Production Shift Threatens Traditional Auto Parts Centres in U.S.

Detroit already has lost dominance of the car market and its share of the all-important light truck business is slipping. Now, the Midwest may lose its traditional role as the centre of the auto parts industry, says a Chicago economist.
“The balance of the auto industry is shifting South,” said Federal Reserve Bank of Chicago economist Thomas Klier.
Michigan, Indiana and Ohio — the long-established hub of the auto parts industry — have lost factories. Southern states now contain 20 percent of the U.S. vehicle assembly capacity and a third of its auto parts plants.
“We’ve picked up a lot more business in the last year because so many other foundries have closed,” said Greg Bierck, vice president of Interstate Castings in Indianapolis, noting a third of the new volume is in auto parts.
Half of the country’s vehicle assembly capacity is in the Great Lakes states, and most of it belongs to the Big Three. Asian and European companies have tended to locate their assembly plants in southern states, where they take advantage of lower costs and non-union workforces, as well as hefty incentives.
Between 1995 and 2003, the number of plants operated by the top auto parts makers in Michigan, Indiana and Ohio has declined, while southern states such as Kentucky and the Carolinas have added parts factories to feed the growing number of auto factories in the South, mainly operated by non-U.S. makers, says Klier.
Of the 1,500 plants operated by the top 150 parts makers, 24% are in Michigan, down from 27% in 1995.
At the same time, Kentucky’s share of parts plants has grown from 3% to 5%, and North Carolina and South Carolina each are home to 4% of parts plants, up from 3% in both states in 1995.
Michigan remains home to the most major auto parts plants supplying vehicle assembly lines, followed by Indiana and Ohio.