Automotive Update: Bad News, Good News
Today's headlines sound bleak, but industry analysts predict better days ahead.
Steve Stackhouse-Kaelble (Oct/Nov 08)
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The Road Ahead
Industry observers say the big picture that gets obscured in the discussion about today's slowdown is that tomorrow will be filled with lots of opportunities. Spotty headlines are no reason to give up on automotive, or be any less interested in attracting an auto plant to town. It won't be long before the auto industry will be hard-pressed to find enough good help and will be casting kind glances toward communities that can offer qualified workers.
"One of the key issues is that with the retirement of baby boomers, there will likely be thousands of new jobs in the industry, even though the industry is getting smaller," says David Cole, chairperson of the Center for Automotive Research (CAR) in Michigan. "There will be thousands of new people who are not in the industry now."
That may seem rather counterintuitive, especially when considering the numbers from a study Cole's organization recently released, Beyond the Big Leave: The Future of U.S. Automotive Human Resources. American automotive manufacturing employment is clearly on the decline - having peaked at 1.13 million in 1999, it had fallen 27 percent to 820,000 by 2007. The trend has hit the traditional automaking capital, Michigan, particularly hard. Employment there dropped 45 percent, from 316,300 in 1999 to 173,600 in 2007. And it's expected to get even worse. The study forecasts that the Detroit Three will shed another 20,000 jobs in the next eight years.
Still, the future holds a lot of great job opportunities, according to CAR's study: "Baby Boomer production and salaried employees are leaving (and will leave) in such numbers that the companies such as the Detroit Three must still hire many thousands of new employees in the years ahead. This massive replacement of auto labor represents an opportunity for many in Michigan and other Midwest states."
But it also represents a challenge. The report further predicts that declining jobs will be replaced by different jobs involving different tasks and requiring different qualifications and experience. Cole also says there will no longer be good auto manufacturing jobs for high-school dropouts, that it will take at least a two-year community college degree to land the jobs of the future.
Communities that recognize this and plan for that future will be the winners of the current shakeout. "There needs to be significant training for states to be able to compete," says Andy Mace, principal with Cushman & Wakefield Business Consulting.
According to Cole, the size and quality of the work force is the key to success in attracting automotive businesses. "If I were a community looking at economic development, I'd make sure I understand the demographics of the work force and the education of the work force," he says.
Still, whatever the challenges, Mace believes it will certainly be worth all the trouble to do what it takes to land new auto manufacturing jobs. "They are the jewel of manufacturing, because they bring a lot of investment from the supplier base," he says, adding that communities that spend a lot winning the site selection battles rarely have buyer's remorse: "You can heavily invest in an auto plant and capture a lot of return for your investment."
Assembly, says Cole, "has been steadily drifting to the South, and one of the key elements of this is the issue of right-to-work states." It's a reality that executives rarely admit publicly, but international automakers prefer to set up shop in places where unionization is less likely. Cole notes that the recent American Axle strike that disrupted GM production happened at roughly the same time Volkswagen was making its final decision on a site in the South.
Cole says that when it comes to new assembly operations, the rumor mill is relatively quiet at the moment. But he can think of at least one source of potential good news at some point down the road. Many vehicles continue to cross the ocean from assembly plants in Japan, "and with the strengthening of the Japanese yen, that's a reason that they might consider moving more production here," he says. "But we've heard no specific rumors."
Then, says Mace, there's the question of when Chinese and Indian automakers will act upon their itch to tap into the American market: "They may start to look to the U.S. to build their market share."