The Economic Importance of the U.S. Automotive Industry or the “big 3”

1. The Economic Importance of the U.S. Automotive Industry or the “big 3” By Mark Preston • 1796 – French Engineer, Nicholas Cognot – first steam-powered carriage or road vehicle • 1860- Belgian, Jean Joseph Lenoir used first Internal Combustion Engine (ICE) in road vehicle • 1891 – Thomas Edison inspired William Morrison to test electric road vehicle in Des Moines • The Forming of a New Industry coupled with engineers, innovators, and investors from Copper, RR, etc. industries formed the companies we know today.

2. In 1897, Ransom E. Olds of Lansing was granted a patent with the objective to “build a lightweight, easily operated vehicle with enough power to satisfy the average driver’s needs” leading to introduction of the “runabout” Bentley Historical Library website:the invention of the automobile has “impacted society like nothing else” “continuing growth in auto output could greatly assist future growth in the overall economy” – Center for Automotive Research (CAR) “the automobile’s impact on the economy was not only due to the amount of capital and number of workers involved in its manufacturing, but also to service occupations that it spawned” – Michigan: A History of the Wolverine State Important quotes of car & industry “America’s love affair with the automobile” phrase appeared in the American Heritage dictionary, as a usage example under the entry for “love affair.” - Bureau of Labor Statistics, Rick Wallick

3. 1914 Chrysler Co found by– Walter P. Chrysler with John and Horace Dodge • 1897- Olds Motor Works – Ransom E. Olds • 1902– Henry M. Leland of Cadillac Automobile Co. • 1903 – David D. Buick formed Buick Motor Co. • 1908 to 1917– General Motors Corp formed by William Durant in New Jersey toavoid trust-busting merging with Buick, Olds, Pontiac, Cadillac, then Chevrolet • 1876 - On a carriage ride into Detroit with his father, Henry Ford saw a self-propelled steam threshing machine. This encounter is what Ford felt "helped to shape the course of his life" • 1899 - Henry Ford formed Detroit Automobile Co and closed after a year • 1903 - Henry Ford formed Ford Motor Co. in Detroit • 1906 - Ford popularized Model T and the moving assembly line • 1909 - Henry Ford’s almost merged with GM The “Big Three” of the U.S

4. Leading to 2009 industry bailout • 2001 Sub-Prime Mortgage Lending • 2002 Sarbannes-Oxley Act • 2004 Credit Default Swaps • 2008-2009 – The Great Recession • 2009 Summer a dire time for ALL U.S. Auto Makers and Suppliers • U.S. and Canadian Governments bailout totals $80 billion –CAR • GM and Chrysler (not Ford)

5. Economic Analysis - Employment • Industry Employment • Experienced near 40% unemployment • Over 400 thousand lost jobs • On a comeback from massive layoffs • CAR reports that the industry will add 90,000 jobs through the year 2016 • More efficient than before • Early History Fact: • 1900 Olds employed 100 workers in Detroit

6. Economic Analysis - Earnings • Industry Earnings • 2013 – 26% higher average wage for industry of Manufacturing of Motor Vehicles $30.38 per hour vs. All Manufacturing $24.04 per hour -BLS • “Monopoly Rents” – Rick Wallick • Early History Fact: • 1914 – Henry Ford increased pay to workers from $2.50 to $5.00 per day.

7. Economic Analysis – Supply & Demand • Industry Supply and Demand • 2006 – 122 vehicle models • 2011 – 85 vehicle models • 2012 – 133 vehicle models • Early History Fact: • Model Ts were available in “any color as long as it was black”

8. Economic Analysis - GDP • Gross Domestic Product • 2007 – 3.3% of National GDP • 2009 – 1.7% of GDP • 2011 – more than 3% • Net exports at $20 billion • Early History Facts: • In 1905 Olds produced 6,500 runabouts • By 1909 autos and parts value of $400 million or 36.7% of Michigan’s manufacturing output • In 1911 Ford made more than 20% of all cars in U.S. • In 1923 Ford produced more than 2 million Model Ts • In 1927 Ford produced more than 15 million Model Ts

