Driving Michigan‟s Automotive
Industry Forward
Steve Hilfinger, Executive Vice President &
COO
Michigan Economic Developme...
2

Michigan Approach
 Business-friendly tax and regulatory
environment
 Level playing field
 Market-based solutions
NOT...
3

Positive Change for Business
 Business taxes are
lower than at any time
in decades
 Burdensome
regulatory processes
a...
4

New Focus

Now

Then
Business
Climate and
Development

©2014 Foley & Lardner LLP

Tax Based Incentives Economic Gardeni...
5

Competitive Tax Structure
Corporate tax rank
#7 from #49
Overall tax rank
#12 from #18
3rd best among the
nation’s 12 l...
6

Regulatory Reinvention
Revising and removing outdated/burdensome
rules that block innovation, growth and job
creation.....
7

Focused & Balanced Approach

 Business Growth &
Investment
 Talent Enhancement
 Vibrant and
Reinvigorated
Communitie...
Michigan Business
Development Program
 Upfront cash to fund new facilities and
expansions
 Typically $5 – 10K for each n...
9

MBDP Highlights – Automotive Investments
FY 2013 To Date
 34 Projects
 $953.9 million Projected Total Private
Investm...
10

America‟s Comeback State
 Added about 230,000 private sector jobs since Dec. 2010

 No. 1 for availability of skille...
Nigel Francis: Michigan
Automotive Adviser
 Nigel Francis, senior automotive adviser to the
Governor and senior vice pres...
State of Michigan Automotive
Strategic Plan
Vision

“We will leverage the strengths and assets of Michigan’s
automotive in...
13

Michigan is Automotive!
Jobs
 Auto supports 513,300 jobs in

Michigan1


Michigan has 12 assembly
plants & 35 automa...
14

Strategic Plan Development Team Global
Vision “Think Globally, Act Locally”

Automotive Technology Expertise

Future V...
Three Key Dimensions to the
Strategic Plan

Strengthen Michigan as
the center of the North
American automotive
Retain and ...
Current Situation &
Opportunities for Michigan
Current Situation
 Michigan’s automakers and
suppliers have stabilized and...
17

Opportunities in Connected & Automated
Vehicle Technologies; Must Close Talent Gaps
Key Future Drivers
 The confluenc...
Michigan Must Lead Transformation
to Lightweight, Multi-Material Vehicles &
Infrastructure
Key Future Drivers
 Future veh...
Increasingly Electrified Powertrains;
Opportunities Lie in Advanced Systems
Integration
Key Future Drivers

Strategies for...
Leverage Expertise to Implement
„R&D, Advanced Engineering & Pilot Plant‟
Strategy
Key Future Drivers
 Automakers will ac...
Must Build on Existing Logistics &
Supply Chain Assets to Support the State‟s
Automotive Industry
Current Locations of Sup...
Success will be Driven by Key
Enablers, Supported by the Right Strategic
Plan, Stakeholders, Resources & Processes
State o...
23

Road Map for Enabling Michigan‟s
Future Automotive Industry
Phase
II

Phase
I
Coordinate &

Build Virtual
Foundation

...
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Driving Michigan’s Automotive Industry Forward - Steve Hilfinger

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Presented by Steve Hilfinger, Executive Vice President & COO of the Michigan Economic Development Corporation on January 15, 2014. Visit http://www.MichiganBusiness.org.

