Executive Summary - Driving Change: Greening the Automotive ...

Executive SummaryBefore the Great Recession, the auto industry inIndiana, Michigan and Ohio was in the throes ofrestructuring—applying new technologies andproduction efficiencies, reducing costs, and modifyingproduct lines to equal or beat global competitors—accompanied by an extended period of downsizing.Overlaying the recession on the restructuringcompounded the challenges the industry wasalready facing.This report is a reality check, accepting that theregional economy is at a fundamentally different placeand cannot return from where it came. However, asthe auto sector works toward its revival, there areworkforce issues to be addressed, particularly in thecontext of the growing evolution and demands of agreen economy.At the outset of this study, there was limitedunderstanding of the specific nature of thetransformation in skills relevant to efficient andrenewable vehicle technologies and other careeropportunities in the green economy. To moreeffectively serve the large numbers of dislocated autoindustry workers, Indiana, Michigan and Ohio formedthe Driving Change consortium to address this subjectand in doing so developed four overarching goals:1. Chronicle the transformation from the oldauto industry to a new, more efficient autoindustry, especially focusing on the newskill and training requirements of the autoworkforce.2. Identify the effects of this structuraltransformation on the auto parts supplychain workforce.3. Examine green job opportunities now andin the future as alternative career pathwaysfor displaced workers.4. Identify the skills gap and therequired educational and technical trainingneeded for dislocated workers to transition intonew occupations.Technology Drives ChangeThe pace of vehicle technology change is accelerating,particularly in response to changes in consumer tasteand expectations, higher safety standards, and thedrive toward a low-carbon future embodied in moreaggressive government fuel economy standards andmore stringent greenhouse gas emissions rules. Whenconsidering changes in automotive technology thatsupport the “greening” of automotive transportation,most people think first about advanced powertrains,materials and electronics.These three technology sectors play a significant rolein the transformation of the new auto industry:• The most noteworthy change occurring in thepowertrain and fuels sector of the industryis the re-emergence of the electric vehicle.The development of alternative forms ofenergy storage (primarily batteries) is rapidlyprogressing, but the internal combustion enginecould remain the dominant technology forthe next decade and beyond. As powertraintechnologies advance, the locations of powertrainproduction and employment may shift. Thetri-state region of Indiana, Michigan andOhio represented 62.2 percent of total U.S.traditional engine production in 2010. It ispossible that new vehicle propulsion systemswill be produced outside the region and/or that advanced technologies may requirefewer workers to produce the same number ofpropulsion systems. In either event, a large-scaledisplacement of traditional engine production byalternative technologies puts the tri-state region’spowertrain employment at risk.• The need to make vehicles lighter forimproved fuel economy is a major driver inthe development of automotive materials andforming. Vehicle lightweighting focuses on1

finding the optimal combination of materialsto achieve the desired vehicle weight reduction.Currently, the adoption of new materials isimpeded by risks of performance issues andthe lack of reliable simulation models to predictpotential problems. The ability to develop aregionalized supply base is also a major rolein the adoption of new materials for vehiclelightweighting. The U.S. workforce’s strength isin steel use, but less so in alternative materials.While there are only a few domestic metallurgyprograms focused on lightweight materials,Europe and Asia have much more experience inthis field.• Electronics, software and controls in vehicleswill continue to increase at a rapid rate. Todayelectronics account for about 25 percent ofa vehicle’s value. In the next five to 10 years,that figure will climb to 40 percent or more.Although the tri-state region is poised to benefitfrom the research and development, design,engineering, and systems integration side of theelectronics used in vehicles, the area will facestiff competition from other automotive regionsthat are stronger in electronics manufacturing,particularly those in Europe and Asia.Workforce ImplicationsToday’s auto industry needs engineering and technicalemployees who consider the interactions amongvehicle systems in order to optimize solutions morebroadly. This need for systems thinking means thatindividuals who work in research, development andengineering must also possess the soft skills thatenable cross-cultural communication, collaborationand teamwork. Production and skilled trades workersmust adapt to an increasingly fast cadence of newproduct, process and technology introductions. Theseworkers, too, require communication and teamworkskills that enable problem solving and continuousimprovement in process and quality systems.Fortunately, the tri-state region has the educationalinfrastructure to meet these challenges and preparethe workforce for the occupations and careers of thefuture. Out of nearly 900 accredited postsecondaryinstitutions in the region, more than one-thirdoffer programs relevant to the engineering, design,production and maintenance of automobiles.Investing in the FutureDespite the recession, financial constraints, marketand regulatory uncertainty, automakers and suppliersare investing in the technologies discussed above toproduce greener products and processes. Automakerannouncements in 2010 and thus far in 2011 total$4.3 billion in “green” investment in the tri-stateregion alone.Auto production rebounded significantly in 2010and many firms have seen profit margins return.Nonetheless, management appears to be concernedabout the rebound’s permanence and hesitates toexpand hiring or production at the rate of previouseconomic recoveries. Management, it appears,continues to operate in a cost-cutting mode.Unfortunately, simple cost-cutting models of survivalalone are not viable in the long run. Firms also needto build on their strengths and the strengths of theknowledge and skills of their workers.This study concluded that the U.S. auto supply chaincould prosper by adopting a “high-road” productionapproach in which firms, their employees andsuppliers work together to optimize investment, labor,quality and technology development.Adopting high-road policies requires that everyonein the value chain be willing and able to shareknowledge. Production will also gravitate towarddecentralization and greater reliance upon allworkers. Our fieldwork found examples of firmsthat are thriving because they adopted an agileproduction model—a variety of products for a varietyof industries delivered quickly. They use advancedequipment enhanced with cutting-edge informationtechnology; but in addition to changing their productand operations strategies, they have also transformedtheir human resource policies.Green OpportunitiesEven if labor and management work togetherto advance the productivity of the value-chain,2 Driving Workforce Change: Regional Impact and Implications of Auto Industry Transformation to a Green Economy

