Financial Contribution of Automotive Sector to State and Federal Tax Revenues: $134 BillionThe Center for Automotive Research (CAR) recently released a report show-ing that the automotive sector contributed at least $91.5 billion in state government tax revenues, and $43 billion in federal tax revenues in 2010. The study focuses the in-dustry’s financial contribution to state and federal tax revenues, and examines mul-tiple instruments of tax revenue generation.

Taxes are generated at various points in the automotive product lifecycle. Beyond the sales taxes generated when vehicles are purchased, government agencies collect taxes from a variety of automotive-related sources, including: income taxes from em-ployees working in the automotive sector; taxes on fuels, registrations, and licenses from drivers; and corporate income taxes and licensing fees from the automotive manufacturers and suppliers. Due to the

depth and breadth of the automotive sector, every state in the nation generates tax rev-enues related to the automotive industry.

In Michigan, a full 13 percent, or $2.8 bil-lion, of the State’s $22.2 billion in tax reve-nue now comes from the auto sector. Mich-igan’s automotive tax revenues are broken down by source in the pie chart below.

CAR’s research confirms that the U.S. au-tomotive sector has a large impact through-out the nation, and supports state and feder-al governments. As the economic recovery continues, auto sales improve, and com-panies are able to create and retain jobs at greater rates, tax revenues generated by the sector could increase to even greater levels both nationally and within Michigan.

http://www.cargroup.org/publications

Michigan Automotive Tax Revenues, 2010 (in millions)

Source: Center for Automotive Research

2010 State and Federal Taxes from the Automotive Sector

Of the $91.5 billion in state government tax revenue:

• $30 billion was generated from taxes on the sales and ser-vice of new and used vehicles.

• $860 million was generated from income taxes on direct employ-ment at auto manufacturers, auto parts suppliers, and dealerships (This number increases to over $4 billion when taxes from intermedi-ate and spinoff jobs are included).

• $60 billion was generated from use taxes and fees–which includes fuel taxes, reg-istration fees, and driver licensing fees.

• $750 million was generated from busi-ness taxes, such as corporate income taxes, and business license fees.

Of the $43 billion in federal government tax revenue:

• $14 billion was generated from in-come taxes on direct employment at auto manufacturers, auto parts suppliers, and dealerships (This number increases to nearly $69 bil-lion when taxes from intermedi-ate and spinoff jobs are included).

• $29 billion was generated from federal motor fuel taxes.

Use Taxes and Fees $1,904

Sales Taxes $738

Business Taxes $63

Income Taxes $104

As market demand continues to grow, Michigan automotive employment will increase, as well. Since January 2011, Michigan motor vehicle and parts manufacturing employ-ment has increased by 14,800 workers.

CAR’s Forecast: U.S. & Michigan Auto Employment and Production

Source: LMC-Automotive; BLS; CAR

CAR Michigan Automotive Focus, Issue 3, May 2012Page 2

LMC-Automotive Inc. forecasts that Michigan vehicle production will grow by 9.5% this year. Based on LMC’s prediction, CAR estimates Michigan automotive employment will increase by 10% for 2012 and 2013. Michigan’s automotive employment growth will slow down, but will still show gains in 2014 and 2015.

Source: BLS

Michigan Light Vehicle Production and CAR’s Motor Vehicle & Parts Employment Forecast, 2010-2015

Michigan Motor Vehicle and Parts Manufacturing Employment January 2011-March 2012

CAR Michigan Automotive Focus, Issue 3, May 2012Page 3

Eye on the Market: The Rise of Four Cylinder Engines

15%

20%

25%

30%

35%

40%

45%

50%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

4 cyl 6 cyl 8 cyl

Rising fuel prices and stricter fuel econ-omy regulations have made four cylinder engines more popular with car buyers. The table (below) provides a ten year his-tory of U.S. light vehicle market share for four, six, and eight cylinder engines. Both domestically-built and imported vehicles are included in the analysis, and the data is provided on a model year, as opposed to a calendar year, basis.

