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The Automobile Industry and Its Impact on Michigan


Automobile industry is an industry that plans, designs manufactures and markets automobile models. Automobile industry is one of major lucrative industries contributing much on growth of economies around the world. In everyday life we travel to our workplace, homes or from one country to other using automobiles. The industry has eased transportation of goods and movement of people from one point to another and from one country to another. Development of automobiles has taken several years to be what its today with enhancement of models into more effective, efficient and fancy ones. The industry deals with manufacturing of light vehicles such as cars and light trucks, and heavy trucks.

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The industry started with development of steam engine in 17th century which was followed by attempts to develop a road vehicle using the same technology. The first self-propelled road vehicle propelled by steam engine was developed by French engineer by the name Nicholas Joseph in 1770 which ran on three wheels1. The first automobile that could carry passengers was made in the begging of 19th century by British inventor by the name Richard. Richard’s model was small, more efficient and more powerful than that of Nicholas. Major development and enhancement in the industry continued and by 1830 coaches that used steam were the common means of transport in England. The first steam propelled vehicle in the US roads was build by Oliver Evans in 1775. The self propelled steam coaches were removed from roads by 1860 and as result inventors turned attention to engines whose combustion was internal.

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The internal combustion engine used illuminating gas to propel automobiles. The first engine to use gasoline practically was developed in 1860 by Etienne Lenoir a French inventor. Later two German engineers, Langen and August Otto build on Lenoir’s ideals and created more efficient gas engine with Otto latter in 1876 building a four cycle engine. The first car whose body formation and parts arrangement from rear to back resembled the modern models was build in 1894 by Levassor French engineer using an engine build by Germany engineer Daimler. Daimler’s engine was faster and powerful than the previous one; was made using two v-shaped cylinders. In early 1890s, the pioneer automobiles were the first company to build internal-combustion engine automobiles in the US after a motor vehicle patent obtained by Baldwin Selden. This patent allowed the US automobile industry to build vehicles propelled by internal-combustion engine.

The patent also, allowed many US automobile industries to acquire manufacturing licenses, although others, such as the Fords declined to acquire the license. Fords declined acquiring license on basis that the Selden patent only allowed manufactures to build automobiles that use a specific type of engine. It’s believed by the time of Selden patent expiry period; more than 600,000 automobiles were being used in the US. These automobiles were driven by steam, gasoline and some by electricity.

The US automobile industry growth picked up in 1913 with increased demand for automobiles from all over the world. The Ford group which had entered the industry improved its production efficiency by use of conveyor belt that carried the automobiles part to place of assembly. The formation of automobile board of trade was another reason behind the rampant growth in the US automobile industry in 1913. The board members allowed companies to use patent of other companies without paying royalties to the patent owning company. This move was aimed to avoid monopolies so that the industry could make batter automobiles. Early US auto manufactures located their businesses near or in Detroit state which had more water reserves and abundant iron-ore mines. The major US automobile companies playing in the industry were the Fords, General Motors and Chrysler motors.

The US automobile industry experienced a steady expansion until the year 1978, although the production declined during the world war when the industry was changed to firearm manufacturing industry. The climax of the industry product ion was in 1978 recording more than 12 million units of various automobiles. Since then the industry production has fluctuated depending on economic conditions and competition from other raising world companies. The industry was in recession in early 1980 producing fewer cars the worst out since early 1950s. The industry recovered in 1996 with increased output especially by industries to the north of US. A total of 143 million cars and 45 million trucks were in use in the US by 1991 forming an immense transportation system2.

In mid 20th century other automobiles companies had replaced the US automobile companies’ dominance in the world and also in the US. The Volkswagen of Germany was the first non American automobile company to launch its business in the US soil, exporting its model popularly known as the Beetles to the US market. The company opened a manufacturing industry in the US in 1978 which later moved to Mexico after poor run in the US. After Germans automakers, followed the Britain and French automakers. The two countries exported much of their auto products to the US market. After the failure of European automakers to hit the US automobile market, Japan took over and her automobile sales in the US market have ever increased since 1956. Japan’s Honda Company built its assembly industry in state of Ohio with other Japanese auto firms putting up plants in North America. The Germans BMW and Mercedes-Benz entered the US market in 1990s while, South Korea’s KIA motors and Hyundai established their business in early 21st century.

