The trend is not our friend
Friday, Jul 31, 2015 - Posted by Rich Miller
* Crain’s takes a look at the big picture…
Between 1979 and 2011, carmakers and their suppliers closed 267 plants across the U.S., according to a Center for Automotive Research study. Almost two-thirds of them were in the Midwest, and 42 percent of the closures occurred between 2004 and 2010, when the Great Recession bankrupted General Motors and Chrysler.
While Wisconsin no longer has a single car factory and Missouri is down to two, Illinois had managed to avoid the industry’s retrenchment. But the geography of production continues to evolve. Even as they’ve cut labor costs, the traditional domestic producers are losing market share in North America to rivals based overseas, driving them, in some cases, to move jobs and increase investments in Mexico, a rising auto-industry powerhouse. […]
Ford’s Torrence Avenue assembly plant, however, is humming along thanks to the popularity of the Explorer. In 2014, the factory produced 284,993 of the sport-utility vehicles, boosting total production at the facility 4.3 percent to 366,672 vehicles, according to the Automotive News data. The factory also produces Taurus cars and police Interceptors but is losing the Lincoln MKS. […]
In Belvidere, nearly 4,500 Fiat Chrysler employees made 348,552 vehicles last year, an increase of 7.2 percent from 2013 and a number that surpassed the previous peak eight years ago. The London-based company’s Jeep Compass and Patriot brands accounted for about three-quarters of the activity, with the Dodge Dart making up the remainder. […]
Though Dearborn, Mich.-based Ford has shifted some jobs back to the U.S., more recently the company said it will take production of its Focus compact car from Michigan and invest $2.5 billion to build engine and transmission factories in Mexico.
As long as automakers and other manufacturers prize squeezing workers over everything else, we’re always gonna be faced with a big problem here. And so is every other state.
- Tournaround Agenda - Friday, Jul 31, 15 @ 10:27 am:
If we could only get rid of minimum wage, basic safety regulations and weekends, we could compete with Mexico and China for those manufacturing jobs. It’s time to Turnaround America to the 19th century boom days.
- Midway Gardens - Friday, Jul 31, 15 @ 10:28 am:
As long as consumers are driven by low price not domestic content, the car makers are going to continue to respond by moving production to less expensive facilities.
- SAP - Friday, Jul 31, 15 @ 10:29 am:
From the same article; average cost of wages and benefits:
Ford: $57/hour
GM: $55/hour
Chrysler: $47
When the manufacturers were facing extinction in 2008 they got the UAW to sign off on a 2-tier wage structure and renegotiate pensions, so new hires are well below those averages, but I don’t think auto-makers prize squeezing workers over all else.
- Bill White - Friday, Jul 31, 15 @ 10:31 am:
= = As long as automakers and other manufacturers prize squeezing workers over everything else, we’re always gonna be faced with a big problem here. = =
Or, we can learn from Germany.
= = So how did Germany just completely blow up the myth that car companies have to pay their workers less to be more profitable and manufacture more cars? How can Germany do the opposite: pay their workers more, be more profitable, and make more cars? = =
http://www.yesmagazine.org/issues/the-end-of-poverty/why-are-bmw-and-mercedes-so-rich
- The Muse - Friday, Jul 31, 15 @ 10:32 am:
It’s hard to compete with cheap overseas labor when your automotive technology is easily replicated overseas and is very similar to what the US is producing. I mean, we were promised hover boards already for crying out loud!!…. I really, really wanted a hover board
- How Ironic - Friday, Jul 31, 15 @ 10:32 am:
Morning Rich,
Gov Bruce Rauner is going to be ‘tweaking’ his Runaground ™ Agenda, in order to provide a more lucrative business environment to these ‘job creaters’. Starting today, we’d like local input in the RTWFF (Right To Work For Free) initiative.
By not paying our already overpaid workforce, we should be on par with other 3rd world countries, and be an attractive target for industry.
Best,
ck!
- Anonymous - Friday, Jul 31, 15 @ 10:32 am:
The average age of a car in the United States is 11.5 years old.
Cars are made to last longer and owners are keeping them and not buying new until they have to. There is nothing surprising about seeing Mitsubishi fold this plant when they have had their American business diminish to next to nothing.
- The Dude Abides - Friday, Jul 31, 15 @ 10:36 am:
How is it that job killing Illinois has more auto plants than job friendly Missouri and Wisconsin? (snark)
- Six Degrees of Separation - Friday, Jul 31, 15 @ 10:37 am:
The average age of a car in the United States is 11.5 years old.
Cars are made to last longer and owners are keeping them and not buying new until they have to.
The domestic auto industry may be on the wrong side of the curve, but the aftermarket auto parts industry is thriving. In the last 2 years, there were 2 new auto parts stores in town, and the old ones didn’t go out of businesses by any means. Instead of fighting the effects of NAFTA, US suppliers are figuring out new synergies to provide logistical support to the new and planned plants across the border.
- Truthteller - Friday, Jul 31, 15 @ 10:51 am:
Rauner is a great competitor- he wants to win the race to the bottom.
- Team Sleep - Friday, Jul 31, 15 @ 11:05 am:
I drive a 10 year old car. Mrs. Sleep and I can only afford one car payment - especially since insurance is $100+ a month. Sometimes the market and people’s budgets just are what they are.
It is cool to learn that some Darts are made in Belvidere. The revived model is pretty sweet.
- Mama - Friday, Jul 31, 15 @ 11:07 am:
Businesses also like third world counties because they do not care about clean air and water.
