February 10, 2012
President Obama’s call to repatriate U.S. factories with
manufacturing work put the domestic auto industry in the spotlight last
month during his State of the Union address.
But the reality, auto
executives say, is it will take more than patriotism and a lower tax
rate to bring factory jobs back from abroad. Auto companies need a
strong business case to justify the “Made in America” label.
fluctuations and upheaval in global markets are driving many automakers
to consider moving factory work to the United States, helping to
reverse a decades-long migration of jobs to countries with cheaper
Factor in the risk of natural disasters, which last year
ruptured the supply chain for many Japanese carmakers, and the
increasing competitiveness of U.S. labor costs, and automakers have more
incentive to build where they sell, industry experts say.
costs are one reason to go offshore, but risk is a reason to come back
onshore,” said Kristin Dziczek, director of labor and industry at the
nonprofit Center for Automotive Research (CAR) in Ann Arbor, MI. “There
has to be a business case for bringing work back. The biggest case right
now is that companies are evaluating the cost of risk to their supply
The U.S. auto manufacturing sector has a long way to go to
reverse decades of job losses. Last year, the sector employed 592,100
workers, a nearly 50% drop from the 1.1 million workers in 1999,
according to CAR.
In his speech, Obama called for the return of
U.S. manufacturing, stressing its importance to the nation’s economic
future. He called on businesses to bring work back to U.S. factories and
urged Congress to rewrite the tax code so companies would be more
likely to keep manufacturing jobs here. “What’s happening in Detroit can
happen in other industries,” Obama said.
Last year, Ford Motor
Co., General Motors and Chrysler Group each agreed to add thousands of
U.S. jobs as part of their four-year labor pacts with the UAW. Without
the contracts, the companies said, some of those jobs would have gone to
Mexico or other countries. But beyond the contracts, auto industry
leaders say more U.S. factory jobs could be added—if sales justify them.
North American President Mark Reuss has said the company will carefully
match production to demand. But he also pointed to GM’s plans to reopen
its former Saturn plant in Spring Hill, TN, this year as a source of
GM also is urging more global suppliers to move near
its U.S. plants to streamline parts flow, he said. “We’re going at it
hard,” Reuss said last month on the sidelines of the Washington Auto
Show. “There is a lot of margin there.”
Foreign automakers also
are moving production to U.S. factories to better guard against
seesawing exchange rates. Volkswagen AG opened a $1 billion plant in
Chattanooga last May with an annual capacity of 150,000 cars in the
first phase and another 75,000 to 100,000 vehicles in subsequent phases.
Motor Corp. opened a plant in Blue Springs, MS, in November, adding
2,000 jobs, and is exporting its popular Camry sedan overseas from its
factory in Georgetown, KY. It also builds Sienna minivans for export in
Princeton, IN. “Our philosophy is we want to build vehicles where we
sell them,” Toyota spokesman Javier Moreno said. But ultimately, he
added, “it’s really auto demand that’s going to guide those decisions.”
Tetreault, Ford’s vice president of North American manufacturing, said
automakers’ decisions on U.S. production depend on several factors, such
as tax incentives, labor costs, exchange rates and workforce
productivity. “It comes down to the individual business environment in
one part of the world versus the United States,” Tetreault said.
with U.S. sales rising slowly, many automakers remain hesitant. CAR
predicts that even with a rebound in sales, employment in the auto
manufacturing sector will grow only by about 166,800 jobs over the next
four years, hitting 756,800 workers by 2015.
Still, even though
carmakers may be adding workers, they’re holding off building new
factories. “We’ve winnowed down to a very lean body,” Dziczek said. But
she added: “Pretty much everyone in the auto industry is hesitant to add
Copyright © 2005 LexisNexis