The Automotive Communities ProgramThe Automotive Communities Program

Sean P. McAlinden, Ph.D.Vice President of Research and Chief Economist

Center for Automotive Research (CAR)Ontario Mayors for Automotive Investment

Cleary International Centre

Windsor, ONOctober 6, 2006

Motor Vehicle Production by Country, 2005

Millions of Units 11.98

10.80

5.76 5.71

3.70 3.552.75 2.69 2.53

1.80 1.67

0

2

4

6

8

10

12

14

US Japan Germany China S. Korea France Spain Canada Brazil UK MexicoSource: OICA, Ward’s Automotive

It’s All About Product…..

North American Production By Country Year to Date August 2006

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

8.00%

9.00%

10.00%

11.00%

12.00%

13.00%

14.00%

15.00%

16.00%

17.00%

18.00%US Production

Canada

Mexico Production

Canadian % Of North AmericanProduction

(In M

illio

ns)

North American Production By Country Year to Date August 2006

70.00%

72.00%

74.00%

76.00%

78.00%

80.00%

82.00%

84.00%

86.00%

88.00%

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%U.S. % Of North American Production

Canadian % Of North AmericanProductionMexican % Of North American Production

Canada Becomes More Expensive

1.11

1.60

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

Jan-99Ju

l-99

Jan-00Ju

l-00

Jan-01Ju

l-01

Jan-02Ju

l-02

Jan-03Ju

l-03

Jan-04Ju

l-04

Jan-05Ju

l-05

Jan-06Ju

l-06

CDN $

U.S. $ Down 31% Against the Loonie

The Automotive Communities Program• Funded for Development by the Mott Foundation• Based at Center for Automotive Research• Program is beginning its FIFTH YEAR of assisting communities• A Joint Industry-Community Information Outreach and Conference

Program• Self-funded through Community Contributions

• 32 US/Canadian Upper Midwest Traditional Automotive Communities• 5 states, 1 province, 6 utilities

• Top Five N. American Vehicle Firms and 8 of the Largest Suppliers (GM, Ford, DCX, Honda, Toyota)

• Only program of its kind bringing multi-national communities and auto companies together to address common issues related to the ever-changing automotive industry

• To serve as a not-for-profit auto advisory and information service to traditional automotive communities

• Provide real time communication with automotive firms – and contacts

• Advise communities on local policies that impact auto renewal.• Share product change and opportunity information• Perform impact joint research

ACP Assistance to Specific Communities

Ontario

MO

MI

INOH

IL

The ACP Region

OEM and Supplier Facilities

ACP Member Communities 2006 - 2007Ministry of Economic

Development & Trade - Ontario

Canada

Windsor-Essex County

Development Commission

London Economic

Development Corporation

Greater Toronto Marketing Alliance

Nottawasaga Futures

Canada's Technology

Triangle

The Indy Partnership

Allen County Department of Planning (IN)

South Central Indiana

Economic Development

Group

Town of Normal (IL)

The Right Place, Inc.

Bay Future, Inc. (MI)

City of Bay City (MI)

Saginaw Future Inc.

Michigan Economic

Development Corporation

(MEDC)

Flint-Genesee Economic

Growth Alliance

Economic Development Alliance of St. Clair County

(MI)

Missouri Department of

Economic Development

St. Louis Regional

Automotive Partnership

City of Hazelwood (MO)

City of Fenton (MO) City of Wentzville

(MO)

Regional Growth

Partnership (Toledo, OH)

Ohio Department of Development City of Lima (OH)

Wood County Economic

Development Commission

(OH)

Defiance County Economic

Development (OH)

Perry County Development

Corporation (IN)

Indiana Economic

Development Corporation

City of Ft. Wayne

Grant County Economic

Growth Council(IN)

Project Future -Economic

Development for South Bend, etc.

ACP Member Companies/Utilities/Misc. 2006 - 2007

Consulate General of

Canada

Indiana Municipal Power Agency (IMPA)

American Electric Power (AEP) Hoosier Energy Duke Energy CMS Energy

FirstEnergy

Denso International America, Inc.

Federal-Mogul Corporation

Ford Motor Company

General Motors Corporation

Honda of American Mfg.

Inc.Lear Corporation

TRW Johnson Controls

ArvinMeritor, Inc. DaimlerChrysler Corporation

Dana Corporation

Toyota Motor Manufacturing

Inc.

