From today's Wall Street Journal:
"U.S. Car-Making Boom? Not for Auto-Industry Workers
U.S. auto-industry wages have declined despite rise in output due to competition from foreign parts makers
By JAMES R. HAGERTY and JEFF BENNETT March 23, 2015 7:50 p.m. ET
THREE RIVERS, Mich.—U.S. auto production is nearing all-time highs on the back of strong domestic demand and steady export increases. But American-made cars and trucks are increasingly loaded with parts imported from Mexico, China and other nations.
The U.S. imported a record $138 billion in car parts last year, equivalent to $12,135 of content in every American light vehicle built. That is up from $89 billion, or $10,536 per vehicle, in 2008—the first of two disastrous years for the car business. In 1990, only $31.7 billion in parts were imported.
The trend casts a cloud over the celebrated comeback of one of the nation’s bedrock industries. As the inflow of low-cost foreign parts accelerates, wages at the entry level are drifting away from the generous compensation packages that made car-factory jobs the prize of American manufacturing.
At an American Axle & Manufacturing Holdings Inc. car-parts factory in Three Rivers, some new hires are paid as little as about $10 an hour, roughly equivalent to what the local Wal-Mart will pay. John Childers, a 38-year-old assembly-line stocker, said he is grateful for the job but finds it tough to get by on the money he and his fiancée make at the plant.
“Lower class is what we are,” he says. “Let’s be honest.”
Mexico was by far the biggest supplier of car parts to the U.S. last year, accounting for 34% of the imports, followed by China with 13%. Imports from China have more than doubled since 2008. Those from Mexico are up 86%.
The Ford Escape had 55% U.S. and Canadian content in the 2015 model year, down from 90% for 2010 models, according to government data. The U.S.-made Honda Accord slipped to 70% from 75%.
“We’ve never produced so many cars in the U.S., but we’ve never made so few of the parts,” says Sean McAlinden, chief economist at the Center for Automotive Research.
Auto makers built 11.37 million light vehicles in the U.S. in 2014, among the higher output totals since the record of 12.59 million produced in 1999, according to WardsAuto.com.
Exports of American-made vehicles topped 2 million for the first time in 2014, U.S. trade data show. However, the growth of parts imports has left the U.S. with a growing deficit in overall trade in cars and parts—$168.3 billion last year, compared with $156.2 billion in 2013.
The shift of parts production to other countries has shrunk an industry that has long been one of the largest sources of U.S. manufacturing jobs.
In 2014, employment at car-parts makers averaged about 537,000, down 36% from 2000. At manufacturers of completed vehicles, employment fell 32% over that period, despite the recent boom in output—a decline due in part to productivity improvements including automation.
Bolstered by weaker currencies and other factors, foreign countries are tightening their grip on broad swaths of the car-parts industry, including making small and fairly inexpensive components that are easily shipped. Among those most likely to be imported are electrical connections, air bags and fuel injectors. Transmissions, engines and seats are more likely to be made in the U.S.
To survive in an increasingly global market, the larger U.S. parts makers have implanted themselves abroad. Detroit-based American Axle, for example, has plants in Mexico, Brazil, the U.K., Poland, India, China and Thailand. Only about 30% of the company’s 12,820 employees are in the U.S.
Wages are much lower for American workers at parts companies than at car manufacturers, though both have trended down. In 2014, the average hourly wage for production and other nonsupervisory workers at car-parts makers was $19.91, down 23% from a decade earlier in inflation-adjusted terms. That compares with a 22% decline to $27.83 at makers of motor vehicles, according to the Bureau of Labor Statistics.
Kevin Hobbs, president of the United Auto Workers local that represents workers at the American Axle plant where pay starts at $10 an hour, said members struggle to meet basic living expenses. One major consolation is that health-care benefits are excellent.
Wal-Mart Stores Inc. recently announced plans to boost pay for U.S. workers to at least $10 an hour next year. With retail wages rising, Mr. Hobbs said, “you’re going to have a hard time attracting folks into a manufacturing environment.”
A spokesman for American Axle said the company’s benefit packages are better than those of other employers in the region.
Mr. Childers and his fiancée, Chrystal Varty, work the overnight shift at the plant. Employed for two years, he earns $11.50 keeping the line stocked with parts; Ms. Varty is about a year into her job, making $11 driving a forklift.
With overtime, bonus payments and profit-sharing, they figure their combined annual income is about $55,000—low enough to qualify for food stamps. It is hard for them to provide for themselves and five children from previous marriages, partly because much of their money goes into payments and repairs on their three-bedroom house, where some of the floorboards are rotting.
The UAW will renegotiate with American Axle in 2017, and Cindy Estrada, a vice president with the union, says entry-level wages have to go up.
For most of the sector, however, there is little the UAW can do about it. Once ubiquitous in American auto manufacturing, the union has lost its grip, particularly in the South, where Asian and European car companies have nonunion plants.
Denise Barnett has worked nine years at the nonunion Lear Corp. plant in Selma, Ala., and sorts through bins of foam used in the production of car seats for the nearby Hyundai Motors Co. assembly plant. Earlier this month, she was given a 92-cent hourly raise to $12.25.
Even with the bump, the 37-year-old single mother of two boys works a lot of overtime. “I am getting home just in time to put my kids on the school bus,” she says, noting she then pays someone to watch them. “So I am really losing out on both ends.”
Thomas DiDonato, Lear’s human-resources chief, said the company pays competitive wages, gives regular raises and has turnover of less than 2%.
“If our employees couldn’t make ends meet, they would demonstrate their dissatisfaction with their feet by leaving and getting a job elsewhere,” he said.
Write to James R. Hagerty at bob.hagerty@wsj.com and Jeff Bennett at jeff.bennett@wsj.com"
Sadly we can't even get Greensboro's wealthiest investors to invest in Greensboro so expecting others to invest here is a really big leap.
Mr Thomas DiDonato, Lear’s human-resources chief states in the article, “If our employees couldn’t make ends meet, they would demonstrate their dissatisfaction with their feet by leaving and getting a job elsewhere,” but would they? Does that hold true for American Axle as well?
Three Rivers is a small town with a population of only 7,811 people in a county of only 61,295 people with at least 2 empty industrial parks being pushed by the Three Rivers Chamber of Commerce. Imaging that, empty industrial parks where they already have auto plants-- how could it be?
The unemployment rate for Three Rivers is said to be 5.2% (Better than Greensboro's official 5.7%)
The City of Three Rivers was forced to discontinue leaf and brush pick-up this Spring. Is that a sign of a thriving local economy? Or a town council worried about where the money is going to come from now that they blew it all helping to fund those empty industrial parks?
American Axle is the largest employer in the entire county-- perhaps there's few if any other places for American Axle workers to go.
As for Lear in Selma, Alabama? Despite the fact that the City of Selma is very well known it remains a small city with a population of only 20,756 people. And the unemployment rate in Selma currently stands at twice the national average at 11.7% as of January 2015 so I submit Mr Mr Thomas DiDonato, Lear’s human-resources chief is lying his ass off in order to keep his precious job. After all, people don't quit the only job they can get.
