Site Selection magazine
twitter linkedIn facebook email email
TRANSLATE: 
AUTOMOTIVE INDUSTRY
From Site Selection magazine, November 2016
SHARE THIS ON SOCIAL MEDIA

Economic Recovery ‘Highly Unusual’

GM’s economist weighs in on the strange and positive qualities of the post-Recession economy.

AUTOMOTIVE INDUSTRY
Mustafa Mohaterem, Chief Economist, GM
Photo courtesy of the Kentucky Cabinet for Economic Development

by MARK AREND

General Motors’ Chief Economist Mustafa Mohaterem addressed the Kentucky Automotive Industry Association’s (KAIA) AutoVision Conference in Lexington on September 12. His topic: the global and national economic drivers shaping the prosperity of the automotive industry in 2016 and beyond. Following are excerpts of his remarks organized by the topics he addressed:

The economy

Our economy is growing very gradually and somewhat erratically. We didn’t get the bounce back from the recession this time … nobody has come up with a clear answer as to why. Because it’s been such a slow recovery and in some respects an uncertain one, we’re not building up imbalances — there is no inflation in sight. Balance sheets are very strong. I don’t see another downturn coming yet.

We are beginning to see pockets of labor shortages, and the Fed is debating whether it’s time to raise interest rates [the Fed did not raise rates at the September FOMC meeting]. Once inflation is built into the system, it’s very difficult to wring it out.

This has been the slowest economic recovery we have had in the post-war era, or probably any era. Average economic growth is about 3 percent. We’ve been averaging just under 2 percent in this recovery, which is highly unusual.

Vehicle sales

Year to date, we’re running almost parallel with last year, which was a record year. I still believe we will set a new record this year or be close to it.

Auto sales is the really good news of this recovery. It’s the only sector of the US economy that has done as well or better than in a typical recovery. We’ve had very steady growth. And this is a North American phenomenon, not just a US one. Canada is at an all-time record, and Mexico is well above its all-time record sales. Many of our businesses are structured around North America, not just the US, so that’s good news.

Crossovers and SUV sales combined have surpassed car sales, and that’s a global trend — in China and Western Europe, for example. Across the globe we’ve got shortages in capacity. All our market research is telling us this is what people want.

The job market

The job market has taken much longer to come back [from the recession] than we typically see. If you had a job, you were fairly secure for four or five years. But if you’re young, entering the job market or were laid off in the deep recession and now want to come back, jobs are much harder to find. Also, the Obama administration changed a lot of rules and regulations, so a lot more Americans went on disability. The labor force participation rate shrank. Employment in the US took a long time to come back from where it was pre-recession. The number of people on long-term unemployment has really gone up, the number of people not in the labor force has gone up, and until recently, the young people coming into the labor force were not finding the types of jobs they expected they would have. All of that is changing, and that’s positive news going forward.

Brexit

We have not seen as big an economic impact as people had feared. But we have seen a big impact on currency markets. For companies like GM or Ford, where the UK was a big revenue source and revenue is in pounds, we’re looking at much lower revenue in dollar amounts coming out of the UK. That’s true across the board — they’re not the only ones selling a lot to Europe in the UK. Many of the German motor companies face the same thing, as do Toyota and Honda. A weaker pound, while over the long term it might help the competitiveness of the UK operations, short term, it’s certainly hurting financially.

Autonomous cars

For now, services like Lyft and Uber are enablers. They allow people to retain mobility [particularly for older drivers]. The journey to autonomous will make cars a lot safer, especially for older people to operate. This process will change the demographics of the car industry. Older people will stay in the market a lot longer, and as the price of these technologies comes down, younger people may be able to come into the market. It will mean more drivers, more vehicles on the road. These technologies will change the industry for the better.

The long-term demand for vehicles remains very positive. The states and companies that plan on strong demand for cars with changing technology and changing parameters of that technology are very well placed. There is a competition among states about who will lead in that technology. Being a Michigander, I believe we have a significant head start on almost everybody and a very supportive legislature that has voted to allow testing of autonomous cars on public roads. It’s new enough technology that there will be significant changes that everybody can [participate in]; there are significant entrepreneurial opportunities. This is a solid, strong industry with a lot of opportunities for the innovators. North America is very well positioned to be a very significant player.

Mark Arend
Editor in Chief of Site Selection magazine

Mark Arend

Mark Arend has been editor in chief of Site Selection magazine since 2001. Prior to joining the editorial staff in 1997, he worked for 10 years in New York City at Wall Street Computer Review, ABA Banking Journal and Global Investment Technology. Mark graduated from the University of Hartford (Conn.) in 1985 and lives near Atlanta, Georgia.

 



comments powered by Disqus

Site Selection online is a worldwide service of Conway, Inc. ©1983-2017, all rights reserved.
Data is from many sources and not warranted to be accurate or current.
For contact information visit our staff page or send general information queries to Cathie Wendt.
Send direct technical inquiries or comments to webmaster bounce@conway.com. View our Privacy Policy.
HOME | SITE SELECTION MAGAZINE ARCHIVES | SUBSCRIBE