Auto Bailout: Southern Workers Watch and Worry

Workers at Honda's Lincoln, Ala., plant support a Detroit rescue more than politicians do. They fear cuts, too

The tiny town of Lincoln, Ala., is 706 miles from Detroit. But as the U.S. recession deepens, the distance between this Southern enclave of the American auto industry and the Big Three's headquarters to the North seems to be shrinking.

At the edge of the 4,500-resident town looms a massive Honda plant, marked only by two tall towers bearing the Japanese automaker's name and by the sounds of industry that drift into Lincoln on otherwise sleepy afternoons. The plant, which opened in 2001, makes Honda Odyssey minivans and Honda Pilot SUVs.

Like other "transplant" factories set up by Japanese, Korean, and European companies in the South, the Lincoln Honda plant has no union, reflecting a wariness in the region about a typically Northern institution. Many in the South feel that General Motors (GM), Ford Motor (F), and Chrysler—and their unionized workers—have no one but themselves to blame for their difficulties. That opinion came through loud and clear during the debate that left Congress killing a legislative bailout of the Detroit car companies. Sen. Richard Shelby (R-Ala.) blasted the Detroit companies as "dinosaurs" and the bailout legislation as "a bridge loan to nowhere."

Yet it was also clear in a visit to Lincoln on Friday, Dec. 19—the day that President George W. Bush announced he was extending a $17.4 billion lifeline to GM and Chrysler—that some workers and residents here think the woes of the auto industry are not entirely due to mismanagement or the high costs of pensions and health care for Detroit's retirees.

Stalled Foreign automakers

The souring U.S. economy is hurting the Japanese companies to which Detroit automakers are so frequently and unfavorably compared. Honda has been cutting production to match its plummeting U.S. sales, and its leaders in Japan are sending ominous signals that things are expected to get worse in 2009. On Dec. 17, Honda CEO Takeo Fukui said the company probably will earn 62% less this fiscal year than what it had projected just six weeks earlier. That sense of alarm was reflected in the latest November results, which showed Honda's U.S. sales were down 32%, roughly in line with declines at other companies.

The transplant factories have responded by chopping work hours and production. In October, Mercedes-Benz offered buyouts at its Vance, Ala., plant, which makes SUVs and crossovers. Earlier this year, Nissan offered buyouts to white collar workers at its Tennessee headquarters, as well as to line workers. On Dec. 15, Toyota announced it would delay the opening of a factory in Blue Springs, Miss., where it was to start U.S. production of the Prius hybrid gas-electric car. Toyota workers at the company's brand-new San Antonio pickup truck plant were idle from August to November.

Honda says it will sharply cut the number of vehicles it produces in the U.S. and Canada in the coming year. While no layoffs have yet been announced in Lincoln, Honda has pulled back on production several times: In January it plans to reduce the number of vehicles built there, from 1,300 a day to 1,150. The plant was closed for two days in August and in the fall a second Friday shift of workers was eliminated.

Just A Northern Problem?

For many workers in Lincoln, the drama of the last-minute rescue of Detroit seemed distant.

"Really, [they] don't feel that the bailout has anything to do with them," says Debra Cochrum, 63, a former Honda employee who is now treasurer of the UAW's Alabama branch, which keeps an organizing operation just down I-20 from the plant. "They think that the Northern people created this mess and that's their problem."

Still, some workers and residents interviewed in Lincoln say they're pleased with Friday's $17.4 billion bailout.

"It doesn't do anyone no good if those boys go under," says Donald Snow, 39, who has worked on the assembly line at the Lincoln plant for seven years. "What a lot of these guys at the plant don't realize is that it's all connected. If Detroit goes down, the suppliers get hurt. If the suppliers get hurt, we get hurt."

Southern benefits are far lower

According to CSM Worldwide, 58% of GM's suppliers—and 65% of Ford's—also provision the Asian transplant factories. A GM, Ford, or Chrysler bankruptcy could send hundreds of supplier companies into bankruptcy or liquidation, jeopardizing production at Honda, Toyota, Nissan, Hyundai, Mercedes, and BMW plants for months.

