The 2019 Automotive Outlook: Trade &Labor Relations Issues
The 2019 Automotive Outlook:Trade & Labor Relations IssuesKristin Dziczek – Vice President, Industry, Labor, & Economics (ILE) Group26th Annual Automotive Outlook ConferenceFederal Reserve Bank of Chicago – Detroit Branch31 May 2019
AGENDA Sales & ProductionAutomaker InvestmentsAutomaker AnnouncementsTrade UpdateUAW DiscussionCENTER FOR AUTOMOTIVE RESEARCH2
Positive Factors in the CAR Forecast: Projected moderate U.S. economic output growth in 2019 Historically low U.S. unemployment rates Relatively low oil prices continue through 2020 Underlying nominal wage growth continues High levels of consumer confidence were reached in Q4 2018, and Solid new housing starts and home prices rebounding to pre-recession levelsCENTER FOR AUTOMOTIVE RESEARCH3
There are Some Risks to the Forecast that areDifficult to Model Section 232 Steel & Aluminum TariffsSection 301 China TariffsU.S.-China TalksChina Auto Sales SlowdownUSMCA Ratification ?New BusinessModels Competitors TechnologiesSection 232 Auto & Parts TariffsU.S.-Japan TalksJapan Economic SlowdownU.S.-EU TalksBREXITU.S.-U.K. TalksRecession?Geopolitical RisksConsumer ConfidenceInterest RatesUAW Negotiations/Strike ?CENTER FOR AUTOMOTIVE RESEARCH4
CAR’s U.S. Light VehicleSales Forecast2019-2025U.S. 7.317.617.7202320242025U.S. LV Sales in Millions17.420152016Source: CAR Research, January 201920192022CENTER FOR AUTOMOTIVE RESEARCH5
Are Sales Back?1995 – 2019 YTD (March)In Spending (Billion of 2009 )In Units2070016.50 million units18165001440012 476.2 billion1030086Both spending and vehicle salesexceed 2006 level200Million UnitsBillion (2009 dollar)600410020Source: BEA, Table 7.2.6B. Real Motor Vehicle Output, Chained DollarsCENTER FOR AUTOMOTIVE 1996199506
There’s been a price shift.Light Vehicle Sales and New Vehicle Price Index; January 2004 – March 55New Vehicle Price Index(1982 100)2005-08S1150D2145140D11351301258S1: Average sales of Jan ’08 – Dec ‘ 09S2: Average sales of Jan ’12 – Dec ‘12910111213141516Light Vehicle Sales SAARCENTER FOR AUTOMOTIVE RESEARCH1718192021227
And a pronounced move toward light trucks –enabled by relatively low fuel prices.Light Truck Sales & Real Gasoline Prices; 1990 – March 112011-20172018-2019Real Gasoline Price in Dollars4.504.003.503.002.502.001.501.00Source: EIA, BEA3.004.007.008.009.00Light Truck Sales (Millions SAAR)CENTER FOR AUTOMOTIVE RESEARCH10.0011.0012.008
U.S. automotive employment growth is slowing.Motor Vehicle & Parts Manufacturing Employment; January 2010 – April 0U.S. LevelState -18Jul-18Oct-18Jan-19Apr-190*Transportation Equipment Manufacturing Employment**National data follows one month behind State data. Indiana employment is estimated.Source: BLS, U.S. DOL, Statistics CanadaCENTER FOR AUTOMOTIVE RESEARCH9
Assembly & supplier overtime hours are steady.Average Weekly Hours of Production and Nonsupervisory Employees; 2007 – March2019Parts Supplier12 per. Mov. Avg. (Vehicle Assembly)12 per. Mov. Avg. (Parts Supplier)Source: Employment, Hours, and Earnings from the CurrentEmployment Statistics survey (National), BLSCENTER FOR AUTOMOTIVE 373635Jan-07Hours per WeekVehicle Assembly10
