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The Springfield News-Sun has covered the auto industry extensively, including recent investments in Ohio facilities by auto makers like Honda. For this story, the paper spoke to local economic development officials, auto industry analysts, economists and area manufacturing firms to dig into several recent investments at area firms that produce parts for the industry.
By the numbers:
95,300 — Auto parts manufacturing jobs in Ohio in May, 2005
71,100 — Auto Parts manufacturing jobs in May 2015
17.5 million — Vehicles expected to be produced in North America this year
17.2 million — Peak vehicles produced in North America in 2000
Sources: Bureau of Labor Statistics, IHS Automotive.
Clark and Champaign county businesses that produce parts for automakers like Honda and other manufacturers have pledged to invest about $110 million into their facilities and add more than 400 jobs over the next few years as the auto industry roars back from the Great Recession.
Those investments have included adding new production lines, equipment, a high-tech research facility and additional factory space as the demand for auto parts has skyrocketed.
The rebound is occurring across much of the region as auto sales and production hit record levels and parts makers have become more confident in the industry’s future, according to Springfield News-Sun interviews with company officials and industry experts.
Major automakers like Honda, Ford and General Motors will produce about 17.5 million vehicles in North America this year, beyond the previous peak of 17.2 million vehicles in 2000, said Mike Wall, an auto industry analyst with IHS Automotive.
Now auto parts makers are scrambling to boost production and keep up with demand as they rebound from a recession that slashed the industry’s workforce nearly in half at its lowest point. But suppliers might never reach full pre-recession employment levels as they were forced to become much more efficient during the downturn.
“In the last 18 months, maybe two years even, suppliers have been stepping out on a limb a little bit more, investing in operations and hiring,” Wall said.
Auto parts manufacturing has a significant impact on the region’s economy, said Horton Hobbs, vice president of economic development for the Greater Springfield Chamber of Commerce.
A recent report from the Dayton Development Coalition showed parts manufacturers alone supported just shy of 1,000 jobs in Clark County in 2012. The industry is expected to grow locally almost 13 percent by 2018, much higher than the national rate.
Several of the biggest job announcements since the recession have been a result of investments from local auto parts makers.
“Strategically, we’ve diversified our focus, but we’ve never lost sight of the importance of manufacturing in our community,” Hobbs said. “It remains and will remain our biggest economic driver.”
Recent expansions include:
• KTH Parts Industries in St. Paris announced plans in 2013 to complete a $29 million expansion that included a pledge to create 90 new jobs, add 40,000 square feet to its facility and install a 3,000-ton press to produce stronger, light-weight auto parts. The company also broke ground this year on a new, $6.7 million research facility in Plain City, Ohio, adding 33 jobs to develop new technology. The firm produces auto body parts for Honda.
• Yamada North America announced a plan in June to add 100 jobs over three years as part of a $15.2 million expansion to add more production and dock space. The South Charleston-based company had already added about 60 new jobs as part of a 61,000-square-feet expansion in 2012. The company makes water pumps, drive shafts, steering columns and other car parts.
• Pentaflex, a Springfield firm that produces parts for the heavy truck industry, announced this spring it will hire 40 workers and add 20,000 square feet to its plant on Gateway Drive over three years. The company also installed two new servo press lines last year, for a total investment of about $8 million.
• McGregor Metalworking Companies was named a Tier I supplier for Honda earlier this year, providing the company with additional work and allowing them to ship parts directly to Honda. The total number of new jobs that result from that move hasn’t been determined. Company officials said last week they have invested at least $1 million in new equipment for its Honda business alone.
• Parker Trutec announced a $15 million expansion last year at its Springfield facility, with plans to add 15 jobs. The company, which provides heat treating and other services to the auto industry, also said last year it would invest $3 million at a separate facility in Urbana, including building an additional production line.
• Johnson Welded Products in Urbana submitted plans in 2014 for an expansion to add about 15,000 square feet to its facility. The company manufactures reservoirs for air brake systems for the heavy truck industry. Company officials didn’t respond to requests for comment for this story, but have said previously the firm has added about 70 new jobs in the past few years.
Much of the growth is the result of a booming auto industry, particularly Honda locally, said Tom Franzen, economic development director and assistant city manager for Springfield.
“Once (auto manufacturers) have the confidence they’re able to sign larger contracts with the suppliers, the suppliers then have the confidence to hire more people and buy equipment and expand their buildings,” Franzen said.
Some jobs lost for good
Despite the recent investments locally, parts manufacturers statewide lost tens of thousands of jobs at the height of the recession. Many of those jobs are unlikely ever to return, experts said.
Auto parts manufacturing provided jobs for about 95,000 Ohioans a decade ago, according to the U.S. Bureau of Labor and Statistics. But that number was slashed nearly in half, to about 50,000 jobs by mid-2009.