Over the last ten years, four cylinder en-gines grew from 28 percent to 41 percent of the market, an increase of nearly 46 per-cent. Most of the growth in four cylinder sales has come at the expense of six cylin-der engines, which shrank from 47 percent of the market in the 2002 model year to 36 percent in 2011. The market share for eight cylinder engines also declined, but posted a smaller drop from 24 percent to 20 percent over the same time period. For the 2011 model year, 22 percent of light trucks and a full 64 percent of passenger cars sold in the United States were equipped with four cylinder engines.

Over the last decade, four cylinder en-gines have become not only more fuel efficient, but also have improved horse-power and torque levels that are closer to those achieved by six cylinder engines. The customer, therefore, benefits from both in-creased efficiency and increased power of these smaller engines. Higher efficiency and power are made possible partially by the increasing adoption of direct injection technology and turbocharging (turbocharg-ing was discussed in the April issue of Michigan Automotive Focus). Direct injec-tion involves the use of a second fuel pump to supply fuel directly into the combustion chamber, bypassing the valve used in con-ventional engines. This allows for more

efficient combustion, providing both more power and increased efficiency. Ford’s Eco-Boost line of engines, which are offered in both four and six cylinder versions, are an excellent example of the use of direct injec-tion and turbocharging together.

Two Michigan engine plants produce four cylinder engines. They include the General Motors Flint South plant and the Chrysler Dundee Engine Plant. Flint South produces four cylinder engines used in General Mo-tors’ Chevrolet Cruze, Chevrolet Sonic, Buick Verano, as well as the Chevrolet Volt. Chrysler’s Dundee Engine Plant pro-duces several four cylinder engines used in a variety of vehicles, including the Dodge Avenger, Chrysler 200, Dodge Journey, and several Jeep models. Interestingly, 1.4 liter four cylinder engines produced in Dundee are exported to Mexico for inclusion in the Fiat 500 subcompact.

Market Share for Number of Cylinders in Light Vehicles Models 2002-2011

Source: Ward’s Automotive Yearbook

CAR Michigan Automotive Focus, Issue 3, May 2012Page 4

Technology Focus: Fuel Economy for All VehiclesAdvances in vehicle powertrain technol-ogy are reducing vehicle emissions and im-proving fuel economy, and consumers now have more choices than ever when it comes to buying clean and efficient vehicles. Be-yond the range of choices in vehicle fuels and powertrains, however, improved fuel economy can be achieved through the use of other vehicle technologies such as lightweight materials, high efficiency tires, improved aerodynamics, and electrified ac-cessories and subsystems. Many of these fuel efficiency-enhancing technologies are already being deployed by manufacturers.

Lightweight MaterialsLighter vehicles require less energy to ac-celerate, and that means they consume less fuel. Many automotive parts and compo-nents can be made using lighter materi-als. Depending on the application, heavier materials, such as conventional steel, can be replaced by lighter materials, such as advanced high-strength steels, aluminum, magnesium, composites, and plastics.

The Chevrolet Sonic’s body structure integrated lightweight materials such as high-strength steel (yellow) and ultra-high Strength Steel (red).

Source: General Motors

Tire Rolling ResistanceRolling resistance is an efficiency loss that occurs when a tire rolls over a surface and undergoes repeated cycles of deformation and recovery, dissipating energy in the form of heat. The amount of rolling resistance increases when a vehicle is accelerating, on curves, and on a grade. Rolling resistance can be decreased through improvements in both tire design and materials. Typically, low rolling resistance tires incorporate sili-ca in their tread compounds to reduce effi-ciency loss without compromising traction.