Delphi Corporation

Three Major Activities

• Automotive Information Outreach

• Automotive Communities Studies

• ACP Membership Meetings Forums

Automotive Information

• Industry updates• Product timing information• Investment and dis-investment alerts• Database and analysis of major automotive investments• Partners with JD Power, CSM Worldwide, Elm Intl., Polk• Major supplier contract activity• Arrangement of special meetings• Significant technology developments• New productivity developments

Major automotive investments from 1993-2005

Source: Book of Deals, CAR

4 out of Top 10 Global Transportation Sector Investments are in ACP Region--2005

What Are a Company’s Options?

1 Close

2 “Warm Idle”

3 Update current products

4 New Product(s)

5 ??????

Lessons Learned

• Strong and persistent leadership• Building partnerships• Focus on industry & job retention

– Success produces new jobs/investment• Maintaining the right business environment• Adopt proactive strategies• Automotive Action Groups

ACP Meetings to Date• January 22, 2003 - General Motors World Headquarters, Detroit, MI• May 28, 2003 - Daimler Chrysler Technology Center, Auburn Hills, MI• August 3, 2003 - Grand Traverse Resort, Traverse City, MI (MBS)• October 28, 2003 - Ford World Headquarters, Dearborn, MI• December 16, 2003 - Delphi Corporation, Troy, MI

• May 10, 2004 - General Motors World Headquarters, Detroit, MI• August 2, 2004 - Grand Traverse Resort, Traverse City, MI• November 9, 2004 – Johnson Controls Inc., Plymouth, MI• January 19, 2005 – Automotive News World Congress, Detroit, MI• April 29, 2005 – Denso Manufacturing Michigan Battle Creek, MI

• August 3, 2005 – Grand Traverse Resort, Traverse City, MI (MBS)• September 7, 2005 – Honda of America Manufacturing, Marysville, OH• January 11, 2006 – Cobo Hall, Detroit, MI (North American Intn’l Auto Show)• April 13, 2006 – Toyota Motor Manufacturing, Princeton, IN

• June 28, 2006 – Dana Corporation, Maumee, OH• August 9, 2006 – Grand Traverse Resort, Traverse City, MI (MBS)• October 12, 2006 – Ford World Headquarters, Dearborn, MI• January 2007 - TBD

Stuck on a Plateau or Worse! Total U.S. Sales of Light Vehicles:

1992 - 2007

8.2 8.5 9.0 8.6 8.5 8.2 8.2 8.8 9.0 8.7 7.7 7.9 8.0 8.1

2.5 2.6 2.8 3.0 3.1 3.4 3.8 3.8 3.9 4.2 4.7 4.8 4.42.6 2.9 3.4 3.3

4.3 4.1 4.4 4.6

8.6 8.4

7.88.3

2.5

4.03.74.4

3.64.64.6

0.02.04.06.08.0

10.012.014.016.018.020.0

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

Car MV/CSU/CUV Other Truck/Van

Mill

ions

Year

13.3 13.915.0 14.7 15.1 15.0 15.6

17.0 17.4 16.9 16.917.216.516.8 16.6 16.6

North American LV ProductionFord and GM NA production below recession levels

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

EGM Ford Chrysler Group Other

Thou

sand

s of

Uni

ts

Down Below 54% “Detroit 3” U.S. Market Share1986 – 2006/1st 8 Months

(Sales of Detroit 3 N. American “owned” production)

25.521.8

39.2

33.5

11.414.7

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06/1st8 Mo.

Year

Perc

ent

Ford GM Chrysler

17.0%

12.8%

22.8%

Source: Kim Korth, IRN presentation to OESA 2005 Nashville Regional meeting

1999 2000 2001 2002 2003 2004 2005

BREED Technologies

(9/99)

Key Plastics(3/00)

Cambridge Industries(5/00)

Mexican Industries

(7/01)

A.G. Simpson(10/01)

Federal Mogul(12/01)

Harvard Industries(2/02)

DCT(8/02)

GenTek(10/02)

Exide Technologies

(4/02)

Talon Automotive

(7/01)

Hayes Lemmerz(12/01)

Aetna Industries(2/02)

Insilco(1/03)

Valeo(1/02)

Venture Industries

(5/03)

Atchison Casting(8/03)

Precision Tool & Die

(12/03)

Veltri Metal(1/04)

Citation(9/04)

Amcast Industrial(12/04)

Oxford Automotive(12/04)

Intermet(11/04)

Tower(2/05)

Collins & Aikman(5/05)

Meridian(4/05)

EaglePicher(4/05)

2006

Dana(3/06)

Delphi(9/05)

Hayden(2/06)

Major Supplier Bankruptcies . . .and now the largest, Delphi, and another large one, Dana

?

