US Auto production didn’t hollow-out. It just went south this millennium.

The myth that US manufacturing has withered has been woefully, umm, mis-estimated. The latest UNido report on manufacturing shows the US in the top slot, making 19% of all goods globally. The big news is that China overtook Japan for #2.

The US story is a geographic and demographic shift. It’s not only retirees heading south, it’s companies looking for hospitable environments. I recently left a company that touted its move as a raise for employees – no state income tax and it wasn’t only employees enjoying better tax conditions. Also the cost and quality of life for workers has been a draw to southern states like Texas, Alabama, South Carolina.

US auto output is up nearly 40% from the 1980’s to the levels of 2007-8 (net of the recent crises levels.) Though the market doubled, if we include Canada and Mexico where everyone expanded, NAFTA production is higher as a % than it was in the 70’s.

Why the hollowing out myth? Mainly the shift has been from the heavily unionized north. The big change is that growth is outside the old monolithic UAW/Big3 paradigm. Today non-Det3 production accounts for 40% of NAFTA output and about 1/2 the sales. 20 years ago it was less than 15%. If you recall, the first challenge to the Japan auto makers was that they had to build their cars in “here.” Well, they came, as did the Koreans, Germans, etc.

Auto jobs rose 18% from ’90-‘00, and not surprisingly shed 20% since 2008. These losses came heavily in the Big 3, and with the restructuring efforts, should not come back at the same ratio with volumes recovery. The evolution has been more output with fewer workers, productivity.

Americans are not going to accept a decrease in quality of life, hence we can’t expect our cost of living to decrease. So, the key is very clear; we rightly won’t compete on wages, we must compete on productivity. Detroit, just as European makes have already adopted many of the productive methods of the Asian makes, they must continue for the US to retain its #1spot.


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