AerodynamicsThe shape of a vehicle affects efficiency by changing the amount of aerodynamic drag it experiences. Design changes such as decreasing the frontal area of a ve-hicle, rounding corners, modifying the angle of the rear window, and using side skirts reduce drag on the vehicle and im-prove fuel economy. In addition, air-flow management components and active sys-tems, which use moving surfaces or parts to change a vehicle’s aerodynamics, can be used to further streamline a vehicle.

Integration of Lightweight Materials in Vehicle Body Structure

Electrification of accessories and subsystemsIn conventional vehicles, many devices such as oil and coolant pumps, power steering, power brakes, and air condition-ing are powered by the crankshaft. These systems decrease efficiency by diverting energy that could otherwise be delivered to the drivetrain. Vehicles with larger bat-teries can reduce some of these mechani-cal loads by using electricity to power such systems. In addition, some technolo-gies which require increased electrifica-tion, such as stop-start and launch assist, can be used to improve fuel economy.

Michigan’s RoleMichigan companies are poised to benefit from increased demand for fuel efficient ve-hicles. Not only are high fuel-efficiency ve-hicles—including the Chevrolet Volt, Ford Focus, and Chevrolet Sonic made in Mich-igan—but many automaker and supplier research, development, and design centers focused on advanced fuel efficiency tech-nologies are located in the state. Michigan is host to more than 330 automotive R&D fa-cilities, including facilities operated by 9 of the 10 largest global automakers, and 46 of the 50 largest global automotive suppliers.

CAR Michigan Automotive Focus, Issue 3, May 2012Page 5

Did You Know?Michigan accounts for 14.5% of total automotive parts establishments, and 20% of total automotive supplier workers in the United States. Michigan does not just dominate the number of auto supplier employments, but also dominates the size of establishment. Ac-cording to the Census Bureau, Michigan has 12 establishments with 1,000 workers or more, 25 establishments with 500-999 employees, 43 with 250-499 workers, and 123 establishments with 100-249 employees.

Source: BLS Quarterly Census of Employment and Wages

State

Employment Establishments2009 2010 2009 2010

Alabama 13,128 13,414 149 140Alaska (ND) (ND) 1 2Arizona 2,572 2,154 74 73Arkansas 4,848 5,347 58 55California 13,641 12,375 566 550Colorado 1,086 981 78 73Connecticut 3,227 3,210 66 69Delaware 82 77 10 9Florida 3,075 2,886 173 181Georgia 8,118 8,416 180 177Hawaii (ND) 15 4 5Idaho 251 228 20 19Illinois 18,617 18,748 298 288Indiana 44,000 46,436 361 343Iowa 6,528 6,760 71 68Kansas 1,707 1,657 36 34Kentucky 23,058 23,311 176 174Louisiana 410 383 32 32Maine 262 196 10 10Maryland 816 723 31 29Massachusetts 908 746 32 34Michigan 81,368 84,526 886 829Minnesota 1,845 1,834 85 80Mississippi 3,184 3,078 71 57Missouri 8,126 7,499 166 153

State

Employment Establishments

2009 2010 2009 2010Montana 110 104 14 12Nebraska 3,832 3,836 35 36Nevada 456 426 36 32New Hampshire 435 375 14 14New Jersey 1,319 1,280 58 53New Mexico 108 124 20 21New York 12,170 11,812 188 183North Carolina 13,435 13,402 160 157North Dakota 763 731 19 19Ohio 54,633 54,526 519 497Oklahoma 2,716 2,586 74 73Oregon 1,677 1,646 75 71Pennsylvania 6,613 6,424 129 123Rhode Island 43 (ND) 5 5South Carolina 13,009 11,712 119 111South Dakota 519 594 15 13Tennessee 25,422 26,856 227 222Texas 13,779 14,126 318 307Utah 3,367 3,402 60 56Vermont 490 (ND) 6 6Virginia 4,946 4,764 84 83Washington 1,792 1,812 81 81West Virginia 1,637 1,551 11 9Wisconsin 7,965 7,722 115 110Wyoming 60 63 5 6