Automotive labor productivity falls before (and during)a recession.Recessions & U.S. Automotive Productivity; 1960 - 2018150144 142137140127130Productivity Index(2000 0042008201220162020*Automotive Productivity Index consists of SIC 3711/3714 and NAICS 3361/3363. 2000 is the base year.CENTER FOR AUTOMOTIVE RESEARCHSource: CAR Research based on Data from U.S. Department of Labor, Bureau of Labor Statistics and Wards Auto11
11.211.3201720182019Source: CAR Research, January 201910.910.62020202111.12022CENTER FOR AUTOMOTIVE RESEARCH0.0%201611.2 0.9%201512.1 4.5%11.7 4.7%U.S. ProductionU.S. Vehicle Production (millions)CAR’s U.S. Light VehicleProduction Forecast2019-202511.611.711.720232024202512
CAR’s N.A. Light VehicleProduction 0202021Source: CAR Research, January 201917.22022CENTER FOR AUTOMOTIVE RESEARCH 0.6%17.2 1.9%17.5 3.5%18.1N.A. Vehicle Production (millions)18.0 3.6%N.A. Production17.818.118.220232024202513
N.A. Announced Automaker Investment by Region2009 to Q1 2019RegionInvestment Amount ( USD)Canada 8.2BUnited States 98.2BU.S. Great Lakes 63.1BMichigan 32.8BSouth 22.3BMexico 24.8BTotal 131.2B6%75%19%Note: U.S. Great Lakes includes: IL, IN, KY, MI, MO, and OHSouth includes: AL, FL, GA, MS, SC, TN, and TXSource: CAR Book of Deals, Q1 2019CENTER FOR AUTOMOTIVE RESEARCH14
Automotive investment announcements peak every four years,& have been slower between Q4 2015-Q1 2019.BillionsQuarterly Automaker Announced U.S. Investment; 2010 to Q1 201918x̄ 3.4B/Quarterx̄ 3.4B/Quarterx̄ 1.5B/Quarter1614121086FCA 90%42Source: CAR Book of Deals, 2019CENTER FOR AUTOMOTIVE RESEARCHQ1 2019Q4 2018Q3 2018Q2 2018Q1 2018Q4 2017Q3 2017Q2 2017Q1 2017Q4 2016Q3 2016Q2 2016Q1 2016Q4 2015Q3 2015Q2 2015Q1 2015Q4 2014Q3 2014Q2 2014Q1 2014Q4 2013Q3 2013Q2 2013Q1 2013Q4 2012Q3 2012Q2 2012Q1 2012Q4 2011Q3 2011Q2 2011Q1 2011Q4 2010Q3 2010Q2 2010Q1 2010015
FCA AnnouncementsFCA Q1 2019: 3.5 Billion (6 announcements) Mack Ave Engine: 1.6BJefferson North: 900.0MWarren Truck: 500.0MSterling Heights/Warren (Stamping): 400.0MDundee Engine: 119.0MAuburn Hills (Components Plants): 12.6MFCA-R Merger?CENTER FOR AUTOMOTIVE RESEARCH16
Ford RestructuringFord: eliminating about 7,000 salariedpositions (10% of global salariedworkforce) by the end of August In North America: 500 employees will leave involuntarily thisweek; majority of cuts completed by May24th Ford expects 800 total layoffs by the endof June 2019 Globally: Restructuring process expected to becompleted in Europe, China, SouthAmerica, and International Markets Groupby the end of AugustCENTER FOR AUTOMOTIVE RESEARCH17
GM AnnouncementsPlantProductsEnd ofProductionEmploymentUnion LocalDetroit/HamtramckLaCrosse, Volt,CT6, ImpalaJune 1, 2019January 20201,542UAW Local 22LordstownCruzeMarch 1,20191,618UAW Local 1112OshawaImpala, XTS,Silverado,SierraQ4 20192,900Unifor Local 222Warren Trans.6 Speed TransAugust 1,2019335UAW Local 909BaltimoreOps.PickuptransmissionsApril 1, 2019310UAW Local 239CENTER FOR AUTOMOTIVE RESEARCH18
YOY Change in U.S. Passenger Car Market Shares2013 – 8YOY % Change-5%-10%-15%-20%-25%All AutomakersSource: IHS MarkitAll But D3D3GMCENTER FOR AUTOMOTIVE RESEARCH19
