Honda’s new battery plant keeps auto industry key to Ohio economy

Honda’s announcement last week that it would spend billions on a new electric vehicle battery plant in Ohio isn’t just important for Honda, which is lagging behind other automakers in making electric vehicles.

It’s also key to the state’s efforts to ensure that the production of automobiles and the parts that power them continue to play a disproportionate role in the state’s economy.

In partnership with South Korean battery maker LG Energy Solution, Honda announced Tuesday that the company will build a $3.5 billion battery factory in Fayette County, southwest Ohio, to power Honda and Acura vehicles take care of. Honda also said it will spend $700 million to convert three of its Ohio factories.

The two projects are expected to create 2,527 jobs and are designed to build on Honda’s longstanding relationship with the state by transforming the state into Honda’s electric vehicle development and production hub that it can share at its North American operations.

Ohio receives announcements announcing production of electric vehicles

The projects are the latest of several Buckeye State successes by companies moving away from internal combustion engines.

LG has a similar partnership with General Motors in Lordstown, northeast Ohio, and Ford is investing $1.5 billion in its Avon Lake plant west of Cleveland to make commercial electric vehicles. GM is making a separate $760 million investment in Toledo to manufacture power units that will be used in future GM electric vehicles.

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After a rocky start, Lordstown Motors near Youngstown began production of its long-awaited endurance electric pickup last month.

Ohio has also attracted businesses outside of the legacy automakers.

A Chinese manufacturer of materials used in electric vehicle batteries and other products, Semcorp Manufacturing USA, has announced a $900 million investment in Sydney, western Ohio. And in February, California-based Hyperion Cos. announced that it will be moving its headquarters back to Columbus to employ nearly 700 workers developing hydrogen fuel cells on the Far West Side.

For all its gains, Ohio isn’t a leader in electric vehicle manufacturing, said James Rubenstein, a Miami University professor emeritus and auto industry analyst.

“The Ohio jury is still out. I’m not ready to say we’re ahead of the pack,” he said.

The Auto Industry’s Outsized Impact on Ohio’s Economy

Ohio employs nearly 100,000 workers in auto, body and auto parts manufacturing, about a tenth the national total, according to economist Bill LaFayette, owner of central Ohio economic consulting firm Regionomics.

That’s an increase from 82,281 in 2011 and nearly triple the employment that would be expected in an economy the size of Ohio, he said.

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“I really think that increasing concentration is going to attract more,” LaFayette said.

“In addition to these announcements, we have engineering schools, including Ohio State and Case Western, that are constantly graduating new talent. The companies involved must certainly have recruited here some brain power.”

Are Auto Jobs Safe During the Transition to Electric Vehicles?

The Ohio investments come amid fears that the transition to electric vehicles will result in job losses in traditional auto manufacturing.

Miami-based Rubenstein said if jobs were at risk at a Honda plant, it was likely at the Anna engine plant. Honda has announced that the plant will be retooled to allow workers to manufacture the battery cases that will be combined with the battery modules from the battery plant.

“Battery cases are not the same as making 1 million motors a year,” Rubenstein said. “What are you really going to do with Anna? If there are job cuts, then there.”

In addition, there are currently too many unknowns about how the transition will affect auto industry jobs, he said. Automation and robots could have more to do with car employment than electric vehicles in the future, he said.

Michigan, Indiana and Ohio make half of the nation’s internal combustion engine production and three-quarters of the transmissions, said Kristin Dziczek, an auto analyst at the Chicago Federal Reserve Bank.

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Over time, auto employment in Ohio and other Midwest states will be affected by how well legacy automakers compare to startups making electric vehicles, she said.

“It’s way too early to know,” she said.

Challenges, but also opportunities lie ahead of us

JobsOhio, the state’s business development arm, welcomed the involvement of Honda and LG.

“This means that Ohioans, who are now retiring from Honda with 40 years of experience, will not only pass the mantle on to new working-age Ohioans, but babies born into Ohio families today will have the opportunity to be in to make state-of-the-art products at these plants into the ’30s and beyond,” said JP Nauseef, JobsOhio’s CEO and president, in an email outlining the details of the deal.

Jonathan Bridges, JobsOhio’s automotive executive, acknowledged the challenges of transitioning away from internal combustion engines, while noting that production of these vehicles will not be discontinued anytime soon.

JobsOhio is focused on new opportunities for workers in the industry who are vulnerable in the transition, he said.

“The automotive industry has been a strong industry for Ohio in the past and will continue to be a strong industry in the future,” he said.

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@BizMarkWilliams

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