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  • Burdensome regulatory processes are being streamlined and eliminated.More than 1,500 outdated or burdensome environmental, workplace, and business rules that blocked innovation, growth, and job creation have been revised or removed.Michigan is the only Midwestern state whose workers’ compensation pure premium rates have decreased by over 7 percent each of the last two years.Unemployment Trust Fund, which was $3.9 billion in debt, now has a balance of $1.5 billion.State has launched the Reinventing Performance in Michigan A $1.5 billion budget deficit has been erased without using any accounting gimmicks. Long-term liability has been reduced by more than $20 billion or $2,000 per Michigan resident. State’s rainy day fund is up to $505 million.
  • Direct + Spinoff income from Automotive sector: Auto industry generates $500 Billion in paychecks annually1
  • Multiple consulting firms had input to the analysis you see in the presentation …
  • Key takeaways:Michigan’s auto industry is back and environment is ripe for new investmentMichigan must prepare for global changeNeed to focus on a strategic plan and right investment in R&D to ensure Michigan’s auto industry’s future growth
  • Key takeaways:There is a huge opportunity for Michigan to become the global leader in the confluence of vehicle and automated technologies. Other regions and other foreign automakers can and will lead on specific technologies in CAV but Michigan must be the leader in bringing the technologies together. Michigan obtaining a leadership position will help ensure Michigan’s future global relevance in the automotive industry. While this is a great opportunity, there is also a clear risk in other technology firms being able to enter this sector. Implications across the board in investment, industry cooperation, legislation, etc.
  • Key takeaways:Michigan’s infrastructure has been and continues to be high-volume mild steel, and it lags other regions in shifting to lighter weight materials. Transformation of infrastructure will not happen quickly, long-term strategy and effort is needed. Currently there is a diverse set of resources and stakeholders working on lightweight and advance multi-materials. Recommendation is a mechanism to focus industry resources and collaboration to catch up to the expertise being developed other global regions. Collaboration center should emphasize:Benchmarking and gap analysis Technology road-mappingMixed material applications (cross-industry)Supply chain developmentNew business accelerators
  • Key takeaways:Increasing regulatory requirements in developed countries will continue trend toward powertrain electrificationIncreasing cost of technology, and different regulatory targets in different regions will require a flexible adaptable approach to powertrain designOther regions and foreign automakers lead in certain electrification and powertrain technologies. Similar to CAV, Michigan should not focus on being the global leader in every single technology area … The opportunity for Michigan is in advanced system integration/optimization. The ability to develop a diverse set of advance propulsion solutions driven by differences in global regional customer preferences and regulatory requirements. To be the global leader in integrating and optimizing a “powertrain of choice”.
  • Key takeaways:Build where you sell paradigm presents long term challenges to Michigan’s manufacturing base, both on a global and U.S. regional basisTwo pronged strategy:Preserving and defending Michigan’s current manufacturing base, and look for strategic growth opportunitiesEmploy a “R&D and Pilot plant’ strategy for developing future manufacturing technologies
  • Key takeaways:To preserve and defend manufacturing base, it is vital to build on Michigan’s existing logistics and supply chain assetsMichigan must aggressively leverage current advantages in location of suppliers and assembly plants to attract new investmentFreight and logistic bottlenecks must be addressed
  • Key takeaways:Foundation of the plan is engaging the right stakeholders, developing key resources, and implementing the right processes to execute the strategic plan. The plan focuses on developing three key enablers of the strategy: technology, talent and capitalAll three of those enablers are critical - Michigan fails at any of those three, the strategy will not be robust
  • Driving Michigan’s Automotive Industry Forward - Steve Hilfinger

