Tuesday, May 24, 2011

More auto plants coming to the South

The Wall Street Journal published an interesting story today on the opening of the Volkswagen plant in Tennessee:

"Volkswagen AG on Tuesday will celebrate the opening of a new Tennessee auto plant that gives the German auto maker much lower U.S. labor costs than not only its Detroit rivals but its Japanese competitors on American soil.

The new plant will present a stiff challenge for Detroit auto makers, which restructured with the goal of achieving cost parity with Japanese companies building cars in the U.S.

Located near Chattanooga, Tenn., the plant will pay starting workers about $27 an hour in wages and benefits, according to estimates by industry analysts. That's roughly half the $52 an hour cost of labor at the Detroit Three auto makers and some non-union U.S. plants owned by Toyota Motor Corp. and Honda Motor Co. It comes as Korea's Hyundai Motor Co. and Kia Motors Corp., whose Alabama and Georgia plant labor costs are similar to VW's, are gaining share against Detroit and Tokyo rivals.

During the auto bailout restructuring led by the U.S. government, General Motors Co. and Chrysler Group LLC were told they had to rework union contracts to be in line with Toyota. While unions agreed to sharply lower the pay for new hires, there haven't been that many workers coming in at the lower levels. As a result, their labor costs remain far higher than those of new plants in the South.

"Any current wage or benefit gap between the Detroit Three and transplants could grow as transplants add capacity in the lower-wage U.S. South," said Brian Johnson, the lead auto analyst for Barclays Capital.

VW plans to build its Passat, a sedan that will be priced at $20,000, about the same as the Honda Accord and Chevrolet Malibu, making it competitive with the other volume sedans in the segment. The current model starts at nearly $28,000 but the price is coming down.

Over the next three years, VW is expected to boost the average worker's wage from $14.50 to $19.50, pushing up the total cost for a worker to roughly $38 an hour, according to the Center for Automotive Research in Ann Arbor, Mich.

Ford Motor Co., GM and Chrysler have battled for years to lower the gap between themselves and Japanese auto makers that assemble vehicles in the U.S. Years ago, Detroit had labor costs of around $70 an hour, but in the last few years the three companies have won concessions from the United Auto Workers union. Ford's labor cost is now about $58 an hour, according to the company.

One key UAW concession allows GM, Ford and Chrysler to hire new workers at a wage of $14 an hour, about half the pay of veteran workers. New workers also get less costly benefits, such as 401k retirement accounts instead of a life-long pension program. The number of workers who get this "second-tier" pay package is limited, however.

The Detroit Three and the UAW are scheduled to begin negotiating a new labor contract this year. Barclay's Mr. Johnson expects GM, Ford and Chrysler to seek to increase the percentage of workers making the lower, entry-level wage up from the 20% cap today.

The string of non-union auto plants that have gone up in the South is a reflection of the U.S.'s increased competitiveness in auto manufacturing. Both BMW AG and Daimler AG produce vehicles in the U.S. and export them to markets around the world..." Rest of the article


Anonymous said...

Makes sense. For the South, that's still good pay after you add in the benefits. What makes auto workers in Detroit so special that they are entitled to higher pay and unbelievable benefits when compared to the rest of the nation? Desk jockeys, executives, retail employees, waitresses...I could go on, but most folks don't know what a pension is, for good reason.

Anonymous said...

For the South, that's still good pay after you add in the benefits.

Damn right.

Low wage dead-end service sector and tourism related jobs won't get it done. NAFTA gutted the South. Jobs such as those discussed in the article will actually raise the boats and improve the lot. Everyone in the South should be buying cars made in the South. The quality has to be there but when it is we must do our part.

Anonymous said...

Auto plants heading to the South? Not if the Blackmans can stop it! They loves them some dumb, poor, unemployed peoples so they can do what's best for them. And don't you forget that.

Anonymous said...

9:13 - NAFTA had severe effects on low-skilled manufacturing everywhere (e.g., "The Rust Belt"). I'm not convinced any region got it significantly worse than others.

The bottom line is there are low-skilled people able and willing to do the low-skilled manufacturing jobs that don't take much education or extensive training, and they're willing to do it for a lot less than Americans are used to making. The shift to other countries was inevitable; NAFTA just sped it up.

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Jackson Jambalaya is the home of Trollfest '07. Catch this great event which promises to leave NE Jackson & Fondren in flames. Sonjay Poontang and his band headline the night with a special steel cage, no time limit "loser must leave town" bout between Alan Lange and "Big Cat"Donna Ladd following afterwards. Kamikaze will perform his new song F*** Bush, he's still a _____. Did I mention there was no referee? Dr. Heddy Matthias and Lori Gregory will face off in the undercard dueling with dangling participles and other um, devices. Robbie Bell will perform Her two latest songs: My Best Friends are in the Media and Mama's, Don't Let Your Babies Grow up to be George Bell. Sid Salter of The Clarion-Ledger will host "Pin the Tail on the Trial Lawyer", sponsored by State Farm.

There will be a hugging booth where in exchange for your young son, Frank Melton will give you a loooong hug. Trollfest will have a dunking booth where Muhammed the terrorist will curse you to Allah as you try to hit a target that will drop him into a vat of pig grease. However, in the true spirit of Separate But Equal, Don Imus and someone from NE Jackson will also sit in the dunking booth for an equal amount of time. Tom Head will give a reading for two hours on why he can't figure out who the hell he is. Cliff Cargill will give lessons with his .80 caliber desert eagle, using Frank Melton photos as targets. Tackleberry will be on hand for an autograph session. KIM Waaaaaade will be passing out free titles and deeds to crackhouses formerly owned by The Wood Street Players.

If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

This is definitely a Beaver production.

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