Detroit’s Loss Is China, Slovakia’s Gain as Auto Jobs Move East
March 3 (Bloomberg) — General Motors Corp. pays Qiu Mingyuan $18 a day to build engines in Shanghai. Thousands of miles away in Oklahoma City, Adana Spain last week lost a job paying about 10 times more when GM closed a factory there.
Qiu and Spain are the face of an eastward shift in car production after automakers including DaimlerChrysler AG and Ford Motor Co. announced plans to cut 192,000 jobs in North America and western Europe over the past five years. As the companies display new models this week at the Geneva Motor Show, they are shifting jobs to countries such as Russia, China and Slovakia in pursuit of cheaper labor and sales in growing markets.
Last year, for the first time, automakers built more cars outside North America and western Europe than inside, according to PriceWaterhouseCoopers. The migration of jobs may not end for eight to 10 years, says Chris Benko, a car industry analyst for the consulting firm.
“They’ve been outsourcing our jobs for a very long time and it isn’t just GM,” says Spain, 59, who moved to Oklahoma in the early 1980s after GM closed the plant in Southgate, California, where her late husband worked. “The American plants, as far as General Motors and them go, it’s going to continue to buckle, and the foreign plants are going to grow and take over.”
While global auto sales will rise almost 19 percent in the next seven years, most of the increase will come from outside North America and western Europe, says Nigel Griffiths, a London-based analyst for Global Insight Inc. His firm projects sales will grow 5.5 percent in the two regions, compared with 36 percent in the rest of the world, including 20 percent in eastern Europe and 44 percent in Asia.
`Horrendously Painful’
“The dislocation is going to be horrendously painful,” says Benko, who is based in Detroit. “This industry has lived on borrowed time a long time and it needs to go through this readjustment.”
Factories in North America and western Europe produced 48.9 percent of the world’s cars last year, down from 50.5 percent in 2004, Benko estimates. That share will drop to 44.7 percent in 2013, he forecasts.
Detroit-based GM plans to close nine factories and eliminate 30,000 hourly jobs in North America by 2008. Last week, it shut the plant in Oklahoma City where Spain and her colleagues built Chevy TrailBlazers and other sport-utility vehicles.
The company sold 26.2 percent of all new cars in the U.S. last year, down from 51 percent in 1962. That loss in market share has left GM with too many U.S. plants and too many workers.
Spain, whose husband died in 1999, says she didn’t work for GM long enough to be eligible for full retirement benefits and will look for another job.
Toyota’s Rise
Toyota Motor Corp., on pace to unseat GM as the world’s largest automaker in the next few years, is increasing its market share in both the U.S. and Europe. Asian automakers captured a record 36.5 percent of the U.S. market last year. Their share of western Europe rose to 17.4 percent from 14.8 percent in 2000.
The stock of Toyota, based in central Japan’s Toyota City, has risen 53 percent in the past 12 months, compared with a 16 percent gain in the 19-member Bloomberg World Auto Manufacturers Index. GM shares have dropped 44 percent in the same period.
Like GM, Dearborn, Michigan-based Ford is shedding workers in North America. Chief Executive Officer William Clay Ford Jr., 48, in January said the automaker would close 14 plants and eliminate as many as 30,000 jobs during the next six years. DaimlerChrysler’s Chrysler unit cut 40,000 jobs in North America from 2000 to 2004 to end losses at that division.
In western Europe, carmakers such as Paris-based PSA Peugeot Citroen and Wolfsburg, Germany-based Volkswagen AG are offering early retirement and buyouts while opening factories further east.
Volkswagen, DaimlerChrysler
Volkswagen may eliminate as many as 20,000 positions in Germany in the next three years. Auto sales in western Europe declined 0.2 percent to 14.5 million vehicles last year and have yet to get back to the peak of 14.63 million sold in 1999.
DaimlerChrysler CEO Dieter Zetsche, 52, is spending about 3 billion euros to cut 14,500 jobs at corporate headquarters and the company’s Mercedes division, mainly in Germany. At the same time, he plans to invest about 1.5 billion euros in China to make Mercedes and Chrysler models there.
GM and Ford have announced a combined 18,700 job cuts in Europe since 2003.
Volkswagen, Europe’s biggest automaker, plans to hire workers for a new assembly plant in Russia that will produce 300,000 Skoda Octavia sedans a year, Volkswagen CEO Bernd Pischetsrieder, 58, said Jan. 8 during an interview at the North American International Auto Show in Detroit.
Peugeot Chief Executive Jean-Martin Folz, 59, says the move to the east will continue.
`Center of Gravity’
“The center of gravity of our sales is moving east, while the center of gravity of our production was far in the west,” he said Feb. 8 in Paris, when the company released 2005 earnings.
Peugeot’s western European deliveries dropped 2.1 percent last year to 2.36 million vehicles. Sales in the rest of the world, mainly eastern Europe, the Middle East, South America and China, rose 8.4 percent to 1.03 million vehicles.
The company’s shift to the east is already changing the lives of its workers.
Barry Suddens, 59, took a buyout from Peugeot in May 2005 after working at its Ryton, England, plant for 20 years. He left with 55,000 pounds ($95,816) in hand and a pension of 917 pounds a month. Peugeot cut a total of 1,600 jobs at the Ryton plant in 2004 and 2005 through buyouts and early retirements, leaving about 2,000 workers at the factory.
Suddens says that since leaving Peugeot he has had 73 interviews for jobs ranging from stacking boxes at a warehouse to filling shelves at the local Tesco Plc supermarket, without an offer. He now volunteers to lead groups of schoolchildren on tours of his old factory.
“I planned to get another job,” he says. “I’ve totally given up now.”
Slovak Optimism
Peugeot spent 700 million euros to build its new factory in Trnava, Slovakia, which will employ 3,500 people. It plans to invest an additional 350 million euros to expand the plant’s capacity in 2010, adding 1,800 more jobs. The carmaker had 40,000 applications for the first 3,500 positions.
In 2005, gross monthly wages in the Slovak manufacturing industry averaged $574 (18,088 koruna), compared with $3,259 in the U.K., according to the national statistics offices of the two countries.
Marek Mikus, 24, is four weeks into a five-week training course before he starts his job at the new Peugeot plant.
“I’m very happy I got this job,” says Mikus, who previously worked as a security guard. “Peugeot is a big, stable company, and conditions for work are better here than with someone else.”
Qiu, 28, says he has been working in the engine department at GM’s factory in Shanghai for two years and earns about 3,500 yuan ($434) a month. The average hourly wage for a unionized assembly-line worker at GM plants in the U.S. was $26.35 at the end of last year, according to the United Auto Workers Web site. That’s about $4,200 a month.
No Complaints
Qiu says he’s satisfied with his pay. “There’s nothing to complain about,” he says.
It’s not just the low wages that make emerging markets attractive. Factory jobs follow sales growth, says Global Insight’s Griffiths.
“I don’t hate those people for those jobs moving over there,” says former GM employee Spain. “Those people are going to scramble for those jobs. I don’t blame them. But I walk through the plant, and it just about rips my heart out.”