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Higher fuel standards lead to jobs, investment

Honda and its suppliers among manufacturers adapting to new federal rules.


A push for more fuel-efficient vehicles, along with pent-up demand from consumers, is helping create jobs and millions of dollars in investment for a handful of local manufacturing firms as the auto industry continues to recover from the Great Recession.

Experts said auto firms and their suppliers could continue to add jobs and invest in new materials as they try to find ways to produce more fuel-efficient vehicles without sacrificing safety. Companies like Honda, for example, are investing millions of dollars at plants across Ohio to implement technologies that make vehicles more efficient.

Those efforts are also reflected at local parts suppliers like KTH Parts Industries. The company recently launched a $29 million expansion to add about 90 Champaign County jobs. The project included an investment in a new 3,000-ton servo press designed to produce stronger, light-weight auto parts.

“Due to the certainty provided by fuel efficiency standards the auto makers and the truck makers are investing in fuel-saving technologies, and that means jobs,” said Luke Tonachel, senior vehicles analyst with the Natural Resources Defense Council.

The auto industry overall directly employs as many as 700,000 workers, including about 427,000 who supply other services such as design, engineering and manufactured parts that are used in cars and light trucks, according to the Natural Resources Defense Council.

Honda employs 5,000 people in southwest Ohio, including 1,450 from Clark and Champaign counties.

In 2012, the federal government finalized new standards that will require fuel efficiency of 54.5 miles per gallon by 2025 for cars and light-duty trucks. Those vehicles are also required to meet a standard of 35.5 miles per gallon by 2016.

“Because the standards are set over a long period of time, that really helps in the investment decisions for technologies,” Tonachel said. “Some of these technologies take a while to go from testing to production to mass deployment on vehicles, so absolutely we see this trend going forward.”

Overall, Ohio added about 1,000 auto parts manufacturing jobs between December 2012 and December 2013, according to information from the U.S. Bureau of Labor Statistics. Indiana and Michigan, which have also traditionally played a key role in the auto industry, have also added jobs. Indiana added about 2,100 auto parts manufacturing jobs during that time, while Michigan added 4,600, according to information from the BLS.

At KTH, a recent expansion included an automated storage retrieval system, as well as a trailer yard expansion and more room for training and locker rooms. But a significant part of the investment was to add a 3,000-ton servo press, used make auto parts from high-strength steel, said Art Liming, senior vice president and plant manager.

The St. Paris company produces auto body frame assemblies for Honda. The higher-strength steel will mean frames that can withstand current crash test standards but require fewer parts, making them lighter to help increase fuel efficiency. KTH works closely with Honda to match available technology to Honda’s needs.

“Who does it best will end up busiest down the road,” Liming said. “If a company is busy today, that’s fine, but today has a limited life. You have to be ready for tomorrow.”

Other area companies have also added jobs because of higher standards for fuel efficiency.

Officials from Johnson Welded Products have added production lines within the past year or so to make aluminum air tanks for truck manufacturers like Peterbilt and Navistar.

“We make steel air tanks, but now we’re making a lot more aluminum tanks, so we’ve added another production line for the aluminum,” said Lilli Johnson, president for JWP. “That’s because of a requirement to take weight out of the vehicle because it makes them more fuel efficient.”

JWP added about 70 jobs in Urbana in the last year or so.

Auto companies are increasingly looking at aluminum and other materials to make vehicles lighter and more efficient, said Eric Lyman, vice president of editorial and consulting for TrueCar.com.

Lyman pointed to Ford, which recently announced it will use aluminum frames in its newest F-150 pickup trucks. He said the decision will help the vehicle shed about 700 pounds from its previous weight.

The higher fuel standards present a challenge to the industry, Lyman said. Auto makers are increasingly looking for ways to produce stronger, lighter vehicles to increase fuel efficiency, while simultaneously adding weight from other new technologies to increase safety.

“Essentially the industry has 10 years to double the fuel economy of the fleet, which you can imagine is just a herculean task,” Lyman said.

Honda has been working with high-strength steel for more than a decade, said Ron Leitzke, a spokesman for Honda North America Inc. Overall, he said the company has invested millions in Ohio in the past three years to produce parts like a Continuously Variable Transmission that helps increase efficiency in vehicles like the Accord. Honda has also introduced its Earth Dreams technology, a feature offered in some Accord models that helps improve fuel efficiency.

“If you’re not a company that’s trying to adapt, you’re a company that won’t be around in that future,” Liming said.



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