Detroit-In the Cross Hairs
Dauch, Richard E., Executive Speeches
Thank you Larry (Yost). Good afternoon ladies and gentlemen. I am honored to be joining all of you in this forum today. The Detroit Economic Club, in its 70th year, does a superb job at aligning students along with leaders from business, government and the community to confer on everything from matters of local interest to international issues and world events.
Today, the topic of my discussion combines a critical world event with a matter of great local interest. If you live in Southeastern Michigan, you undoubtedly have felt the tremors relative to the structural change transforming the automotive industry. The epicenter of that change is here in the heartland of the automobile world. But, the fault lines undoubtedly circle the globe.
But the issue for you and me is Detroit. Ladies and gentlemen, like it or not, Detroit is in the cross hairs of world automotive competition.
If you look at the American auto industry in terms of vehicle production, with a Seasonal Average Adjusted Rate (SAAR) hovering at 17 million units for 2004, you could assume that it is business as usual for U.S. automakers. But the significance of SAAR takes on a different meaning when you understand that there is a new generation of manufacturers that have become a part of the landscape.
Whether this change is viewed as a success or a setback, depends on whether your job is in Detroit, Michigan; Flint, Michigan; Marysville, Ohio; Smyrna, Tennessee; Mobile, Alabama; San Antonio, Texas; Tuscaloosa, Alabama; or Spartanburg, South Carolina. As demand in the U.S. for import vehicles has grown, a growing number of foreign automakers are building vehicles and components in the U.S. But they are bypassing Michigan to build factories in southern states. This influx of foreign companies, who have operations in our nation, have the latest state-of-the-art facilities and processes and more often than not, young workforces that are not unionized.
Overseas-based assemblers invest in manufacturing here because the U.S. is currently the largest and most lucrative market; has moderate political dynamics; and has strong prospects for continued market growth. They also realize the potential to capture incremental worldwide sales and provide insulation against currency fluctuations.
In 1997, Detroit's Big Three had a combined 73 percent of the U.S. car and truck market. That translates into nearly three out of every four vehicles. Six years later, that combined market share has fallen to 60 percent or, only six of 10 vehicles manufactured by The Big Three! The loss of manufacturing jobs from Michigan is due in a large part to the rapidly changing dynamics of the auto industry.
It could be argued that if Detroit's Big Three did not create the innovative products that launched the craze of minivans, pickups and SUVs for the last 20 years, the job loss tallies could have surged even higher. Now, the Asian and European builders also have minivans, trucks and SUV products and they are making them right here in the U.S. in their southern and southwestern facilities.
The traditional worldwide trade borders have been erased and the world landscape for automotive manufacturing has changed. The result is global competition that is far more brutal and relentless than we have ever experienced.
The economic reality of global competition is affecting everyone of us in this room, and the people we represent. What is at stake? The absolute survival of Detroit's auto industry as we have known it.
Never before in my nearly 40-year automotive career have I seen General Motors, Ford, and the Chrysler Group all losing market share at the same time. Despite the heavy incentives, the traditional Big Three continue to lose market share as we speak. In the past six years, Japanese auto makers have increased their share by 17 percent, the Europeans by 52 percent and the Koreans by a whopping 72 percent. …