North American Automotive Industry Struggling, but Spending Still Riding High into 2006

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). In the last six months, the majority of news coming out of the automotive industry has been pertaining to bankruptcies, plant closures, and employee layoffs. The aforementioned are all signs of an industry in great turmoil. However, early indicators are that capital and maintenance spending for the automotive industry appears to be on the rise for 2006.

In our early 2005 analysis of the automotive industry, written around this time a year ago, the year was showing modest increases in forecasted spending for the industry, a mere $4.8 billion forecasted for 2005, versus the $4.7 billion that was spent in 2004. When we once again took stock of the industry for our mid-year review in 2005, we saw spending was nearing $6.5 billion for the year, a nice healthy increase over 2004’s totals.

Now that 2005 is complete, a review of what was actually spent for the year shows an incredible $9.6 billion in capital and maintenance projects began construction during the year. This more then doubled 2004’s spending in the industry.

Currently, we are tracking 259 capital and maintenance projects worth over $6.3 billion projected to begin construction during 2006. This would be an increase of 131% over 2005’s initial spending numbers, a healthy indicator that automotive spending may end up topping 2005’s totals in 2006.

The major change for 2006 appears to be where this money is going to be spent. In 2005, the United States possessed the lion’s share of the spending at $6.3 billion while Canada came in second with $3 billion and Mexico spent a paltry $276 million in the industry. In 2006, there appears to have been a shift in spending locale. The United States is still the frontrunner, with current spending topping $2.5 billion, but Mexico has jumped into second place spending over $2.4 billion and Canada is running third at $1.4 billion.

In 2005, the top five spending states were Ontario ($3 billion), Michigan ($1.88 billion), Ohio ($603 million), Illinois ($563 million), and Indiana ($563 million). In 2006, this spending has made significant shifts down south with the top five spending states currently being Coahuila, Mexico ($1.5 billion), Ontario ($1.3 billion), Nuevo Leon, Mexico ($800 million), Mississippi ($665 million), and Tennessee ($493 million).

All early indicators are that the automotive industry should have a very healthy spending year yet again in 2006, despite recent woes. As the year progresses, we will be watching carefully to see if the impending layoffs and plant closures by both GM and Ford have an immediate impact on spending in the industry.

For more information on the North American Automotive industry check out Industrialinfo.com's Automotive Database or call Member Center at 1-800-762-3361 for details.

Industrial Information Resources (IIR) is a Marketing Information Service company that has been doing business for over 22 years. IIR is respected as a leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.