Changes jolting the global auto industry could hit Kansas City sooner than we think — with devastating impact on the region’s economy.
If you wonder how such forces could impact us, look no further than KCAP, Ford Motor Company’s Kansas City Assembly Plant in Claycomo, which is the largest manufacturing site in the region. Then ponder General Motors’ December announcement of plant closings in Ohio and Michigan.
In the auto business, nothing is ever certain.
Imports from China and other locations, as well as highly-capitalized new entrants into the U.S. market, are eating into consumer automobile demand, and will continue to do so. Growing product segments such as self-driving and electric vehicles could force automakers to reconfigure their plants at great expense. Meanwhile, trade and geopolitical tensions don’t appear to be going away anytime soon.
We should be proud that the auto industry is the largest exporter from the U.S., but this could change as trade tensions limit our ability to export to critical markets around the world.
It’s tempting to think that KCAP is safe from these forces. After all, it produces the F-150 truck and the Transit van — two vehicles that have historically always sold well.
But the plant is not an island, and having a false sense of security about it would be a mistake. After all, larger vehicles use more metal than sedans, and the Trump administration’s steel and aluminum tariffs have already cost U.S. manufacturers billions.
Last year, Ford put 2,000 KCAP workers on temporary layoff because of slower Transit sales. The news should serve as a reminder that Claycomo relies on a stable economy driving healthy demand.
KCAP employed 3,000 people in 2010. Its workforce has now grown to more than 7,100. That number only begins to show the plant’s economic impact on our regional economy. Ford puts an estimated $1.7 billion into the Kansas City economy every year through purchases from local suppliers, not to mention millions in philanthropic donations and state and local taxes.
Perhaps the biggest impact is the so-called “multiplier effect” that auto manufacturing jobs have on a region’s economy. This effect captures the number of other related jobs an industry creates as a result of being located in a community. Manufacturing has a higher multiplier effect than other kinds of business, and that is especially true of auto manufacturing.
According to the non-partisan Center for Automotive Research, auto jobs have a multiplier effect of seven. In other words, every auto manufacturing job creates seven additional jobs. For example, a factory buys goods and services from local suppliers, and its workers spend their paychecks at restaurants, clothing stores and movie theaters. Those businesses, in turn, employ people. And the local taxes they generate help hire teachers, police officers and other public servants.
The auto industry is critical to our state’s economy, and Ford’s Missouri-based manufacturing plant is similarly important to our region. All stakeholders — including the automakers, their labor partners, policymakers and economic development leaders — should continue to collaborate to ensure this plant keeps driving job growth in our state.
Ford’s stock plunged more than 20 percent in 2018, and its debt is rated at or near junk level. Wall Street has even less faith in Ford than it does in GM. While this is not proof that rough waters are ahead, it should give us all pause.
If you want to know how devastating it is to lose an auto plant, ask the folks in Janesville, Wisconsin, who lost a GM plant in 2008. You could also talk to people in Lordstown, Ohio, and Hamtramck, Michigan.
Many Kansas Citians still remember General Motors idling and then closing the Leeds assembly plant in the late 1980s, and how hard that was for the families who lost their livelihood. We all have a stake in keeping KCAP strong.
T.J. Berry is executive director of the Clay County Economic Development Council.