So . . .GM Will be the Size of Ford, and Ford the Size of Chrysler

and Chrysler the Size of . . .

6.2

4.3 4.63.3 3.1

3.2

0

1

2

3

4

5

6

7

8

GM-2004 GM-2008 Ford-2004

Ford-2010

Chrysler-2004

Chrysler-2008

Mill

ions

(Capacity equal to the size of Chrysler will be closed . . . (Capacity equal to the size of Chrysler will be closed . . . About 22% since 2004, or 3.2 mil. units.)About 22% since 2004, or 3.2 mil. units.)

2004-2010 Change in North American Vehicle Production Capacity

Chrysler!

The Landscape is Changing

Oklahoma City-2006

Lansing Craft Centre-2006

Spring Hill - 2006

Atlanta – 2008

Oshawa 2 - 2008

Moraine - 2006

Lansing Metal - 2006

Pittsburgh Metal - 2007

Portland - 2006

Ypsilanti SPO - 2007

St. Catherine’sPowertrain -2008

Flint Engine 1 - 2008

Baltimore - 2005

Linden - 2005

Lansing M - 2005

Lorain - 2005

GM, Ford, Delphi & ACHU.S. Plant Shutdowns and Line Trimmings

Announced and Executed, 2005-2008

St. Louis - 2006Doraville - 2008

Wixom – 2007

Batavia – 2008

Windsor Casting – 2008

Ford Shutdowns, +7 More TBDDelphi Plant Shutdowns

ACH Plant Shutdowns

GM and Ford Job Cuts: 22 Plants and Lines61,500 Hourly (28,783 in Plant Shutdowns), 17,000 Salaried to start

Delphi Job Cuts: 21 Plants23,000 in Plant Shutdowns and Selloffs600 other salaried

ACH Job Cuts: 14 Plants27,600 in Plant Shutdowns and Selloffs500 other salaried.

Total = 120,200 Jobs

Twin Cities - 2008

Norfolk - 2008

Essex Engine – 2007

Maumee Stamping – 2008

0.2

4.6

10.5

-13.9

-8.0

-11.0

10.9

-4.2

-20 -15 -10 -5 0 5 10 15 20

Small Car

Middle Car

Large Car

Luxury Car

CUV

SUV

Van

Pickup

Percentage Change

Segment Breakdown - U.S. LV SalesYOY % Change1st Half, 2006

Growth Segments TotalNearly 75% of the Market by 2012

0%10%20%30%40%50%60%70%80%90%

100%

2005 2006 2007 2008 2009 2010 2011 2012

Large RWD B-Segment C-Segment CUV/MAV Other*

* Mostly SUVs, pick-ups & vansSource: CSM Worldwide

CUVs Built in the Upper MidwestOakville, OntarioFord Edge, Lincoln MKX:October, 2006Ford Fairlane,Lincoln CUV: Mar 2008

Alliston, OntarioAcura MDX: Sep 2006

Honda MAV: Jan 2009

Delta Township, MIGMC Acadia, Saturn Oulook: Nov 2006Buick Enclave: April 2007Chevrolet CUV: June 2008

CAMI—Ingersoll, OntarioSuzuki XL7: August 2006

Chevrolet Equinox: July 2009GMC CUV, XL7: Jan 2010

East Liberty, OHElementJuly 2008

Belvidere, ILDodge Caliber

U.S. Sales of RWD Independent Suspension Passenger Cars

2001 – 2012

0.60.7

0.7

0.91.1

1.2 1.1 1.11.3

1.4

1.8 1.8

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Uni

ts (M

illio

ns)

Source: CSM Worldwide

An Integrated Industry

TXMS

ALGA

SC

TN

KY

INIL

MI

MITSUBISHI-NORMAL

TOYOTA-PRINCETON

TOYOTA-SUBARU

HONDA EAST LIBERTY HONDA MARYSVILLE

TOYOTA

SPARTANBURG-BMW

I-65

NISSAN-CANTONHYUNDAI-HOPE HULLHONDA-LINCOLN

TOYOTA-SAN ANTONIO

MERCEDES BENZ-VANCE

TOYOTA-HUNTSVILLE

OH

NISSAN

I-75

Roads Heading South …?

