uto makers in North America continue to bemoan the burden of competition:
“In view of further reductions in model lifecycles and continuing over-capacity, DaimlerChrysler does not expect any alleviation of the intensely competitive pressure in the automobile industry,” read a typically cold statement in 2005.
John Engler, president of the National Association of Manufacturers and a former governor of Michigan, told a conference audience in November that the Big Three’s legacy costs have forced a “wrenching readjustment” that has involved halving of wages and reduction of job classifications from 48 to five in the case of one Michigan plant.
“In the interest of competitiveness … clearly, it’s going to fall on the areas where the older investments were made,” he said. “Things will get smaller.”
In a late November speech to the Business Roundtable in Washington, D.C., William Ford Jr., president of Ford Motor Co., asked for a dramatic increase in the R&D tax credit to assist U.S. companies in keeping up with their competitors. He asked for something else too, in noting the demands that advanced technologies “created outside our borders” have placed on older U.S. plants:
“I believe there is an opportunity here to convert some of our industry’s existing plants so we can build advanced technological vehicles and components,” he said. “I urge Congress to consider tax incentives to help American manufacturers convert existing but outmoded plants into high-tech facilities.”
As a consequence of such statements, territories in the heart of automotive country are honing their own competitive edges in trying to maintain a piece of the inevitable industry consolidation. The strategies range from a training center in Arkansas to targeted incentives restructuring in Ohio.
DaimlerChrysler‘s several projects provide a case study in industry consolidation trends. But they also exhibit the investment promise inherent in those trends. And they aren’t waiting for federal incentives.
Chrysler Group in December announced it would invest up to $1 billion in its plants in Fenton, Mo., outside St. Louis, where various Chrysler and Dodge pickups and minivans are manufactured. While no new jobs necessarily will be created, preservation of the complex’s 5,500 jobs suits all parties just fine.
Like the company’s recent investments in places like Belvidere, Ill., and Toledo, Ohio, the DaimlerChrysler (DCX) investment in St. Louis is characterized by the drive to build as much flexibility as possible into plants, allowing multiple vehicle types to be built on one assembly line. Among the new features will be a fully robotic body shop, just one feature expected to help reduce model changeover time. In addition, the very job classification reductions that are said to threaten the industry in some areas will in this case be welcomed as part of the team concept the company will be implementing. The South Plant was recognized as the most productive minivan plant in North America by the 2004 Harbour Report.
In the background hover reported conversations between DCX and Volkswagen about DCX taking over VW-brand minivan production, with the St. Louis South plant a leading candidate.
Missouri Gov. Matt Blunt had met with Chrysler Group officials in summer 2005 to discuss the prospective investment, and Blunt later supported the move by Fenton and St. Louis County officials to offer tax abatements to the project. The state’s package comes to $32 million, half of that for training; the local abatements will be valued at $46 million over 15 years.