Motor Vehicle Manufacturing Employment: National and State Trends and Issues

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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 foreign-owned 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 companies.
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.
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Introduc tion ..................................................................................................................................... 1
Motor Vehicle Manufacturing Jobs: A National Crisis?..................................................................3
Sales and Production Trends in the U.S. Market.......................................................................4
U.S. Demand for Domestically Made Vehicles Declines—Trucks Worst Affected............4
Big Three UAW Plants Suffer Largest Production Cuts.....................................................7
The Impact of Sales and Production Trends on Employment...................................................8
National Motor Vehicle Manufacturing Employment Data................................................8
Motor Vehicle Manufacturing Holds Up Better Than Other Manufacturing
Employment ................................................................................................................... 10
Past Performance and Future Outlook for Motor Vehicle Manufacturing
Employment ................................................................................................................... 10
Motor Vehicle Manufacturing Performance by State.....................................................................11
The Heartland Auto Belt.........................................................................................................13
A “One-State Recession” in Michigan..............................................................................13
Mixed Results in Ohio and Indiana..................................................................................16
Employment Mostly Stable in Other Leading States..............................................................16
Other Motor Vehicle Manufacturing States.............................................................................17
U.S. Manufacturing of Small Motor Vehicles...............................................................................18
Changing Detroit: The 2007 Collective Bargaining Agreements..................................................22
The 2007 Contract Negotiation Process..................................................................................22
Summary of New Contract Bargaining Agreements...............................................................24
Transfer of Retiree Health Care to UAW..........................................................................25
Two-Tier Pay and Benefits................................................................................................25
Jobs Bank Changes...........................................................................................................26
Detroit Big Three Cost Benefits........................................................................................26
Labor Gains in Job Security..............................................................................................26
Reducing Detroit’s Commitment to Canada?...................................................................28
Conclusion: A Competitive Detroit Big Three?............................................................................28
Outlook for U.S. Motor Vehicle Manufacturing Employment..........................................28
Legislative Initiatives May Affect Automotive Manufacturing Employment
Outlook ........................................................................................................................ .. 29
Figure 1. Motor Vehicle Sales.........................................................................................................4
Figure 2. U.S. Motor Vehicle Production........................................................................................6
Figure 3. U.S. Motor Vehicle Industry Manufacturing Employment..............................................9
Figure 4. Employment Trends, Motor Vehicle and General Manufacturing...................................9
Figure 5. U.S. Motor Vehicle Manufacturing Employment by State............................................14

Table 1. Motor Vehicle Manufacturing States...............................................................................15
Table 2. Four Decades of U.S. Small Car Manufacturing.............................................................20
Table 3. Identification of Small Cars by Manufacturer.................................................................21
Table 4. U.S. Small Car Manufacturing Assembly Operations.....................................................21
Author Contact Information..........................................................................................................32

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The 110^th 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 ²
union-organized, while virtually none operated by foreign-owned companies are.
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 ³
about 1 million workers. 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 ⁴
shipped to the motor vehicle industry, which is the second-largest sectoral user.
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. 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

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that bind the domestically owned companies have been impediments to their competitiveness. In ⁵
the autumn of 2007, the United Auto Workers (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 contracts.
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 ⁶
traditional Midwest “Auto Belt” more into a corridor that includes the mid-South.
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 manufacturing industry:
• National employment trends. Is there an employment crisis in the U.S.
automotive manufacturing industry?
• 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 broader?
• 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 them?
• 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.

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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 ⁷
factory floor of the traditional Detroit-based Big Three.
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 “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 2006-07.
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 ⁸
could be hurt. Although Toyota, for example, publicly sided with the Big Three
position, the success of its Prius hybrid vehicle reinforced a public impression ⁹
that the Japanese companies are the leaders in fuel economy.