GM Vehicle Production Capacity and CapacityUtilization by Country, 2015-2018, 2019-2025(f)Capacity UtilizationMillionsProduction 2020United StatesSource: CAR analysis of LMC Automotive 201820192020United StatesCENTER FOR AUTOMOTIVE RESEARCH20212022Canada2023202420252026Mexico20
GM Transmission Capacity and Capacity Utilizationby Country, 2015-2018, 2019-2025(f)MillionsTransmission CapacityCapacity Utilization160%6140%5120%4100%80%360%240%1020%2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025USSource: CAR analysis of LMC Automotive dataCanada0%2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025MexicoUSCENTER FOR AUTOMOTIVE RESEARCHCanadaMexico21
CENTER FOR AUTOMOTIVE RESEARCH22
Since 2009, GM & Ford have lost share & FCA has gained.Detroit 3 U.S. Market Share; 1985 – 2019 YTD Through April45%FordGMFCAPercent of U.S. Market Sales40%35%30%25%Since 200916.8%-16%14.3%-11% 40%12.5%20%15%10%Since 1985GM -59%Ford -33%FCA 4%5%0%Source: Automotive News; Wards Auto (2012 and on); CAR ResearchCENTER FOR AUTOMOTIVE RESEARCH23
The United States cannot currently self-supply thevehicles American dealers sell to U.S. consumers.Sourcing of U.S. Light Vehicle Sales2018U.S. Production10.8 millionless U.S. Exports- 1.8 millionplus U.S. Imports 8.2 millionU.S. Sales 17.2 millionUK OtherGermany1% 4%3%South Korea5%U.S. Firms28%Japan10%Canada10%U.S. Sales ofImportedVehiclesU.S. Sales ofU.S. ProducedVehicles47%52%Mexico15%International Firms24%FCA, Ford, & GM Represent 43%of Canada & Mexico ImportsSource: IHS Markit dataCENTER FOR AUTOMOTIVE RESEARCHSource: CAR; U.S. International Trade Administration24
2018 U.S. production is 55% U.S.-based firms, 33%Japanese firms, 7% German firms, & 5% Korean firms.German, 7%Korean, 5%U.S.-Based, 55%Japanese, 33%*U.S.-Based 42% if subtract FCASource: IHS Markit dataFCAFordGMTeslaCENTER FOR AUTOMOTIVE RESEARCH25
MV & parts trade comprise a large share of the U.S. trade deficit. 1,00045% 80035% 60025%Trade Deficit in Billions 40015% 200 -5%20142015201620172018 (200)-5%-15% (400)-25% (600) (800)-35% (1,000)-45%Goods & ServicesGoods OnlySource: U.S. Department of Commerce, International Trade AdministrationMotor Vehicle & Parts Share of Goods & ServicesCENTER FOR AUTOMOTIVE RESEARCHMotor Vehicle & Parts Share of Trade DeficitNearly One-third of Goods & Services Trade Deficit andAlmost One-quarter of the Goods-Only Trade DeficitMotor Vehicle & Parts Share of Goods26
The bulk of U.S. motor vehicle & parts trade is within NAFTA.Almost Half of Vehicle Exports & Imports, Parts Imports; Over 70% of Parts ExportsNAFTAMotor VehiclesMV PartsMotor VehiclesExportsSource: U.S. Department of Commerce, International Trade AdministrationMV PartsMotor VehiclesImportsCENTER FOR AUTOMOTIVE RESEARCHMV PartsExportsMotor 1820172016201520142018201720182017 2016 2015 202014 202018 402017 402016 602015 602014 802018 802017 1002016 1002015 1202014 1202018 1402017 1402016 1602015 1602016 1802015 180 2002014Billions 2002014BillionsWorldMV PartsImports27
