Hotbeds for auto research growing
U.S., import firms expand labs
December 9, 2007
BY KATHERINE YUNG
DETROIT FREE PRESS BUSINESS WRITER
The following story was also posted online at www.leasetrader.com.
As thousands of the state's autoworkers punch out for the last time, it's easy to assume that Michigan's role as the world's auto capital faces a very limited future.
Think again.
The state has reached a historic crossroads. Even as it sheds much of the business of building cars and trucks, Michigan is quietly growing its ability to design and create the next generation of vehicles.
The expansion is largely coming from foreign automakers and their suppliers and from companies, including the Detroit Three, working feverishly to introduce eco-friendly alternatives to traditional gasoline-powered engines.
The growth is occurring despite increased competition for the work from the South and other regions of the country, the lack of a state fund for alternative energy technology efforts and other challenges.
For decades, Michigan has been a key global hub for automotive research and development. But this advantage is critical for the state's economy as it loses its base of vehicle and parts manufacturing jobs.
Experts say that even as Michigan diversifies its economy, it can grow by expanding its role as the auto industry's knowledge capital.
"Michigan, and Detroit in particular, is the brain center of the auto industry," Richard Blouse Jr., chief executive and president of the Detroit Regional Chamber, said in a speech last month. "This is really our foundation that we need to keep transforming on."
Automakers rank among the world's biggest corporate research and development spenders. Last year, Toyota Motor Corp. lavished $7.7 billion on R&D alone, more than any other company, according to a study by the consulting firm Booz Allen Hamilton. Ford Motor Co. came in at No. 3, followed by the former DaimlerChrysler in fifth place and No. 6 General Motors Corp.
Michigan captures nearly 80% of the $16.7 billion spent on automotive R&D in the United States, according to figures compiled by Sean McAlinden, vice president of research at the Center for Automotive Research in Ann Arbor.
He and other experts estimate the state is home to from 275 to 330 automotive R&D facilities, employing 65,000 workers.
"Our role is to be on the R&D side," said Kevin Finn, interim dean of students at Lawrence Technological University in Southfield. "We have to be inventors of the ideas or the ones making things better."
Michael Robinet, vice president of global vehicle forecasts for CSM Worldwide Inc., an automotive research and forecasting company in Northville, predicts that even though basic development work for different vehicle platforms may decline, the state should remain a strong hub for advanced vehicle development, the research and engineering that creates innovations in areas like safety, electronics and powertrains.
"We are and will be one of the brain centers of the auto industry, but we'll share the mantle with Tokyo, France and Germany," he said.
Even as Detroit's automakers whittle their labor forces, they still employ thousands of engineers, scientists and others. And many of their new hires are these kinds of workers.
General Motors has been hiring about a thousand workers each of the last few years, the bulk of them in advanced technology and alternative energy.
Detroit's Asian rivals are also hiring many engineers and scientists in Michigan, opening or expanding technical centers in the state.
The need for more workers and space comes as these companies take on more vehicle development work in the United States. They are still growing their capabilities here as they build more of their cars and trucks in the country.
For instance, when Toyota finishes building its second North American technical center next summer on 700 acres in York Township, the new campus will include the auto giant's first safety crash test facility on the continent.
Toyota does safety crash tests in Japan or leases U.S. space.
"Michigan has such a strong infrastructure in place -- tech centers and suppliers -- and with the continuing need to do engineering design here, the future is bright," said Bruce Brownlee, a senior executive administrator for external affairs at Toyota's other U.S. technical center in Ann Arbor.
So far, Toyota's Michigan engineers have handled the development work for vehicles unique to North America like the Avalon, Sienna and Solara. They're working on other new products, Brownlee said.
"If we continue to have successes here and continue to sell vehicles, we could do more," he added, noting that Toyota wants the two centers to be the key engineering arm for North American product development.
East of Ann Arbor, at the 210,000-square-foot Hyundai Kia America Technical Center in Superior Township, executives are preparing for the facility's expansion.
The center does facelifts for the Hyundai Sonata and Santa Fe, but ultimately aims to handle all the engineering for all Hyundai vehicles built in North America as the automaker expands its production.
"You cannot find anyplace like this in the U.S.," Chung Kook Park, the center's president, said about Michigan's automotive R&D potential. "People are most important. All the talented people are in this area."
The center, on a 136-acre former soybean field, has 145 employees, but expects to eventually employ 400.
