Auto Plants at Capacity Buoying All Parts of U.S. Economy: Cars

Auto Plants at Capacity Buoying All Parts of U.S. Economy
General Motors Co. (GM) employees inspect Chevrolet Silverado and GMC Sierra trucks as they moves down the production line. Photographer: Jeffrey Sauger/Bloomberg

Bobbi Marsh puts her 11-year-old son to bed each night and then heads to her job at General Motors Co.’s metal-stamping plant in Lordstown, Ohio. She gets home in time to make him breakfast.

Marsh, 34, is one of thousands of auto workers in the U.S. benefiting from the return of a third shift at factories -- often from 11 p.m. to 7 a.m. -- translating to 24-hour-a-day production at many plants for the first time since the industry collapse in 2009. At the nadir, some plants ran only one eight-hour shift.

The new third shifts, adding more than 4,300 jobs in four states at GM alone, bring jobs to the economy and revenue to governments as well as demand at odd hours for everything from daycare and dentistry to financial services and food. U.S. auto plants this year may operate at about 81 percent of capacity after falling as low as 49 percent in 2009, according to estimates from IHS Automotive in Northville, Michigan.

“It’s been great: I can spend all evening with my son,” said Marsh, 34, a three-year GM employee who lives near the plant about 60 miles southeast of Cleveland. She switched from working evenings to the overnight shift when it was reinstated last year and sleeps from about 8 a.m. to 2 p.m. “It does take a different kind of person to work third shift, but I love it.”

Automakers are increasing production at the car plants after the U.S. light-vehicle sales rose by at least 10 percent for two straight years for the first time since 1984 and grew at a faster rate than China, the world’s biggest auto market, for the first time in at least 13 years. States that were hard-hit by the downturn, such as Michigan and Ohio, are among the biggest beneficiaries, adding jobs at places like Ross’ Eatery & Pub and Tony M’s.

15 Plants

GM, Ford Motor Co., Chrysler Group LLC, Nissan Motor Co. and Kia Motors Corp. have either added U.S. production beyond the traditional two shifts or announced plans to do so at 15 plants, including six in Michigan, since GM and Chrysler emerged from bankruptcy in the middle of 2009.

“There’s no question we’re running full-out,” said Kim Rodriguez, a principal at KPMG’s auto-consulting business in Detroit. “After China, the U.S. was the market where executives expect the most growth, which is staggering considering where we were.”

Businesses from auto suppliers to trucking companies are hustling to add capacity and find new workers to adapt to the increased production, she said.

Restaurant Hours

For GM worker Marsh in Ohio, the new job means off-hour grocery trips to the 24-hour Giant Eagle supermarket and late-night orders from Ross’ Eatery & Pub, which gets 75 percent of its restaurant business from the three shifts at the Lordstown complex that builds the Chevrolet Cruze sedan. The restaurant now runs from 6 a.m. to 1 a.m. to accommodate the new shift, expanding last year from 8 a.m. to 11 p.m.

“We had been treading water for what seemed like an eternity -- it was just me, my mom and my aunt running the place” during the auto crisis, said owner Earl Ross, 36. He now employs 20, up from the three family members just a couple of years ago, to supply the plant with fried chicken, burgers and his signature $6.99 Philly steak sandwich.

Ohio added 79,300 jobs through November 2011 from December 2010, an improvement from a decade when only Michigan among U.S. states lost a larger percentage of jobs, according to the federal Bureau of Labor Statistics. Ohio was second in the nation to Michigan in vehicle production in 2010, according to the state Department of Development.

Market Growing

The momentum for added production is expected to continue this year as auto deliveries may rise about 5.6 percent to 13.5 million, the average estimate of 10 analysts surveyed by Bloomberg. Vehicle sales rose 11 percent in 2010 and 10 percent last year after sales fell to a 27-year low of 10.4 million sales in 2009.

A third shift at a Midwestern U.S. auto plant typically requires about 1,000 direct workers and creates about 7,850 spinoff jobs ranging from police and fire workers to construction, retail and restaurant employees, according to estimates from the Center for Automotive Research in Ann Arbor, Michigan. About a third of the positions are within 60 miles of the plant.

Michigan gained 63,500 jobs in 2011, according to the Research Seminar in Quantitative Economics at the University of Michigan. It was the first job gain in the state since the turn of the century. The group predicts a net gain of 26,000 jobs this year, 28,500 in 2013, and 46,800 in 2014.

Tony M’s Lasagna

The overnight shift at GM’s sport-utility vehicle factory in Delta Township, Michigan, near the state capital of Lansing, has meant a 40 percent increase in business at Tony M’s restaurant nearby, said Stefan Farrell, the general manager at the eatery that specializes in pizza and lasagna.

The restaurant, which boasts a highly guarded sauce recipe, has expanded the business hours from 7 a.m. to 2 a.m. each day, from the 11 a.m. to 10 p.m. workday before the third shift was added in 2010, he said.

About 15 workers who drive trucks delivering parts overnight at the plant were eating nearby as he talked, he said.

“When GM is down, it’s a ghost town,” said Farrell, who said last week he personally drove 15 pizzas in one batch to the factory on a food run.

Chrysler and Ford are adding so-called third crews, which use new workers to allow the plants to operate more hours of the week by adding rotating crews that include both day and evening shifts and also include Saturday and Sunday, rather than running later into the night on a full third shift.

Weekend Output

Ford will have four plants in Kentucky, Michigan and Illinois on the three-crew system within the next year, meaning those plants will run about 120 hours out of the 168 hours possible, instead of the 100 hours for a two-shift run. Chrysler’s Jeep Grand Cherokee plant in Detroit will add a similar system next year.

The benefits are being felt outside the traditional Midwestern U.S. auto heartland.

Nissan already runs three shifts on its Altima sedan assembly line at the Canton, Mississippi, factory, said Bill Krueger, vice chairman of Nissan’s Americas operations. The automaker is studying a third shift at its largest North American plant in Smyrna, Tennessee, as well, he said.

“It’s in our future,” Krueger said.

Suppliers’ Shifts

Auto suppliers nearby are talking about adding third shifts in Rutherford County, Tennessee, which is home to the Nissan plant and about a 75-minute drive from Volkswagen’s Chattanooga factory, said Holly Sears, the vice president of economic development for the Rutherford County Chamber of Commerce.

“Every single auto supplier we’ve talked to recently has a positive outlook for 2012 and 2013,” she said.

West Point, Georgia, with about 3,500 residents, has seen new hours at dentist offices, banks, health clubs and other businesses since the Kia factory there added a third shift last June, said Randy Jackson, vice president of human resources at the 3,000-employee operation.

Nellie’s Day Care in West Point has added eight to 10 kids who spend the night, a majority from Kia employees, as the third shift was added, said Bo Barber, 46, who took over operations for the 24-year-old business from his mother Nellie about five years ago. A year ago, they had none.

The children, ranging in age from three to seven, may get a light meal before bedtime and then the staff helps them get ready in the morning, he said. The overnight business required an additional worker for the daycare center, which serves a total of about 46 kids on all three shifts with six employees, Barber said.

Investors have been talking about opening another daycare center in the area to cater to workers on all three shifts and several area doctors are planning to operate an urgent care clinic with extended hours, Jackson said.

“Third shifts are beginning to sprout up in a lot of places now,” said Jackson, who has worked at U.S. auto factories for 31 years. “Businesses are expanding here and it’s helping the community.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE