Automakers and Suppliers and Auto Industry and Factories and Honda and Toyota and Manufacturing & Technology

Confident automakers adding factory workers

October 28, 2011

Toyota Motor Corp.’s Mississippi plant opens this month to build the Corollas that the Japanese automaker needs to get its U.S. sales growing. It’s part of a surge of hiring among car companies that’s a bright spot in the slow U.S. recovery.

Among the 1,500 people Toyota is hiring for the Blue Springs plant is Karen Bowen, 39, a single mother. Her job with the quality-assurance team “means a better life for my family,” said Bowen. Along with a $15 hourly starting wage, more than she was earning in her previous job at a chiropractor’s office, Bowen now has health insurance, a retirement plan and job stability, she said.

“I aim to work here until I retire, about 25 years,” Bowen said.

U.S. and international carmakers plan to hire or rehire at least 25,000 workers between now and 2015. That includes 4,000 jobs in the fourth quarter alone from Toyota’s $1.3 billion plant, a new assembly shift at Honda Motor Co.’s Civic factory in Indiana, a third shift at Kia Motors Corp.’s Georgia assembly plant and an expansion at Hyundai Motor Co.’s Alabama plant.

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. New and enlarged plants for Asian and European carmakers and resurgent Michigan-based rivals also means auto-related job creation may last for years.

“There’s a sense of ‘let the good times roll’ for automakers,” said 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,” Rubenstein said. “The feeling in the industry generally is sales are going to keep inching up and they’re preparing for that.”

U.S. industrial output grew 0.2 percent in September, helped by rising auto production, after being little changed in August, according to figures from the Federal Reserve released on Oct. 17. Factory production, which makes up 75 percent of the total, has risen for the three months in a row.

Investment in new plants exposes international automakers to financial risks if the nascent auto sales recovery reverses or exchange rate changes boost the cost of building cars with U.S. labor and materials. A sluggish global economy and consumer demand has contributed to the 20-percent decline in the value of Toyota’s Tokyo-listed shares this year. Shares of General Motors Co. and Ford Motor Co. have fallen 29 percent and 28 percent, respectively, this year.

Still, the combination of pent-up demand, population growth and a vehicle fleet that executives, including Ford Chief Executive Officer Alan Mulally, say is the oldest ever suggests sales will continue to grow.

Toyota, recovering both from production losses this year and record recalls in 2010, is also working to revive U.S. demand for Camry sedans, the market’s best-selling car, by releasing a revamped version last month.

The hiring this year may also generate 28,000 additional jobs at parts makers 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,” said Debbie Menk, project manager at the Ann Arbor, Mich.-based research center.

Bowen, who lives in Guntown, Miss., 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 said. “Everyone is excited.”

That’s welcome news in Mississippi, which had 10.6-percent unemployment in September, topping the 9.1-percent U.S. rate, according to the Bureau of Labor statistics.

Including Volkswagen AG’s new Tennessee plant and recent hiring by Bayerische Motoren Werke AG in South Carolina, international carmakers are adding 6,350 jobs this year at their U.S. plants, with 3,400 more coming in 2012 as Toyota, Honda, Nissan Motor Co. and Daimler AG’s Mercedes-Benz expand U.S. operations.

“The positive aspect of all this is we’re seeing more, not less, North American production,” said Rebecca Lindland, a Norwalk, Connecticut-based analyst at IHS Automotive.

“When an auto plant goes up in a community, that’s not a fly-by-night thing,” Lindland said. “It’s an investment that creates many direct and indirect jobs, and contributes to the economy for decades.”

Toyota, Asia’s largest carmaker, is raising its North American output by 15 percent in the fourth quarter above its production plan at the start of the year, to recoup U.S. sales lost to inventory shortages triggered by Japan’s earthquake, said Steve St. Angelo, Toyota’s executive vice president for North American manufacturing. Toyota has also hired about 200 more workers at its Alabama engine factory.

Honda is hiring 1,000 more people at its Greensburg, Indiana, plant to boost production of Civic compact cars. Like Toyota, Tokyo-based Honda is also running North American plants overtime to rebuild vehicle supplies thinned by parts shortages, said Ron Lietzke, a company spokesman.

Honda , however, is studying modifications to its Civic small car after a revamped version of the model fared poorly in a review by Consumer Reports, failing to win the magazine’s coveted “Recommended” status.

The 2012 Civic’s score in testing by the magazine fell to 61 points, from 78 for the previous model. The latest version of Tokyo-based Honda’s best-selling compact declined in agility and interior quality, had a choppier ride, longer stopping distances, and more road noise compared with the previous generation, Consumer Reports said.

“One of Honda’s strengths has always been the ability to quickly react and recover fast,” John Mendel, the carmaker’s U.S. executive vice president, said. “That’s what you’re going to see us do. I think you’ll see us take appropriate actions,” he said, without elaborating.

Honda models since the 1980s have consistently ranked among the most frequently recommended by the magazine published by Yonkers, N.Y.-based Consumers Union, a non-profit group. Carmakers seek favorable evaluations from the magazine as its reviews are considered the most objective because of policies of not accepting advertising and buying every vehicle it tests.

Sales of Civic this year haven’t met Honda’s target, owing to limited inventory due to reduced parts supply after Japan’s record earthquake. Sales of the car, built at Honda plants in Ontario and Indiana, dropped 16 percent this year through September, to 167,384.

North American Civic production began recovering in September, and Honda this month added the second manufacturing shift at its Greensburg plant to boost supplies of the car.

Improved supply of all Honda models should lift its overall U.S. sales in October compared with a year ago, the first such increase since April, Mendel said. Deliveries of new Honda and Acura vehicles are down 5.8 percent this year through September.

Kia, South Korea’s second-largest carmaker, needs 1,000 more people for a third shift at its new West Point, Ga., plant as the company boosts Optima sedan production, said Corinne Hodges, a factory spokeswoman.

Volkswagen added about 2,100 jobs at its Chattanooga, Tenn., plant that started building Passat sedans in May.

Expansion plans by international automakers come as GM, Ford and Chrysler Group LLC, say they’ll also restore 20,000 U.S. factory jobs by 2015 as part of new contract agreements with the United Auto Workers union.

“Automakers aren’t doing this out of the goodness of their hearts. They’re doing it because the economics make sense,” said Jeremy Anwyl, CEO of auto industry researcher Edmunds.com.

The Santa Monica, Calif.-based company estimates that U.S. drivers will purchase 13.5 million new cars and trucks next year, up from about 12.6 million in 2011. The rebounding demand, combined with a currency that’s weakened against the yen and euro and rising wages in developing markets have made the U.S. a more attractive production base, Anwyl said.

“Some of the conditions have changed. The cost of labor in markets like China and India is actually getting higher,” he said. “The economics that argued against manufacturing in the United States changed.”

Combined employment at U.S. auto-assembly plants, parts and materials factories, dealerships, and auto-related sales and service companies account for about 8 million jobs, St. Angelo of Toyota said. This year and next, the auto industry will spur 88,000 more jobs, he said.

“The auto industry is the largest manufacturing sector in America,” St. Angelo said. “What other sector has that kind of horsepower?”

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