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• 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 ¹⁰
icon, for second place in domestic market share.
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 plants.
Figure 1. Motor Vehicle Sales
^{(Cars and}^{Light Trucks)}
^Sources:^Autom^{otive News}^{Market Data Books}^{, sup}^{plemented b}^y²⁰^{07 data f}^rom^Automotive^News^{and Ward’s}
^{Motor Vehicle Facts & Figures}⁽²⁰⁰^{7) for U.S. imports.}
^{*Annual rate (U.S., Canada -}^{Jan. Oct.; Mexico - Jan.-Sept.).}
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.

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UAW organizes only plants in the United States, both this figure and the one following focus ¹¹
primarily on U.S sales and production, as the main North American trend driver.
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 “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 ¹²
level.
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 ¹³
products, but less than half of all cars. Truck-based vehicles had become the redoubt of the ¹⁴
unionized, domestically owned motor industry.
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

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^units,^w^{ith 2}⁰⁰⁸^de^m^a^{nd a}^t¹⁵^.5^m^{illion u}ⁿ^{its. G}^e^ne^ra^{l Mot}^o^rs^of^fⁱ^cⁱ^a^l^{s “}^e^x^pe^c^t^a^f^l^a^t^m^a^r^k^e^t^”^{in 20}^{08, w}^h^ile^Nissaⁿ
^{CEO Ca}^{rlos G}^{hosn “}^s^aⁱ^{d t}^h^e^m^a^r^k^e^t^w^ould^be^f^l^a^t^a^t^be^{st, ra}^ng^ing^be^tw^e^eⁿ^{15.5 a}^nd¹⁶^m^{illion v}^e^hi^c^l^e^s^;”^De^{troit Ne}^ws
⁽^d^e^tⁿ^ews.^co^m^),^“S^l^o^w^A^u^t^o^S^a^l^e^{s F}^o^recast^f^o^{r 2}⁰⁰⁸^”^(No^v^em^b^e^{r 2}³^,²⁰⁰⁷^);^W^a^{ll S}^t^{. J}^o^urn^a^l.^onliⁿ^e^,^“G^M^Fⁱⁿ^aⁿ^ce
^C^h^ie^f^Ex^pe^c^t^s^L^o^w^e^r^I^ndus^tr^y^Sa^l^e^s^”⁽^N^ov^em^be^r^{30, 2}⁰⁰⁷⁾^.
¹³^C^R^S^R^e^por^{t R}^L³²⁸⁸³^,^U.^S^.^A^u^t^o^mo^tⁱ^{ve In}^du^st^{ry: R}^ecen^t^Hi^st^o^r^y^an^d^Issu^es^,^by^Ste^phe^{n C}^o^oⁿ^e^y^aⁿ^{d B}^r^eⁿ^{t D}^.
^Yaco^b^u^cci^,^T^a^b^l^{e 3}^.
¹⁴^I^t^s^h^o^u^l^d^be^note^d^t^h^a^t^by^the^e^a^r^ly^2000s^{, t}^h^e^m^a^r^k^e^t^ha^{d a}^l^s^o^s^e^eⁿ^the^e^v^ol^uti^on^of^a^ne^w^pr^oduc^t,^the^“^c^r^os^s^o^v^e^r
^utility^v^e^hic^l^e^”^(CUV^{s, nic}^k^na^m^e^{d dism}^issiv^e^l^y^b^y^off^-roa^d^purists^a^s^“^c^u^te^ute^s^”⁾^{. G}^e^ne^ra^ll^y^,^SUV^s^a^r^e^ba^se^{d on}^a
^he^a^v^y^,^pic^k^up-truc^k^-^ty^pe^body^-on-f^r^am^e^pla^t^f^o^r^m^{. CU}^V^s^a^r^e^lig^hte^r^{, s}^m^a^lle^r^v^e^hic^l^e^s^{built t}^o^a^c^a^r-b^a^s^e^d^uni^bo^dy
^de^sigⁿ^{, b}^u^{t a}^r^e^{still c}^l^a^sse^{d a}^s^“^t^ru^c^k^s”^w^{ithin the}ⁱⁿ^d^u^stry^{. T}^h^e^T^o^y^o^ta^RA^V^-^{4 a}ⁿ^{d t}^h^e^Hon^d^a^CR^V^,^a^l^ong^w^{ith For}^d^’s
^Es^c^a^p^e^/^Me^r^c^ur^y^Ma^rⁱ^ne^r^,^a^r^e^the^be^s^t^-^k^now^{n m}^ode^ls^.

