Michigan is the most attractive state in the Midwest for new aerospace manufacturing businesses.
That’s according to a recent report from PricewaterhouseCoopers (PwC), a global consulting firm. The annual rankings report, which also raised the state from 8th nationally in 2018 to fourth in the 2019 report, cited the state’s “favorable corporate tax structure” and “healthy economy” as top reasons for the jump in attractiveness.
“It has really surprised a lot of people that they’ve consistently had Michigan in the top 10,” Tony Vernaci, president of the Aerospace Industry Association of Michigan, said of the report.
AIAM represents about 800 aerospace companies in the state, including major global players with operations in West Michigan such as Arconic Inc., Eaton Aerospace LLC and GE Aviation Systems LLC.
The infrastructure that companies in the state have built around automotive manufacturing has given Michigan a head start on the competition in aerospace, according to Vernaci.
“The auto industry is our obvious strength and that’s been a dominant industry here for a hundred years, but what people don’t realize is the synergies and the commonality between aerospace and automotive,” he said. “Our strength in automotive is what gave us this position in aerospace.”
Michigan-based automotive manufacturers and their supply chains have a long history of crossing over into the aerospace industry. During World War II when the U.S. military needed to build more bombers, Henry Ford’s engineers stepped up with the idea to mass-produce the aircraft on an assembly line.
Within 18 months, Ford Motor Co. built Air Force Plant 31, a 3.5 million-square-foot facility, known today as Willow Run. In less than four years, they produced almost half of all the B-24 Liberators in the field. By the end of the war, they were building an aircraft every 59 minutes, according to reports.
Now, The Boeing Co. forecasts the rising demand for 44,040 new jets and related services over the next 20 years. That investment is valued at $6.8 trillion and 65 percent of that value is in the supply chain, according to Vernaci.
“We don’t have any airframers here. We don’t have a Boeing or an Airbus here, but we are the supply chain,” he said. “This is a huge opportunity, and the nice thing about the aerospace industry is an aircraft stays in service for 30 or 40 years. It’s like the gift that keeps on giving because you’ve got the aftermarket side of it as well.”
West Michigan-based manufacturers who diversify into the aerospace industry may also fare better as the next economic downturn draws nearer, according to economists’ forecasts. In the event of a recession, aerospace may be one of the best bets, according to Vernaci.
“The aerospace industry has not been unlike the automotive industry, because it’s a cyclical business,” he said. “This cycle is different because 50 percent of those 40,000 aircraft are to replace an aging global fleet. That could tell you that, regardless of what the economy does, when an aircraft has to be taken out of service, it’s going to be replaced.”
Since the 1970s, the air travel industry has doubled every 15 years — despite economic crises and cycles, Vernaci said. The global aerospace and defense industry reported a record operating profit of $81 billion in 2018, a 9-percent increase over the previous year, according to the PwC report.
In the past 18 months, Michigan has attracted nearly $750 million in aerospace capital investment in the supply chain, the report’s authors said.
Michigan also is home to more than 18 educational institutions with aerospace and aviation-related degrees and curriculum, including multiple programs at Western Michigan University (WMU).
The programs provide the state with a pipeline of skilled workers, said Joe Agostinelli, a partner at Southwest Michigan First, a Kalamazoo-based economic development organization.
“They train both the pilot side and the maintenance side of the aviation industry, and they’re a very large player nationally,” he said. “There’s not a lot of aviation colleges in the country and we’re lucky enough to have one of them.”
The Aerospace Engineering Program at WMU’s College of Engineering and Applied Sciences provides an education that addresses the fundamental understanding of the underlying mathematics, sciences, engineering and design methodologies in the industry. As well, students get exposure to modern simulation and design tools in extensive laboratories used for instruction and research at both the undergraduate and graduate levels, according to the college. The Aerospace Engineering degree at WMU is accredited by the Engineering Accreditation Commission of the Accreditation Board for Engineering and Technology Inc.
In the current talent crisis, that’s “huge,” according to Agostinelli.
“Any manufacturing project, any company in the manufacturing space, if you ask them what their biggest challenge is today, 11 out of 10 will say talent. Where are you going to find that talent if you’re in growth mode?” Agostinelli said. “We have a unique value proposition in that we’re graduating the talent that you need right here.”