InternationalSupplierAndManufacturerLocations

KIA-TROUP COUNTY

New International Assembly Facilities in U.S. & Canada: 2006-2009

Source: Automotive News, Harbour Report, CAR research

Company Location WorkersInvestment ($ million)

New Capacity

TMM-TexasTMM-Canada

Toyota-SubaruKia

Honda

San Antonio, TXWoodstock, ON

Lafayette, INTroup County, GA

Greensburg, IN

2,0001,300

7002,5001,500

8509503001,200550

200,000150,000100,000300.000200,000

New Vehicle Total 8,500 950,000$3,850

Total International Capacity by 2009 = 7.3 mil., 40.3%Big Three Capacity by 2010 = 10.9 mil., 59.7%

Honda in the Midwest—Minimize Costs, Logistics, Supplier Upheaval

Source: Honda of America, 2006

•• •••• ••••••••••••• ••••••

••

•• •• ••••••

•

•

••

•

•

•

•

• ••

•

••• • •

••

••

••

•• •

• ••

••

•••••

•• •

••••

• •• •• •••••• ••

•••• •

••

•••

••

••••••

•••

••••• •

••••

••••

•

•

•

• •••

•

•

••

•

••

••

•

• •

••

••

•• ••

•

•

•

•

•

•

•

•

•

••

•

•

•

••

•

••

••

•

•

•

••

•

•

•• •

•

•

•

•• •••

• •

•

•

••

••

•

•

•

••

•

•

•••

•

•

•

•

•

••

•

••

• •••

•

•

••

• •••

•

•

•

•

•

•

••

•

• •

•

••

••

•

•

•

•

•• ••

•

••• • • •

•

••

•

•

•

•

•

•

•

•••

•

••

•

••

•

•

•

•

•

•

•

•

••

•

•

•

•

•

•

•

•

•

•

•

•

•

Toyota in the Midwest (and beyond)—

Minimize Costs, Logistics, Supplier Upheaval?

• Toyota Pursuing:• Increased Local Sourcing• Additional Engine plant• Additional Assembly plant(s)

Average Incentives Compared to Kia and Toyota 2006

Announcements$409.2

$130.0$68.0

$22.2$0.0

$50.0$100.0$150.0$200.0$250.0$300.0$350.0$400.0

Toyota-Lafayette, IN

North Average South Average Kia, GA

Toyota-Lafayette, INNorth AverageSouth AverageKia, GA

Mill

ions

Source: CAR research—Book of Deals

Average Incentive Comparison(OEM Plants 1993-2005)

$57.1 $44.2

$61.1

$24.7

$6.8

$4.1

$0.0$20.0$40.0$60.0$80.0

$100.0$120.0$140.0$160.0$180.0$200.0

North SouthTax Abatements Infrastructure Employee Recruitment, Trg., Screening

Source: CAR research—Book of Deals

Mill

ions

OEM Facilities in ACP Region

Type NA Facilities ACP Facilities ACP % NATransmission 13 11 84.6%Engine 24 16 66.7%Stamping 39 30 76.9%

NA Prod. 2003 ACP Prod. 2003 % ProductionTransmission 10,765,687 10,162,492 94.4%Engine 11,637,291 8,310,735 71.4%Stamping (pc/hr) 24,758 19,326 78.1%

Source: The Harbour Report, 2003

U.S.Assembly Plant

2,000 Jobs

.56 Powertrain Plants or 560 Jobs

.56 Stamping Plants or 850 Jobs

3,800 Parts & Component Jobs or a Total of

7,210 Manufacturing Jobs!

And another 7,700 Non-manufacturing Supplier Jobs

Vehicle Assembly is Huge Driver of Economy

Source: CAR Research

7.5

Approximate National Automotive Manufacturing Multiplier

of

6.5 U.S. Jobsfor each Job at a

U.S. Motor Vehicle Firm

Source: Contribution of the U.S. Motor Vehicle to the Economies of the United States, California, New York, and New Jersey, Center for Automotive Research, 2003, Contribution of Toyota to the Economies of Fourteen States and the United States in 2003, Center for Automotive Research 2005