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Manufacturing, a minor element in Michigan's economy in the mid-19th century, grew rapidly in importance until, by 1900, an estimated 25% of the state's jobholders were factory workers. The rise of the auto industry in the early 20th century completed the transformation of Michigan into one of the most important manufacturing areas in the world. In 1997, the value of shipments totaled $218 billion.

Motor vehicles and equipment dominate the state's economy, representing more than one-fourth of the state's manufacturing payroll; the value of shipments by automotive manufacturers was almost half of the total. Production of nonelectrical machinery, primary and fabricated metal products, and metal forgings and stampings was directly related to automobile production.

The Detroit metropolitan area is the major industrial region: this area includes not only the heavy concentration of auto-related plants in Wayne, Oakland, and Macomb counties, but also major steel, chemical, and pharmaceutical industries, among others. Flint, Grand Rapids, Saginaw, Ann Arbor, Lansing, and Kalamazoo are other major industrial centers.

Because the auto industry's "Big Three"—General Motors (GM), Ford, and Chrysler—have their headquarters in the Detroit area, Michigan has had for many years three of the nation's largest industrial corporations. In 2000, General Motors was the leader among all manufacturers in the world. In 1997, Michigan hosted the headquarters of 14 Fortune 500 companies, including General Motors, Ford, and Chrysler (ranked 1st, 2nd, and 9th, respectively).

The auto industry's preponderance in Michigan manufacturing has come to be viewed in recent years as more of a liability than an asset. When times are good, as they were in the 1960s and early 1970s, automobile sales soar to record levels and Michigan's economy prospers. But when the national economy slumps, these sales plummet, pushing the state into a far deeper recession than is felt by the nation as a whole. Michigan is the top vehicle manufacturing state in the nation, accounting for 23% of all US car and truck production in 1998. It made 31% of the automobiles produced for the US that year and 16.5% of the trucks.

Earnings of persons employed in Michigan increased from $181.9 billion in 1997 to $192 billion in 1998, an increase of 5.6%. The largest industries in 1998 were durable goods manufacturing, 24.8% of earnings; services, 24.2%; and state and local government, 11.3%. Of the industries that accounted for at least 5% of earnings in 1998, the slowest growing from 1997 to 1998 was nondurable goods manufacturing (6.4% of earnings in 1998), which increased 2.9%; the fastest was construction (5.3% of earnings in 1998), which increased 8.3%.