For more than a century, the auto industry has been no stranger to economic struggles and recessions. When the pandemic forced auto plant shutdowns and stalled production, none could foresee the economic impact the shutdowns would have on the industry months later. However, the industry currently shows an exemplary trajectory in the face of the ongoing pandemic.
Notably, several large-investment projects are advancing during the summer months. Industry leaders have walked a fine line for the past few months, balancing reopening production and ensuring the health of workers. The continuity of these large-investment projects signals optimism within the industry. Some of the projects began before the pandemic hit. Others are beginning throughout the summer to make an impact post-pandemic.
“The industry has been cautious for a while,” observed Bernard Swiecki, director of the Automotive Communities Partnership, an auto project-monitoring program associated with the Center for Automotive Research in Ann Arbor, Mich. “A number of projects have been walked up to the point of making a final commitment, but then put into suspended animation. So there is a bit of pent-up investment just waiting to get a green light of confidence.
“But there are also a number of companies that just can’t wait for that green light,” he said. “They need to position themselves to gain maximum benefits when the recovery comes.”
As noted by Swiecki, many companies see the current pandemic as an opportune time to invest in the future. The companies can invest and capitalize on growth in a particular segment or hire additional workers to raise production levels at existing plants. With the full economic impact of the pandemic and its shutdowns still unknown, funding projects for the future may aid companies in the long-term.
The North American marketplace’s angle differs. Shutdowns gave factory workers much time off, but even their returns to work did not indicate optimism. Within one week of re-openings, auto plants were sending employees home due to cases of the virus emerging within factory walls. This has left millions of Americans without work.
Fortunately, though, industry leaders are confident in a vast revival of the auto industry following the pandemic. The last major recession of 2008-09 caught the auto industry with severe manufacturing overcapacity. Plants closed in 2009. “This time around, we’re much leaner, and manufacturers have even been straining to meet demand,” Swiecki said. “The industry sees this year’s crisis as not being permanent.
“And even where there is a cash shortage at a company, and an automaker can’t support everything in its plan, you’ll see projects that are related to trucks and SUVs receive priority. The last project you’re going to delay right now is a truck factory.”
Some projects remain full speed ahead.
- Tesla Inc. said last month it will spend $1 billion to construct a pickup factory in Austin, Texas, a project that will require the electric vehicle maker to hire 2,000 people in the next 24 months. But the construction plan represents a major product initiative for Tesla: electric trucks. And there is little time to lose in that category, because competitors see the same gold that Tesla does. General Motors and Ford Motor Co. intend to produce electric pickups. So do startups Rivian and Nikola.
- Mazda Motor Corp. and Toyota Motor Corp. are midstream in a project to build a $1.6 billion joint-venture assembly plant in Huntsville, Ala., announced in January 2018. Mazda badly needs to increase its portfolio of crossovers and has no U.S. capacity. And Toyota is capacity-constrained to meet its future North American growth forecasts.
- Ultium Cells LLC is the 50-50 joint venture between GM and the global battery maker LG Chem. Construction of a $2 billion manufacturing center in Lordstown, Ohio, launched this summer. This plant, expected to employ about 1,000, is no mere production-capacity play. The batteries it will produce will be the cornerstone of a new electrified vehicle strategy for GM in the next three years.
- SK Innovation, the South Korean EV battery maker, began construction last month on its second EV battery manufacturing facility in Jackson County, Ga., as it completes its first one at the site. The combined $1.67 billion project will allow SK to produce enough batteries for 310,000 EVs a year, with Volkswagen as it initial U.S. customer.
- Nikola Corp. broke ground last month on a $600 million plant in Coolidge, Ariz., where it will produce zero-emission Class 8 semitrucks and create thousands of jobs, according to Coolidge Mayor Jon Thompson. Nikola is a startup that intends to build hydrogen fuel cell-powered commercial trucks for large fleet customers, as well as electric pickups.
- Ford Motor Co. said at the end of last year that it will invest $750 million in and add 2,700 new direct jobs at its plant in Wayne, Mich., this year and next year. Ford is launching production of the all-new Bronco and Ranger and creating a vehicle modification center at the location.