Projections for the 2013 Automotive Manufacturing Sector
2012 was a mixed bag for American manufacturing. Production increased 2.7% over December 2011, which was a decrease from the last two years, which showed gains of 7.5% and 4.7% in ’10 and ‘11, respectively.
Many pundits and industrial experts would agree that the largest factor in the decrease of positive growth was the issue of global market struggles slowing down American output. The European budget crisis of 2012 forced numerous plant shutdowns in the automotive industry. Four Ford European manufacturing facilities were shut down last year alone, in addition to a Fiat plant in Italy, a General Motors facility in Belgium, and a Saab plant in Sweden which shut down in the last two years. In addition, the 2011 tsunami that riddled the coastline of Japan continued to really stunt development in that region as well.
Fortunately for companies in the US, overseas struggles should benefit American manufacturing this year, compared to 2012. A combination of excellent domestic logistics networks, lower energy costs (specifically, natural gas) and certain negative economic factors, like a consistent 10-15% increase of Chinese labor costs annually, will play a big role in increased domestic manufacturing development across all industries. A recent study by the Boston Consulting Group showcased that in 2005, it was generally 30% cheaper to manufacture goods in China compared to the US. As of the end of this year, that percentage will shrink to only 16%.
The same study found that a third of US CEOs (with company sales over $1B) are discussing the option of bringing some production back to the States. Speculation has loomed for months that Toyota, Honda, Ford and Nissan may all make announcements this year about increased domestic production facilities –
- Jim Lentz, President and CEO of US Sales at Toyota Motor Corp, stated back in August that he thought it was “only a matter of time” before the company shifts some level of operations to North America for closer proximity to the US market.
- Nissan already shifted production of their lithium-ion batteries for the LEAF in 2011 to a facility in Tennessee, which continues to draw a buzz from the community.
- Honda was obligated to give their Chinese workers a 47% pay raise in 2010 after labor strikes forced their hand.
- In August 2012, Ford announced they were investing $220 M to expand their transmission plant in Sterling Heights, MI. This is part of the 12,000 hourly US jobs and $16B in US product development and manufacturing operations Ford Motor promised its labor union by 2015.
Even if big moves are not made in the US for the next calendar year, the automotive industry remains prepared for a strong year.
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