The economic downturn of the last two years has affected all manufacturing and consumer sectors immensely, but few more so than the automobile industry. Household names have been buffeted by safety recalls, government regulations and bailouts, spiraling legacy costs and changing consumer preferences. Yet as the economy rebounds, certain trends are emerging in the development of auto technologies, the retooling of production facilities, and shifts in industry workforce deployments.

Bouncing Back To The Future

Boosted by reduced costs and rebounding growth in U.S gross domestic product (up 3.2 percent in Q1 2010), U.S. auto sales jumped 20 percent in the second quarter with the majority of car makers seeing sizable profits. As stability returns, the next phase of growth appears to be taking hold, especially in “next generation” vehicles, where both new and established companies are ramping up the introduction of new vehicles and technologies.

Though gasoline and diesel still reign supreme, various other fuel sources and powertrain modalities are vying for critical mass in the leap from laboratory to marketplace: plug-in hybrid, battery electric, natural gas, and even hydrogen-based fuel cells. Of those, electric vehicles (EVs) are the strongest contender for penetrating the mass market in the next five years to 10 years.

“As the economy picks up, the price of oil and gas will start to rise,” says James Hizer, president and CEO, Bowling Green (Ky.) Area Chamber of Commerce. “That will impact the demand for hybrid and electric vehicle technology as it continues to be the fastest-growing segment of the automotive sector.”

Others take a more subdued view. “There is a lot of buzz surrounding hybrid and electric vehicles, but most recognize that these technologies will be slow in development and will gain prominence in the auto industry at a more gradual pace than originally anticipated,” says Aleksandra Miziolek, director, Automotive Practice Group at Dykema Gossett PLLC. “Barriers include the relatively high cost of batteries, battery density, lack of established infrastructure, affordable fuel prices (if they remain at current levels) and the uncertainty stemming from an unproven technology attempting to be deployed at such a large scale.”

The speed and extent to which widespread rollouts of EVs will take place may be up for debate, but there is little doubt that such vehicles — despite significant technical and infrastructure barriers — will have an impact on manufacturers, battery makers, energy utilities, workforce development and the site selection process for years to come.

Breaking Through The Battery Barrier

The biggest obstacle in EV adoption is battery technology. There is a global race to support vehicle electrification by developing an inexpensive, light, reliable battery with greater storage capacity than currently available. “All the major manufacturers have at least one agreement with battery developers, some of whom — like NEC, Panasonic, LG, and others — are not automotive suppliers,” says Bruce Belzowski, assistant research scientist, University of Michigan, Transportation Research Institute. “This places a large burden on the supply base for this critical technology, which is very unlike previous strategies when manufacturers always wanted control of the powertrain-related functions of their vehicles.”

Affordability is a key issue. “For widespread adoption, we believe the cost of the batteries will need to come down to make EVs a more viable option for consumers,” confirms Ted Miller, manager, Research and Advanced Engineering at Ford Motor Co.

Miller says activities range from investment in new production plants and equipment, especially in the United States, Japan, South Korea and China, to automotive-specific advanced lithium-ion battery technology research and development. Pike Research, a Boulder, Colo., clean-tech market research firm, projects in a recent study that the expansion of new manufacturing capacity will create an $8 billion industry for batteries by 2015.

Increasing supply, coupled with growing demand, is giving birth to new supplier clusters and initiatives. One example in the United States is the Kentucky-Argonne Battery Manufacturing R&D Center in Lexington, which, Hizer explains, received approval in late 2009 for government funding of up to $3.5 million, to create advanced battery technologies for vehicle applications. Regions severely hit by the industry downturn are also showing signs of revival thanks to EV activity. “We're seeing heavy investment by at least three firms moving forward in this area, and we're courting one more,” says Peter Auger, city manager, city of Auburn Hills, Mich.

Infrastructure also is a consideration as both consumers and public utilities will need to be ready to support this new technology. “We want to help future owners of Ford's EV optimize the way they recharge their vehicle and manage their energy use,” Miller says.

Even though EV technology hasn't been perfected, cities and states have actively begun to prepare for the arrival of electric vehicles. Last summer, the U.S. Department of Energy (DOE) awarded Electric Transportation Engineering Corp. $100 million to deploy over 10,000 charging stations in Washington, Oregon, California, Arizona, and Tennessee. Pike Research forecasts that charging stations where drivers can plug in and recharge their vehicles will be available at more than 5.3 million locations around the globe by 2015.

