Help Wanted: Autoworkers at $14 an Hour

Help Wanted: Autoworkers at $14 an Hour

By Michelle Krebs

New labor contracts negotiated between Detroit’s automakers and the United Auto Workers union last fall, combined with upcoming buyouts and retirements of aging baby boomers, may lead to a healthy hiring spree of engineers and hourly workers by auto companies nationwide, according to a new study.

The overall employment level for workers at auto companies in 2016 will be about the same as in 2007 — about 355,000 people — well off this decade’s peak of nearly 500,000, says a study on automotive hiring trends released this week from the Center for Automotive Research in Ann Arbor, Mich.

However, the study concludes, the auto company workforce of 2016 will have a different makeup than today’s.

Auto companies will hire replacement workers for people taking buyouts or retiring. The new production workers for the Big Three will be paid $14 an hour — about half of what their counterparts currently earn — in accordance with the contracts negotiated last fall.

Along the way to 2016, the study predicts dips in automotive employment before it rises steadily again.

Another shift in employment patterns will be that international auto companies, like Honda and Toyota, will employ more people through 2016, and Detroit automakers will employ less, even though the Big Three will continue to employ the largest number of workers in the U.S. auto industry.

U.S. Auto Industry: Employment Relatively Stable

In 2007, automakers in the U.S. employed 354,599 people. Of those, 241,189 worked for Chrysler, Ford or GM; 113,410 worked for international auto companies building vehicles in the U.S.

In 2011, the study predicts automaker employment will dip only slightly to 348,104 people, with Detroit auto companies dropping to 210,542 employees and international automakers having more — 137,562 — on their payrolls.

By 2016, the study forecasts, automaker employment will rise to slightly above 2007’s level at 355,274 people. But the employee ranks of Detroit auto companies will shrink further to 203, 220 people and international automakers will employ more people, at 152,054.

Farewell to Older Workers

Through 2016, Detroit's three automakers expect to lose nearly 115,000 workers, largely because aging baby boomers will retire and others will accept buyout packages offered by the automakers to eliminate older employees, the study noted.

Every Detroit automaker is in the midst of offering older workers buyout packages. After reporting a record $38.6 billion loss for 2007, GM last week offered buyout packages to all 74,000 of its UAW hourly workers. Ford has offered buyouts in hopes of eliminating at least 8,000 hourly workers. Chrysler has buyout packages on the table to cut its work force by 21,000 people.

Most of the job losses will be hourly factory jobs. Michigan will bear the brunt, with 54 percent of the job losses occurring in the state.

Engineering and technical jobs will see the lowest drop-off.

Source: Center for Automotive Research

Hello to New, Lower-Paid Workers

While it is out with the old, it is in with the new as far as Detroit’s automakers are concerned. From 2008 to 2016, Chrysler, Ford and GM are expected to hire nearly 77,000 new employees — about 56,673 new hourly workers and an additional 20,536 salaried employees.

Nearly all of the hiring of hourly productions workers will take place between 2009 and 2011.

These jobs will be for such things as assembly of vehicle sub-systems and materials handling, which qualify under the union contract for $14 an hour and no defined pension or retiree health-care benefit. By 2011, 27 percent of the Big Three workers nationwide will be receiving the second-tier compensation at the auto companies, due to more falling into the category that allows for the second-tier pay and a decrease in the number of skilled-trades workers.

Source: Center for Automotive Research

Less Pay, But More Skills Required

Despite the lower pay, automakers surveyed for the study said they'll expect more from the new workers than they did of workers in the past.

The automakers told researchers production work requires more brains and less brawn than before.

The physical demands of building a vehicle have lessened, and injuries have declined. But building a car has becoming increasingly complex and the technology used to build vehicles more advanced. Computer proficiency is critical, they say. So too is higher literacy and better math skills, along with communication and team skills.

Labor Shortage?

In the past, automakers could lure higher-skilled workers to their ranks from suppliers and dealerships through higher wages and benefits. However, they will no longer be able to use that bait.

Instead of suppliers and dealerships being feeders for auto-company jobs, automakers will find themselves in competition with suppliers and dealerships for these higher-skilled workers.

That could lead to a labor shortage — at least of the desired kind of workers, the study concluded.

It also has major implications for education and what skills prospective employers expect from graduates of high schools and colleges.

Automotive Engineers: Outlook is Good

The study shows the outlook for automotive engineers is good, in part because research and design spending will increase.

From 2008 to 2016, automakers will hire about 13,000 engineers; about 9,000 engineers will be hired in Michigan.

Though the researchers found automakers do not fear a shortage of engineers, they are concerned about the preparation of the new crop of engineers.

Mechatronic engineering, which combines mechanical, electronic and software engineering, will dominate future hiring for vehicle design, engineering and manufacturing. Future engineers, automakers say, must be well-versed in computer design and engineering methods. Experience, through previous employment or college work-study, will be a huge plus. Other skills mentioned as desirable were global business acumen, second-language proficiency and teamwork skills.

About the Study

The study is called “Beyond the Big Leave: The Future of Automotive Human Resources in the United States.” It was done by the Center for Automotive Research was prepared for the Charles Stewart Mott Foundation and the Mid-Michigan Innovation Team/U.S. Department of Labor Workforce Innovation for Regional Economic Development Initiative. As a result, the emphasis is on Michigan.

In addition to Chrysler, Ford and GM, Honda and Toyota participated in the study. Automotive suppliers Continental AG, Cooper-Standard Automotive Denso International America, Johnson Controls, Robert Bosch, Siemens VDO Automotive, Valeo and Yazaki North America also took part in the study.

Study Assumptions

The study assumes U.S. vehicle sales will grow every year, from the decade’s low of 15.7 million vehicles in 2008 to 17.9 million in 2013. The study also assumes the Big Three’s market share of total sales will decrease; it's now hovering at about 50 percent of all sales.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.