9. Economic Analysis - Prices • Product Prices • Average price near $30,000 for new light vehicle • 2011 – 9.6 million units forecast to sell • -New York Times

10. Supply-Chain • 2/3 0f the 90k jobs expected by 2016 in supply-chain • Supplier to Motor Vehicle employment Ratio • 3:1 to 2:1

11. Benefits to the Economy • Job Providers • 3% of GDP • Global Demand (emerging market in China) • Good Products • Corporations now realize benefits to sustaining the environment

12. Challenges Ahead • Working together on process improvements and product innovation • Continued efforts in R&D to improve fuel and efficiency • Supply-Chain Management – Auto Industry challenges: • Volatile Market • Uncertain Gas Prices • Green Energy implications • Social & Ethical Responsibility • -Management Decision • Energy Policy Act of 1992 - reduce U.S. dependency on imported petroleum for gasoline production, help reduce harmful green-house gases, and improve overall air quality which prompted further R&D into alternative fuels with awareness to environmental sustainability • Fuel Infrastructure for the “right” fuel (EV, Hydrogen, Ethanol, Natural Gas, and/or Bio Diesel) – U.S. Dept. of Energy

13. Conclusion

14. Works Cited • Automotive History. (2007, July 5). Retrieved March 25, 2013, from Bentley Historical Library University of Michigan: http://bentley.umich.edu/research/guides/automotive/ • Bureau of Economic Analysis. (2012, November 2013). Retrieved March 31, 2013, from U.S. Department of Commerce: http://www.bea.gov/iTable/iTable.cfm?ReqID=5&step=1#reqid=5&step=4&isuri=1&402=45&403=1 • Bureau of Economic Analysis (Gross Output). (2013, 12 November). Retrieved April 2, 2013, from U.S. Department of Commerce: http://www.bea.gov/iTable/iTable.cfm?ReqID=5&step=1#reqid=5&step=4&isuri=1&402=15&403=1 • Amadeo, K. (2013). US Economy. Retrieved April 5, 2013, from www.useconomy.about.com: http://useconomy.about.com/od/criticalssues/a/auto_bailout.htm • Cable, J. (2012, September 11). Industry Week Supply Chain. Retrieved April 20, 2013, from www.industryweek.com: http://www.industryweek.com/supply-chain/auto-industry-s-next-bottleneck • Dunbar, W. F., & May, G. S. (1995). Michigan A History of the Wolverine State. Grand Rapids, MI: Wm. B. Eerdmans Publishing Co. • Schiller, B. R., Hill, C., & Wall, S. (2011). The Macro Economy Today. In The Macro Economy Today (pp. 121-123). New York: McGraw Hill. • Sean P. McAlinden, Y. C. (2012, December). CAR Center for Automotive Research. Retrieved April 1, 2013, from cargroup.org: http://www.cargroup.org/?module=Publications&event=View&pubID=98 • Sean P. McAlinden, Y. C. (2012, December). Center for Automotive Research. Retrieved April 1, 2013, from cargroup.org: http://www.cargroup.org/?module=Publications&event=View&pubID=98 • Statisitcs, B. o. (2013, January). Current Employment Statistics. Retrieved April 2, 2013, from Bureau of Labor Statisitcs,: http://www.bls.gov/web/empsit/ceseeb3a.htm • Vlasic, B. (2011, May 20). The New York Times Business Day. Retrieved April 20, 2013, from www.nytimes.com: http://www.nytimes.com/2011/05/21/business/21auto.html?_r=1& • Wallick, R. (2011). Auto Industry Labor Costs in Perspective. Retrieved February 4, 2013, from Bureau of Labor Statistics: http://www.bls.gov/opub/cwc/cm20110419ar01p1.htm • Yu Xia, T. L.-P. (2011). Sustainability in Supply Chain Management: Suggestions for the Auto Industry. Management Decision, 495-512.