    1. 1. Driving Michigan‟s Automotive Industry Forward Steve Hilfinger, Executive Vice President & COO Michigan Economic Development Corporation ©2014 Foley & Lardner LLP
    2. 2. 2 Michigan Approach  Business-friendly tax and regulatory environment  Level playing field  Market-based solutions NOT government picking winners and losers ©2014 Foley & Lardner LLP
    3. 3. 3 Positive Change for Business  Business taxes are lower than at any time in decades  Burdensome regulatory processes are being streamlined and eliminated  MEDC a “gap filler” to meet market needs ©2014 Foley & Lardner LLP
    4. 4. 4 New Focus Now Then Business Climate and Development ©2014 Foley & Lardner LLP Tax Based Incentives Economic Gardening MBT CIT Centralized Regional
    5. 5. 5 Competitive Tax Structure Corporate tax rank #7 from #49 Overall tax rank #12 from #18 3rd best among the nation’s 12 largest states Best in the Midwest! ©2014 Foley & Lardner LLP At Least 80% Tax Cut for Businesse s
    6. 6. 6 Regulatory Reinvention Revising and removing outdated/burdensome rules that block innovation, growth and job creation... 1,539 AND COUNTING! Workers’ compensation premium rates decreasing Unemployment Trust Fund in the black Reinventing Performance in Michigan (RPM) ©2014 Foley & Lardner LLP
    7. 7. 7 Focused & Balanced Approach  Business Growth & Investment  Talent Enhancement  Vibrant and Reinvigorated Communities  Michigan’s business and tourism image ©2014 Foley & Lardner LLP
    8. 8. Michigan Business Development Program  Upfront cash to fund new facilities and expansions  Typically $5 – 10K for each new job created  More flexibility and utility for businesses  Greater cost certainty to the state » Replaces previous MEGA program » Legacy MEGA credits still being managed ©2014 Foley & Lardner LLP 8
    9. 9. 9 MBDP Highlights – Automotive Investments FY 2013 To Date  34 Projects  $953.9 million Projected Total Private Investment  $180.2 million Projected Total Public Support  7,273 Total Jobs Committed ©2014 Foley & Lardner LLP
    10. 10. 10 America‟s Comeback State  Added about 230,000 private sector jobs since Dec. 2010  No. 1 for availability of skilled labor  No. 1 for states that recovered most from Great Recession  No. 3 most business-friendly tax ranking among nation’s 12 largest states  No. 3 in high-tech job growth  No. 4 in the nation for new corporate expansions or building projects in 2012  No. 7 corporate tax ranking, up from No. 49  No. 8 most competitive state for doing business  Michigan employers saving $1 billion in unemployment costs  Michigan credit ratings upgraded: AA ©2014 Foley & Lardner LLP
    11. 11. Nigel Francis: Michigan Automotive Adviser  Nigel Francis, senior automotive adviser to the Governor and senior vice president, Automotive, for the MEDC  Appointed by Governor Snyder  29 years experience in global automotive sector  Central connection point for automotive industry stakeholders, including partners like CAR, MichAuto, MEMA, OESA, MERA, Automation Alley and others  Develop, implement and execute ©2014 Foley & Lardner LLP 11
    12. 12. State of Michigan Automotive Strategic Plan Vision “We will leverage the strengths and assets of Michigan’s automotive industry for sustained intellectual and manufacturing global leadership. Our vision is that every significant entity in the global automotive industry has a strong presence in the State of Michigan.” Mission A Mandate from the Governor of the State of Michigan “To implement and execute a comprehensive strategic plan to drive Michigan’s automotive industry forward to remain as the global center of the automotive industry and to foster sustainable growth within the industry in Michigan.” ©2014 Foley & Lardner LLP 12
    13. 13. 13 Michigan is Automotive! Jobs  Auto supports 513,300 jobs in Michigan1  Michigan has 12 assembly plants & 35 automaker parts & component plants 14.6% of Michigan’s workforce is employed in automotive3  22.1% of all direct auto jobs in the United States are in Michigan3 ©2014 Foley & Lardner LLP  The auto industry generates $2.8 Billion in direct taxes and fees to Michigan’s Treasury in 20101  Direct automotive jobs generate $14.5 Billion in personal income in Michigan2 Technology & Talent Industry Presence  Michigan is home to 61 of the top 100 North American automotive suppliers4  Michigan produces 23% of the vehicles in the nation, more than any other state1  Michigan leads U.S powertrain production with 31% of engine and 26% of transmission output1 State Revenue Assembly Plants Sources: 1) Center for Automotive Research, 2) U.S. Census Bureau, 3) U.S. Department of Labor, 4) Automotive News, 5) MEDC, 6) NSF  Michigan is the automotive R&D hub with 370 R&D centers and more than 70% of all U.S. automotive R&D spending6  Michigan ranks #1 nationally in concentration of engineers, with 65,000 industrial, mechanical, and electrical engineers3  Michigan has 650 automotive education programs offered at 91 institutions1
    14. 14. 14 Strategic Plan Development Team Global Vision “Think Globally, Act Locally” Automotive Technology Expertise Future Vehicles/Design Expertise ©2014 Foley & Lardner LLP Plan Leadership Market and Demographics Expertise Powertrain Expertise Manufacturing Expertise
    15. 15. Three Key Dimensions to the Strategic Plan Strengthen Michigan as the center of the North American automotive Retain and grow Michigan’s market current automotive industry base ©2014 Foley & Lardner LLP Grow the technologies, talents and infrastructure necessary to lead the Global automotive market of the future 15
    16. 16. Current Situation & Opportunities for Michigan Current Situation  Michigan’s automakers and suppliers have stabilized and business is robust, profitable and growing  Increased globalization exposes automakers to economic instability and regulatory pressure meaning Michigan must prepare now for global changes  Current tax and policy reforms created an attractive environment for local and global automotive investment in Michigan Opportunities for Michigan  The pace of global change will intensify, driven by customers, markets, regulations, technology and new global OEM and supplier entrants  Michigan must focus and reinforce its automotive R&D to attain sustained growth and global leadership in new key technology areas  Michigan requires a comprehensive strategy focusing locally, regionally and globally to remain the center of the automotive Now is the time for relentless positive of the future industry action! ©2014 Foley & Lardner LLP 16
