Order Code RL34297
Motor Vehicle Manufacturing Employment:
National and State Trends and Issues
December 27, 2007
Specialist in Industrial Organization and Business
Resources, Science, and Industry Division
Motor Vehicle Manufacturing Employment:
National and State Trends and Issues
The U.S. motor vehicle manufacturing industry employs about 1 million
workers, or about 7.5% of the entire U.S. manufacturing workforce, including those
who work in manufacturing parts and bodies, as well as those who assemble motor
vehicles. Since 2000, the industry has eliminated about 300,000 manufacturing jobs,
but the employment level is still almost as high as in 1990. By comparison,
manufacturing in general has suffered a much higher rate of job loss.
The Detroit-based U.S.-owned manufacturers (General Motors, Ford, and
Chrysler, collectively known as the “Big Three”), all of which are organized by the
United Auto Workers union (UAW), have cut back domestic production by 3 million
units since 2000, accounting for all the net employment losses. The shift in consumer
preferences from trucks and SUVs to smaller vehicles has accelerated a loss of
market share by the Big Three producers and gains for foreign-owned domestic
manufacturers and imports. Big Three employment losses were partially offset by
new investments by foreign-owned manufacturers in the United States. Today,
companies owned by foreign investors produce 28% of all U.S.-made light motor
vehicles, up from 11% in 1990.
The patterns of job loss and creation have not been evenly distributed around
the country. Forty-four percent of all persons in the industry work in a “heartland
auto belt” of three states, Michigan, Ohio, and Indiana, each of which has more than
100,000 persons in the industry. Michigan alone has accounted for more than a third
of the net job loss in the industry since 2000. Losses in Ohio and Indiana have been
less severe, offset somewhat by foreign investment. Alabama has been the big recent
job gainer, adding 15,000 jobs since 2000. Tennessee and Kentucky, now the fourth
and fifth largest producing states, have added the most jobs since 1990, and South
Carolina has also seen a big net gain. These jobs, mostly non-union, have stretched
the “auto belt” more to the South.
New fuel economy standards for automobiles and light trucks, as approved by
Congress and signed into law (P.L. 110-140), may encourage greater development
of small, fuel efficient cars, but the number of such U.S. plants, even for foreignowned companies, has declined in recent years. S. 2191, approved at committee
level in the Senate in December 2007, would use funds from the auction of emission
allowances to support domestic manufacture of fuel-efficient vehicles and
components. Congress may also consider the proposed Korea-U.S. Free Trade
Agreement, which addresses the current imbalance in automotive trade. The
Employee Free Choice Act (H.R. 800), approved by the House, but on which a
cloture vote failed in the Senate, could help the UAW organize foreign-owned
In seeking to improve the competitiveness of Big Three assembly operations
against both non-union domestic producers and imports, the UAW and the Big Three
in 2007 negotiated new contract bargaining agreements. The deals addressed health
care costs, wage levels, and other issues.
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Motor Vehicle Manufacturing Jobs: A National Crisis? . . . . . . . . . . . . . . . . . . . . 3
Sales and Production Trends in the U.S. Market . . . . . . . . . . . . . . . . . . . . . . 5
U.S. Demand for Domestically Made Vehicles Declines — Trucks
Worst Affected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Big Three UAW Plants Suffer Largest Production Cuts . . . . . . . . . . . . 8
The Impact of Sales and Production Trends on Employment . . . . . . . . . . . . 9
National Motor Vehicle Manufacturing Employment Data . . . . . . . . . . 9
Motor Vehicle Manufacturing Holds Up Better Than Other
Manufacturing Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Past Performance and Future Outlook for Motor Vehicle
Manufacturing Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Motor Vehicle Manufacturing Performance by State . . . . . . . . . . . . . . . . . . . . . 13
The Heartland Auto Belt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
A “One-State Recession” in Michigan . . . . . . . . . . . . . . . . . . . . . . . . . 15
Mixed Results in Ohio and Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Employment Mostly Stable in Other Leading States . . . . . . . . . . . . . . . . . . 20
Other Motor Vehicle Manufacturing States . . . . . . . . . . . . . . . . . . . . . . . . . 21
U.S. Manufacturing of Small Motor Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Changing Detroit: The 2007 Collective Bargaining Agreements . . . . . . . . . . . . 26
The 2007 Contract Negotiation Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Summary of New Contract Bargaining Agreements . . . . . . . . . . . . . . . . . . 29
Transfer of Retiree Health Care to UAW . . . . . . . . . . . . . . . . . . . . . . 29
Two-Tier Pay and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Jobs Bank Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Detroit Big Three Cost Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Labor Gains in Job Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Reducing Detroit’s Commitment to Canada? . . . . . . . . . . . . . . . . . . . 33
Conclusion: A Competitive Detroit Big Three? . . . . . . . . . . . . . . . . . . . . . . . . . 33
Outlook for U.S. Motor Vehicle Manufacturing Employment . . . . . . 33
Legislative Initiatives May Affect Automotive
Manufacturing Employment Outlook . . . . . . . . . . . . . . . . . . . . . 34
List of Figures
Motor Vehicle Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
U.S. Motor Vehicle Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
U.S. Motor Vehicle Industry Manufacturing Employment . . . . . . . . . 10
Employment Trends, Motor Vehicle and General Manufacturing . . . 11
U.S. Motor Vehicle Manufacturing Employment by State . . . . . . . . . 16
List of Tables
Table 1. Motor Vehicle Manufacturing States . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Table 2. Four Decades of U.S. Small Car Manufacturing . . . . . . . . . . . . . . . . . . 24
Table 3. Identification of Small Cars by Manufacturer . . . . . . . . . . . . . . . . . . . . 25
Table 4. U.S. Small Car Manufacturing Assembly Operations . . . . . . . . . . . . . . 26
Motor Vehicle Manufacturing Employment:
National and State Trends and Issues
The 110th Congress is addressing many issues that could have a major impact
on the U.S. motor vehicle manufacturing industry. This includes adopting new fuel
economy standards for automobiles and light trucks (P.L. 110-140), plus
consideration of legislation that may be used to help promote the manufacturing of
future generations of fuel-efficient vehicles (S. 2191). Also, it includes the proposed
Korea-U.S. Free Trade Agreement, because Korea is a major supplier of cars and
trucks to the U.S. market. In the field of industrial relations, the Employee Free
Choice Act (H.R. 800), approved by the House, but on which a cloture vote failed in
the Senate, could be significant in an industry in which all assembly plants owned by
U.S. domestic corporations are union-organized, while virtually none operated by
foreign-owned companies are.2
Any legislative action by Congress that affects U.S. motor vehicle production
and sales will have a major impact on U.S. manufacturing employment. The share
of U.S. manufacturing employment directly employed in manufacturing motor
vehicles and parts in 2006 was 7.5%, or about 1 million workers.3 There are also
many industries whose output is sold in large measure to the automotive industry.
For example, 14% of the output of the U.S. steel industry in 2006 was shipped to the
motor vehicle industry, which is the second-largest sectoral user.4
Within Congress and throughout the country, there have been many concerns
expressed about lost jobs in the automotive industry. Indeed, according to the U.S.
John Williamson of the CRS Knowledge Services Group assisted in the preparation of the
data for this report, especially for Tables 2-4.
On this divergence in industrial relations organization, see CRS Report RL32883, U.S.
Automotive Industry: Policy Overview and Recent History, by Stephen Cooney and Brent
D. Yacobucci, pp. 37-43.
This ratio is based on annual data for 2006 reported by the U.S. Dept. of Labor, Bureau of
Labor Statistics, in “National Employment, Hours and Earnings,” drawn from the Current
Employment Statistics survey. It includes all employees at manufacturing establishments,
and, for motor vehicles, all employees included in North American Industry Classification
System categories 3361, 3362, and 3363 (these categories will be described below in this
report). Unless otherwise defined, this categorization is the basis for statements in this
report regarding motor vehicle manufacturing employment.
However, this does not include steel shipments to metals service centers, some of which
also may supply auto parts manufacturers; see “Steel Markets” in American Iron and Steel
Institute, Annual Statistical Report (2006).
Labor Department’s Quarterly Census of Employment and Wages, automotive
manufacturing employment declined by about a quarter between 2000 and 2006.
However, over the longer term, automotive manufacturing employment has held up
much better than overall manufacturing employment. While the United States has
seen overall manufacturing employment decline by about 3.5 million jobs since 1990,
employment in the auto industry declined only marginally over this longer period.
But the Detroit-based “Big Three” U.S. auto manufacturers (General Motors, Ford,
and Chrysler) are still in the middle of restructuring efforts, which could imply
further employment reductions in the near future, and the total level of employment
could decline further.
By contrast, employment has increased at foreign-owned motor vehicle
assembly and parts plants. This change has offset at least partially the decline in
employment at the Detroit Big Three and their suppliers. As foreign-owned
manufacturers have increased U.S. motor vehicle sales, market share, production, and
employment, the perception has grown that contract agreements that bind the
domestically owned companies have been impediments to their competitiveness. In
the autumn of 2007, the United Auto Workers5 (UAW) union negotiated new
collective bargaining agreements with each of the Detroit Big Three. These new
agreements seek to reduce or remove the perceived structural issues in union
This leads to a further major aspect of the issue, which will be explored in this
report. Changes in automotive employment have not been geographically balanced.
The decline overall has had the strongest impact by far on Michigan, and to a lesser
extent on Ohio and Indiana, the other two leading Midwest auto manufacturing
states. Other states outside this region, such as New York, New Jersey, Maryland,
Georgia, Virginia, and Oklahoma, have lost their Big Three assembly plants since
1990, but are generally less reliant on auto manufacturing employment. Meanwhile,
foreign-owned nameplate manufacturers (original equipment manufacturers, or
“OEMs” in the industry) have established new plants largely, though not exclusively,
in the South during this period. As assembly plants tend to draw parts supply plants
in their direction, there is evidence that what Automotive News labels the “new
American manufacturers” have extended the traditional Midwest “Auto Belt” more
into a corridor that includes the mid-South.6
This report looks at four sets of issues that have received attention in Congress
or among the public more widely, with respect to employment in the U.S. motor
National employment trends. Is there an employment crisis in the
U.S. automotive manufacturing industry?
