Dennis Cuneo shares a speech he gave in Alabama in July of 2015 at the Economic Development Association of Alabama 2015 Summer Conference Agenda.

1. Economic Development Association of Alabama
2015 Summer Conference Agenda
June 21, 2015
Changing Geography
of the Automotive Industry
(& the Mexican Challenge)
Dennis Cuneo
Fisher & Phillips LLP

2. Automotive Credentials
• Former SVP Toyota
• Automotive-related Boards
• AK Steel
• BorgWarner
• SSOE
• Center for Automotive Research
• UIEvolution (Advisory Board)
• Site selection/ Start-up: >20 vehicle facilities:
assembly plants, parts plants, HQ, and R&D centers
• Advisor to several states and communities on attracting automotive projects

3. 3 Decades of Change
1982: 5 companies (4 American/ 1 foreign)
 assembled vehicles in 20 states (including 6 Southern States)
Today: 13 companies (2 American/ 11 foreign)
 assemble vehicles in 14 states (including 7 Southern States)

4. Foreign Automaker
Investment
1982 – 2008: Southern Automotive Juggernaut
Toyota
Toyota

5. D3 consolidated in
Great Lakes/ Upper Midwest
1982-2008: Emergence of Auto Alley
Foreign Automakers
Built Mostly in South
Mercedes
Volvo
AL: Southern Anchor
Of Auto Alley

6. Since 2003: Significant Investment Outside Auto Alley
Mercedes
VolvoToyota
Toyota
Tesla
GM
GM
GM
Ford

7. Tesla Gigafactory
• $5 billion investment
• 6500 jobs
• Average wage: $26/ hour

8. Since 2003: Significant Investment Outside Auto Alley
Mercedes
VolvoToyota
Toyota
Tesla
GM
GM
GM
Ford

9. Center of
Automotive
Production
2000
2010
2015
2021
2026
© 2014
IHS
Source: IHS, Presentation to Management Briefing Seminar, Traverse City, Center for Automotive Research, Aug. 2014
“Center” of Auto Production is Moving Southwest

10. Mexico: The New Automotive Juggernaut
Ford
Announced in 2015
3800 jobs; $2.5 billion investment

11. Automotive Investment:
U.S. vs. Mexico
Source: Center for Automotive Research
Assembly Plant Announcements Since 2009
US
MX
Each $500M
Toyota: $1B
Audi: $1.3B
Hyundai-Kia: $1B
Mercedes: $1.4B
Honda: $800M
BMW: $1.B
Nissan: $2B
Mazda: $500M

12. Automaker Investment Announcements, Jan 2010-May 2015
Canada
$5.4 billion
United States
$53.4 billion
Mexico
$24.2 billion
Total North
America
$83.0 billion
Source: CAR Research, Book of Deals

13. Southern States Not Keeping Pace
Other U.S.
$13.2 billion
Mexico
$24.2 billion
Great Lakes
$ 28.2 billion
South
$12.0 billion
Note: U.S. Great Lakes
includes: IL, IN, KY, MI,
MO, and OH while
South includes: AL, FL,
GA, MS, SC, TN, and
TX
Source: CAR Research, Book of Deals

14. Mexican Automotive Wages:
1/8 to 1/5 of U.S. Wages
Average Hourly Wages for Production and Non-Supervisory Workers in Motor Vehicle and Parts, 2007-2014
Sources: U.S. Department of Labor, Bureau of Labor Statistics;
Mexico National Institute of Statistics and Geography (INEGI: Instituto Nacionalde Estadística y Geografía)

15. The Real Mexican Advantage
Hourly Labor Cost on a Subcompact Car $674 a car
FTA advantage on a Q5 Export to Europe $4,500+ per vehicle

16. Mexican Capacity, Production, and
2015-2018 Production Forecast
Mexican Production and Forecast Mexican Production Capacity
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Sources:LMC, AMIA, INEGI, Ward's Automotive, U.S. Federal Reserve Board, Statistics Canada, and CAR Estimates
2017 2018
Millions

17. Source of Mexico’s Growth
- Detroit 3 moving capacity to MX from U.S./ Canada
- Japanese/German OEMS moving capacity to MX
from home locations not from U.S./Canada
-But new MX capacity is lost opportunity for South

18. 1. Alabama
2. Kentucky
3. Louisiana
4. Mississippi
5. South Carolina
6. Tennessee
- - - - - - - - - - - - - - - - - - - - - - -
• Duke Energy
• CU-ICAR
• University of Alabama
• AAMA
• MAMA
• SCMA
• TAMA
• GAMA
Southern Automotive Research Alliance
(SARA)
How Can the South Meet MX Challenge?
Preliminary Report 10/14 SAC
But No Progress Moving Forward

19. Image source: Automotive News
Auto Industry In New Disruptive Phase
• Fuel Economy regulations: 54.5 mpg by 2015
• New technology
• New Entrants

20. Fuel Economy Standards: 54.5 MPG by 2025
• Light-weighting: New materials: AHSS; Aluminum; Composites
• Powertrain technology: ICE improvements; Electrification

21. Average vehicle: 50 microprocessors  100 million lines of software.
Luxury Vehicles: Software/ Electronics: 40% vehicle content
Pace of New Technology is Accelerating
Source: Center for Automotive Research
Mechanical-base  Software-base
Transportation-focus  Technology-focus

22. Autonomous Technology
“Fully autonomous vehicles are a real possibility.
Probably, in the next five years, you’ll see
somebody introduce autonomous vehicles.”
Mark Fields, Ford CEO, Remarks @ Consumer Electronics Show 1-5-15
Google Self-driving Car
Mercedes F 015

23. SLATE
McKinsey Report on Autonomous Vehicles
• 90% reduction in accidents
• Save $190B in damages & health care costs
• Fewer repair shops; first responders;
emergency rooms
• No more impaired driving
• Won’t need a drivers license
• Improved highway flow and capacity
• 25% less parking space – 5.7B square
meters
• Change in car ownership patterns
• Improved productivity during commute

24. New Entrants
• 10 year old company
• $33 billion market cap*
(GM $50 billion*)
(Honda $57 billion**)
*7/14/15
**12 months ending 3-31-15

25. And what does Apple, with $194B in cash, have planned?