Wither the Domestic Automobile Industry?

Auto industry analysi Amy Fritz takes stock of the global automobile industry in a recent post over a Her analysis is one of the few to consider the globalization of the industry’s manufacturing process.

“Regardless of what some may say, there is no such thing as an “American” vehicle anymore. We are fast shifting into a global economy that requires the sharing and collaboration of multinational resources from across the globe. Consumers demand quality products at very affordable costs. Corporations have no choice but to comply with consumer demand even if it means off-shoring production and even trimming quality in order to save money. In many ways, this is the Wal-Martization of consumer goods.”

But, this is just the start of the process. Another important factor is where the brainpower will be located. The global recession is sending the industry through another major restructuring, and the traditional manufacturing states of Michigan, Ohio, Indiana, and Illinois seem to be taking the brunt of the downturn, but she cautions about calling them out.

The 21st-century automotive industry will be geographically spread throughout North America. Modern technology allows engineers to work from just about any location regardless of population, climate or infrastructure. However, many engineering outfits have found that locating brainpower in dynamic places improves quality and innovation. A dynamic place is a place where the educated and skilled want to work. These includes places like southern California (where most of the design studios are located), Ann Arbor, Austin, and others.

Interestinly enough, this is where the Midwest still has a competitive advantage.

“Critically, there still seems to be a lack of emphasis on higher education in the south. Even the best universities in the South cannot fully compete with the universities in the Midwest from a technical standpoint. Institutions such as Michigan, Wisconsin, University of Chicago, Michigan State and Indiana are still levels above the universities found in Kentucky, Tennessee and Georgia. The Midwestern schools built their solid knowledge and research background over a period of decades. This cannot easily be duplicated.

“To be sure, the auto-dominated economies of Michigan and Ohio will be shrinking in the future. These states are shedding their manufacturing sectors while reinforcing their knowledge-based sectors. Over time they may find it much easier to morph into a knowledge-based economy by using previous know-how than to build a knowledge economy from scratch. Michigan, for example, may have been hit hard by this global schism in manufacturing, yet it has been left with the know-how and knowledge left over from industry in the form of a strong university system. In contrast, nowhere in the south can we find that.

“In conclusion, some individual Midwestern cities may come out of this crisis better than many expect. Younger workers in the future will look at specific towns such as Madison and Ann Arbor, which offer an excellent quality of life, rather than head off to the sunbelt. This may be particularly true as they enter their 30s and look for a good place to raise their children, hopefully close to grandparents. The Midwest may be down, but not all of it is out — far from it.