    17. 17. 17 Opportunities in Connected & Automated Vehicle Technologies; Must Close Talent Gaps Key Future Drivers  The confluence of connected and automated vehicle technologies and personalization apps create opportunities  New vehicle ownership and business models develop  Intelligent Transportation Systems (ITS) will become prevalent in urban areas  Non-automotive tech firms may become players in intelligent mobility  Emergence of ADAS and V2V/V2I safety mandates Strategies for Michigan  Leverage Michigan’s expertise and experience to attract federal and industry investment  Support and lead NHTSA V2V mandate implementation  Make Michigan the center for intelligent mobility-as-a-service business model  Attract relevant electronics, software and systems integration firms to locate in Michigan  Support industry investment in collaboration, testing and certification facilities  Expand relevant educational and training programs ©2014 Foley & Lardner LLP
    18. 18. Michigan Must Lead Transformation to Lightweight, Multi-Material Vehicles & Infrastructure Key Future Drivers  Future vehicles will require aggressive use of advanced materials to meet regulations  The demand for lightweight materials will require greater industry resources and a focus on collaboration  Advanced lightweight, mixed materials will require new forming and joining technologies, advanced simulation and engineering skills  Michigan must transform its high-volume mild steel infrastructure ©2014 Foley & Lardner LLP Strategies for Michigan  Collaboration center for suppliers with linkages to automakers, material suppliers, tooling, fabricators, de sign and testing firms  Leverage Michigan’s expertise and experience to attract federal and industry investment  Michigan must focus and leverage current assets including density of engineering talent and concentration of tooling facilities  Critical talent needs in materials science, simulation and modeling, system engineering and integration and skilled trades 18
    19. 19. Increasingly Electrified Powertrains; Opportunities Lie in Advanced Systems Integration Key Future Drivers Strategies for Michigan  Regulatory trends will drive a doubling in fuel economy performance by 2040  Provide advanced system integration from powertrain to vehicle to road  United States, Europe and China responsible for vast majority of GHG reduction  Leverage Michigan’s expertise and experience to attract federal and industry investment  Regulatory targets for the United States will lag Europe and China  Focus on preparing future automotive engineers to meet a diverse set of talent and skills needs  The strategies to meet regulatory targets will differ by region  Developed markets will shift toward electrification and hybrid powertrains ©2014 Foley & Lardner LLP  Critical talent needs in electrification and hybrid technology, advanced system integration and optimization, flexible control strategies, advanced analytics and simulation 19
    20. 20. Leverage Expertise to Implement „R&D, Advanced Engineering & Pilot Plant‟ Strategy Key Future Drivers  Automakers will act as integrators, shifting greater responsibility for systems/subsystems to suppliers  Automotive manufacturing will employ fewer, but more highly trained workers  Global platforms will become dominant, with regional variation to meet market needs  Greater focus on sustainability of product and manufacturing processes  Automakers will continue to build in the markets where they sell ©2014 Foley & Lardner LLP Strategies for Michigan  High-tech processes refined in a Michigan R&D, advanced engineering and pilot plant environment before global deployment  Prioritize manufacturing process R&D  Retain and defend Michigan’s current manufacturing base and strategically pursue growth opportunities  Ability to scale advanced manufacturing processes to mass production  Critical talent needs in automation, robotics, virtualphysical system integration and communication 20
    21. 21. Must Build on Existing Logistics & Supply Chain Assets to Support the State‟s Automotive Industry Current Locations of Suppliers & Assembly Plants Serve as an Attractor & Accelerator for Investment Source: Center for Automotive Research ©2014 Foley & Lardner LLP Strategies for Michigan  Promote the Great Lakes region as the largest North American automotive manufacturing mega-region  Build streamlined world-class logistics systems  Attract public/private investment to improve freight movement and logistics services  Connect Michigan with global headquarters and tech centers  Leverage free/foreign trade zones  Accelerate implementation of Michigan’s Logistics and Supply Chain Strategic Plan 21
    22. 22. Success will be Driven by Key Enablers, Supported by the Right Strategic Plan, Stakeholders, Resources & Processes State of Michigan Automotive Office Technology “Globally Best in Class” Talent “Attract & Retain World-Class Talent”  Connected and automated vehicles  Advanced lightweight and multi-material vehicles  Advanced powertrain and propulsion systems  Advanced manufacturing  Integrated and connected supply chain  R&D, advanced engineering and pilot plant        Engineering and design Software and coding Systems integration Skilled trades including re-training Creation of “master technicians” Technology management excellence Manufacturing management excellence Capital “Right Capital at the Right Time”        State of Michigan Strategic Plan Automotive Industry Stakeholders ©2014 Foley & Lardner LLP Federal funds State funds Government owned/contractor operated Industry investment Public-private partnerships Venture capital and private equity Foreign direct investment 22
    23. 23. 23 Road Map for Enabling Michigan‟s Future Automotive Industry Phase II Phase I Coordinate & Build Virtual Foundation Communicate Vision  Rollout and align plan  Market and communicate  Form teams  Organize assets  Fund teams  Retain, grow and attract firms/talent      Align teams Secure major funding Direct assets Develop talent Retain, grow and attract firms/talent  Support policy and legislation Phase III Phase IV Build Physical Foundation Expand Virtual & Physical Foundation  Focus accelerators and incubators  Build collaborative Michigan automotive ecosystem  Retain, grow and attract firms/talent  Institutionalize strategy  Evolve strategy  Expand firm and talent retention, growth and attraction activities  Extend industry collaboration  Continuous improvement of plans Strategic priorities will evolve and adapt to both disruptions and new opportunities ©2014 Foley & Lardner LLP
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