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Supplier Article
U.S. auto supplier industry in transition
Evolving relations between carmakers and their parts
suppliers have resulted in local, regional, and international
shifts in the location of production. An upcoming Chicago
Fed conference in Detroit will examine these ongoing
structural changes, which are affecting the prospects
for the U.S. auto industry's continued concentration
in the Midwest.
Motor vehicle production involves two types of firms:
makers of parts (suppliers) and assemblers of finished
vehicles (carmakers). The latter are better known to
consumers because they market the vehicles with their
brand names. However, suppliers employ three and a half
times more people and add about 60% of the value of a
finished vehicle.
Over time parts makers have taken on more responsibility in the vehicle production
process so that an increasingly important factor influencing the competitiveness
of carmakers is the strength and constructiveness of their relationships with
their suppliers.
This Chicago Fed Letter sets the stage for a conference on this topic, titled "The
Supplier Industry in Transition: The New Geography of Auto Production," which
is to take place on April 18 and 19, 2006, in Detroit (for details, please visit
www.chicagofed.org/news_and_conferences/conferences_ and_events/2006_auto.cfm).
Structural changes in supplier-carmaker relationships have produced geographic
shifts in production on three scales. On the local scale, close spatial networks
and time-dependent relationships have formed between vehicle producers and key
parts suppliers. On the regional scale, production has shifted from the Midwest
to the South as new vehicle producers and parts suppliers entered the U.S. market
and as sales of longtime domestic players declined. On the international scale,
vehicles assembled in the United States contain an increasing percentage of
parts produced overseas.
