America's other automakers roaring ahead

It's a tale of two industries. One is downsizing its workforce, discounting its prices, and is based in Detroit. The other is building factories, expanding its market share, and calls the South its regional home.

But these days, domestic and foreign automakers are two sides of the same US auto industry.

Although brands like GM and Toyota remain locked in fierce competition, international nameplates bring important benefits to the US economy - not just in the form of cars for consumers but in US-based jobs and innovation.

The latest case in point: Korean carmaker Kia announced plans this month to build a plant in Georgia that will employ nearly 3,000 workers and make 300,000 cars a year.

The name Kia may not have the familiar ring of Chevy to American ears, but the new jobs will pay wages that are not far below the union ones paid at Ford or General Motors (GM).

And the jobs come as very different news emerges from Detroit. Wednesday, GM and parts supplier Delphi announced a deal with the United Auto Workers (UAW) to entice thousands of workers to retire early.

Against that backdrop of cutbacks, the rise of foreign "transplant" factories helps explain a surprising fact: For all the difficult news about plant closings and big quarterly losses, America's auto industry is retaining jobs better than other traditional industries.

Overall employment in domestic manufacturing is down sharply during the past 15 years, yet the automotive sector employs more people than it did in 1990.

In some ways, each Ford pickup that rolls off a Michigan assembly line still represents a bigger boon for the US economy than a made-in-America Toyota. The domestic nameplates tend to contain more US-made parts and more US-based design value. But the larger trend is that such lines are increasingly blurring as all major auto companies go global. Productivity gains, too, have been spurred by the arrival of transplants.

"I think it's the best thing that ever happened to us," says James Womack, an automotive expert at the Lean Enterprise Institute he founded in Brookline, Mass. "My concern was that Americans were going to get spooked.... But I don't hear calls to dump Toyota off the dock."

His enthusiasm isn't shared by all. But the government hasn't imposed limits on foreign carmakers here. Instead, US communities have offered them the same kind of tax breaks they do to domestic employers - and for the same reason: They want high-paying jobs.

While the foreign automakers have successfully avoided unionization, the pay they offer in the South is not that different from what UAW workers earn in places like Lansing and Dearborn, Mich.

The new Kia plant in West Point, Ga., for example, is landing not far from a new one run by its sister company, Hyundai, in Montgomery, Ala.

Job postings for the Hyundai plant currently offer $14.79 an hour to start, but that rises to $22.50 within two years at the plant.

Such a deal is typical of what transplants pay from Tennessee to South Carolina. When bonuses are factored in, the wage after a couple of years on the job is within a few dollars an hour of what workers at Ford or GM earn, experts say.

That doesn't mean organized labor makes no difference in the industry. One factor pushing up transplant wages is the fear that workers might unionize if paychecks or health benefits lag.

But in a highly competitive global industry, jobs at home under whatever corporate banner are providing payroll benefits to the economy.

"It's always better to make those cars here than it is to import those cars," says Steven Szakaly, an economist at the Center for Automotive Research in Ann Arbor, Mich.

The transplants' other useful role is as a kind of laboratory of efficiency. "There's a huge benefit ... in helping to make the US economy more productive," says Mr. Szakaly.

The gains that followed from foreign firms setting up shop here rippled beyond the auto industry. The transplants provided not just competition but a visible model, says Mr. Womack. "Actually having something on the ground here was a powerful thing."

In the process, the auto industry is taking on a regional shape like a barbell tilted on its end. One huge side is in Midwestern states like Michigan, which had 270,000 auto jobs as of 2003.

The other side is the South, where a slew of states like Alabama now each have more than 20,000 auto jobs, according to a report last year by the Congressional Research Service.

But as foreign carmakers push for their piece of the lucrative US market, any jobs they displace incur a cost. It's getting harder for Ford and GM to afford generous healthcare and retirement packages.

And US partsmakers such as Delphi increasingly face foreign competition. Imports of auto parts have increased nearly 50 percent since 2001, according to the UAW. The union says trade policies should be changed to stem a recent outflow of jobs.

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