Formally, the United Automobile, Aerospace and Agricultural Implement Workers of
For a detailed analysis of this phenomenon, see Thomas H. Klier and Daniel P. McMillen,
“The Geographic Evolution of the U.S. Auto Industry,” in Federal Reserve Bank of Chicago,
Economic Perspectives (2nd qtr., 2006), pp. 2-13.
State and regional developments. What is the impact of automotive
manufacturing trends on states and regions? As Michigan has
apparently borne the brunt of automotive employment cutbacks and
by 2007 was suffering from the nation’s highest unemployment rate,
is this a “one-state recession,” as some have said, or is the impact
Fuel economy and small vehicle manufacturing. In view of the
congressional debate over fuel economy rules, where are smaller,
fuel-efficient vehicles made in the United States, and who makes
New UAW labor contracts with the Detroit Big Three. How do these
new agreements address some of the competitiveness issues raised
by the domestically owned industry?
Impact of federal legislative proposals. Finally, and in conclusion,
the report will briefly review the status of legislative issues that may
have a major impact on U.S. automotive employment.
Motor Vehicle Manufacturing Jobs:
A National Crisis?
Is the national auto manufacturing base in a crisis? One answer might be in
perceptions, but perceptions, especially in this case, shape reality. The reality is that
many Americans identify American industrial competitiveness with the
competitiveness in the marketplace and on the factory floor of the traditional Detroitbased Big Three.7
The economic health of the Big Three is not good. The public perception of this
circumstance is influenced by a confluence of recent major developments:
First, there were widely publicized bankruptcies and financial
distress in the auto supplier sector associated with the Big
Three. Notably, this included the largest industrial bankruptcy
of all time, the declaration of Chapter 11 by Delphi
Corporation, formerly the parts manufacturing arm of General
Motors, in October 2005.
Since 2005, the Big Three, including Chrysler, which for most
of this period was a subsidiary of German-owned
DaimlerChrysler AG, each have reported losses cumulating in
the billions of dollars.
Moreover, there have been widely reported “buyouts” by the
Big Three of unionized production employees to get their
contracts off the company books, and mid-contract
This perspective may have been reinforced by a seminal and critical work on Big Three
auto production methods authored by the MIT International Motor Vehicle Project in The
Machine That Changed the World (New York: Rawson Associates, 1990).
“givebacks” on health care coverage requested by each of the
Big Three (and negotiated by the UAW with Ford and GM,
but denied to Chrysler).
As oil has climbed near the $100-per-barrel level, as gasoline
prices increased by 50% in an unstable global security
environment, and as policy concerns with climate change
issues increased, sales of pickup trucks and SUVs, the Big
Three’s most popular and profitable vehicles, stagnated or
declined in 2006-2007. Congress approved in 2007, and the
President signed into law, new fuel economy rules as part of
P.L. 110-140, an energy legislation package, notwithstanding
some concerns by the Big Three and the UAW that their
employment levels could be hurt.8 Although Toyota, for
example, publicly sided with the Big Three position, the
success of its Prius hybrid vehicle reinforced a public
impression that the Japanese companies are the leaders in fuel
Compounding the impression of Japanese technological
leadership in fuel economy, Toyota is pressing GM for the
overall global leadership in motor vehicle sales and
production. It has also overtaken Ford, another U.S. industrial
icon, for second place in domestic market share.10
On top of these adverse developments from the Big Three’s perspective, the
overall market, in terms of U.S. and North American sales, declined significantly in
2006 and 2007. Figures 1 and 2 illustrate how both sales and production have
declined, affecting especially production at Big Three UAW-organized assembly
A discussion of this legislation is in CRS Report RL33982, Corporate Average Fuel
Economy (CAFE): A Comparison of Selected Legislation in the 110th Congress, by Brent
D. Yacobucci and Robert Bamberger.
A voter survey taken by the Pew Campaign for Fuel Efficiency and the National
Environmental Trust indicated that 69% said they supported the across-the-board 35 mpg
light-vehicle standard by 2020 that would be required in the original Senate-passed measure.
Only 19% said they supported a moderate alternative (H.R. 2927) proposed in the House and
supported by auto manufacturers and the UAW. “When read several of the arguments made
by automakers in lobbying ads against the [Senate] plan, including predictions of job cuts
and more expensive vehicles, none garnered more than 25% support from those polled.”
Detroit Free Press, “Give Us More M.P.G., Voters Say” (November 10, 2007).
By the accounting in the 2007 Automotive News Global Market Data Book (p. 5), Toyota
actually outpaced GM in the number of vehicles sold worldwide in 2006, 8.808 million to
8.679 million. According to Automotive News’ 10-month data for 2007, Toyota had sold
2.199 million cars and light trucks in the U.S. market, compared to 2.166 million vehicles
Figure 1. Motor Vehicle Sales
(Millions of Units)
(Cars and Light Trucks)
North American Sales
U.S. Total Sales
U.S. Lt. Truck Sales
U.S. Import Sales
U.S. Car Sales
Sources: Automotive News Market Data Books, supplemented by 2007 data from Automotive News
and Ward’s Motor Vehicle Facts & Figures (2007) for U.S. imports.
*Annual rate (U.S., Canada - Jan. Oct.; Mexico - Jan.-Sept.).
Sales and Production Trends in the U.S. Market
U.S. Demand for Domestically Made Vehicles Declines — Trucks
Worst Affected. Figure 1 illustrates sales of cars and light trucks in the North
American and U.S. markets. It shows total North American sales, because the market
has been fully integrated since NAFTA entered into effect since 1994, with both the
domestic Big Three and their major foreign competitors having assembly operations
in the United States, Canada, and Mexico. However, as U.S. sales alone have
accounted for 85%-90% of sales throughout the period and because the U.S. UAW
organizes only plants in the United States, both this figure and the one following
focus primarily on U.S. sales and production, as the main North American trend
U.S. and North American sales generally follow the U.S. business cycle. Thus,
U.S. sales fell from about 14 million cars and light trucks after the 1990 peak, to just
over 12 million during the 1991 recession. They recovered slowly in the early 1990s,
reaching 15 million units in 1996 — then escalated to over 17 million units annually
in 1999-2001. After the recession of that year, and fed by concerns about the
economic impact of the “9/11” terror incidents, the Big Three led a wave of
discounting and other sales measures to keep production levels up (such as GM’s
The UAW formerly organized plants in Canada as well, but the separate Canadian Auto
Workers union split from the UAW in 1985. The issue of how recent U.S. developments
may affect motor vehicle production in Canada is addressed in a later section.
“Keep America Rolling” 0% interest sales campaign). Through 2005, domestic sales
continued to average almost 17 million units per year. But with higher gasoline
prices in 2006 and the housing slump of 2007, sales slipped to 16.6 million in the
former year, and an annual rate closer to 16.0 million in 2007. Many forecasters
question whether 2008 domestic U.S. sales will even reach that level.12
Perhaps more significant than total sales volume is the composition of sales. As
shown in Figure 1, “light truck” sales were less than half car sales in the U.S. market
in 1990 (4.6 million versus 9.3 million). But then the “minivan” (introduced by
Chrysler in the mid-1980s) and the “sports utility vehicle” (SUV), pioneered by
AMC’s Jeep, and popularized by the Ford Explorer, revolutionized the market in the
1990s. U.S. car sales have never regained the 1990 level, while light trucks overtook
cars in sales volume in 2002, and by 2004 had opened a margin of 1.5 million units.
(9.2 million to 7.7 million, for 54% of the market).
The importance for employment of this market shift is that while foreign-based
competitors had even become dominant in some classes in the domestic car market,
the Big Three, with their UAW-organized assembly plants, remained dominant in the
light truck market. For example, an earlier CRS report showed that by 2003, about
75% of the light trucks sold were Big Three products, but less than half of all cars.13
Truck-based vehicles had become the redoubt of the unionized, domestically owned
Thus, Big Three employment and production would be disproportionately and
negatively affected not only by the total fall in sales (less than a million units between
the 17 million total of 2005 and the annual rate of 16.3 million through October,
2007), but by the decline of trucks as a share of the total. From its peak of 9.2
million in 2004, truck sales declined by almost a million to 8.4 million units in 2006
and less in 2007. Car sales did not increase to make up for the loss, but they did
increase somewhat — and cars remain the strongest suit of the foreign-based
Global Insight. U.S. Automotive Outlook Webcast (December 13, 2007), p. 28; and,
“Motor Vehicles: News and Views — Forecast Highlights” (December 10, 2007). This
source forecast final 2007 U.S. demand at 16.07 million units, with 2008 demand at 15.5
million units. General Motors officials “expect a flat market” in 2008, while Nissan CEO
Carlos Ghosn “said the market would be flat at best, ranging between 15.5 and 16 million
vehicles;” Detroit News (detnews.com), “Slow Auto Sales Forecast for 2008” (November
23, 2007); Wall St. Journal.online, “GM Finance Chief Expects Lower Industry Sales”
(November 30, 2007).
CRS Report RL32883, Table 3.
It should be noted that by the early 2000s, the market had also seen the evolution of a new
product, the “crossover utility vehicle” (CUVs, nicknamed dismissively by off-road purists
as “cute utes”). Generally, SUVs are based on a heavy, pickup-truck-type body-on-frame
platform. CUVs are lighter, smaller vehicles built to a car-based unibody design, but are still
classed as “trucks” within the industry. The Toyota RAV-4 and the Honda CRV, along with
Ford’s Escape/Mercury Mariner, are the best-known models.
Another trend illustrated in Figure 1 that has an adverse effect on Big Three
employment is the recovery of imports. With the arrival of Japanese so-called
“transplant” manufacturers in the 1980s, sales of vehicles imported from overseas
declined from 3 million in 1990 to less than 2 million annually in 1995-1997.15 Even
as German and Korean manufacturers also established assembly plants in the United
States, and the Japanese companies opened new plants, imports subsequently began
to increase again. By 2001, the import level was again higher than 3 million units.
By 2006, it reached 3.7 million, and the annual rate for 2007 was higher.16 In 1996,
1.7 million imports represented just 11% of the U.S. domestic vehicle market of 15.1
million. Ten years later, the market was 1.5 million vehicles larger, but the import
share was 3.7 million, or 23%. The U.S. market in 2006 for North Americanproduced vehicles was actually smaller than in 1996.
Figure 2. U.S. Motor Vehicle Production
(All Cars and Trucks)
(Millions of Units)
Sources: Total U.S. production, 1990-2006 from Ward’s Motor Vehicle Facts & Figures (2007);other
data through 2006 from Ward’s Automotive Yearbooks.