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Michigan economy has over relied on its automobile industry. The automobile industry was initially established in Michigan in the begging of twentieth century before decentralizing to other parts of the U.S and the rest of the world. Although, Michigan economy is now known for her information technology, manufacturing and life sciences, it has ever been known for its auto industry for long time. Many large automobiles companies in the US automobile industry are located in Detroit a town in Michigan State. Her rich iron-owe reserves3 and large water masses has contributed much towards establishment of the automobile industry. The state has numerous natural small lakes and bounders four of the five great lakes. Michigan is the forth highly ranked state in terms of high-tech employment criteria. It is estimated that she has employed more than 70,000 high-tech laborers in her automobile industry by 2000. Much of the US automobile research on new automobiles is done in Michigan which accounts for bigger percentage of Michigan’s total gross domestic product. The automobile industry in Michigan accounts for one in every job in the United States of America mostly in engineering department. The figure below shows employment trade in US in 2000.

200s Unemployment Rate (SA, Monthly)
Figure 1. 200s Unemployment Rate (SA, Monthly)

During the world war the state of Michigan, Ohio and Indiana automobile employment formed three quarters of the total domestic automobile employment level. As is well known concentration of industries in an area affect the economy of that region. The auto industry in Michigan has contributed much towards development of Michigan State. The US economy largely relies on export of automobiles; if exports are high the economy improves and if exports are low the economy goes into recession. Increased exports of automobiles increases production capacity of the automobile industry and also shows how strong the industry is doing. The rise in cost of crude oil internationally affects the demand of the automobiles in both domestic and international markets. In 2007 the US export in automobile reduced significantly due to increasing gasoline fuel internationally4. With high fuel prices customers will shift to car which consumer less fuel and abandon large tracks which consume a lot of fuel in order to minimize fuel consumption cost. This imbalance in variety production affects employment sector and the level of income generated since much is lost on one side.

The auto industries in Michigan have improved the state economy with increased rate of employment by 2000 as compared to many state of the U.S. Transportation equipment contributes a lot towards economic performance of each state. Transportation infrastructure helps much in development of industries. The auto industry in Michigan has helped in development of modern state of the art road and railway system to assist in movement of automobiles and its spare parts. The interstate roads and railway in Michigan connect the assembly plants and the suppliers of spare parts which ensured timely movements. Michigan’s auto industry manufactured all types of autos since in first decades since inception; from the light sports car to heavy trucks.

Michigan for long time has relied much on her automobile industry. As result her economy for the last five years has been negatively affected by changes in the industry5. Although the automobiles revenues contribute much to the US economy, the state of Michigan economy has remained weak as compared to other states. Her poor employment rate as compared to other states is the source of her ever worst economic performance in recent years. Increased production has increased the number of vehicles in the states roads which has increased carbon dioxide emission to the atmosphere: carbon dioxide results from combustion of fossil fuels. The transportation sector in Midwest states, Michigan included is said to the highest emitter of carbon dioxide to the environment6. As result the car manufacturers have been compelled by the state authorities to use fuel-efficient technologies when making car to reduce the rate of carbon emission.

This standards set by the federal authorities has increased the cost of production reducing the level of output all along. These standards have also affected consumer choices on type of vehicles to buy. This fuel-standardization on light cars by the federal government has negatively affected the big three auto manufactures in Michigan: the General motors, the Fords and Chrysler. These three giant firms have found it hard to implement the standards on light trucks and cars, hence have specialized in large vehicle model sale for many years. Recently the big three firm have been experiencing a significant reducing profits and market share. As result many jobs have been lost, income has reduced to household members working in the industry. In July of 2007 workers union and the three giant auto manufactures spend much of the summer negotiating for better wages. For example in July 20th 2007, labor entered into negation with the three companies to contract workers for four years period7. The Delphi Company closed some of its branches in Michigan rendering many people jobless. The number of those working in assembly plant is less than those working in parts making plants. Again those who work in assembly plant by 2005 earned more than those working in parts plants. This difference brought some disunity between the suppliers of the parts and the assemblers’ plants.

