Can electric cars restart the California manufacturing base?

Last week Tesla Motors, the red-hot electric car startup, announced it would use some of its $465 million in stimulus funds to start a drive-train manufacturing plant in Palo Alto, the heart of Silicon Valley. Tesla is bucking a trend in bringing manufacturing jobs to the Golden State. But with billions of dollars in stimulus bucks flowing to the electric vehicles sector, will a maverick move by Tesla CEO Elon Musk prove to be a precursor for a rebound in California manufacturing?

The answer, in short, is probably not. "I don't think Tesla is the beginning of a major manufacturing movement. Toyota and GM are closing their last plants in California. We are not a major car manufacturing center and there is no reason once the EV thing got going, that they wouldn't go to places where they make cars cheaply," says Stephen Levy, Director and Senior Economist of the Center for Continuing Study of the California Economy (CCSCE) in Palo Alto.
But Levy is quick to add that Tesla's move is interesting not so much because it sets up a new manufacturing operation in Silicon Valley, but because the plant will add significant numbers of engineering jobs.

"Tesla said they were moving to Palo Alto because it was close to engineers," Levy said. "California is well positioned to get a significant part of the federal stimulus money going to fund the electric vehicle sector and that should bring lots of new engineering jobs here to design and innovate for the sector. Maybe the plants won't be here, but the innovation could be."

For his part, Levy feels that the hopes for a resurgence in manufacturing jobs in California, and, by extension, in America, is somewhat misplaced. Manufacturing output, even in high-cost centers such as Silicon Valley, has continued to go up even as jobs have gone away, he asserts. Nationally, California has actually fared quite well, with manufacturing jobs declining 5.5 percent during 2008 versus 18.8 percent in Michigan.

Levy also points out that even China has lost manufacturing jobs, in part due to the global slowdown, but also due to efficiency enhancements from automation. Over the last 18 years manufacturing jobs have fallen by roughly 20 percent in the U.S. while actual production has increased by 60 percent (although production numbers dropped significantly in the past two years).

The steady decline in jobs paired with the simultaneous increase in production indicates a diminished importance of manufacturing jobs as a measurement of industrial and economic power. The upshot? In Levy's opinion, where the cars and drive trains are made is far less important to the California and national economy than where the cars are conceived and designed. "There is going to be a big fight for who develops the battery," he predicts. "That would be a coup if, through our innovation, we could get that started here."
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