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The high oil and gasoline prices we have experienced over the past two years have dramatically increased the attention paid to vehicle fuel economy by drivers, new car buyers, and the government. Detroit automakers, who have long depended on the least fuelefficient vehicles to provide most of their profits (and some of who have argued that fuel economy did not matter very much to their customers) are seeing their sales and profits evaporate, as new vehicle buyers switch to more fuel-efficient vehicles. Management apparently assumed that (1) fuel prices would stay low forever, and/or that (2) their customers would not change their vehicle choices because of high fuel prices. In this study, we examine the economic viability of improving fuel economy as a strategy to mitigate the risk of high fuel prices and to gain a competitive advantage. By adopting a “game theory” approach to representing the competitive interactions among the automakers and using different scenarios to represent the risks automakers face with respect to fuel prices and consumer demand, we are able to identify which strategies maximize profits for the automakers and support U.S. auto industry employment. Download Full Report( The State of the Automotive Industry (2006) The state of the U.S. automotive industry at the beginning of 2006 is highly mixed. A set of very positive trends is making the overall industry appear healthy. At the same time some negative trends are exposing troubling weaknesses in some industry participants. The future is more uncertain now than at any time in the last 10 to 15 years. This white paper is a summary of the trends and issues that influenced the industry in 2005 and continue to influence it in 2006 and beyond, with enough historical background to provide some perspective. The opportunities some face are exciting. The challenges some face are daunting. It is the best of times. It is the worst of times. By way of introduction, here are some of the contradictory trends and some comments on them. Download Report (
Sponsored by Alliance of Automobile Manufacturers and the Association of International Automobile Manufacturers, this 2001 report describes the contribution
of the U.S. auto sector, including linked industries, to the U.S. economy. The analysis includes a national model and separate analyses for each state;
estimates of national employment and income based on direct, indirect, and induced effects; and a consideration of the future needs for and challenges of mobility.
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In this 2004 report, we examine the ramifications of a manufacturer tax credit that would cover two-thirds of
the tooling and equipment investment costs for converting current automotive manufacturing facilities into
plants that would build components and engines to support the growth in hybrid and advanced diesel powertrains.
Our analysis suggests that such a credit would cost the federal government about $1.1 billion over five years
from 2005 to 2009. However, our analysis reveals that such a credit could have many positive effects on the
US automotive industry.
Download Report (  Acrobat, 1.2 MB)Return to selections Michigan Automotive Policy Survey (1999)
Sponsored by the Michigan Economic Development Corporation, this 1999 survey of manufacturers and
suppliers examined the degree of industry consensus on a wide range of policy issues. The report
provides an analysis and forecast of key issues in Michigan's automotive economy, including hiring,
attrition, wages, capacity, and capital spending. It also reviews executive views on education and
training, the expansion and location of facilities, health care programs, and global climate
change issues and policies. Authors: Sean P. McAlinden and Brett C. Smith.
Download Report (  Word, 797 KB)
Return to selections Michigan: Still the Automotive State?(1992)
Commissioned by the Governor's Policy Advisor Office, this project is a study of investment decision-making
within the domestic automotive industry. OSAT surveyed current Michigan automotive producers, major suppliers,
and non-Michigan auto firms as to the criteria of plant location decisions, particularly those that concern
present and future state industrial policy
Download Report ( Acrobat, 6.4 MB)
Return to selections
Sponsored by the Michigan Economic Development Corporation, this 2000 research memorandum investigates the contribution of
Michigan's automotive industry to the high-technology sector of the state's overall economy. The paper considers several ways
of comparing states on high-technology activity and employment. Authors: Sean P. McAlinden, Abel Feinstein, and Brett C. Smith.
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In the 1970s, major American industrial cities began to lose much of their economic vitality as a result of economic globalization and affected regional
economies. Since then, the issue of regional restructuring of these cities and their suburbs has become a focus of public discourse. Regional restructuring
is defined as the economic actors’ response to resolve a crisis on the regional level. The industrial cities of the Midwest and Northeast have tried
to respond to the common impacts of economic crisis caused by de-industrialization, such as plant closings and mass unemployment.
However, while these cities experienced the common trend of de-industrialization, they followed different paths in their responses. Some cities have succeeded in revitalizing their economies, while others have failed to regain the vitality of their economy. This gives rise to several questions. Why have major industrial cities restructured their regions via different paths? Why have major industrial cities shown varying results from regional restructuring? To answer these questions, we will compare the regional restructuring that took place in two major American industrial cities, Pittsburgh and Detroit, and examine how the different paths gave rise to different outcomes. In other words, the objective of this study is to compare the regional restructuring of Pittsburgh and Detroit, focusing on the presence or absence of a regional coalition. A regional coalition is defined as a broadened governing coalition that is functioning at the regional level. Download Report ( The Contribution of the International Auto Sector to the US Economy (1996)
Sponsored by the Association of International Automobile Manufacturers, this 1998 report describes the scope
and importance of the international motor vehicle sector, including linked industries, and examines its effects
on national employment and income. The report highlights the various contributions of the international sector
of the motor vehicle industry to U.S. economic activity and compares these contributions to those of a number
of non-automotive industries. The report also reviews the sensitivity of the U.S. economy to production, sales,
and exports of the international motor vehicle industry, including a forecast of the future role of the operations
of the international motor vehicle sector.
Authors: David E. Cole, Sean P. McAlinden, and Brett C. Smith from OSAT; George A. Fulton, Donald R. Grimes, and Lucie G. Schmidt from the University of Michigan Institute of Labor and Industrial Relations. Download Executive Summary(
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