Sales fueling surge in auto industry hiring

2/28/2012

DETROIT -- Auto sales are growing so rapidly that Detroit can barely keep up.

Three years after the U.S. auto industry nearly collapsed, sales of cars and trucks are surging. Sales could exceed 14 million this year, compared with last year's 12.8 million.

The result: Car makers are adding shifts and hiring thousands of employees around the country.

Car makers and parts companies added more than 38,000 jobs last year, with industry employment averaging 717,000 in 2011.

Automakers have announced plans to add 13,000 more this year, mostly on night shifts.

But there's a downside.

The newfound success is straining the factory network of the Detroit automakers, as well as the companies that make the thousands of parts that go into each vehicle. This could lead to shortages that drive up prices.

It also has auto executives in a quandary. They got into trouble in the first place largely because their costs were too high. Now they fear adding too many employees.

Ford Motor Co., for instance, is "squeezing every last component, transmission, engine out of the existing brick and mortar," said Jim Tetreault, vice president of North America manufacturing.

Still, the hiring surge bolsters the argument of those who supported the federal bailout of General Motors Co. and Chrysler Group LLC in 2008 and 2009. The bailout has been a major issue in the days leading up to Tuesday's Michigan Republican primary.

The hiring is good news for communities around the country that lost hundreds of thousands of manufacturing jobs. Starting in 2005, GM, Ford, and Chrysler closed 28 factories and eliminated 88,000 jobs. Parts companies cut 234,000 other jobs.

Now, if sales hit 15 million by 2015, as some experts predict, the three Detroit automakers could hire 20,000 people more, said Sean McAlinden, chief economist for the Center for Automotive Research in Ann Arbor.

In northwest Ohio, Chrysler added about 50 employees last month to its Toledo Assembly complex Wrangler line to keep up with demand.

The hiring was in addition to a $500 million investment in the plant that Chrysler announced last year. That is expected to lead to more than 1,100 jobs, including the addition of a second shift at the plant. Chrysler also said it planned to invest $72 million in its Toledo Machining Plant.

GM announced plans for two investments totaling $343 million in its Toledo Transmission plant and a $47 million upgrade of its Defiance Powertrain plant. At the Alexis Road facility, also known as Toledo Powertrain, GM officials have said they expect to add as many as 650 jobs this year, including up to 150 in the first quarter. This is the first time in a decade that Toledo Transmission is hiring workers new to GM.

Ford Weber, president and chief executive officer of the Lucas County Improvement Corporation, said in December that the big auto companies' plans have a trickle-down effect, with many auto suppliers investing in Toledo-area facilities.

Laurie Schmald Moncrieff, president of a parts-manufacturing company near Flint, Mich., said that when demand for auto parts collapsed, she shifted production to parts for companies in green energy, aerospace, and defense.

Now automakers and other parts suppliers have her on speed dial, trying to line up everything from fuel pump parts to tools that make hoses. She just added six workers and may hire five more.

"I see tremendous growth coming in the near-term," Ms. Schmald Moncrieff said.

Like many parts suppliers, she's having trouble finding people with the skills to run machinery in her plant.

Michigan is not the only region to benefit from the surge in hiring.

Ford is adding positions in Louisville, Chicago, and near Kansas City, Mo. Chrysler is adding jobs in Belvidere, Ill., and General Motors is hiring at plants in Tennessee, Kentucky, Texas, and New York.

New jobs with auto companies don't pay as well as the old ones.

Under union contracts, companies can pay new hires about $16 per hour, a little more than half the pay of longtime workers.

Foreign car makers are also shifting production to the United States because of higher sales and the weak dollar, which cuts the profits they get from selling vehicles exported to America.

The sales rebound comes with risks that are familiar to Detroit.

Crank up production too much and car makers have to sell vehicles at discounts.

Boost production too little and companies could run short of vehicles such as pickups. And even if they find the right balance now, automakers are leery of raising long-term costs by adding plants and workers.

Six years ago, Detroit's automakers were losing billions, in part because they had too many plants and workers. And union contracts forced them to pay employees even if plants were shut down. So automakers kept the factories running regardless of whether vehicles would sell. They built too many cars and trucks and sold them cheap, sometimes at a loss.

Now they're doing everything they can to keep costs under control.

GM will try to handle growth by stretching factories, said Mark Reuss, president for North America.

Auto factories in North America will reach 90 percent of their capacity if sales hit 14 million, said Michael Robinet, managing director of IHS Automotive Consulting, which forecasts auto production.

The lack of factories, though, could cause automakers to run short of pickups this year, Mr. McAlinden said.

Detroit automakers, which dominate truck sales, had far too many pickup factories just seven years ago.

They have closed eight truck plants since 2005, removing the ability to build 2.25 million pickups a year. With only nine North American pickup plants left, they may have cut too much, Mr. McAlinden said.

If sales increase as projected, companies also could run short of compact cars and small sport utility vehicles.

It adds up to what could be a challenging but profitable year for the industry, said Ms. Schmald Moncrieff.