Detroit Auto Suppliers Look To Other Industries As the Big Three automakers contract, the manufacturing base that supplies those automakers is being forced to adapt. Detroit Public Radio's Sarah Cwiek talks with NPR's Steve Inskeep about one auto supplier that has diversified its business.

Detroit Auto Suppliers Look To Other Industries

Detroit Auto Suppliers Look To Other Industries

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Michigan, the national leader in recession, depends on an auto industry that will never be as big as it was. So how does the Detroit area diversify? Who's hiring, or investing in something new? In the series Retooling Detroit, Morning Edition reports on Detroit's desperate race to replace the jobs that the automakers eliminate.

As the Big Three automakers contract, the manufacturing base that supplies those automakers is being forced to adapt.

One such business, TNT EDM, a precision tool and die shop in Plymouth, Mich., specialized in small components such as injection molds for cars. (EDM stands for electro-discharge machining.) Their primary customers were larger suppliers who sold to automakers such as GM, Detroit Public Radio's Sarah Cwiek tells NPR's Steve Inskeep.

In 2003, TNT EDM saw many of its customers consolidating or even going bankrupt. Because of the nature of its product, TNT was able to expand into other industries. It now provides parts for the alternative energy, medical, defense and aerospace sectors, with an emphasis on the last two.

Greg Rothermel, TNT's business development director, says, "We started taking a look at what was out there that would appeal to our capabilities as far as other types of markets. We have a lot of the high-tech processes and technologies that work well within aerospace defense."

Rothermel says the aerospace-defense industry has a big backlog of orders worth about $200 billion annually. TNT's business was about 25 percent aerospace-defense last year; he projects it will be up to 50 percent by next year. Revenues have grown from $10 million in 2003 to $12 million as of last year, since TNT began diversifying.

Charlie Hall, a skilled machinist who has worked for TNT for 23 years, says his job has not changed drastically since TNT diversified.

"We have new software, and basically the machines [are] pretty similar to the last 10 years," Hall says. "But they also have different technology in 'em, so you have to learn that technology."

Michigan Gov. Jennifer Granholm and the Michigan Economic Development Corporation are betting on diversification as a key part of their economic strategy for the state, and have devoted resources toward helping auto suppliers move into the same alternative industries that TNT has targeted.

Tim Davis of the Center for Innovation Research at the University of Michigan, Dearborn thinks there is room for flexible organizations to find opportunities outside the auto industry.

"Does that mean that all of them will be able to succeed? Probably not. A dashboard component maker won't be able to start creating large wind turbine blades. You'll need to find where your product mix fits with where these industries need," Davis says.

Davis says the key is making the transition to products that fit well with suppliers' pre-existing infrastructure. He thinks that in the long term, most of the government funding will be in alternative energy and biomedical supplies. But in the short term, Davis says many auto suppliers might focus on aerospace-defense, a historic industry with a similar institutional culture.

"Automotive is in more of a historic or kind of a legacy organization. So [suppliers] think, 'Aerospace is something that's been around, defense is something that I can relate to.' "

Everyone agrees that a number of suppliers will either consolidate or go out of business before the auto industry stabilizes. The consulting firm Grant Thornton estimates that hundreds of auto suppliers — 30 to 40 percent of the whole industry — are at "high risk" of failure in the current environment.

For the businesses that survive the shake-up, most in the industry seem to think there will be enough advanced manufacturing pie to go around. But the state estimates that Michigan has lost more than 400,000 manufacturing jobs in the past eight years. The diversification push may be helpful, but it will not make up for the overall job losses in that sector.