many workers who have lost jobs due to industryrestructuring or the Great Recession still need work,and many will never be hired back into the autoindustry. Team assemblers and assemblers/fabricatorswere the two auto manufacturing occupationsexperiencing the largest job losses, accounting formore than 57,000 dislocated workers in the threestates. More than 60 percent of these workers haveonly a high school education—a troubling statistic.Where will these displaced workers find jobs intomorrow’s economy? How will they increase theirtraining and skills in order to secure the jobs of thefuture? What are their alternatives? Is the greeneconomy a viable alternative?The project partners conducted surveys to benchmarkthe number of green jobs in each state and theindustries they are concentrated in. While thepercentage of jobs considered green differs amongstates, survey results show that green jobs span a widerange of industries and occupations from engineeringjobs to production jobs.The surveys found that green jobs were concentratedin manufacturing and construction, the industriesmost affected by the recent economic downturn.Demand for these jobs varied across the region, basedon the industry mix and employers’ perceptionsof green.Employers reported that most green jobs requireonly on-the-job training. Considering that a largenumber of green jobs are in production, this findingalso supports the findings of the automaker interviewand survey responses. Automakers also stated thatgreen products and production techniques will havea more profound effect on engineering and technicalstaff requirements than on the production and tradesworker skill sets.The green engineering and technology occupationswith the greatest demand now and projected for thefuture tend to require expanded skill sets and moreeducation and training. This trend in “up-skilling” ofoccupational requirements is true of green jobs as wellas most other in-demand occupations.Alternative Career PathwaysGiven restructuring in the auto industry, manydisplaced workers need help to find suitablealternative jobs. The two-step pathway cluster andskills gap analyses developed in this study offervaluable guidance to displaced workers chartingpathways to new career opportunities.The technique used to group occupations into pathwayclusters is groundbreaking. Pathway clusters areorganized based not upon industries or functions, butupon the similarities and differences of worker andjob characteristics. Not only are occupations in a givenpathway cluster considered similar to one anotherin terms of their knowledge and skill requirements;the pathway cluster analysis also measures thedegree to which worker traits such as “highly social”or “attentive to detail” make occupations more orless similar. Job transitions within a given cluster,therefore, would be easier than moving from onecluster to another.There are seven pathway clusters. Auto industryoccupations are concentrated in the production,construction and engineering cluster, but there aredozens of green or high-wage, high-demand jobs inthe same cluster that make good target occupationsfor each displaced worker. Except for the health, socialand personal services cluster, green occupationsare well distributed throughout the seven pathwayclusters.Knowing the alternative occupations that are mostsimilar to one’s current occupation—those in the samepathway cluster—is a good first step. A worker stillneeds to know the relative difficulty or ease in closingthe skills gap between two occupations. The uniformmeasure, or common denominator, to gauge thedifficulty or ease of making the transition from oneoccupation to another is the amount of time requiredto prepare for a new occupation.The skills gap is the education, training orapprenticeship time required to transition from oneoccupation to another. The skills gap analysis thenmeasures the time (“trip time”) required to changefrom one occupation to another based on the extent3

of preparation required for the new job. While thetrip time measure is not perfect, it is a great advanceover many previous career pathway tools because itprovides users an easily understandable measure of aworker’s skills gap.Finally, this study produced a tri-state trainingprogram database for green and growing occupationsas a resource to complement the trip time results.After a displaced worker generates a set of suitablealternative occupations, he or she can match thoseoccupations with postsecondary educational,technical and vocational programs in the region. Theskills gap and training program databases, togetherwith all the Driving Change analysis and researchresults, are available on the web free of charge atwww.drivingworkforcechange.org.Workforce ImplicationsSeveral practical responses emerged from thisresearch:• The need for ongoing access to capital for thesupplier network is critical to the stabilization ofthis sector.• Emerging green and cross-functional systemsapproaches to design, manufacturing, equipmentmaintenance and building construction willdemand corresponding changes in the training ofworkers from the design center to the shop floor.• Strategic training for managers that emphasizeslong-term planning, worker training benefits andthe need to integrate complex investments couldimprove acceptance of the associated investmentcosts.• Current differences among definitions of greenjobs and inconsistent use of occupational codingsystems frustrate and complicate research effortsaimed at identifying and quantifying these jobsand identifying training opportunities.• Many of the workers displaced from the autosector who will need to transition to alternateoccupations are starting with limited education(high school or less). These workers will beespecially challenged in finding acceptablereplacements for their old jobs and will needsupport throughout that process.4 Driving Workforce Change: Regional Impact and Implications of Auto Industry Transformation to a Green Economy