* Annual rate (U.S., Canada — January-October; Mexico — January-September).
** UAW total includes all assembly plants operated by the Detroit Big Three, and UAW-organized
plants currently or originally operated as joint ventures between the Big Three and other companies.
In keeping with conventional automotive terminology, U.S. “imports” do not include
vehicles assembled at plants in Canada or Mexico — all the Big Three, as well as all the
major foreign OEMs, have assembly plants in one or both countries. CRS Report RL32883,
especially Appendix 1, measures the rising trend of vehicles manufactured in such plants.
CRS has examined the increase from Japan in 2006, and concluded that the primary cause
was an increase in compact and subcompact vehicles sold in the U.S. market in the face of
rising gasoline prices; CRS Report RS22620, The 2006 Increase in U.S. Motor Vehicle
Imports from Japan.
Big Three UAW Plants Suffer Largest Production Cuts. Figure 2
illustrates the impact of the market changes on U.S. Big Three and foreign OEM
manufacturers’ output totals. Total U.S. motor vehicle production (excluding other
North American production, regardless of ownership) stood at less than 10 million
units at the beginning of the 1990s.17 However, of this output in 1990, 89% was
produced by the Detroit Big Three — 8.1 million units directly, and another halfmillion in three joint venture plants operated by Japanese-owned firms in association
with the Big Three, and also organized by the UAW.18 About 1 million units in that
year were produced by foreign OEMs in the United States. All were Japaneseowned, Volkswagen having closed its plant in Pennsylvania, and Hyundai’s North
American plant at that time located in Quebec.
U.S. production surpassed 12 million units by mid-decade, and reached a peak
of 13 million by 1999. Of that figure, more than 10 million were directly built by the
Big Three; adding in 700,000 vehicles built by their joint-venture affiliates, UAWbuilt vehicles accounted for 83% of U.S. production. With expansion by the
Japanese OEMs and new plants opened in South Carolina and Alabama by BMW
and Mercedes Benz, respectively, the non-UAW total units of production had
doubled to about 2 million by the end of the decade.
Since then, total U.S. output has declined by 2 million units. Domestic Big
Three output has fallen by a third, while foreign OEMs have continued to increase
output. The annual rate of U.S. Big Three production in 2006 and 2007 was less than
7 million units. Their joint-venture affiliates maintained their contribution, primarily
because the Toyota Corolla, a popular compact, is built at a joint-venture plant with
GM in California, and the Ford Mustang is built at the Ford-Mazda plant in
Michigan. Adding all the UAW plants together, as in Figure 2, yields a total 2007
annual-rate production of 7.4 million units. Meanwhile, foreign OEMs have built
new plants in new locations (Honda and Hyundai in Alabama, Nissan in Mississippi,
and a new Toyota pickup truck plant in Texas) as well as expanding existing plants.
Their annual-rate 2007 U.S. output is up to 3.4 million units, or on a combined basis,
more than 50% of the output from just the Big Three UAW-organized plants. The
total output of foreign-owned non-UAW OEM plants in the United States in 2007
has reached 28% of total U.S. motor vehicle production. Moreover, foreign OEMs
have announced the building of more assembly plants in 2006-2007: Toyota in
Mississippi, Honda in Indiana, and Kia in Georgia.
The economics consulting firm Global Insight predicts a continued declining
share of North American production from the Detroit Big Three. From a forecast
2007 production base of just under 15 million light vehicles in 2007, they estimate
that 2008 output will decline to 14.4 million vehicles. They then forecast a slow
Totals for Figure 2 include medium and heavy trucks, but these are less than a half-million
units annually, and do not alter the trends in the figure, which essentially reflect light vehicle
The three plants were GM-Toyota (Fremont, CA), known by the acronym of NUMMI
(New United Motor Manufacturing Inc.); the Ford-Mazda “AutoAlliance” plant in Flat
Rock, MI; and, the Chrysler-Mitsubishi “DiamondStar” plant in Normal, IL. All are still
operating, although Chrysler has dropped out of its j.v. with Mitsubishi.
recovery in both car and light truck production, not exceeding the 2006 level until
2011 or 2012. However, they further predict that “Transplants [will] represent all the
growth in North American production.” Big Three North American output, which
they estimate at 9.5 million units in 2007, would fall to 8.8 million units in 2008 in
their forecast, and possibly not reach 9 million units again before 2012. Foreign
OEM output, after stagnating around 5.5 million units in 2008, could resume its
upward climb thereafter, to about 6.5 million units by 2012.19
The Impact of Sales and Production Trends on Employment
National Motor Vehicle Manufacturing Employment Data. Figures 3
and 4 illustrate how these trends have impacted overall employment in the U.S.
motor vehicle manufacturing industry. Figure 3 presents the total level of such
employment since 1990, as well as employment levels in each of the three subsectors
that constitute this manufacturing sector. Under the new North American Industry
Classification System (NAICS), these major components are motor vehicle assembly
(NAICS 3361), motor vehicle bodies and trailers (NAICS 3362), and automotive
parts (NAICS 3363).20 One advantage of using NAICS categorizations is that all
automotive equipment is clearly shown as associated with the motor vehicle industry
and not other product groups. NAICS 3362 does include such products as truck
trailers, recreational vehicles and motor homes, but using all three NAICS categories
insures comprehensive coverage of the motor industry, and more than 90% of
employment in the three classes is associated with the manufacture of cars and light
trucks. Another advantage of using the NAICS-basis data is that it is indifferent to
ownership, so that we can measure employment, for example, at the same parts
manufacturing plant, whether it was owned by GM, spun off by GM to Delphi, or
owned by a third-party supplier, at any time between 1990 and the present. It still
counts as a parts plant and not a motor vehicle assembly plant.
Figure 3 illustrates that total U.S. employment in automotive manufacturing
rose from about 1 million persons in 1990, to a peak of 1.3 million in 1999-2000,
before falling back to about the 1 million level in 2006-2007. If one disaggregates
the total number for the three subcategories, one can see that the overwhelming
number of jobs, as well as gains and losses, in the industry have been in the parts
sector — about 840,000 at the industry’s 1999-2000 peak. By 2007, that number had
fallen to near the 600,000 level, which was actually 50,000 below the 1990 level.
The workforce in motor vehicle assembly operations (NAICS 3361) has varied by a
much smaller amount — growing from 271,000 in 1990 to 291,000 at the 1999-2000
peak, then falling to 222,000 by 2007. The decline, however, in this category has
been steeper than the rise, reflecting a number of trends and cross-pressures that will
be discussed further below. The third, and smallest, subcategory, bodies, trailers, etc.
(NAICS 3362), has been less sensitive to the rise and decline of demand for cars and
light vehicles. Employment has fallen a little from the 2000 high of about 180,000,
but is still much higher than the level of 130,000 recorded in 1990.
Global Insight. Auto Webcast, pp. 33, 40-41.
Data organized under the NAICS system has been recalculated to cover the entire period.
Many commentators have emphasized the loss of jobs in this sector since 2000:
for example, a front-page caption in the trade news paper Automotive News
highlighted the fact that, “The U.S. auto industry employs nearly 25% fewer factory
workers today than it did in 2000.”21 However, that is typical of “peak-to-trough”
accounting. In a cyclical industry such as motor vehicle manufacturing, there is no
reason to believe that employment (hours worked) will not move up and down with
the business cycle.
Figure 3. U.S. Motor Vehicle Industry Manufacturing Employment
(Thousands of Employees)
Motor Vehicle Mfg.
Motor Vehicle Bodies & Trailers
Motor Vehicle Parts
U.S. TOTALS (NAICS 3361-63)
Source: U.S. Dept. of Labor. Bureau of Labor Statistics. “National Employment, Hours and
Earnings” (November 13, 2007).
* Annual rate.
Automotive News, “Endangered Species: Factory Jobs” (November 26, 2007), p. 1.
Figure 4. Employment Trends, Motor Vehicle and General
(1990 = 100.0)
US Motor Vehicle Mfg. Employment
Total US Manufacturing Employment
Source: As for Figure 3.
* Annual rate.
Motor Vehicle Manufacturing Holds Up Better Than Other
Manufacturing Employment. When employment in automotive manufacturing
is compared to manufacturing employment in general (as in Figure 4), one can see
that motor vehicle manufacturing has actually sustained its employment numbers
over time much better than U.S. manufacturing in general. If one normalizes 1990
as the base employment level, motor vehicle manufacturing increased employment
by 25% through 2000, while, despite an economic boom for most of the decade, total
manufacturing employment did not actually ever regain the 1990 level. Since motor
vehicle manufacturing is a significant share of total manufacturing, one can calculate
that, for all other types of manufacturing, employment fell by more than 1 million
jobs between 1990 and 2000. Motor vehicle manufacturing employment has,
statistically speaking, returned to its 1990 base level, while manufacturing
employment in general has declined by 3.7 million jobs since then.
Past Performance and Future Outlook for Motor Vehicle
Manufacturing Employment. There are a number of reasons why auto
manufacturing employment patterns may have differed from those of industry in
Foreign OEMs have been steadily expanding or establishing new
plants in the United States throughout the period since 1990. In an
earlier CRS report calculations were presented that indicated the
total number of persons employed by foreign-owned motor vehicle
manufacturers, including parts suppliers, had reached nearly 300,000
by the early 2000s, or about a quarter of the total employment in the
industry. This calculation excluded employees of Chrysler, then a
subsidiary of a German company.22 This number has continued to
grow, despite the overall automotive employment decline since
Strong Detroit Big Three sales in the 1990s supported employment
growth throughout the motor vehicle manufacturing sector
independent of foreign companies’ U.S. expansion. Then, as
demand for Big Three U.S.-built vehicles declined since 2000, the
Big Three and their suppliers have been reducing employment to
reflect reduced production and market share levels. “For every job
created by the International [companies] in the U.S., the Big 3 have
shed 6.1 jobs ...”23
Current and future Big Three restructuring implies further job
losses in the industry. Job declines are directly related to production
cuts by the Big Three, and consequent reduction in orders for parts
from their suppliers. However, a large share of the employment
reduction is also due to improving productivity. Adjustments in
union contracts with the industry allow more flexibility in
determining employment levels, including through negotiated
“buyout” arrangements accepted by labor. For example, GM since
2002 has reduced the average hours needed to assemble a vehicle by
15%, but has reduced its U.S. workforce by 40%. One industry
analyst has commented, “In the past, job losses have been cyclical
... But the decline since 2000 is permanent because it’s structural.
