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Sunday, 30 March 2014 22:00

Report affirms Michigan’s position as ‘epicenter’ of automotive R&D

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A new report issued by the Federal Reserve Bank of Chicago has some good news for Michigan’s auto industry.

Michigan is the “epicenter of automotive R&D in the U.S.,” an $11.7 billion sector for which the state is responsible for between 70 percent and 80 percent of all activity, authors Thomas Klier, Bill Testa and Thomas Walstrum stated in “Michigan’s Automotive R&D Part II.”

As automakers continue to add technology and new capabilities to vehicles, that’s placed an even greater emphasis on R&D in the industry, which continues to bolster Michigan’s economic growth and competitiveness, the report stated.

“The state has been highly successful to date in sustaining its leading automotive R&D concentration,” the report stated. “Yet, for good reason, policy initiatives in the state are aimed at retaining and building on its strength.”

As a hub for the industry’s R&D and innovation, the state is positioned to grow, particularly in high-paying, technical jobs such as engineering, the authors said. Even as the chemical, medical, office furniture and other industries play a key role in Michigan’s economy, the report finds “automotive engineering has come to dominate further in recent decades.” In the middle of the 20th century, only 30 percent of all the state’s engineers were in the automotive industry, but that concentration increased to 51 percent by 2012.

At the same time Michigan companies have added engineering capabilities in the automotive sector, they’ve been shifting more and more production and traditional manufacturing to other areas. The Chicago Fed report states that “since 1950, Michigan’s share of (automotive) production workers has fallen from 54 to 19 percent, a loss of approximately 255,000 jobs.”

As MiBiz has previously reported, many assembly jobs have shifted southward over the past few decades, first going to states like Tennessee and Alabama and then across the border into Mexico. This has a number of southern auto suppliers looking to tap into Michigan’s strengths in research and development, as an October 2013 Brookings Institution report suggested.

But even as cars themselves are made elsewhere, the design, engineering and technology are originating from Michigan.

“(The shift from production to R&D) is a good trend,” said Dr. Sean McAlinden, executive vice president of research and chief economist at Ann Arbor-based Center For Automotive Research (CAR). “These are good paying salaries. There’s a new calling for different kinds of engineers every couple years. … Today, it’s software and connectivity.”

R&D comes into play in numerous ways for the state’s leading industry. Connectivity, for example, links vehicles’ infotainment systems with smartphone applications. It is also one of the four basic areas of technology that the state has identified as it constructs its 30-year strategic plan for the industry, as MiBiz has previously reported.

“(CAR has) heard from (auto) executives that the instrument panel is the battleground, but people don’t know what they want,” McAlinden said.

Other critical areas of R&D in the state’s plan include developing advanced powertrains, increased safety features and efforts to improve fuel efficiency and develop alternative powertrains.

The Chicago Fed report did not offer much as far as easy answers for Michigan to remain dominant in R&D given the competition from other regions.

“Company reorganizations and the geographical shifting of activities that tend to be interdependent with technological activities represent risks to Michigan’s position,” the report said. “It may be beneficial for some industries to locate technology and production in close proximity to facilitate (and reduce the cost of) communication and transportation between the two activities.” 

Read 7233 times Last modified on Sunday, 30 March 2014 22:14

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