Wednesday :: Jun 22, 2005

Foreign Automakers Expand In Southern States

by Steve

The New York Times runs a story today on the growth of foreign automaker production facilities and jobs in the United States. Foreign automakers now account for well over 40% of the auto making jobs in the country, with most of their factories and jobs located in the southern states for one big obvious reason: these are non-union states.

Now, an obvious knee-jerk reaction from someone like me would be to oppose what these automakers are doing because these are nonunion jobs in red states. However, when you look at the pay and benefit package offered for example by Toyota, you will see that notwithstanding the physical expectations that Toyota and other automakers demand out of their workers, the end result is still that well-paying jobs are being created in this country, jobs with companies that have a different corporate culture that American firms and some appreciation for long-term employment commitments.

There are several downsides here, which include: 1) these jobs are really replacing union jobs at American automakers in the northern states in a longer-term effort to ultimately defeat unions here; 2) the southern states are engaging in ultimately self-defeating tax giveaway competitions with other states to lure these companies; and 3) without a union to bargain on their behalf and protect their interests, these workers will have little ability to improve their situation except for the benevolence of their bosses.

Having said that, the result at the end of the day is that cars are being made here in this country by Americans in good jobs, working for automakers that are better run than those in Detroit. Sure, it's part of a long-term strategy to break up the UAW and have red states benefit at the same time through a shifting of jobs out of the north. As a point of interest though, take a look at the difference in the pay and benefit package for these nonunion workers at the foreign automakers when compared to the Big Three union jobs they are ultimately replacing:

Union jobs at the Big Three plants pay a dollar or two more an hour - about $26 an hour compared with $24 or $25 an hour for the nonunion jobs at the foreign plants. But compensation at the American automakers swells to an average of $55 an hour when health care, cost of living and other benefits are counted, compared with $48 an hour, on average, at Toyota.
In a state (Alabama) where the average wage is $31,000 a year, according to the Commerce Department, Toyota's workers earn $45,000 on average, with overtime, plus a benefits package valued by the company at $10,000. Workers receive medical, dental and life insurance coverage; a traditional pension plan and a 401(k) plan; an allowance for child care; and an annual cash bonus, which was $3,850 a worker last year.
I had thought the hourly cost gap between the two would have been larger than $7 per hour, and I would like to see what the actual health benefit package is for the foreign automakers as compared to what the Big Three are providing. And as the story makes clear, the Japanese automakers get more production out of their workers than their American counterparts, due to better production processes, better investments, and frankly working their workers a little harder.

But with only a $7 per hour gap between the two, what would happen if the UAW took steps to close that gap by giving Detroit an incoming pay and benefit package for new workers that closely matched what is being offered down south? Sure, Labor would still have to deal with the stupidity of the Big Threeís decision making, lack of effective investment, and accept measures to increase production per worker, which they have been doing over time in recent contracts anyway. But at least the blame for Detroitís troubles would be placed squarely where it would belong, on the corporations and not the workers.

And I realize that it's easy for me and my white-collar fanny to be suggesting that the UAW scale back what it is willing to accept for new workers in the Big Three's factories in jobs that are more physically demanding than mine. But what I'm looking at here is a long-term survival and rebound strategy that can stop the bleeding.

I also have no illusions that the long-term environment for an eventual unionization of these new southern plants would improve significantly if there were little or no cost differences between north and south, because the political environment in some of these southern states will still be hostile to unions coming in and attempting to organize. But moving to eliminate a cost gap that cripples unions now in their efforts to hold onto what they have can only help build an argument that it isnít the unions that are the problem.

Steve :: 9:48 AM :: Comments (22) :: TrackBack (1) :: Digg It!