Those jobs are not coming back, and all auto-dependent areas are
sharing the loss.”24 While the overall decline in manufacturing
employment has slowed since 2003, the decline in Big Three
employment, and that of their suppliers, may continue at the current
pace, or accelerate.
To answer the question at the beginning of this section, there is not a general
jobs crisis in U.S. automotive manufacturing sector, but there is a crisis in a major
part of that sector: unionized Big Three plants, and supplier companies that rely on
Big Three production for major shares of their output. This crisis may be viewed as
the belated response of the traditional, Detroit-based automotive manufacturing
CRS Report RL32883, pp. 31-33 presents this calculation, based on U.S. Commerce Dept.
foreign investment data.
Center for Automotive Research (CAR). The Big Leave: The Future of Michigan’s
Automotive Industry, presentation by Sean McAlinden to RSQE Economic Outlook
Conference (November 15, 2007), p. 23. A specialist in the supplier industry forecasts that
“half of the estimated 5,200 suppliers in the United States are expected to disappear over
the next five years ... About one-third will likely find new buyers, and the rest will go out
of business.” Detroit Free Press, “Component Crisis: Suppliers Dwindling” (November 28,
Prof. James Rubenstein, quoted in Automotive News, “Endangered Species ... ,” p. 34.
model to international competition, including foreign manufacturers setting up shop
in the United States. The rest of U.S. industry has already been undergoing this
“downsizing” or “rightsizing” (depending on the observer’s perspective), through
both the growth period of the 1990s, and the manufacturing recession that occurred
after 2001. But only since this latter date have the UAW and the Big Three been able
to reach agreements, culminating in the 2007 collective bargaining agreements, that
allow this sector of the motor industry to implement labor cost savings and to take
fuller advantage of productivity improvements.
The UAW in the 1980s had negotiated agreements with the Big Three to allow
more rapid introduction of technology and greater employment flexibility, but
founded on the principle that there should be no effort to increase profits by reducing
the union-organized employment base. In the industry conditions prevailing since
2000, as production levels stagnated then fell, and profits turned into losses in the
billions of dollars, labor has accepted buyouts and other early retirement offers by the
Big Three, which has cut or will eliminate the number of jobs in the United States
(plus Canada) by a total of 150,000 between 2005 and 2009. “With buyouts or early
retirement offers expected at all three Detroit automakers in the wake of [new] UAW
contracts that allow new hires to get less in pay or benefits, the number is sure to
The new contract agreements will be summarized in the last part of this report.
But, first, the report will review the latest data on auto industry employment by state.
The impact of restructuring to date has been far from even across the country. While
it may be ongoing, there has already been a measurable impact on the location of the
U.S. motor vehicle industry.
Motor Vehicle Manufacturing Performance by State
As described in the earlier CRS report on the U.S. motor industry, the domestic
Big Three manufacturers have followed a strategy of “reconcentrating” automotive
assembly operations in the traditional midwestern heartland of the industry. This
strategy has been driven by a number of factors, not only including declining
production and loss of market shares on their part, but also a new tendency to
proliferate models under different corporate badges off the same underlying vehicle
platform. The earlier strategy of locating assembly operations nearer customers to
minimize shipping costs has essentially been discarded. Virtually all the Big Three
assembly plants on the East Coast have been or are being closed, as well as in
disparate locations such as Atlanta (both Ford and GM), Maryland, Virginia,
Oklahoma, and California. The new Big Three model consists of centralized
locations, each producing one family of cross-badged vehicles, which can be
conveniently supplied by parts makers, and from which product can be shipped to
Detroit Free Press, “150,000 Cuts Enough?” (November 5, 2007).
customers nationwide.26 Sean McAlinden of the Center for Automotive Research has
described this as “the retreat to the core ... Michigan as the Alamo!”27
At the same time, the “new American manufacturers” have extended the
traditional U.S. “auto belt” farther to the South, bringing with them an increasing
number of auto parts suppliers. This has created more of an “auto corridor” focused
on the I-65/I-75 interstate highways. Not all foreign-owned OEMs have invested
exclusively in southern plants and the Detroit Big Three produce some vehicles in the
South. Despite the now-shuttered plants in Georgia, GM continues to build product
in Texas, Louisiana, Tennessee and Kentucky, and Ford also builds trucks in
Louisville. But the three largest Japanese manufacturers, plus BMW, Mercedes
Benz, and Hyundai have all built plants south and west of the traditional Midwest
auto belt, and more new plants (and expansions) are being built by these companies.
This upsurge in southern investment continues to bring with it a substantial number
of new automotive supplier plants.28
The map in Figure 5 illustrates the geographic distribution of employment in
the U.S. motor vehicle industry, defined here as 2006 employment reported by the
Labor Department’s Bureau of Labor Statistics (BLS) in NAICS 3361-62-63.29 The
core of the industry remained in three midwestern states each with employment
greater than 100,000: Michigan (about 200,000), Ohio, and Indiana. They are labeled
in this report as the “Heartland Auto Belt.” Then there is a group of seven states
filling out what are labeled as seven other leading states in terms of automotive
employment. These states have at least one light vehicle assembly plant (in most
cases more) and at least 30,000 automotive industry workers. They include some
traditional midwestern auto manufacturing states (Illinois and Missouri). They also
include some states with both Big Three and foreign OEM assembly plants
(California and Texas), but which mainly make the list because of large supplier
industries. Three other leading states have mainly risen through heavy investments
by foreign-owned companies in the past 20 years (Tennessee, Kentucky, and
The remaining states in the national map are classed according to the number
of employees in the automotive manufacturing sector. Some of them still have major
light motor vehicle assembly plants, some formerly had such plants but now are
primarily equipment suppliers (such as New York), and others (like North Carolina)
have never had a light vehicle manufacturing plant, but are important suppliers to the
industry. In Table 1, the report provides some further details on the “Heartland Auto
Belt,” the other leading states, and all other states that either have a large number of
CRS Report RL32883, pp. 33-37, largely based on the work of Thomas Klier and
colleagues for the Federal Reserve Bank of Chicago.
McAlinden, The Big Leave, pp. 29-30.
This development in discussed in more detail in CRS Report RL32883, pp. 35-36.
In Fig. 4 above, and Fig. 5 and Table 1 below, it was not possible to include state
employment in auto assembly plants (NAICS 3361) for all states, because of federal data
disclosure rules. Totals for states that had one or two light vehicle assembly plants were
completed by information supplied to CRS by the OEMs themselves.
persons working in the industry or at least one light motor vehicle assembly plant.
Excluded from the table are those states, such as Iowa, Pennsylvania, and Oregon,
whose industry is primarily dominated by the medium and heavy truck building, or
bodies and trailers.
The Heartland Auto Belt
A “One-State Recession” in Michigan. Michigan remains unambiguously
the state most highly dependent on automotive manufacturing. While two other
midwestern states also employ more than 100,000 persons in the industry, a third of
all manufacturing jobs in Michigan in 2006 were in motor vehicle manufacturing,
compared to 22% in Indiana and 16% in Ohio. In terms of its “intensity quotient”
shown in Table 1, the percentage of employment in the motor industry compared to
the national average, Michigan ranked 4.4 times more reliant on the industry than the
national average, while Indiana was about three times above the national average, and
Ohio about twice that level.
But unlike the other two heartland auto states, Michigan has experienced no
investment in motor vehicle assembly operations by foreign companies in the past
20 years (excluding the Daimler acquisition of the entire Chrysler group), meaning
that, essentially, the relative decline of the Detroit Big Three’s role in U.S. motor
vehicle manufacturing during this period has been an unalloyed negative
development for Michigan.30 Between 2000 and 2006, Michigan lost 351,000 jobs
overall — 241,000 of this net job loss was in manufacturing, and the net loss in
motor manufacturing was 116,000 jobs, about half of the total, according to BLS
data. That meant a loss of 35% of all motor industry jobs. While there had been
some gain in motor vehicle manufacturing employment there in the 1990s, the net
gains have all been wiped out since then in all three of the industry’s subsectors.
More than a quarter of all jobs in U.S. motor vehicle manufacturing in 1990 were in
Michigan; by 2006, the share was down to one-fifth. About 40% of the net national
decline in motor industry manufacturing jobs in 2000-2006 was accounted for by the
net loss of jobs in Michigan.31
Toyota and Hyundai have established technical centers in Michigan, and Volkswagen has
had its U.S. headquarters in the state, which it announced will be moved to Virginia. Also,
foreign-owned auto parts suppliers have numerous operations in the state.
These data are from the same source as the data in Table 1.
Figure 5. U.S. Motor Vehicle Manufacturing Employment by State
Table 1. Motor Vehicle Manufacturing States
Heartland Auto Belt
Other Leading Auto Manufacturing States
Other Auto Manufacturing Statesa
Sources: Department of Labor. Bureau of Labor Statistics. “Quarterly Census of Employment and
Wages” for state data; U.S. totals from “National Employment, Hours and Earnings.”
a. More than 20,000 motor vehicle manufacturing jobs, or at least one assembly plant in 2006.
As a consequence partly of this decline, Michigan by 2007 had the worst
unemployment rate in the nation. According to seasonally adjusted Labor Department
data, Michigan’s unemployment level as of October 2007 was 7.7%, more than 1.5
points above the level in the next two most affected states (Mississippi and Alaska).
Thus, on a Labor Department map, Michigan was the only state with unemployment
higher than 7% of the workforce, and was three points higher than the national
average of 4.7%.32
Mixed Results in Ohio and Indiana. By comparison with Michigan, Ohio,
the second-leading motor vehicle manufacturing state, has seen a much more
moderate decline in employment, as shown in Table 1. Since 2000, it has lost
37,000 motor manufacturing jobs (22%) — 11,000 of them in motor vehicle
assembly, and 21,000 in parts, which in 2006 employed about three times as many
people in the state. Manufacturing overall saw a net decline of 228,000 jobs in Ohio
in 2000-2006, so unlike Michigan, the motor vehicle industry directly accounted for
only about 16% of the net loss. Ohio’s unemployment rate, at 5.8 % is higher than
the national average, but is thus not primarily due to auto industry job losses. Note
that, unlike Michigan, Ohio has seen major investment in foreign-owned assembly
plants in the state, with two Honda facilities.