40Motor VehiclesExportsMV PartsMotor VehiclesImportsMotor VehiclesExportsSource: U.S. Department of Commerce, International Trade AdministrationMV tsMotor VehiclesImportsCENTER FOR AUTOMOTIVE RESEARCHMV PartsExportsMotor Vehicles201820172016201520142018 20182017201620152014 2018 2017 102016 102015 202016 302017-2018:-36.6%2015 6.9% 402014-12.1% 50 20MV PartsMV PartsChina-12.7%Motor Vehicles-0.9%Motor VehiclesExportsBillions 302014Billions 402017-2018: 8.8%2018MV PartsS. Korea 20162015201420182017201620152014 -2018 2017 102016 102015 20MV Parts 1.3% 30 20Motor Vehicles 4.2%2018 30 502017 2.3%2016 0.9%Japan2017-2018: 4.8%2015 40 12.5%Billions 50EU272017-2018:-3.2%2014BillionsIn addition to Canada & Mexico – EU, Japan, South Korea, &China are the U.S.’s major motor vehicle & parts trade partners.MV PartsImports28
Tariffs are piling up on light vehiclesChina Tariffs @ 25%Potential PartsTariffs @ 25%No TariffsAluminum Tariffs@ 10%Steel Tariffs @25% 65%Source: Center for Automotive ResearchCENTER FOR AUTOMOTIVE RESEARCH29
U.S. Consumer & Economic Impacts of U.S.Automotive Trade Policies Assume: USMCA is ratified,Section 232 tariffs on steel & aluminum remain in place on all currentcountries,Section 301 China tariffs remain at current levels, andSection 232 auto & parts tariffs are levied at 25% on all trading partnersexcept Canada, Mexico, & South e-Trade-Policies-.pdfCENTER FOR AUTOMOTIVE RESEARCH30
Impact of USMCA, Section 232 Steel & AluminumTariffs, Section 301 China Tariffs &Potential Section 232 Auto & Parts Tariffs 2,750 average 1,900 U.S.-built 3,700 imports-366,900 jobs-1.3M fewer U.S. sales- 43.6B dealership revenue-77,000 dealership jobs- 30.4B GDPSource: Center for Automotive ResearchCENTER FOR AUTOMOTIVE RESEARCH31
NAFTA Timeline Under Trade Promotion /20191/28/2019Aiming for1/1/2020CENTER FOR AUTOMOTIVE RESEARCH32
USMCA Passage is not certain.AFL-CIOUAWSteelworkersMachinistsCENTER FOR AUTOMOTIVE RESEARCH33
Presidential Proclamation on Canadian & MexicanSteel & Aluminum Imports Clears a hurdle to passing theUSMCARemoves 25% steel and 10%aluminum tariffs on Canada &MexicoRemoves retaliatory tariffsplaced by Canada & MexicoMonitoring transshipments andsubsidized/dumped steel &aluminumNo hard quotas, but U.S. can re-impose tariffsif imports “surge” abovehistorical levels &Canada/Mexico can onlyretaliate in steel or aluminumCENTER FOR AUTOMOTIVE RESEARCH34
Status of Section 232 Auto & Parts Import Tariffs Tariffs delayed until13 November 2019Only Ford & GM areconsidered “U.S. firms”Focused on how importsharm ability to do R&Dneeded to support nationalsecurityTargeted at Japan, EU, and“any other country theTrade Representativedeems appropriate”Commerce report still hasnot been made publicCENTER FOR AUTOMOTIVE RESEARCH35
Brief China Trade UpdateU.S. raised tariffs from 10% to 25%– includes all automotive goodsU.S. moves to impose tariffs onnearly all Chinese imports –including consumer goodsChina retaliates with tariffs on 60B U.S. imports (rates increasefrom 5-10% to 20-25%)Average increase in cost due totariffs/U.S.-built vehicle 190CENTER FOR AUTOMOTIVE RESEARCH36
2019 NegotiationsCENTER FOR AUTOMOTIVE RESEARCH3737
Thank You
The 2019 Automotive Outlook: . Vice President, Industry, Labor, & Economics (ILE) Group 26 th Annual Automotive Outlook Conference. Federal Reserve Bank of Chicago - Detroit Branch . Trade Update AGENDA UAW Discussion. CENTER FOR AUTOMOTIVE RESEARCH 3 Positive Factors in the CAR Forecast: Projected moderate U.S. economic .
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