The firm estimates that the combined market for electrified vehicles will represent a small (2.5 percent) portion of the total vehicle market in the foreseeable future. Nevertheless, plans by companies both big and small are coming to fruition. In addition to Toyota and Tesla Motors, several companies are in hot pursuit of market share in the space. Ford will offer the electric Transit Connect commercial van in 2010, followed by the Focus Electric in 2011. In 2012, they aim to deliver two more hybrids. General Motors Corp. has plans to build its Chevrolet Volt extended range EV at the company's Detroit-Hamtramck factory. Nissan Motor Co. has launched the Leaf, which will be commercially produced in Smyrna, Tenn.

Norway-based Think Global will build its first car for the U.S. market in 2011, at an Elkhart County, Ind., assembly plant near their Indianapolis-based, lithium-ion battery supplier EnerDel. Fisker Automotive, will be introducing the Karma, a luxury plug-in hybrid EV later this year, while Coda Automotive is taking orders for an EV sedan around the same time. On the commercial vehicle side, Kansas City, Mo.-based, Smith Electric Vehicles is slated to receive $32 million in U.S. DOE grant funding to produce all-electric, zero emissions commercial trucks.

People And Places Undergo Retooling

All of this activity will require skilled labor, though the transition has not been without pain. In the United States, GM, Ford and Chrysler have laid off tens of thousands of workers in the last two years. To compensate, efforts such as Michigan's No Worker Left Behind program have retrained 80,000 workers, though not all found jobs in the auto industry.

The U.S. Department of Labor allocated $3.2 million this year for retraining of autoworkers displaced by cutbacks in the industry and preparing them for new technician careers in the emerging “green” industry. The St. Louis area will also utilize government funds to transition 1,200 sheet metal workers into clean energy construction, design and HVAC jobs.

Workers who were retained by major auto companies are in the early stages of the transition to manufacturing these new technologies, explains Belzowski. Local community colleges and other centers of learning are also working to retool the workforce that has now entered the market.

“We are also seeing players in the alternative energy arena tapping our engineers for work in the next wave of auto technology,” Miziolek says. “New suppliers are setting up shop in Michigan because the labor force is incredibly skilled and plentiful and the cost of living is more manageable.”

As for shuttered factories and assembly plants, there are promising signs of rejuvenation taking place. Hizer predicts that the absorption rate and reuse of existing manufacturing buildings will increase across the nation over the next two years.

“We have seen an amazing amount of creativity involved in developing a useful role for these facilities,” Miziolek notes. “Ford's abandoned plant in Wixom [Mich.] will get a new lease on life as the largest renewable energy park in the United States, home to solar panels and large-scale batteries to store power for the electric grid and from wind farms.”

Though all these trends are in their early stages, it is clear that significant retrenchment and collaboration between a variety of sectors have begun to converge in unprecedented ways. “At this point, it's an emerging market and it's going to take collaboration among several key sectors to promote commercialization of electric vehicles — including the automotive, utility, battery and technology industries as well as governmental support,” Miller says.

“There is a lot of uncertainty about which technologies will end up being the winners in the long term,” Belzowski says. “It's an exciting, but challenging time to be in the automotive industry.”

Mark Kleszczewski is president and CEO of GoBusiness Group, LLC and a freelance writer on critical business topics. He can be reached at mark@gobusinessgroup.net.

For complete details on the organizations featured in this article, visit:

Bowling Green (Ky.) Area Chamber of Commerce, www.bgchamber.com

City of Auburn Hills, Mich., www.auburnhills.org

Dykema Gossett PLLC, www.dykema.com

Ford Motor Co., www.ford.com

University of Michigan, Transportation Research Institute, www.umtri.umich.edu

From Rust Belt To Green Belt

Beset by falling sales and onerous legacy costs, all three major automotive manufacturers combined have closed nearly two dozen auto plants in the United States since 2004, with 16 more plants likely to be shut down by 2011.

Fraught with environmental liabilities, complexity, and sheer size, finding a second life for such facilities is a formidable task. Yet there are signs of a transformation beginning to take place.

First opened in 1957, Ford's massive, 320-acre Wixom Assembly Plant in southeast Michigan was one of the company's largest auto manufacturing sites, producing more than 6 million total vehicles until it was permanently shuttered in 2007. At its peak, the plant employed more than 5,000 workers, making Thunderbirds, Town Cars, GTs, and other Ford models.
Despite Ford's initial difficulty in finding a buyer for the mega-complex, last summer two “green sector” companies announced a planned $725 investment that would repurpose about a third of the former factory into the largest renewable energy park in America. Clairvoyant Energy aims to eventually produce solar panels in Wixom, while Xtreme Power will make large-scale batteries and systems that store wind and solar energy for quick release into the electric grid.

Despite facing regulatory and financial hurdles in finalizing the purchase, the redevelopment project is expected to gain approval and move forward by the end of the year, moving the rust belt one step closer to an emerging green belt.