Asian Carmakers Settle Into the South

Very interesting read in today's Washington Post about the rise of Asian automakers in the South. One lesson is that the decline of Ford and GM is not necessarily a bad thing:

As profits fall and sales slump at General Motors Corp. and Ford Motor Co., thousands of autoworkers gathered in Montgomery, Ala., yesterday to celebrate the opening of a $1.1 billion factory to build Hyundais.

The Alabama factory, the first in the United States for the South Korean company, is the latest in a parade of foreign-owned facilities springing up throughout the South. Each one -- Nissan Motor Co. opened a factory in 2003 in Mississippi, a Toyota Motor Corp. truck plant cranks up next year in Texas -- is another sledgehammer swing at the crumbling fortunes of Ford and GM.

Another is that unions are not always the best friend of American workers, by serving to price themselves out the market and run the companies they work for into bankruptcy:

Hyundai's non-unionized plant, for example, will pay most of its 2,000 employees a starting wage of $14.46 an hour, far below the $20-plus hourly wages for comparable United Auto Workers members in Michigan. The Hyundai workers also will have to contribute $14.54 every two weeks for health coverage, which is free to employees under UAW contracts.

There is no pension available to the Hyundai workforce; instead, employees have a 401(k) plan.By contrast, GM, Ford and the Chrysler Group of DaimlerChrysler AG carry more than 800,000 retirees and family members on their pension rolls at a total cost of $11 billion per year. The companies estimate that about $1,500 of the cost of building each vehicle goes toward health care -- several times what Hyundai pays.

That's part of the reason Hyundai can offer a laundry list of safety features on the new Sonata, quality that ranks near the top of the auto industry and a price that undercuts competitors at Honda and Toyota -- and still make more profit than GM.

Lastly the article indicates that the rise of Asian auto manufacturers comes at the same time that textile plants are meeting their demise. In effect a lower-paying industry is being substituted by a high-paying industry:

The auto companies and suppliers account for up to 40,000 workers statewide, have invested billions of dollars and have caused the state to revamp its education and worker training programs, Deravi said. Rural Crenshaw County, for example, lost five textile mills in recent years to cheap foreign competition. Those jobs have been more than recouped, and at higher wages, by companies supplying the nearby Hyundai plant, said Doni Ingram, the county's economic development director.

Read the whole article.