The Auto Industry Circa Right Now
A friend sells houses in the western suburbs of Detroit. There are not all of those financial woes in places like Northville and Bloomfield Hills as there are in Detroit. These markets are comparatively hot.
He recently told me that he was having a problem with inventory. There were plenty of people chasing too few properties. Which seemed somewhat wondrous to me. But he explained that there are a whole lot of engineers being hired by the auto companies in the area. In fact, he said, it seems that there is also a greater demand for engineers than there is inventory of them, too.
Which brings me to the sales numbers reported on Friday by the vehicle manufacturers. GM up 15.9% vs. January 2012. Ford up 22%. Chrysler up 16%. Toyota up 26.6%. Honda up 12.8%. Nissan up 12.9%.
The pattern seems to be, well, up.
Over the past several months, we’ve seen announcements by these companies regarding their investments in additional capacity in the U.S.
GM chairman and CEO Dan Akerson announcing a $600-million investment at the GM Fairfax Assembly & Stamping Plant in Kansas City, Kansas, where the Chevy Malibu and Buick LaCrosse are produced, on January 28,2013. (Photo by Susan McSpadden for GM)
If you look at the sales picture in Europe, where the pattern absolutely is down, it makes sense that that’s not where capacity is going to be added. If you look at the situation with the Japanese yen, that’s not a country where there is likely to be a whole lot of capacity added. And if you look at China—well, companies are doing their damnedest to add capacity there, too.
Of course, when we went into the Great Recession, there was a whole lot of capacity taken out of the U.S. market. So the addition of fresh capacity is necessary as these sales numbers tend to increase.
But it is a different world. The new capacity is more flexible capacity. It is capacity that will allow the vehicle manufacturers to make more of what is being sold and less of what will sit on dealer lots until a massive pile of cash is shoveled into the trunk.
It is also capacity that is more automated, capacity that doesn’t require the same number of people who once produced cars and trucks.
Which brings me back to my friend in real estate, and what he said about there being a whole lot of engineers being sought, well-paid individuals who are looking for nice houses in the suburbs.
That’s where the future of this industry is going to be. The engineers. And designers will be needed, because they’re key to providing the differentiation.
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