In Indiana, the state has actually gained motor vehicle assembly and body and
trailer-building jobs over both 1990 and 2006 (NAICS 3362 accounts for a much
higher share of motor vehicle employment in Indiana than in either Michigan or
Ohio). However, the state has lost about 23,000 parts manufacturing jobs since 2000,
many of them in plants owned by the Big Three or their major suppliers. This led to
an overall net decline of 15,000 in motor industry jobs in the state. As in Ohio, this
was only a fraction of the state’s overall net manufacturing job loss (15%).
Moreover, as of 2006, Indiana actually had recorded a small increase in automotive
employment over 1990, and its overall unemployment rate in October 2007 was
about equal to the national average. Future job losses owing to Big Three
downsizing may be offset to some degree by a new Honda assembly plant announced
The overall statistics for loss of auto industry jobs since 2000 in the “heartland
auto belt” do not necessarily suggest that the motor vehicle industry is dying in this
region. Almost half of the nation’s employees in motor vehicle manufacturing (44%)
still work there. Both the Big Three and foreign investors have been aggressive in
developing new facilities in these states. Each of the Detroit Big Three has made
major investments in rebuilding or renovating assembly plants in Michigan. Chrysler
has created a new “modularized” campus for building Jeeps in Ohio. Besides
expanding its assembly plant in Princeton, Indiana, Toyota has added a new assembly
line in a former Isuzu plant in the same state. And Honda, as mentioned above, has
announced a new assembly plant, also to be built in Indiana.
Department of Labor, BLS. “Unemployment Rates by State,” map and table (December
Employment Mostly Stable in Other Leading States
Table 1 identifies seven other states as being leading motor vehicle
manufacturing states. These states all have one or more motor vehicle assembly
plants, as well as major parts supply industries, with auto industry employment
greater than 30,000 persons in 2006. Each state ranges between three and five
percent of total U.S. motor vehicle manufacturing employment. The states have had
diverse experiences in recent decades in auto manufacturing.
Alabama is the star of the group. With no motor vehicle manufacturing
assembly plant as of 1990, Alabama successfully recruited Mercedes Benz’ U.S.
assembly plant in the 1990s, and plants built by Honda and Hyundai since 2000.
Toyota has an engine manufacturing plant there, leading a large group of parts
suppliers establishing themselves in the state. Since 2000, while the United States
as a whole was losing 250,000 motor vehicle manufacturing jobs, Alabama was
adding 15,000 — the only gain of this magnitude in the country. Of these jobs,
10,000 were in vehicle assembly, with another net 4,000 in parts manufacturing.
With Kia announcing a new plant to be opened just across the river in West Point,
Georgia, parts manufacturing jobs in the state may continue to increase. Despite
these gains, motor vehicle manufacturing employment in 2006 was still only 11.6%
of Alabama’s manufacturing workforce, significantly less than in the heartland auto
belt states, and its intensity quotient, at 1.5 times the national average, is also lower.
Two other southern states in the I-65/I-75 auto corridor, Tennessee and
Kentucky, succeeded in the 1980s in attracting auto manufacturing plants from
foreign OEMs, as well as GM’s Saturn plant in Spring Hill, Tennessee. Both states
in 2006 had more than 50,000 persons employed in motor vehicle manufacturing,
and had higher shares of their workforce so employed than Alabama. With 20.3%
of the workforce in the motor industry in 2006, Kentucky actually recorded a higher
level than Ohio’s 16%, and a higher intensity quotient as well. Both states have
shown dramatic employment gains in the industry since 1990 (Tennessee, up 18,000
— Kentucky, up 25,000). However, both states have also lost other auto industry
jobs, from a Big Three assembly plant in Kentucky and NAICS 3362-63 plants in
Tennessee since 2000, and have recorded small net losses in the current decade.
Texas has recorded a gain in assembly operations, mostly from a large new
Toyota truck plant that began operating in San Antonio in 2006, but a net loss in
parts manufacturing jobs left the auto employment level in the state flat since 2000.
Illinois, Missouri, and California, all of which have been major auto manufacturing
states for decades, failed to attract any new foreign or domestically owned assembly
plants since 1990, and were the major net job losers since 2000 among this group of
states. Except in Missouri, by 2006 the auto industry shares of these states’
manufacturing workforces were less than 10% and below the average intensity
Other Motor Vehicle Manufacturing States
Table 1 includes also all the remaining states with at least one light motor
vehicle assembly plant, including those in which closures of the plants had been
announced by 2006. The table also includes states that have a major role in the
industry only through leading roles as parts suppliers, notably North Carolina, New
York (whose last assembly plant, in Tarrytown, was closed in the 1990s), and
Virginia (where Ford’s truck plant in Norfolk was closed in 2007). But while motor
vehicle industry-related employment has been relatively stable in North Carolina and
Virginia, it has declined by 18,000 jobs or 42% in New York since 1990, a higher
rate of loss over that time even than in Michigan.
The only state in this group showing a major overall gain in automotive
employment since 1990 is South Carolina. BMW’s North American plant was
established there in the 1990s and further expansion of that facility was announced
in 2007. South Carolina has recorded a net gain of 12,000 auto industry jobs since
1990, and the sector in 2006 accounted for almost 10% of the state’s manufacturing
workforce. Delaware, a small state but one with two assembly plants, is the only
other state in this group where auto manufacturing employment accounts for 10% of
the manufacturing workforce, and where the intensity is greater than the national
average. However, one of the state’s two plants, the Chrysler plant in Newark, is
now slated for closure. Despite establishment of the big Nissan assembly plant in
Canton, Mississippi has recorded little net overall gain, but this may change once the
Toyota plant announced for the state is in operation.
In other states in this group, two assembly plants in Georgia, both in the Atlanta
area — one owned by Ford, the other by GM, are in the process of closing. Ford has
also announced closure of the only assembly plant in Minnesota. Chrysler closed
its large assembly plant in Kenosha, Wisconsin (a former AMC plant), two decades
ago, but still maintains an engine plant there, and GM assembles trucks in Janesville.
GM also builds trucks in Kansas and Louisiana. In none of these states is the auto
industry share of manufacturing employment greater than 5%.
U.S. Manufacturing of Small Motor Vehicles
During recent debates on energy legislation and automotive fuel economy
standards in both houses of Congress, the issue was raised as to whether proposed
bills would damage, or even cause the disappearance of, the manufacturing of small,
fuel-efficient motor vehicles in the United States. It was stated by the UAW, for
example, that there are in the United States 67,000 workers “who assemble or make
parts for these vehicles.”33
Therefore, it was argued that a statutory “anti33
U.S. House. Committee on Energy and Commerce, Subcommittee on Energy and Air
Quality. Hearing on Alternative Fuels, Infrastructure, and Vehicles (June 7, 2007).
Testimony of Alan Reuther, Legislative Director — UAW, p. 2. More frequently cited is the
UAW count of “17,000 small car production jobs in the United States.” See, for example,
Detroit News (detnews.com), “Auto Industry Backs CAFE Deal” (December 2, 2007). Table
backsliding” provision was required to prevent companies from meeting new fuel
economy rules by importing more vehicles from abroad, to the detriment of their
continued manufacture at domestic plants.34
If it is difficult to produce smaller vehicles at a profit in the domestic market,
as is sometimes alleged, it was feared that these jobs would be in danger of being
outsourced overseas, if stringent new fuel economy rules were adopted. A CRS
report, cited earlier, illustrates how a surge in imports of motor vehicles from Japan
in 2006 was linked to increase in sales of small cars, owing to sharp increases in
gasoline prices.35 Data for 2007 indicate that subcompact vehicles, all imported to
the United States, are the fastest-growing segment of the U.S. car market. Through
November 2007, sales of such vehicles were up about 22% over the previous year.
They may have taken sales away from the next larger class, compact cars, whose
sales were down 3.3% during the same period. While all of the Detroit Big Three
manufacture compacts domestically (see Table 4 below), no subcompacts are
produced in the United States, and in the auto industry, it is widely believed that it
cannot be profitable to do so.36
Table 2 illustrates the development over time of plants in the United States,
which manufacture motor vehicles defined by CRS as small motor vehicles using
data from Ward’s Automotive Yearbook and Environmental Protection Agency fuel
economy guides. It shows these plants as shares of total numbers of plants operated
by each U.S. nameplate manufacturer, as they have been opened, closed, or altered
product mix since 1975. The list excludes two-seat sports cars and CUVs that may
be measured as small in capacity, but do not achieve low fuel economy ratings.
Table 3 lists those vehicles that are included under the small car definition. Table
4 provides details on the location of each assembly plant that was still producing
small cars as of mid-2007, or for which plans exist to produce small cars there in the
For both domestic and foreign OEMs, assembly plants producing small, fuelefficient vehicles in the United States have declined in number and as a share of total
plants operated since the 1985-1990 time period. Table 2 divides the numbers of
plants by UAW-organized and non-UAW plants, as the union has been particularly
concerned about the potential loss of U.S. small-car manufacturing capacity.
2 below provides data on employment at individual assembly plants.
See, for example, comments of House Energy and Commerce Committee Chair John
Dingell, quoted in New York Times, “Lawmakers Set Deal on Raising Fuel Economy”
(December 1, 2007). As Chairman Dingell noted in that article, a provision in present law,
requiring that manufacturers meet specified fuel economy standards for both their imported
vehicle fleet and their vehicle fleet manufactured in North America, was retained in P.L.
110-140. See 49 U.S.C. §32904(b) for this provision.
CRS Report RS22620.
Detroit News (detnews.com), “Subcompact Sales Boom” (December 10, 2007).
UAW-organized assembly plants producing small cars peaked in
1985 at nine out of 56 operating at the time (16%). Seven of the
nine were operated directly by the Big Three (including in this count
an American Motors plant acquired by Chrysler two years later).
The other two UAW plants were the Volkswagen plant in
Pennsylvania, and the GM-Toyota NUMMI joint venture in
California. By 2007, just four of 53 UAW-organized assembly
plants still produced small cars (7.5%) — one for each of the
domestic Big Three and NUMMI, which produces the Toyota
Corolla and the Pontiac Vibe.