That figure has since slowly ticked up. The industry now employs about 71,000 workers statewide, about 24,000 less than it did at the height of 2005.
Providing parts for the truck industry is cyclical, with peaks and valleys about every three to five years depending on demand, said Ross McGregor, executive vice president at Pentaflex. But the decline during the Great Recession went well beyond anything the company had previously seen, he said.
“In 2009 we went from 130-plus employees down to about 50,” McGregor said. “In 2009 we didn’t know what was going on but we were hanging on for our lives. Since then things have improved, and like many other manufacturers, we were able to hold on through the recession. Now that things are a little bit more stable, back to what we would consider the normal cyclical nature of our industry, we can have some confidence in making strategic investments in additional capacity.”
McGregor Metalworks in Springfield went from 400 employees to 250 during six months at the height of the recession. It’s now back at pre-recession levels, said Jamie McGregor, vice president of business development for the family of companies. Since the recession, McGregor Metalworking has focused on training workers in a variety of tasks to increase productivity in return for higher pay.
One reason auto parts makers will likely never fully regain those jobs is that most manufacturers grew learner during the downturn to be more efficient with both manpower and equipment, said James Rubenstein, a professor at Miami University who has written several books on the auto industry.
“People found out they could do a certain amount with a lot fewer people, so there were enormous productivity gains,” Rubenstein said. “Some of those productivity gains were not sustainable because they were coming out of overtime and running machinery full blast, so now we’re getting this delayed investment. The employment will never be at the pre-recession level even though we’re probably headed for record production levels.”
Honda’s influence
Several of the local companies that have seen recent growth are suppliers for Honda, a manufacturer with a large footprint in the state. Parker Trutec, Yamada, KTH and McGregor Metalworking all supply parts and provide other services for the Japanese automaker.
Honda built more than 663,400 cars in Ohio last year, representing about 42 percent of the state’s total automobile production, according to information from JobsOhio, the state’s private, nonprofit economic development entity. The car maker employs 13,000 Ohioans, including more than 1,400 residents in Clark and Champaign counties.
An annual auto industry report from Bank of America Merrill Lynch projected Honda will gain the most market share over its competitors over the next four years as it is poised to redesign several of its most popular models through 2019, including the Civic, Accord and Pilot.
“Honda’s new product is skewed toward (Crossover Utility Vehicles) and mid/large cars,” Bank of America Merril Lynch said in its annual Car Wars report. “This along with a strong cadence bodes well for market share and pricing.”
Parts manufacturers in the region have an additional advantage because of their location in Clark and Champaign counties, Jamie McGregor said. The area provides easy access to highways, and it’s already close to Honda facilities in Marysville, East Liberty and Anna.
“Being located in Springfield is a huge selling point because we are 60 miles from their factory,” Jamie McGregor said. “That’s a huge deal. They want us to be close and certainly that helps with relationships, too, because we can interact face-to-face and there’s something to be said for that.”
Slow but steady growth ahead
Area parts manufacturers are already planning ahead for the future of the industry. KTH broke ground in June on its $6.7 million research facility. KTH specializes in stamping and welding, and produces auto body parts for Honda. The new facility in Plain City is located near Honda and will allow the company to research and develop stronger, lightweight materials to improve fuel efficiency while still maintaining tough crash test standards.
“The whole industry is trying to lightweight the cars to get better miles per gallon,” said Chris Millice, assistant vice president of general administration at KTH. “Our parts are heavy parts, usually the structural frame of the car, so we need to look at how to do that — whether its using high-strength steel, plastic resin, hot stamping with material.”
High-tech jobs like those at KTH are increasingly in demand as automakers try to meet higher fuel standards and develop new technologies, said Wall, of IHS Automotive.
Parts manufacturers have room to add more jobs moving forward, Wall said, but the employers are increasingly looking for positions like engineers, researchers and skilled trades.
“We’re adding employment slowly but surely, but it’s a different kind of employment,” he said. “There is still a lot of opportunity to add more jobs, but at the same time it’s a different composition and I don’t know that we’re going to add all those (lost jobs) back.”
Automakers are expected to produce 17.5 million vehicles this year. That figure is projected to increase to 18.6 million vehicles by 2018 and 19 million by 2021, Wall said.
“There is going to be a leveling off, but I do think suppliers still have time to really grow their base and will have attractive opportunities,” Wall said.
Several factors should keep the industry stable for the next few years, Jamie McGregor said. Interest rates are still low, banks are becoming more lenient and the average age of vehicles on the road is high.
“The quality has improved and the cost has continued to go down, and those two things compounded together make the American consumer hungry to buy a new car,” Jamie McGregor said.
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