The fate of the Detroit companies could ripple through the South in other ways. One of the goals of the restructuring envisioned in the bailout is to close the gap in wages—and other costs—between GM, Ford, and Chrysler and the transplant factories. Southern autoworkers make less than their northern counterparts: UAW workers make an average of $29 an hour, vs. about $25 for a Toyota worker in the U.S., according to the Center for Automotive Research in Ann Arbor, Mich. However, if you factor in the expense of health-care and other benefits for active workers, plus pension and health-care costs for retirees, a UAW worker costs about $76 an hour, vs. $58 for a Toyota worker.

Why? The automakers have been in business for a century in the U.S. Many autoworkers go to the assembly line after high school and then put in 30 years. At age 48, they're seventeen years from qualifying for Social Security or Medicare, and they count on the hard-won pension and health-care benefits the UAW has negotiated over the decades.

Yet experts agree that the pay of Southern auto workers is benchmarked to the wages of UAW workers in the North. If the UAW were to make concessions and Northern wages dropped drastically, Southern workers' salaries might be held down as well.

Issue No. 1: Jobs

"Southern workers should take no glee in Detroit's problems because their pay is absolutely dependent on what the UAW gets paid," says George Hoffer, an economics professor at Virginia Commonwealth University who has studied the auto industry for 40 years.

The issue that most heavily weighs on the minds of the Lincoln plant's workers is preserving their jobs. In the wake of recent production cutbacks, rumors have spread that some part-time workers—who make up a sizable share of the plant's 4,000 employees—could be laid off if the economy continues to worsen.

After a hard day of physical labor, several of the plant's workers are unwinding at a local bar. As they sip beer and shoot pool, opinion seems split between those who feel that the best way to maintain job stability is to unionize and others who fear unionization would price Honda out of Lincoln, forcing the plant to shut its doors permanently.

Elvis Cox, 41, worked in the steel industry and was a member of the United Steel Workers Union before he took a job seven years ago at Honda's Lincoln plant. Cox says he lost his job when his steel factory closed because it couldn't meet the union's financial demands. He is content with his post—which, after all, pays more than most in the area—and doesn't want to make any waves that could endanger the income that supports his family.

Could the union secure pensions?

Cox has pointed advice for those seeking to unionize: "If you don't like the job, then quit," he says. "What's the purpose for a union? What's the purpose?"

Snow doesn't want a union to bring his pay up to the level of the UAW workers; he simply wants to know that his job will be there and that his pension will be strong. "All I want is long-term security," he says shaking his head. "I can't do this job for too long. It's just so hard—physically."

When companies like Honda, Hyundai, and Mercedes-Benz opened plants in Alabama over the past 15 years, they did so in a state whose blue-collar employees had been decimated by the exodus of textile work to Mexico, China, and other parts of Asia in the 1980s. It was not uncommon to hear stories that those who signed on at Honda's Lincoln plant had previously worked simultaneous jobs with no benefits. Many workers fear that rocking the boat will chase the automakers to Mexico, or to some other state.

In the South, employers come first

Thus, historians agree that unionizing southern plants would require a dramatic cultural shift.

"In the North you work for the UAW first and the company second," says Hoffer at Virginia Commonwealth University. "It's just never been that way in the South. You work for the company first."

That attitude certainly is reflected in previous failed attempts to organize the transplant factories. Two decades of work by the UAW to force a vote at a Toyota factory in Georgetown, Ky., have yielded no results; votes at a Nissan plant in Smyrna, Tenn., were rejected out of hand by workers in 1989 and 2001.

"There is considerable tension between the union and Southern autoworkers," says John Heitmann, a history professor at the University of Dayton in Dayton, Ohio, who has studied the auto industry for a decade. "It's in part due to the strong strain of individualism that's a part of the South. There's no real compassion for union brothers down there."

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