The share of non-UAW plants (all foreign-owned) producing small
cars peaked at half the total (four out of eight) in 1990. By 2007, the
share was 11% (two out of 18).
One may infer from this that, although foreign-owned manufacturers, especially
from Japan and Korea, have a perceived comparative advantage in designing and
producing small fuel-efficient vehicles, the most efficient use of their resources in the
United States is to expand the production of vehicles aimed more at the evolving
“sweet spots” of the U.S. market — midsize sedans, minivans, SUVs, trucks, and,
lately, CUVs. Foreign or domestic, manufacturers in the United States appear to be
still following the 1970s dictum of Henry Ford II, “minicar, miniprofit.”37
Quoted in Douglas Brinkley, Wheels for the World (New York: Penguin Books, 2003), p.
666. On the same page a Chrysler executive from the same era is quoted as saying, “Even
if we don’t believe in small cars, we have to build them. There’s a law.”
Table 2. Four Decades of U.S. Small Car Manufacturing
(numbers of plants)
A: Total Light Vehicle Assembly Plants.
B: Small Car Plants
Source: Operating plants from Automotive News Market Data Book, various years. Small cars are defined as cars in the
subcompact or compact classes by Ward’s Automotive Yearbook, and/or the Environmental Protection Agency (EPA).
Notes: Light vehicles include passenger cars and light trucks, the latter including pickups, minivans and SUVs. Small
cars are as listed in Table 2. Small cars may be the sole product of an assembly plant or one of several lines of light
vehicles produced in an assembly plant. For the purposes of this table, any plant that has an assembly line devoted solely
to small cars is defined as one plant. If a plant produces small cars as well as other light vehicles, the small car assembly
line is counted as one plant and all other light vehicle lines are counted as another plant. For example, New United
Motor Manufacturing Inc. (NUMMI) of Fremont, CA, a UAW-organized joint venture between GM and Toyota operated
by Toyota, produces small cars (Toyota Corolla/Pontiac Vibe) on one assembly line and a light truck (Toyota Tacoma
pickup truck) on the other. In this table, NUMMI is counted as two plants.
a. Chrysler includes statistics for American Motors which Chrysler acquired in 1987.
b. Volkswagen, NUMMI, Diamond-Star (Chrysler-Mitsubishi), Auto Alliance (Ford-Mazda).
c. Includes Checker Motors (closed 1982) and International Harvester (light trucks and SUVs; closed 1980). Neither
company produced small cars.
d. Honda, Nissan, Toyota, BMW, Subaru-Isuzu, Mercedes-Benz, Hyundai, Kia.
Table 3. Identification of Small Cars by Manufacturer
(as defined for Table 2)
Chevrolet Cobalt/Pontiac G5a
Saturn SC, SL, and SW
(production moved from United States to
Mexico in 1999)
AMC Gremlin (acquired from American
Dodge Omni/Plymouth Horizon
Toyota Voltz (export only)
Source: As for Table 2.
Note: Many vehicles were sold in multiple versions under different nameplates (e.g., Chevy Cavalier,
Pontiac Sunbird, Cadillac Cimarron). This table lists only the most widely sold version.
a. Vehicle still in production in United States.
Table 4. U.S. Small Car Manufacturing Assembly Operations
(as of September 2007)
Announced Plan or
Alpha vehicle, 2011
East Liberty, Ohio
Greensburg, Indiana (under construction) Begin Civic
Sources: Automotive News, various dates; Global Insight. North American Light Vehicle Industry
Forecast Report, various dates. GM data also from UAW GM Report on GM plant investment
commitments from Sept. 2007 contract agreement, not publicly confirmed by General Motors.
The 2007 Collective Bargaining Agreements
The 2007 Contract Negotiation Process
Earlier CRS reports detailed UAW labor contract agreements with the Detroit
Big Three that many observers contended were making the union-organized sector
of the motor manufacturing industry uncompetitive with foreign owned-OEMs that
manufactured both in the United States and abroad. Some of these issues included:
Nearly free lifetime health care coverage for employees, retirees and
dependents — a cost that was estimated by 2005 to cost the
companies as much as $1,500 per vehicle produced. Foreign OEMs
do not pay such costs to any similar degree because of a younger
workforce and few retirees in the United States, as well as different
health care systems in their home markets;
A defined-benefit pension plan, to which employees and their
spouses were entitled after 30 years on the job;
In effect a guaranteed salary — even if a plant closed or was
downsized, companies were required to keep hourly employees on
the payroll through a “jobs bank,” until another suitable position
could be found;
Consequent loss of flexibility in managing production to meet actual
demand — production had to be maintained so that employees were
generating revenue, even if vehicles were sold at a loss through fleet
sales or the use of high-cost incentives (practices that reduced
residual values and therefore attractiveness to customers in retail
There had been interim adjustments to the 2003 national contract necessitated
by multibillion dollar losses reported by each of the Big Three companies. The 2007
contract negotiations saw a substantial effort by both management and labor at the
UAW-represented companies to establish a comprehensive new labor agreement
cognizant of the Big Three’s competitive problems. As has been traditional in
previous UAW-industry contracts, the collective bargaining agreement was reached
through a process of “pattern bargaining.” The union selected one of the Big Three
OEMs with which to bargain, and, in keeping with the UAW’s general policy of not
allowing domestic producers to seek competitive advantages through differences in
labor contracts, to impose that pattern on the other companies once an agreement was
reached. However, owing to some major differences in both the financial conditions
and organizational structures among the Big Three, significant differences emerged
among the collective bargaining agreements that were reached with the three
companies in the autumn of 2007.
Negotiation of the 2007 collective bargaining agreements with the Detroit Big
Three manufacturers proceeded according to the following chronology:
July 20-23: Official commencement of contract renewal talks
between the UAW and each of the Detroit Big Three. (In July,
control of the U.S. Chrysler Group of DaimlerChrysler AG of
Germany is formally transferred to “the new Chrysler,” an
independent company owned by Cerberus Capital Limited
Partnership, a private equity firm.
“Mid-August:” Big Three officially ask UAW to take over
administration of health care benefits for current and retired
employees, and their families.
These issues are discussed in CRS Report RL32883, pp. 43-46; and CRS Report
RL33169, Comparing Automotive and Steel Industry Legacy Cost Issues, pp. 1-6. Sean
McAlinden of CAR summarizes the impact on company management in The Big Leave, p.
September 13: President Ron Gettelfinger announces to UAW
members that GM will be the lead company (strike target) in the
contract negotiations. Ford and Chrysler receive contract extensions.
September 14: UAW contract with GM expires — UAW extends
on an hour-by-hour basis.
September 24: Negotiators fail to reach agreement and UAW calls
first nationwide strike against GM in 40 years.
September 26: GM and UAW settle on a “pattern-setting deal for
the U.S. auto industry,” and strike ends after two days. The new
agreement shifts retiree health care obligations to the UAW, with a
large initial contribution from GM. The UAW also agrees to lower
pay and a different benefit structure for new hires in “non-core” jobs.
In exchange, GM makes new product commitments at existing U.S.
October 7: UAW establishes Chrysler as the next bargaining target.
Chrysler is warned of a possible strike by October 10.
October 10: The “one-shift” national strike against Chrysler. UAW
walks out, because its bargaining committee cannot agree on terms
in view of Chrysler commitments to continued production at U.S.
facilities more limited than those provided by GM. UAW tentative
agreement announced later that afternoon, including a transfer of
retiree health care to UAW, and strike ends. Meanwhile, UAW
members at GM complete ratification of their contract by a 65%
October 27: After aggressive campaign by UAW leadership (and a
split in the negotiating committee), Chrysler workers ratify
agreement — supported by only 56% of production workers and
51% of skilled trades.
November 1: Chrysler announces plans to end shifts at five
assembly plans, terminate production of selected products, and to
eliminate 12,000 jobs in addition to cuts announced earlier in 2007.
November 3: UAW and Ford reach an agreement. Ford will make
significantly lower contributions than GM when retiree health care
transferred to union. Ford also gets right to pay lower-tier wages to
all new hires, up to 20% of the total hourly workforce. In exchange,
Ford announces that it will keep open five plants it had planned to
November 14: UAW contract with Ford ratified by an 81% positive
vote, completing the negotiation process.39
The UAW first negotiated all elements of the issues with GM, to establish a
“pattern” with the company that was then considered financially the strongest of the
three, and the farthest along in terms of restructuring. Having established this
pattern, the UAW then moved on to Chrysler, a company whose management was
Based on Detroit News (detnews.com), “Timeline: The Road to Ratification” (November
16, 2007); also, ibid., “New Era Begins for Big 3” (November 15, 2007).
in transition, with respect to both structure and personnel.40 The agreement
negotiated with Chrysler was the most controversial, both among the UAW
negotiating committee and its membership, as revealed in the relatively close margin
of ratification. Further uncertainty was added by the Chrysler job cuts announced
immediately after ratification. But when Ford agreed in its negotiation with the
UAW to rescind five planned factory closings, the result was the highest level of
ratification approval of any of the agreements. This was despite Ford’s smaller
contribution to the new union-run retirement health care plan than GM, and Ford’s
greater leeway than the other two Big Three OEMs in replacing hourly workers under
the current contract with new employees under a lower-tier wage structure and a
different benefits format. Part of the rationale for this differentiation of treatment
was the perception by the UAW that Ford may be the financially weakest of the Big
Three, and that maintaining current production facilities insofar as possible was the
key union goal.41
Summary of New Contract Bargaining Agreements
The following analysis summarizes the changes in the UAW contract reached
in these collective bargaining agreements.42
Transfer of Retiree Health Care to UAW. A leading objective of the
UAW in the negotiations was the protection of retiree benefits already guaranteed by
previous contracts. Given the real possibility that one or more of the Big Three could
face bankruptcy at some time in the future, the UAW was amenable to consideration
of transferring an open-ended commitment to retiree health care to an independent
entity managed by the UAW (a “Voluntary Employees’ Beneficiary Association,” or
VEBA).43 The cost of this to each of the Big Three varies. GM will contribute $31.8
billion, including $4.4 billion in a note convertible to GM stock and a pledge to back
up the VEBA for up to $2 billion, if inflation is higher than expected.44 Ford and
Chrysler had fewer retirees affected. The upfront contributions for Ford and Chrysler
to the VEBAs were $13.2 billion and $8.8 billion respectively. Because of legal and
Failure of DaimlerChrysler management to gain similar health care “givebacks” from the
UAW (contract modifications) to those agreed with Ford and GM in 2006 is said to have
been one of the motivating factors in the decision to sell the Chrysler Group. Automotive
News, “DCX Board Chief Aims to Undo Schrempp Legacy” (April 2, 2007), p. 3.
