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back to index backAMERItalk November,  2005

Auto sector leads in investment; Michigan No. 2 state in project valuation

Amid the doom and gloom in the auto industry following Delphi Corp.'s bankruptcy filing, there was good news for the region. The auto sector led the U.S. in major capital-investment projects begun in 2004, and Michigan ranked second only to Texas in new-project valuation.

Clearly auto manufacturing and auto parts are a big part of the story of new jobs and new capital investment in the U.S.,” said Tom Neubig, director of the quantitative economics and statistics practice at New York City-based Ernst & Young L.L.P.

It'll be interesting to see how that plays out over time, but Michigan still plays a major role. There's an awful lot of capital expenditures on expansion and rehabilitation by auto manufacturers in Michigan.”

The study — released Tuesday and termed the first annual U.S. Investment Monitor by Ernst & Young — focused on U.S. projects announced in 2004 involving at least 20 jobs or $10 million in capital investment. Those projects totaled $110 billion in domestic and foreign capital and the planned creation or relocation of more than 550,000 jobs.

Auto-sector projects totaled $14.5 billion. Projects in Michigan were valued at $6.5 billion and involved more than 32,000 new jobs. Ernst & Young did not release the list of projects, but said the largest project in Michigan was one of about $300 million at the Trenton Engine Plant, for a new V6 engine line and a redesigned V6 engine line, both to be used in future Chrysler Group cars.

More than two-thirds of the capital expenditures planned for Michigan were auto-related, said the study.

According to the study, 475 auto-related capital-improvement projects were announced in the U.S. last year, including 78 foreign-owned facilities. Auto-manufacturing projects totaled $10.1 billion in the U.S., involving 43,000 new jobs, most of them in Michigan, Ohio or Texas.

Other auto-related investments totaled an additional $4.4 billion and involved nearly 8,000 new jobs.

The auto industry is a very important part of the new-jobs story,” said Neubig.

The No. 2 sector was chemical, paper and other nondurables, at $13.9 billion and more than 51,000 jobs. Third was transportation and distribution logistics, with $10.6 billion, involving more than 74,000 jobs. Energy was fourth at $9.9 billion, and more than 6,000 jobs.

Neubig said that the study looked just at announced projects. He said that while some of them may not come to pass, the scope spoke to the strength of the U.S. economy.

He said the announced projects continue a strong investment in capital-improvement projects. He said that U.S. government figures put the amount spent on capital-improvement projects in the country in 2004, big and small, at $1.2 trillion, an all-time record.

Japan was No. 1 among foreign investors for projects announced last year, with 111 projects worth $4.1 billion and involving more than 15,000 jobs. Germany was second with 77 projects worth $2.8 billion and involving nearly 13,000 jobs, with the United Kingdom third with 46 projects worth $1.8 billion and involving nearly 7,000 jobs.

The U.S. is still attracting significant amounts of foreign investment,” said Neubig.

Source: Crain's Detroit Business - GAI

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