Surprise! Carmakers Are a Recovery Bright Spot

As auto companies prepare for a surge, lower-cost plants in the South will benefit

Americans of all political stripes remain worried that the supply of good jobs in the U.S. has all but dried up. Not Karen Bowen. The 39-year-old single mother from Guntown, Miss., recently landed a job on a quality-assurance team at Toyota Motor’s new Corolla plant in nearby Blue Springs. The starting pay is $15 an hour—almost half what veteran autoworkers get in unionized carmaking strongholds such as Detroit or Louisville. Yet the salary is more than she earned at her previous job at a local chiropractor’s office, and it comes with a potent sweetener: benefits. Bowen now has health insurance and a retirement plan, plus the promise of job stability. That “means a better life for my family,” she says. “I aim to work here until I retire.”

Car companies are hiring, and they’ve become one of the bright spots in the sluggish U.S. recovery. Domestic and international automakers plan to hire or rehire at least 25,000 workers between now and 2015. That includes 4,000 in the fourth quarter of 2011 alone, spread among Toyota’s $1.3 billion Mississippi plant, a new assembly shift at Honda Motor’s Civic factory in Greensburg, Ind., a third shift at Kia Motors’ Georgia assembly plant, and an expansion at Hyundai Motor’s factory in Alabama.

In the U.S., a 10 percent rise in auto sales this year, coupled with rebounding production of Japanese brands recovering from the March earthquake, means industrial output will rise for the rest of the year. Auto-related job creation may last for years, as Asian and European carmakers expand or build new plants and their Michigan-based rivals revive after a solid decade of gloom.

“There’s a sense of ‘let the good times roll’ for automakers,” says James Rubenstein, a professor at Miami University in Oxford, Ohio, who studies industry trends. “So much capacity was taken out in the 2008-09 downturn, and we’re seeing a partial restoration. The feeling in the industry generally is sales are going to keep inching up, and they’re preparing for that.”, an auto industry researcher, estimates that U.S. drivers will purchase 13.5 million new cars and trucks next year, up from about 12.6 million in 2011. That rebounding demand, combined with the dollar’s weakened value against the yen and euro and rising wages in developing markets, has made the U.S. a more attractive location for production. “The cost of labor in markets like China and India is actually getting higher,” says Edmunds Chief Executive Officer Jeremy Anwyl. “The economics that argued against manufacturing in the U.S. changed.”

The latest auto assembly jobs are flowing mainly to plants in the Southeast, where lower business taxes and cheaper labor, land, and utility costs have drawn foreign carmakers for decades. “Right to work” laws in Southern states, which don’t require employees to join labor unions, have also curbed the influence of the United Auto Workers, enhancing the region’s appeal to Asian and European makers.

Combined employment at U.S. auto assembly plants, their parts and materials factories, dealerships, and auto-related sales and service companies account for about 8 million jobs, says Steve St. Angelo, Toyota’s executive vice-president for North American engineering and manufacturing. He predicts that this year and next, the U.S. auto industry will spur 88,000 additional jobs in those parts of the economy. “The auto industry is the largest manufacturing sector in America,” St. Angelo says. “What other sector has that kind of horsepower?”

This year’s hiring may also generate 28,000 additional jobs at parts suppliers and local businesses, according to the Center for Automotive Research, which calculates that, for each worker hired directly by automakers, about seven other jobs are created either by suppliers or because of spending by those new employees. “They support everything from jobs at suppliers to car dealerships and restaurants,” says Debbie Menk, project manager at the center.

Bowen’s hometown, about 15 miles east of the Toyota factory, is proof of that. Six of her acquaintances also will work in the quality assurance department and at least four more have been hired at factories supplying the Mississippi auto plant. “There are a lot of homes being built, apartments, two or three restaurants that opened recently, some hotels have opened,” she says. “Everyone is excited.” That’s welcome news in a state that had 10.6 percent unemployment in September.

Including workers at Volkswagen’s new Tennessee plant and recent hiring by BMW in South Carolina, international carmakers are adding 6,350 jobs this year at their U.S. factories, with 3,400 more coming in 2012 as Toyota, Honda, Nissan Motor, and Daimler’s Mercedes expand U.S. operations. “The positive aspect of all this is we’re seeing more, not less, North American production,” says IHS Automotive analyst Rebecca Lindland. “When an auto plant goes up in a community, that’s not a fly-by-night thing. It’s an investment that creates many direct and indirect jobs and contributes to the economy for decades.”

To recoup U.S. sales lost to inventory shortages following the Japanese earthquake, Asia’s largest carmaker, Toyota, is raising its fourth-quarter North American output by 15 percent above its production plan at the start of the year, says St. Angelo. Toyota has also hired about 200 more workers at its Huntsville (Ala.) engine factory. Honda is hiring 1,000 additional people at its Greensburg (Ind.) plant to boost production of Civic compact cars. Like Toyota, Tokyo-based Honda is running North American factories overtime to rebuild vehicle supplies thinned by parts shortages, says Ron Lietzke, a company spokesman. Kia needs 1,000 more people for a third shift at its new plant in West Point, Ga., as South Korea’s second-largest carmaker boosts production of its Optima sedan, which has seen sales surge 182 percent in the 10 months through October. Meanwhile, Volkswagen added about 2,100 jobs at its Chattanooga factory, which started building Passat sedans in May.

Expansion plans by international automakers come as General Motors, Ford Motor, and Chrysler Group say they’ll also restore 20,000 jobs across 34 U.S. factories by 2015 as part of new contract agreements with the UAW. The unionized jobs will pay about $35,000 annually, not including benefits.


    The bottom line: Due to increased demand, plant openings or expansions, and union deals, automakers will add 25,000 U.S. jobs by 2015.

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