See the section on Ford in a Detroit News “special report” (detnews.com), “Historic UAW
Contracts Forged from Angry Words, Picket Lines, Harsh Reality” (November 16, 2007).
While there are many press sources and accounts of these negotiations and agreements,
the best summary of the final deals are in McAlinden, The Big Leave, pp. 15-20, 47-49.
Complete summaries are provided in the following documents: UAW GM Report
(September 2007); UAW Chrysler Newsgram (October 2007); UAW Ford Report (November
For details on the legislative background of VEBAs, see CRS Report RL33505, Tax
Benefits for Health Insurance and Expenses: Overview of Current Law and Legislation, by
Bob Lyke and Julie M. Whittaker.
As summarized in Financial Times (FT.com), “UAW Could Hold Top GM Stake”
(October 1, 2007).
organizational issues, the VEBAs will not be set up until 2010, but the automakers
might be able financially to recognize savings earlier. The major benefit of this
change for the Big Three is that, for a defined, upfront contribution, they largely
eliminate the uncertainties of future retiree health care costs and the legal obligation
to provide health care to retirees.
Two-Tier Pay and Benefits. The UAW broke with a longstanding tradition
in a national contract negotiation by agreeing to allow the Big Three OEMs to
provide pay and benefits on a differential structure to workers in the same plants. As
opposed to more than $28 in base wages for current production workers, the new
hourly starting wage for new hires will be about $14, rising to $15-$16 after an initial
period. In the first agreement, with GM, the lower tier wages for new hires was
limited to hourly pay for “non-core” activities, such as machinists, line workers on
drivetrain parts and sub-assemblies, inspectors, stampings, material handlers, and
drivers. The definition was so broadly defined that it could include as many as
23,000 positions, covering almost a third of GM’s current UAW-represented
employees. A similar definition was used in the Chrysler contract, again covering
nearly a third of present positions, or 13,000 employees. “Non-core” would receive
seniority when vacancies arose in core production jobs, and they could move into
those positions at the full, “first-tier” contract rate of pay.
With Ford, the distinction between “core” and “non-core,” which preserves the
principle that all UAW-covered workers receive the same rate of pay for the same
job, was eliminated. Ford received the right to hire any new workers, including line
production jobs, up to a level of 20% of the total hourly workforce. The percentage
cap excludes new hires at facilities Ford had agreed to close or at plants Ford had
taken back from its former parts-making affiliate, Visteon. In addition, while GM
agreed to move production workers currently employed on a temporary basis into
permanent positions, neither Ford nor Chrysler accepted this obligation.
The new “two-tier” structure also applies to employee benefits. Current hourly
employees covered by the “first-tier,” traditional union contract will receive the full
pension for which they remain eligible on retirement. They will also receive full
retiree health care benefits, though these will be provided after 2010 by the UAWadministered VEBA, not by the companies. Thus, the UAW will be responsible for
any adjustments in coverage necessitated by any future shortfalls in VEBA resources.
“Second-tier” employees (new hires, however defined at each company) will
never be eligible for a traditional pension or the current retiree health care coverage.
As active employees, they participate in a health plan with $300 to $600 in annual
deductibles, plus they receive a flexible health care spending account, from which to
purchase customized coverage. With respect to retirement, they will accumulate a
cash balance pension, while the company contributes to a 401(k) account that the
employee can use for health care expenses after retirement. CAR analyst Sean
McAlinden also defines a third class of employees, which he defines as “Tier 1.5”
or “the new traditionals.” These are permanent workers who move from a “Tier 2,
non-core” job, into a job included at the “Tier 1” pay level. These workers “will not
have retiree health benefits ever. They will not receive defined pension benefit.”45
Jobs Bank Changes. The burden of the “jobs banks” maintained by the Big
Three companies was to a great extent alleviated by the buyouts put into place
starting in 2006. The union continued to maintain the principle that currently
employed UAW workers cannot be terminated unconditionally through corporate
downsizing. However, going forward, the rules for staying in the jobs bank
indefinitely were significantly tightened. At all three companies, participation in the
jobs bank is now basically limited to a period of two years, with limits placed on the
number of refusals an employee can make when offered a new position either within
or outside their area of residence.
Detroit Big Three Cost Benefits. The new agreements may promise major
labor cost savings for the Big Three. Much of the discrepancy in hourly cost levels
(pay and benefits) estimated at $30,000 per year against non-union producers in the
U.S. market may be eliminated. With respect to new hires, the Big Three may be
paying even less than the competition. McAlinden reports that the total cost per hour
of UAW labor currently under “Tier 1” contracts at $78 per hour today at GM. The
“Tier 2” labor cost would drop to $25.65 per hour, and even the “Tier 1.5 new
traditionals” would only cost a total of $38.47 per hour. Nor are these numbers
purely hypothetical — the average hourly GM employee is nearly 49 years old, with
22.5 years of service, and 63.5% are eligible to retire in five years. For Ford and
Chrysler average age and service levels are lower, but about 30% can retire in five
years (under the traditional UAW “30 and out” guarantee). McAlinden further
estimates for GM total labor cost savings of $3.3 billion by 2011, and retiree health
care cost savings of $2.8 billion. Based on estimated North American production of
about 500,000 vehicles per year in North American in the later year, he projects a
savings of $981 per car in labor costs, and $676 in retiree health cost savings.46
Labor Gains in Job Security. Besides maintaining the retirement security
for current UAW workers in “Tier 1” positions, the UAW won guarantees of
continued production, and in some cases, promises of new product, at most existing
Big Three plants. UAW active membership has declined from a high of 1.5 million
to less than 500,000 in 2007. Each of the Big Three is continuing aggressive buyout
campaigns aimed at current employees, and one source states, “The union’s auto
company membership is expected to drop to 150,000” by 2010.47 Thus, it was
important for the UAW as an organization, as well as its current workforce, to secure
such guarantees going forward.48
Quoted from McAlinden, The Big Leave, p. 17.
Pay and service estimates are from ibid., pp. 18-19. Another account comparing GM with
Toyota estimates that total average hourly cost savings would bring GM down to about $50
per hour, compared to Toyota’s cost of $47 per hour; Detroit Free Press, “How Deal Can
Pull GM Even with Toyota” (October 2, 2007).
Business Week, “Labor’s New Roll of the Dice” (December 24, 2007), p. 37.
The following summary is based on press reports, including commentary on based on
GM made the most extensive new product guarantees. It laid out
plans for continued production and replacement models for all of its
assembly plants, at least through 2011 and beyond. The only
exception is Doraville, Georgia (Atlanta), still scheduled to close in
2008, plus three parts operations. Some products do remain
“business-case dependent” on the list, or, as with the Chevrolet Volt
“plug-in hybrid” planned for the Detroit Hamtramck plant, may be
technologically speculative.49 Global Insight predicts two additional
GM plant closings that have not been announced. The plant in
Moraine, Ohio, that produces the Chevy Trail Blazer/GMC Envoy,
is not listed in UAW’s report. The Wilmington, Delaware, plant is
listed as continuing to produce two-seat sports cars through 2012,
but is assigned no new products. Global Insight believes that GM
must take out 400,000 units of capacity by the end of the decade to
achieve a 90% capacity utilization rate, and suggests these are the
two plants most likely to be shut.50
UAW opponents of the Chrysler agreement “complained that the
deal lacked the specific future product guarantees found in the GM
deal ... The UAW argued that Chrysler had promised to keep
operating all but a few facilities and has identified more than $15
billion in potential investments.”51 The listing released by the UAW
mostly includes commitments to continue production “through the
current product life cycle,” with two assembly plants, Newark,
Delaware and a small Detroit-area plant, slated for closure after
that.52 In a more favorable analysis, McAlinden states Chrysler
promised to “continue and/or expand production at 6 assembly, 4
stamping and 8 powertrain plants,” and “reversed 4 closures.”53
With Ford, the big news for the UAW was the reprieve of five plants
from the list of planned closures, including Avon Lake, Ohio, and
two other assembly plants (Chicago and a Detroit-area truck plant)
for which closure plans had not yet been publicly announced. The
UAW also highlighted new investment and modernization plans at
Ford plants. The previously announced closure at Twin Cities (St.
publicly circulated UAW documents.
The full list is at UAW GM Report, p. 11. See, among many other analyses, Detroit Free
Press, “UAW Contract: Nuts and Bolts” (September 29, 2007).
Global Insight. Auto Webcast, p. 44.
Detroit Free Press, “Tough UAW Vote” (October 28, 2007).
UAW Chrysler Newsgram, p. 14.
McAlinden, The Big Leave, p. 49.
Paul) was confirmed, though a year later than originally announced
along with the closure of a casting plant and a transmission plant.54
In addition to these commitments to keep plants operating, McAlinden notes
commitments to “insource” jobs and allow UAW-organized operations to bid on jobs
previously committed to outside suppliers (a total of more than 5,000 jobs at the three
companies). The Big Three also committed to moratoria on future outsourcing.55
Reducing Detroit’s Commitment to Canada? As discussed earlier in the
CRS baseline report on the motor vehicle industry, the Detroit Big Three have a
longstanding commitment to building motor vehicles in Canada in a two-way sectoral
free trade system that goes back to 1965. This deal has ensured Canada’s role as the
largest U.S. export market for motor vehicles and parts, the largest two-way trade
partner, and a virtually permanent large Canadian automotive trade surplus.56 Under
this agreement, Ontario has overtaken Michigan as the largest auto-producing state
or provincial jurisdiction in North America.
But one reason the Big Three have made significant investments in Canada has
been savings derived from the Canadian health care system, as opposed to expensive,
company-provided health care in the United States. Another advantage has been the
currency exchange rate, with the Canadian dollar falling as low as 65¢U.S. in the past
decade. The Canadian Auto Workers have reportedly used these cost differentials
to leverage contract gains not enjoyed by their UAW counterparts in recent years.