Nissan also plans to increase its U.S. R&D capabilities at its technical center in Farmington Hills. The center's 1,200 employees can handle the engineering development work for two of the automaker's models. A third one could be added, said Bob Sump, the center's vice president of component engineering.
Earlier this year, the center formed an advanced technology vehicle development group. Like Toyota, it lacks a safety crash test facility, but otherwise has all the resources it needs to develop new cars, including a styling studio.
Nissan and other automakers see Michigan as an attractive place to do R&D because of the state's vast engineering workforce and large number of auto suppliers.
Last year, companies in the state employed 21,070 industrial engineers, 21,080 mechanical engineers, 5,490 electrical engineers and 980 materials engineers, according to the Michigan Department of Labor and Economic Growth.
Thanks to the auto industry, Michigan ranked second in the nation for R&D spending in 2004, behind California, the most recent study by the National Science Foundation found.
But some business leaders warn that the state can't afford to take its status for granted. It's facing greater competition from the South as more auto plants locate there.
In May, six Southern universities and Oak Ridge National Laboratory formed the Automotive Research Alliance. The group is trying to win R&D work for its engineers, scientists and others.
The alliance's acting president and chief executive, Ben Ritchey, denies that it is trying to grab R&D work from Michigan. It plans to set up two centers of excellence that will focus on the auto supply chain and sustainable manufacturing.
"We need to have a response to the Automotive Research Alliance," said Thomas Manganello, chairman of the automotive industry group at the Southfield law firm Warner Norcross & Judd LLP and president of MichAuto, a group focused on attracting top auto talent and international investment to Michigan.
"In order to exploit the strengths we have, we need to work together better. We have a hell of a product to sell," he added.
Michigan's R&D growth doesn't depend only on Asian automakers. If the state takes advantage of its skilled workforce and other resources, it could become a leader in the development of hybrid, electric and fuel cell vehicles, experts say.
A few major efforts in this area are under way.
Since 2005, four automakers -- GM, Chrysler, BMW and Mercedes-Benz -- have been working on hybrid vehicle systems at the Hybrid Development Center in Troy. The center employs more than 500 engineers, technicians and others.
The center attracted the attention of Compact Power Inc., the North American subsidiary of LG Chem Ltd., one of the world's largest producers of lithium-ion batteries.
In 2005, Compact moved its headquarters from Colorado to Troy, across from the hybrid center. Compact employs 40 workers, mostly engineers, and expects that number to double by next year as its battery packs to power plug-in electric vehicles moves closer to production and the company gains more customers.
"The intellectual resources here are abundant," said Damian Gardley, Compact's sales and marketing director.
And in January, Tesla Motors Inc., the electric sports car company, opened a technical center in Rochester Hills. The center, which has 40 employees, handles R&D work for future Tesla products like a four-door electric sports sedan.
"We don't have a shortage of innovation in this state," said James Croce, chief executive of NextEnergy, a nonprofit organization helping to grow the state's alternative energy technology industry.
It found that over the last three years, more than 1,000 jobs in hybrid and other advanced powertrain work have been added in Michigan.
Despite these gains, the state faces fierce competition from others for this kind of work.
Michigan lacks a state fund dedicated to helping subsidize R&D in alternative energy technologies, Croce said.
Whether the state can fully capitalize on its assets in this area remains to be seen. One thing that may help: R&D is increasing at a number of the state's auto suppliers such as Aisin World Corp. of America.
Many of these companies, including Aisin, are involved in alternative energy technologies like hybrid transmissions.
One of Toyota's two largest suppliers and a Toyota group company, Aisin has been taking on more technical work from Japan, said Don Whitsitt, the company's president.
At the same time, automakers are giving greater R&D responsibilities to suppliers like Aisin.
As a result, the company expects to add 40 workers this year at its Plymouth headquarters and technical center. With more than 200 employees there, Aisin will soon need to expand its building or move to a bigger site in the state, Whitsitt said.
In another sign of its ambitions, Aisin is building a 3-mile oval test track at its $60-million proving grounds, on 870 acres of former farmland in Fowlerville, southeast of Lansing.
The new track will help Aisin and its customers test brake and chassis systems, transmissions and other key auto parts.
"Southeast Michigan is the automotive center," said Whitsitt, Aisin's first non-Japanese president. "This is where the engineers are."
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This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your car lease, please visit www.leasetrader.com