- hisgirlfriday - Friday, Jul 31, 15 @ 11:09 am:
has rauner issued any comment whatsoever about the Mitsubishi plant closing? that was a plant built through the advocacy of a former republican governor and rauner talks about wanting to bring jobs to this state so has he lifted a finger at all to phone his business contacts about some manufacturer taking over that plant? what about his cat ceo bff? and is dceo even presently empowered given budget limbo with the option of trying to secure a new manufacturer for that facility through any kind of incentives package. quinn certainly had his flaws but I dont think he would have been this silent on this.
- Midway Gardens - Friday, Jul 31, 15 @ 11:14 am:
Bill, Germany is very different than the US. Just try to close an auto plant in Germany. Next to impossible. Germany slaps a 10% import and 19% import VAT on imported cars. Quite protectionist. And when the German car makers setup production facilities in North America, it should say something to you that they go to the largely non-unionized South and to Mexico.
- Precinct Captain - Friday, Jul 31, 15 @ 11:15 am:
Who cares? To quote our governor, “Not every job belongs in America.”
- Anonymous - Friday, Jul 31, 15 @ 11:32 am:
Some States adjust better than others…
http://www.wthr.com/story/19767458/indianas-auto-industry-making-a-comeback
http://m.nwitimes.com/business/local/indiana-s-auto-industry-rises-to-second-place-nationally/article_f3f47c8d-812b-5a12-9b71-5267e6265463.html?mobile_touch=true
- Liberty - Friday, Jul 31, 15 @ 11:33 am:
The cost of Mexican labor with benefits is around $8. America can’t hang on to manufacturing. Cheap money fueled too much growth, over capacity and an expectation of lower prices. Lower prices is a downward spiral for America.
- Bill White - Friday, Jul 31, 15 @ 11:36 am:
@Midway Gardens
The questions stands:
How does Germany pay their workers more than US companies and at the same time be more profitable than US companies?
Yes, Germany is different and we should figure out why and learn from it.
- vole - Friday, Jul 31, 15 @ 11:37 am:
Big picture: The US and world economies are overly dependent on the automobile. You can argue they are a necessary evil. But, they absorb way too much income of the poor and middle classes. The US will not devote the investment costs to maintain the road and bridge infrastructure. The car culture has created a totally unsustainable system built and maintained on a monstrous river of oil. And the automobile represents a huge opportunity cost in how it stifles developing our imaginations and visions toward a better way of living on earth. We need out of the auto culture rut. Put those car factories to a use that helps get us out of it. It would be a fitting end if Illinois could find a use for the Mitz. plant that would help reduce our dependencies on oil and cars.
- Bill White - Friday, Jul 31, 15 @ 11:37 am:
Edit:
[How do German auto companies] pay their workers more than US companies and at the same time be more profitable than US companies?
- Downstate - Friday, Jul 31, 15 @ 11:52 am:
The challenges for growing jobs for the state are a macro effect of what happens in small towns.
Small towns that tied their fortunes to large employers (particularly ones not locally owned), put themselves in a precarious position. The loss of a plant can be severe. Many times the plant closure can be the result of nothing other than industry trends.
Illinois has to grow companies within the state. Companies owned by Illinois residents are likely to remain here, through the ups and downs.
If we land another auto manufacturer, great! But diversity of employers is more important to long term success than fixation on the auto industry.
- Almost the Weekend - Friday, Jul 31, 15 @ 12:40 pm:
Free trade isn’t free. Democratic and Republican elected officials caved into corporate greed.
- Last Bull Moose - Friday, Jul 31, 15 @ 1:25 pm:
Bill White. Germany gets 30 percent of its tax revenues from VAT. VAT is an excise tax on domestic consumption. It is rebates on exports.
We fund social security from a tax on labor. Companies and individuals fund health costs from profits and wages.
Fund both those costs through excise taxes on domestic consumption and considerable numbers of jobs would move to the United States.
Do not have an estimate of how many or how quickly. The change in the cost structure would make this a step change.
- Enviro - Friday, Jul 31, 15 @ 1:30 pm:
“The average age of a car in the United States is 11.5 years old.”
Somewhere along our race to the bottom, downward spiral path, this country has created an growing income inequality. Now American consumers are less able to purchase a new car. Much of Europe and Asia are in an economic recession now. So who will buy the cars when the purchasing power of the American middle class is greatly reduced by lower wages?
- Enviro - Friday, Jul 31, 15 @ 1:45 pm:
Last Bull Moose @ 1:25 pm:
“Germany gets 30 percent of its tax revenues from VAT. VAT is an excise tax on domestic consumption. It is rebates on exports.”
In addition to the value added tax (VAT) in Germany many of us could also be paying income taxes of 45%.
- Anon - Friday, Jul 31, 15 @ 2:20 pm:
==As long as automakers and other manufacturers prize squeezing workers over everything else, we’re always gonna be faced with a big problem here. And so is every other state.==
Squeezing private-sector workers has allowed corporate profits to grow faster than GDP, and boosted the stock market. Pension fund managers like that.
When politicians and public-sector unions advocate a 7.5 or 7.75% projected rate of return for the pensions, they’re advocating squeezing workers.
- Last Bull Moose - Friday, Jul 31, 15 @ 2:20 pm:
Enviro-true on the rates. If we switched funding health care from private to public funds it would appear to be a huge expansion of government. Depending on who could make what decisions the actual shift in power could be large or small.
Point remains that the German tax structure encourages production in Germany.
- nixit71 - Friday, Jul 31, 15 @ 3:10 pm:
==When politicians and public-sector unions advocate a 7.5 or 7.75% projected rate of return for the pensions, they’re advocating squeezing workers.==
Good point. And if the pensions don’t achieve that ROR, the taxpayer picks up the difference anyway.
- Turnaround Illinois - Friday, Jul 31, 15 @ 4:04 pm:
We need to ban a mininum wage for workers under 14 years old, and then repeal all child labor laws. Then we will be competitive!