But with Canada’s dollar reaching parity with the American dollar in 2007, and with
the Big Three offloading retiree health care costs and making other health care gains
in the new UAW contracts, Canadian production is less attractive now to the Big
Three. One source forecasts that Ontario production capacity will decline by 600,000
units by 2012, while Michigan will gain 100,000 units.57 In the near future, Ford is
predicted to close one of its two Canadian assembly plants, in St. Thomas, Ontario,
where it builds large, rear-wheel-drive sedans on an aging platform.58
Conclusion: A Competitive Detroit Big Three?
Outlook for U.S. Motor Vehicle Manufacturing Employment. As to
whether the new UAW labor contracts will renew the competitiveness of the Big
Three and stop their erosion of U.S. market share, labor relations specialist Harley
Shaiken summed up the view of many analysts: “The contract allows the three
automakers to be more competitive, but it doesn’t remotely ensure success — that
Ibid., and UAW Ford Report, pp. 3-5.
McAlinden, The Big Leave, p. 49
See CRS Report RL32883, especially pp. 18-23 and Appendix 5.
Detroit News (detnews.com), “Canada Loses Luster for Big 3” (December 10, 2007).
Ibid., “Ford Will Close Ontario Plant” (December 10, 2007); Global Insight, Auto
Webcast, p. 44. The latter source also noted on p. 43, however, that Toyota is adding
capacity to build 150,000 RAV4 CUVs at Woodstock, ON, in 2008.
requires the right models and the right strategic vision.”59 It is clear that the UAW
has accepted that a different labor model is required, or the union will end up with
the reputation of organizing only losers among the OEMs. The deal may be viewed
as a model of how the union-organized segment of the industry can respond to
At the national level, the prospects for employment growth in the industry as a
whole are not strong during the remaining years of this decade. Foreign-owned
manufacturers continue to invest in the United States. However, insofar as the new
labor deals allow UAW-organized manufacturers to operate more flexibly,
predictions of a continued slowdown in U.S. motor vehicle sales may mean that
employment created by these new investments is more than offset by Big Three
efforts to reduce labor overhead through increased production efficiencies. This will
be especially true if their output is downscaled to demand.
From the state perspective, Big Three cutbacks and plant closures have been
widespread, but the negative effects have been felt disproportionately by one state,
Michigan. It has suffered about 40% of the total net job loss in automotive
manufacturing between 2000 and 2006. Although buyouts will continue, most
Michigan Big Three plants will apparently survive, using the new UAW “Tier 2”
labor contracts. But as the older class of highly compensated workers retires, the new
contract means a clear cut in the pay rate for the new hires who join the industry.
Other states have not been so negatively affected in the 2000s. Within the
“heartland auto belt,” Ohio and Indiana have lost jobs on a net basis. Unlike
Michigan, however, their Big Three losses have been somewhat offset by foreign
OEMs. New York, a major parts manufacturing state, has perhaps suffered a job loss
in the industry that is proportionally as large as Michigan’s, but the automotive sector
is relatively small there as a share of total manufacturing employment.
Southern states have not seen the large overall gains that one might expect to
have seen, except for Alabama, which has gained 15,000 net new jobs since 2000 —
the largest increase of any state. If one goes back to the period since 1990, Alabama
is joined by three other southern states — Tennessee, Kentucky, and South Carolina
— as the biggest net gainers of auto manufacturing jobs, especially through foreign
Legislative Initiatives May Affect Automotive Manufacturing
Employment Outlook. The future of U.S. automotive manufacturing has been a
major concern of many Members of Congress. The outlook for future employment
in the industry may be affected by federal legislation in the present Congress.
The “Employee Free Choice Act” (H.R. 800/S. 1041). This bill was
approved by the House 241-185 on March 1, 2007. This union-endorsed measure
might assist organizing efforts in non-union plants by making it easier to use a “card
check” process that supporters believe is a more effective and efficient means of
Quoted in Detroit News, “New Era Begins for Big 3.”
determining support for union representation. On June 26, 2007, the Senate refused
to close debate on its equivalent bill (S. 1041) on a vote of 51 yeas to 48 nays.
Fuel Economy Legislation (Title I of P.L. 110-140). Federal fuel
economy standards for all light motor vehicles have been made more stringent in
energy legislation approved in the 110th Congress.60 A version approved by the
House on December 6, 2007, by a vote of 235-181 adopted with some changes an
earlier Senate-approved bill, which mandated a general fuel economy standard of 35
miles-per-gallon by 2020. The Senate twice failed to close debate on the bill, but
then on December 13, 2007, approved by 86-8 a different version with an identical
section on automotive fuel economy.61 To assure passage, the Senate removed most
of the tax provisions. However, the Senate did leave in sufficient tax provisions to
offset the federal revenue that would be lost from the auto fuel economy measures.62
The House on December 18, 2007, then approved the version of the bill as amended
by a vote of 314-100. President Bush signed the bill into law on December 19, 2007.
Fuel economy mandates can have a major impact on the automotive market,
with different effects on different manufacturers. The new law contains provisions
designed to offset any negative impacts on U.S. motor vehicle manufacturing.
Section 112 establishes that 50% of the civil fines collected from OEMs who fail to
meet the new CAFE requirements shall be transferred to a Department of
Transportation program for grants in support of the domestic manufacture of
advanced technology vehicles and components. Under the “improved vehicle
technology” subtitle, the Department of Energy is authorized to make grants for
converting and retooling plants for the production of advanced technology fuelefficient vehicles, and to issue loan guarantees for parts and battery manufacturers
for such vehicles.63
Funding Advanced Vehicle Manufacturing in Greenhouse Gas
Reduction Legislation (S. 2191). This bill includes the use of proposed auctions
of greenhouse gas (GHG) emission credits to fund the development and manufacture
of clean, advanced technology vehicles. Eight bills were introduced in the first
session of the 110th Congress with the goal of reducing GHG (including carbon
dioxide, CO2) through a market-oriented program along the lines of the trading
provisions of the current U.S. acid rain reduction program. One of them, S. 2191, co60
On the history of automotive fuel economy legislation, including in the 110th Congress,
see CRS Report RL33413, Automobile and Light Truck Fuel Economy: The CAFE
Standards, by Brent D. Yacobucci and Robert Bamberger.
On House passage, Washington Post, “Broad Energy Bill Passed by House” (December
7, 2007), p. A1. On the Senate’s actions, Daily Report for Executives (DER), “Senate
Rejects Motion to Limit Debate on Energy Bill with $21 Billion Tax Package” (December
10, 2007), p. G-5; “Democrats Go Back to Drawing Board on Energy Bill after Senate
Roadblock” (December 10, 2007), p. A16; and, “Senate Passes Revised Energy Measure
Boosting Fuel Economy, Renewable Fuels” (December 14, 2007), p. A-38.
Ibid., “Senate Passes Energy Legislation after Nixing $21.8 Billion Tax Title” (December
14, 2007), p. G10. Because of anticipated reduction in fuel consumption, tax revenue for the
Highway Trust Fund is expected to decline.
P.L. 110-140 §132-135.
sponsored by Senators Joseph Lieberman and John Warner, was ordered to be
reported by the Senate Environment and Public Works Committee in an 11-8 vote
on December 5, 2007.64
S. 2191 would allocate limits on emissions to utilities and industries, under a
general cap, aimed at reducing total GHG emissions over time. Trading in emissions
credits would be monitored and additional emissions credits would be auctioned by
a “Climate Change Credit Corporation” established under the bill. By Section 4401
of the bill, up to 20% of the proceeds of these auctions could be used to carry out an
advanced technology vehicles manufacturing program. In Section 4405, “advanced
technology vehicles” are defined as “hybrid or advanced diesel light duty motor
vehicles” meeting prescribed emissions and fuel economy standards. Funding would
be available to “automobile manufacturers and component suppliers” to cover the
“engineering integration” of advanced technology components into vehicles and up
to 30% of the cost of “reequipping or expanding an existing manufacturing facility
to produce” vehicles and components.
According to one analysis, compared to relatively modest amounts that would
be provided from fines and loan guarantees under P.L. 110-140, “the cap-and-trade
bill would mean real money.” It is calculated to generate “as much as $40 billion
from the sale of emissions permits.”65
The Proposed U.S.-Korea Free Trade Agreement. Another major issue
for the automotive industry that may be faced by Congress in the second session of
the 110th Congress is whether to approve the proposed U.S.-Korea Free Trade
Agreement. Many in the U.S. automotive sector are concerned that agreement as
negotiated is unbalanced. It would enhance access to the U.S. market for Koreanbased OEMs (Hyundai-Kia), which already in 2006 sold 750,000 vehicles in the
United States (4.6% of the domestic market, more than 500,000 imported), by
eliminating all tariffs on products brought in from Korea, while U.S. OEMs have
only been able to export a few thousand units to Korea. Ford and Chrysler explicitly
oppose congressional approval of the deal.66 GM, with a substantial stake in Korean
manufacturer Daewoo, has remained neutral.67 The UAW is strongly opposed to the
agreement. In testimony before the House Ways and Means Committee’s Trade
Subcommittee, UAW Legislative Director Alan Reuther stated that the agreement as
These bills are discussed in CRS Report RL33846, Greenhouse Gas Reduction: Cap-andTrade Bills in the 110th Congress, by Larry Parker and Brent D. Yacobucci. All the bills
from both houses are summarized in Appendix A. On approval by the Senate committee, see
DER, “Senate Committee Approves Legislation to Place Cap on Greenhouse Gas
Emissions” (December 6, 2007), p. A-44.
Automotive News, “Climate Bill Dangles $40 Billion for Auto Industry” (December 17,
2007), pp. 4 and 45.
Executive Office of the President. Office of the U.S. Trade Representative. Report of
Industry Trade Advisory Committee on Automotive and Capital Goods (ITAC 2) (April 27,
2007), pp.1-2; and “Ford Motor Company Assessment of the Automotive Provisions of the
US-Korea FTA,” appended to that report.
“General Motors Corporation Assessment of the Automotive Provisions of the US-Korea
FTA,” appended to ibid.
contemplated “would exacerbate the totally one-sided auto trade imbalance between
Korea and the U.S. and jeopardize the jobs of tens of thousands of American
U.S. House of Representatives. Committee on Ways and Means. Subcommittee on Trade.
Testimony of Alan Reuther (March 20, 2007); and, letter of Alan Reuther to all Members
of the House (April 18, 2007), p. 2. A similar letter was sent to all Members of the Senate.