CAR Michigan Automotive Focus, Issue 3, May 2012Page 6

Company PlantMarch Production % Change YOY

CHRYSLER LLC

JEFFERSON NORTH

26,079 10%

STERLING HEIGHTS

21,805 4%

WARREN 23,698 -5%FORD

DEARBORN TRUCK

32,455 -6%

FLAT ROCK 15,614 56%MICHIGAN ASSEMBLY

20,617 6%

GM

FLINT TRUCK 16,974 18%HAMTRAMCK 2,482 -59%LANSING DELTA 23,553 -18%LANSING GRAND RIVER

5,286 -26%

ORION 14,009 N/A

Michigan Vehicle Production

Source: Ward’s Automotive

News from CAR’s Book of DealsCAR’s Automotive Book of Deals is a proprietary database that catalogues the details of all major North American automotive investments--including both private and public in-vestment, and job creation and retention estimates. In March and April, there were several large automaker investments in the Great Lakes region, including:

• $98 million at Honda’s Anna engine plant to make components for a new continu-ously variable transmission which will debut in the 2013 Accord,

• $100 million at Chrysler’s Belvidere assembly plant to build a body shop for the Dodge Dart,

• $400 million at Toyota’s Princeton assembly plant to increase production of the Highlander, and

• $83 million at Toyota’s Woodstock assembly plant to increase production of the RAV4.

Industry in Michigan could benefit from these regional investments as demand for parts and components increases. One specific example is Chrysler’s engine plant in Dundee, Michigan, which will provide engines for the Dodge Dart. Toyota also recently announced the hiring of 150 engineers at Toyota Technical Center as part of the company’s commit-ment to localizing design and development North America. In addition, in March and April there were several investment announcements from smaller suppliers in Michigan including Panasonic, Teijin Advanced Composites, Magna, and Lacks Enterprises.

CAR Michigan Automotive Focus, Issue 3, May 2012Page 7

aboutMichigan Automotive Focus is spon-sored by the Michigan Economic Development Corporation to advance knowledge of Michigan’s automotive in-dustry, and is produced by the nonprofit Center for Automotive Research (CAR) .

CAR is focused on a wide variety of impor-tant trends and changes related to the auto-mobile industry and society at the interna-tional, federal, state and local levels. CAR

conducts industry research, develops new methodologies, forecasts industry trends, advises on public policy, and sponsors multi-stakeholder communication forums.

CAR Affiliates include over fifty auto-makers, suppliers, associations, and key stakeholders in the North American auto-motive industry, including: Chrysler Group LLC, Ford Motor Company, General Mo-tors, Honda, Nissan North America, Toy-ota, and Volkswagen Group of America.

The CAR Management Briefing Semi-nars is an annual gathering of more than 900 auto industry, academic and govern-ment leaders addressing critical issues and emerging trends in an atmosphere designed to build relationships. It will be held August 6th-9th, 2012 in Traverse City, Michigan.

The conference includes targeted sessions focusing on topics such as the global manu-facturing strategies, tooling for tomorrow’s automobiles, connected vehicles, advanced powertrain, purchasing, skilled workers, designing for technology, and leveraging

Who Attends the CAR Management Briefing Seminars?

• Automotive Manufacturer and Supplier Executives• Purchasing and Marketing Executives• Energy Industry Representatives• Financial Analysts• Government and Education Representatives• Information Managers• Labor Leadership• Manufacturing Managers and Engineers• Media• Plant Managers and Superintendents

leadership, maximizing momentum

We allow plenty of time for networking and socializing with colleagues. The social hours each evening are renowned for their friendly atmosphere, and offer attendees a great opportunity to meet key people from throughout the industry. The lunch breaks and continental breakfasts offer additional opportunities for discussing the issues of the day. The week's networking activities kick-off with a scramble golf tournament on Sunday afternoon. For additional infor-mation, visit http://www.cargroup.org/