WATCH | MICHauto And CAR Present: The Economic Impact Of COVID-19 On Michigan’s Automotive IndustryJuly 31, 2020
A leading lineup of automotive industry experts discussed the economic impact of COVID-19 on automotive and the ongoing work required to help the industry recover from the COVID-19 pandemic. The two-part discussion focused first on the industry outlook and then on the policy response.
Panel One: Economic Outlook
Recovery was top of mind for the first panel conversation with IHS Markit’s Kristen Balasia, Magna International’s Eric Wilds, and General Motor Co.’s Doneen McDowell. All agree that there is a spirit of resilience in automotive in Michigan. OEMs like Ford and GM were able to step quickly into learning to produce much-needed PPE and, as a result, learned a tremendous amount of what would be required for their return to work as they came back online in May.
“I, along with an army of folks, went to Kokomo, Indiana to make ventilators,” said McDowell. “We got a good understanding of what our COVID playbook should be and I think everyone recognizes our priority is first to keep our employees safe so that they can go home and keep their families and communities safe.”
In addition to keeping employees healthy, there are positive signs on the economic road to recovery. OEMs are really tracking the data and sales rates to focus and prioritize on the production of high-margin pickups and SUVs, where there continue to be strong sales and returns. The IHS Markit forecast for U.S. light vehicles currently sits at 13.3 million, down 21% from the beginning of the year.
“We definitely see some positive signs,” said Balasia. “We think that this is going to be a deeper recession than we saw in the last dip and financial crisis of 2008 and 2009, but hopefully shorter….It’s going to be really important that OEMs stay close to the sales rate and on which specific vehicles and that they have the right production plans and worker availability to support the demand.”
Wilds concurred with Balasia on an optimistic second half of the year, explaining that fluctuation in product segments is a challenge, but no different than during the normal course of business. Suppliers like Magna International continue to focus on the successful ramp-up of high performing products and mitigate some of the lower-volume segments.
With the average age of vehicles on the road at 11.9 years and a possible extension of another four to six months due to COVID-19, strategic planning is critical for the supply chain to meet consumer demand when customers are ready to buy. It is also important to continue focusing on long term trends like electrification and ADAS for a strong future.
When asked by “Autoline” host and panel moderator John McElroy about how productivity and quality are impacted on the assembly lines with the new safety protocols in place, McDowell was clear that there will not be an impact on quality of parts. Team members understand why masks, gloves, and physical separation are in place and continue to support those requirements.
“To address the pandemic is a team sport,” said McDowell. “We all need to do our part. This is not just at work, it’s when you’re home and in the community; and the more we as individuals can protect the herd or the whole, I think it will be better for everyone involved.”
Panel Two: Policy Response
When asked by Mcelroy how Michigan could be more like South Korea, Germany, or New Zealand in terms of COVID-19 recovery, Sen. Mallory McMorrow noted that a full recovery is a matter of will. At any given moment, we are only four to six weeks away from containing the virus. The community and industry need to continue to be diligent, reflect on what we did well, and keep going.
The state’s priority is keeping Michigan the best place to do automotive work. The Michigan Economic Development Corp.’s (MEDC) Josh Hundt and Center for Automotive Research’s Kristin Dziczek reinforced economic recovery goes hand-in-hand with health and safety. Strategic actions to support small automotive and mobility businesses across the state have been a significant focus for the MEDC. The Pure Michigan Business Connect Access and Retooling Grant helped 12 small businesses quickly retool to manufacture 5.5 million pieces of PPE. Further, campaigns like #MaskUpMichigan and Work Smart, Play Smart to Keep Manufacturing Open spread the message about health and safety beyond the workplace.
On the distinctly complex, global nature of this industry, Dziczek noted the importance of keeping a healthy flow of parts, healthy workers, a healthy supply chain, and healthy demand to keep the industry going. And beyond the automotive business tactics involved for recovery, McMorrow explained the need for bipartisan collaboration on budgetary and Federal funding matters.
Another critical component will be a robust talent pipeline. The state need to build on its strengths with the high concentration of engineers, strong manufacturing and skilled trades, and growing technology talent, especially in terms of software engineering. Key to maintaining Michigan’s leadership in these areas is education funding. As part of the MI Safe Schools Roadmap, the state allocated $256 million in funding for K-12 schools, with continued pushes for additional Federal funding to ensure student, teacher, and staff safety.
As the industry’s future continues to unfold and new macro trends emerge, Michigan’s economy post-COVID-19 will be poised for recovery and long-term growth, despite the challenges along the way.