%

60%

80%

100%

120%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Capacity Utilization

United States Canada Mexico


GM Transmission Capacity and Capacity Utilization by Country, 2015-2018, 2019-2025(f)

0

1

2

3

4

5

6

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Mill

ions

Transmission Capacity

US Canada Mexico

0%

20%

40%

60%

80%

100%

120%

140%

160%

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Capacity Utilization

US Canada Mexico

Source: CAR analysis of LMC Automotive data


23

Since 2009, GM & Ford have lost share & FCA has gained.Detroit 3 U.S. Market Share; 1985 – 2019 YTD Through April


14.3%

16.8%

12.5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Perc

ent o

f U.S

. Mar

ket S

ales

Ford GM FCA

Source: Automotive News; Wards Auto (2012 and on); CAR Research

Since 2009-16%-11%+40%

Since 1985GM -59%

Ford -33%FCA +4%

24

The United States cannot currently self-supply the vehicles American dealers sell to U.S. consumers.

Source: IHS|Markit data

FCA, Ford, & GM Represent 43%of Canada & Mexico Imports

Source: CAR; U.S. International Trade Administration

Sourcing of U.S. Light Vehicle Sales2018

U.S. Production

less U.S. Exports

plus U.S. Imports

U.S. Sales

10.8 million

- 1.8 million

+ 8.2 million

= 17.2 million

U.S. Firms28%

International Firms24%

Mexico15%

Canada10%

Japan10%

South Korea5%

Germany3%

UK1%

Other4%

U.S. Sales of Imported Vehicles

47%

U.S. Sales of U.S. Produced

Vehicles

52%


25

2018 U.S. production is 55% U.S.-based firms, 33% Japanese firms, 7% German firms, & 5% Korean firms.


U.S.-Based, 55%Japanese, 33%

German, 7%Korean, 5%

Source: IHS|Markit data

FCAFordGMTesla

*U.S.-Based = 42% if subtract FCA

26

MV & parts trade comprise a large share of the U.S. trade deficit.Nearly One-third of Goods & Services Trade Deficit andAlmost One-quarter of the Goods-Only Trade Deficit


-45%

-35%

-25%

-15%

-5%

5%

15%

25%

35%

45%

$(1,000)

$(800)

$(600)

$(400)

$(200)

$-

$200

$400

$600

$800

$1,000

2014 2015 2016 2017 2018

Mot

or V

ehic

le &

Par

ts S

hare

of T

rade

Def

icit

Trad

e De

ficit

in B

illio

ns

Goods & Services Goods Only Motor Vehicle & Parts Share of Goods & Services Motor Vehicle & Parts Share of Goods

Source: U.S. Department of Commerce, International Trade Administration

27

The bulk of U.S. motor vehicle & parts trade is within NAFTA.Almost Half of Vehicle Exports & Imports, Parts Imports; Over 70% of Parts Exports


$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

Motor Vehicles MV Parts Motor Vehicles MV Parts

Exports ImportsBi

llion

s

NAFTA

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018


Exports Imports

Billi

ons

World


28

In addition to Canada & Mexico – EU, Japan, South Korea, & China are the U.S.’s major motor vehicle & parts trade partners.


$-

$10

$20

$30

$40

$50

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018


Exports Imports

Billi

ons

EU27

$-

$10

$20

$30

$40

$50

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018


Exports ImportsBi

llion

s

China

$-

$10

$20

$30

$40

$50

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018


Exports Imports

Billi

ons

Japan

$-

$10

$20

$30

$40

$50

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018


Exports Imports

Billi

ons

S. Korea


2017-2018:-36.6% -13.1% -3.0% +15.5%

2017-2018:-3.2% +12.5% +0.9% +2.3%

2017-2018:+4.8% +4.2% +1.3% -0.9%

2017-2018:+8.8% -12.7% -12.1% +6.9%

29

Tariffs are piling up on light vehicles

Steel Tariffs @ 25%

Aluminum Tariffs @ 10%

China Tariffs @ 25%

Potential Parts Tariffs @ 25%

No Tariffs

~65%

Source: Center for Automotive Research CENTER FOR AUTOMOTIVE RESEARCH

30

U.S. Consumer & Economic Impacts of U.S. Automotive Trade Policies• Assume:

• USMCA is ratified,• Section 232 tariffs on steel & aluminum remain in place on all current

countries,• Section 301 China tariffs remain at current levels, and• Section 232 auto & parts tariffs are levied at 25% on all trading partners

except Canada, Mexico, & South Korea

https://www.cargroup.org/wp-content/uploads/2019/02/US-Consumer-Economic-Impacts-of-US-Automotive-Trade-Policies-.pdf


https://www.cargroup.org/wp-content/uploads/2019/02/US-Consumer-Economic-Impacts-of-US-Automotive-Trade-Policies-.pdf

31

Impact of USMCA, Section 232 Steel & Aluminum Tariffs, Section 301 China Tariffs &Potential Section 232 Auto & Parts Tariffs

+$2,750 average+$1,900 U.S.-built+$3,700 imports

-$30.4B GDP

-366,900 jobs

-1.3M fewer U.S. sales-$43.6B dealership revenue-77,000 dealership jobs

Source: Center for Automotive Research CENTER FOR AUTOMOTIVE RESEARCH

32

NAFTA Timeline Under Trade Promotion Authority


8/31/2018

11/30/2018

9/30/2018

1/28/2019

3/14/2019

Aiming for 1/1/2020

4/19/2019

33

USMCA Passage is not certain.


AFL-CIOUAWSteelworkersMachinists

34

Presidential Proclamation on Canadian & Mexican Steel & Aluminum Imports• Clears a hurdle to passing the

USMCA• Removes 25% steel and 10%

aluminum tariffs on Canada & Mexico

• Removes retaliatory tariffs placed by Canada & Mexico

• Monitoring transshipments and subsidized/dumped steel & aluminum

• No hard quotas, but…U.S. can re-impose tariffsif imports “surge” above historical levels & Canada/Mexico can only retaliate in steel or aluminum


35

Status of Section 232 Auto & Parts Import Tariffs

• Tariffs delayed until13 November 2019

• Only Ford & GM are considered “U.S. firms”

• Focused on how imports harm ability to do R&D needed to support national security

• Targeted at Japan, EU, and “any other country the Trade Representative deems appropriate”

• Commerce report still has not been made public


36

Brief China Trade Update

U.S. raised tariffs from 10% to 25% – includes all automotive goodsU.S. moves to impose tariffs on nearly all Chinese imports –including consumer goodsChina retaliates with tariffs on $60B U.S. imports (rates increase from 5-10% to 20-25%)Average increase in cost due to tariffs/U.S.-built vehicle = $190


37

2019 Negotiations

CENTER FOR AUTOMOTIVE RESEARCH 37CENTER FOR AUTOMOTIVE RESEARCH

Thank You

Documents

The 2019 Automotive Outlook: Trade &Labor Relations Issues/media/others/events/2019/... · 2019-06-01 · The 2019 Automotive Outlook: Trade &Labor Relations Issues Kristin Dziczek