Auto industry a 'bright spot' in economy

By Dennis Seid/NEMS Daily Journal

TUPELO – The U.S. economy is slowly crawling out of the recent recession, but the auto industry is faring better, said Thomas Klier, senior economist with the Federal Reserve Bank of Chicago.
Klier spoke to more than 200 attendees at CDF’s First Friday forum at the BancorpSouth Conference Center.
“Auto sales are trending up. … it’s been a bright spot of the economy,” he said.
The Great Recession was the deepest economic downturn since the Great Depression, and Klier said a full recovery has yet to take hold.
Such severe recessions don’t come often, and recovery “tends to be moderate,” he said. “Things tend to bounce back, but it hasn’t happened yet, relative to other recoveries.
“The numbers are nothing to be excited about – 2 to 3 percent GDP growth doesn’t make up for the losses suffered during the recession.”
But he was more optimistic about the auto industry, and for good reason. Auto sales in August rose 20 percent compared to a year earlier, and they were the best results in five years. The industry is on pace to sell more than 14 million vehicles this year.
Klier said the “auto alley” stretching from Michigan and Wisconsin to the Gulf Coast has been affected by the growth of automakers opening plants in the South.
While the Detroit Three (GM, Ford, Chrysler) closed 12 U.S. plants from 2000-2010, foreign automakers took up the slack.
“In 2011, domestic automakers accounted for less than 60 percent of U.S. production,” Klier said. “Compare to 30 years earlier, when the only foreign automaker was Volkwagen’s plant in Pennsylvania.”
Mississippi’s recruitment of Nissan and Toyota is indicative of having the workforce and transportation infrastructure necessary to land such projects, he said.
Automotive assembly plants are employment centers, but don’t generate much more employment once they’re settled in, Klier said.
Suppliers will employ about four times as many workers as an assembly plant, but they also are more regional than local in terms of location. Klier said that means suppliers will stay relatively close to an assembly plant – within a day’s driving distance. They’ll also want to have several customers rather than depend on one.
So if a Toyota supplier in Kentucky can easily supply the automaker’s plant in Mississippi, too, it likely won’t be opening a new location in Mississippi.
“But some suppliers will have to be near the plant,” he said. “You just won’t see dozens of them. … that’s probably not what you want to hear.”
However, Klier said an assembly plant expansion could add more suppliers along with additional employees.
“Look at the Nissan plant in Canton,” he said. “Essentially that’s three assembly plants on one site.”
Nissan is starting a new production line by the end of the year and is in the midst of hiring another 1,000 workers, boosting employment there to 4,500.
dennis.seid@journalinc.com