US car industry engineers a remarkable recovery

Volkswagen opened a plant in Tennessee last month with 2000 workers. Honda is hiring 1000 in Indiana to meet demand for its best-selling Civic. General Motors is looking for 2500 in Detroit to build the Chevy Volt.

Two years after the end of the Great Recession, the United States car industry is hiring again - and much faster than the rest of the economy.

As an employer, it's growing faster than aeroplane manufacturers, shipbuilders, health care providers and the federal government.

The hiring spree is more remarkable because memories of the US car industry's near-death experience are fresh. In 2009, General Motors and Chrysler got government bail outs and entered bankruptcy, and car sales hit a 30-year low.

In June of that year, about 623,000 people were employed by the car industry in the US, the fewest since the early 1980s. Now the figure is almost 700,000, a 12 per cent increase.

Sales are back up, too, and carmakers are hiring by the thousands to meet increased demand.

"The buzz is incredible around here about what opportunity we're going to get if we can build a great product," says Ben Edwards, who went to work for Volkswagen in Chattanooga, Tennessee, last year and is now a team leader on an assembly line that installs tyres and seats.

Edwards was working as a general contractor until the housing market dried up. He says the pay at Volkswagen, which starts at US$14.50 ($17.50) an hour, is fair and the benefits are generous.

Besides hiring 2000 people, Volkswagen figures the plant, where it will make its new Passat, will create 9000 spin-off jobs in the region, including 500 at car-supplier plants that are springing up nearby. Carmakers are hiring again because car sales are rising. Americans bought 10.4 million cars and trucks in 2009 and 11.6 million in 2010. This year, they're on track to buy 13 million or more, and car companies are adding shifts to meet the demand.

"Everybody got so lean and mean during the downturn that they're trying to rebuild staff," says Charles Chesbrough, a senior economist with IHS Automotive.

The industry's 12 per cent increase in jobs compares with a 0.2 per cent gain for the US economy, excluding farming and adjusted for seasonal variation, since June 2009.

In a normal economic recovery, improvement in the housing market leads the way by creating construction jobs. But home prices haven't stopped falling, and the construction industry has shed 8 per cent of its workers since June 2009 - 474,000 jobs

The gains in the car industry have been small by comparison. But they do create positive ripple effects for the economy. The Center for Automotive Research estimates that every new car manufacturing job leads to nine other jobs - from parts makers to restaurants that feed carworkers.

The gains have been widespread, with the Midwest the biggest beneficiary. In Ohio, car manufacturing jobs have risen 31 per cent the past two years, while parts makers in Michigan have added nearly 20,000 jobs.

Parts jobs are also up 15 per cent in Alabama, where workers make parts for Mercedes-Benz SUVs and Honda minivans, and in Kentucky, where the Chevrolet Corvette and Toyota Camry are made.

Before the turnaround, new car jobs were scarce. Detroit's car companies had too many factories, high wages and bloated bureaucratic management. Jobs began disappearing in 2006 and 2007 as carmakers tried desperately to restructure. Dozens of suppliers were pushed into bankruptcy.

Then came 2008, when fuel prices spiked and the financial crisis struck. The industry lost almost one in every four of its jobs. By the time GM and Chrysler got out of bankruptcy, in June 2009, the industry employed about half as many people as it did in 2000.

Sales and profits have risen since, and payrolls have followed.

GM, Ford and Chrysler are all making money for the first time since the mid-2000s and adding workers to build popular models like the revamped Ford Explorer. Foreign companies, stung by the high cost of exporting cars to the US when the dollar is weak, are racing to build more products Stateside.

Four years ago, the United Auto Workers agreed to a contract that allowed Detroit's carmakers to hire some new workers at US$14 per hour, or half the starting pay of workers at that time.

While the UAW doesn't represent workers at foreign-owned plants, companies like Volkswagen generally match UAW pay. At a GM event in Toledo, Ohio - where GM was announcing it plans to hire or retain 4000 workers over the next 18 months - UAW Vice President Joe Ashton was unapologetic about wage cuts and said the union would consider allowing more US$14-per-hour jobs.

"We're willing to discuss anything that creates jobs," he said.

Companies are racing to hire white-collar workers, too. Monster.com has more than 100 postings for car engineers, including a handful for Hyundai and Subaru.

Electric batteries, touch-screen dashboards and other technology are so common, carmakers need engineers with expertise.

Randy Floreska was recruited by GM at a competition for college students to design and build hybrid cars. He says he and other young recruits view the 103-year-old carmaker as a trendsetter.

"Here in the battery lab, there's so much youth and so much opportunity for growth," he says.

The industry last topped 1 million workers in 2007, and most analysts don't expect it to reach that level again. The Center for Automotive Research predicts total industry employment of about 877,000 in 2025. The Detroit carmakers have shed nine brands, including Pontiac, Mercury and Hummer, and closed 25 plants since 2005. Mexico, China and other countries with cheap labour are competing for jobs, which will limit US growth.

In a struggling US economy, though, it's significant, since growing car sales indicate growing consumer confidence. And considering what the industry has been through, it's a bonanza.

"I really do believe that we are seeing a renaissance in the American automobile industry," says James Brock, a professor of economics at Farmer School of Business at Miami University.

- AP