The decline in employment rates in automobiles industries have been common feature for the Midwest communities for long time. According to statistics the employment level in auto industries in Michigan, reduced from three quarters of total domestic employment level during the world war two to less than half the total in 2003 as shown by the figure below.

Midwest Share of U.S. Automotive Employment 1914-2017 (Ohio, Michigan and Indiana)
Figure 2. Midwest Share of U.S. Automotive Employment 1914-2017 (Ohio, Michigan and Indiana)

This reduced employment level is credited to increased productivity due to reducing labor content per automobile production: hours used in production on one unit of auto including parts have been declining over the year hence the need to reduce workers. Secondly increased competition from world auto manufacturers has in creased pressure on the three companies. Importation of new cars has been in rise since 2002. However there are signs of growth in labor market across some Midwest states since 2003 except Michigan which has not shown any employment recovery. Relocation of automobile industries from Michigan to other states is seen as the reason behind the slow growth in employment level since Michigan community over relied on the industry as the source of employment for the community.

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The competition between auto makers and automotive supply companies has had bad effects to the economy of Michigan. Any poor performance by the auto mobile industry was reflected by recession in the economy in past decades. Currently the problem faced by the auto manufactures and automobile companies have resulted to underperforming Michigan economy. There relationship has for long time being described as brutal relationship8. The domestic auto assemblers for along time have been dictating parts material prices to the suppliers with any defiance by the supplies leading to loss of the tendering contract. It is estimated that since 2004 Michigan automobile assembly industry has retrenched more than 17,000 jobs while 27,000 has been lost in plants that produces motor vehicle parts. Establishment of more automobile assembly industries outside Michigan has increased competition to the Michigan companies. Her domestic production has reduced significantly due to imports and sale of automobiles from her neighboring states.


The shift of the industry towards south has reduced sales volumes of the Detroit 3 that is, the General Motors, Ford Motors and Chrysler. Their domestic sales share has declined from 65 per cent in 2000 to 58 per cent in 20059. Many of her automobile industries are assemblers with motor vehicle parts coming from the south. This is another reason why her employment level is low because auto assembly plants employ less workers compared to the auto parts manufactures. The future of Michigan labor market is not seen to improve soon because, of developments in auto industry in less labor intensive operations. As result of these negativities being impacted on the Michigan economy policy makers and the Michigan governments have turned to research on life sciences. More finances are now devoted on life science research and development of other manufacturing industries.

End notes

  1., automobile industry. First steam automobile. Web.
  2. Anastakis, D., Auto pact: creating a borderless North American auto industry, 1960-1971, (Toronto: University of Toronto press, 2005).
  3. Bruce, Rubenstein, A. and Ziewacz, Lawrence E. Michigan: A History of the Great Lakes State. (2002)
  4. Thomas, Klier, U.S automobiles exports on the rise.
  5. Testa, Michigan woes (2005): changing auto mobiles in Michigan.
  6. Testa, Michigan woes (2005): carbon emission by motor vehicles in Michigan.
  7. Munchet guide, Downturn in Auto Industry Impacts Michigan Employment: negotiations between labor unions and the Detroit 3. Web.
  8. Mbeeke Candace, B., Shift in auto relationship help Michigan helps Michigan, (2006). Web.
  9. Collier Joe Guy and Kortney, Stringer Michigan’s next generation motoring to other states: Auto industry not providing jobs like it did for parents. Web.


  1. Anastakis, D., Auto pact: creating a borderless North American auto industry, 1960- 1971, (Toronto: University of Toronto press, 2005).
  2. Candace Mbeeke, B., Shift in auto relationship help Michigan helps Michigan (2006). Web.
  3., automobile industry. Web. 
  4. Joe Guy Collier and Kortney, Stringer Michigan’s next generation motoring to other states: Auto industry not providing jobs like it did for parents. Web.
  5. Klier Thomas, U.S automobiles exports on the rise.
  6. Munchet guide, Downturn in Auto Industry Impacts Michigan Employment. Web.
  7. Rubenstein, Bruce A. and Lawrence E. Ziewacz. Michigan: A History of the Great Lakes State. (2002)
  8. Testa, Michigan woes (2005).

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