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 manufacturers.
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 ¹⁵

million annually in 1995-97. 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 ¹⁶
units. By 2006, it reached 3.7 million, and the annual rate for 2007 was higher. 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 American-produced vehicles was actually smaller than
in 1996.
Figure 2. U.S. Motor Vehicle Production
^{(All C}^a^rs^{and Trucks)}
^Sources:^{Total U.S}^{. production, 199}^0-2⁰⁰^{6 from}^{Ward’s Motor Ve}^{hicle Facts & Figures}⁽²⁰^07);other^{data through}
²⁰⁰^{6 f}^rom^{Ward’s Auto}^{motive Yea}^rbooks^.
^{* Annual rate}^{(U.S., Canada—January-Octobe}^{r; Me}^{xico—Januar}^{y-September).}
^**^{UAW total}^{includes all assemb}^{ly plants operated}^{by t}^{he Detroit Big Three, and UAW-organized plants}
^curre^{ntly or originally operated as joint ventures}^betwee^{n t}^{he Big Three and othe}^{r compa}^nies.

¹⁵^Iⁿ^k^e^e^p^ing^w^{ith c}^onv^eⁿ^ti^ona^l^a^u^t^o^m^o^tiv^e^te^r^m^inolog^y^,^U^.^{S. “}ⁱ^m^por^ts^”^do^not^inc^l^ude^v^e^hic^l^e^s^a^s^s^e^m^b^le^{d a}^t^plaⁿ^tsⁱⁿ
^Can^a^d^a^o^r^M^e^xi^co^—al^l^t^h^{e Bi}^{g T}^h^ree,^{as w}^e^l^l^{as al}^l^t^h^{e maj}^o^{r f}^o^rei^gⁿ^OE^M^s^,^h^a^{ve asse}^m^b^l^y^p^l^an^t^sⁱⁿ^on^{e o}^r^b^o^t^h
^c^ountrⁱ^e^s^{. C}^R^S^R^e^p^o^r^t^R^L³²⁸⁸^3,^U.^S^.^A^u^t^o^m^o^tⁱ^{ve Ind}^u^s^t^r^{y: R}^ecen^t^Hi^st^o^r^{y a}ⁿ^d^Issu^es^,^by^Ste^phe^{n C}^oone^y^a^{nd B}^r^eⁿ^t
^D^.^Y^a^c^obuc^cⁱ^{, e}^s^p.^A^ppx^{. 1, m}^e^a^s^ur^e^s^the^rⁱ^sⁱ^ng^tr^e^nd^of^v^e^hic^l^e^s^m^a^nuf^a^c^t^ur^e^d^{in s}^u^c^h^p^l^aⁿ^ts^.
¹⁶^CRS^h^a^{s exam}ⁱⁿ^ed^t^h^{e i}ⁿ^{crease fro}^m^Jap^aⁿⁱⁿ²⁰⁰⁶^,^and^con^c^l^u^d^e^d^t^h^at^t^h^e^p^rⁱ^m^ar^y^c^a^u^s^e^w^a^{s an}ⁱⁿ^{crease i}ⁿ
^co^m^p^act^an^d^su^b^c^o^m^p^act^vehⁱ^cl^es^so^l^dⁱⁿ^t^h^{e U.}^S^.^m^a^rk^etⁱⁿ^t^h^{e f}^{ace o}^f^ri^siⁿ^g^gaso^lⁱⁿ^{e p}^rⁱ^ces;^CRS^R^e^p^o^r^t^RS²²⁶²⁰^,
^T^h^{e 20}⁰⁶^In^crea^{se i}ⁿ^U.^S.^Mo^t^o^r^V^e^hⁱ^cl^{e Imp}^o^r^t^s^f^r^o^m^Jap^aⁿ^{, by}^S^t^e^phe^{n C}^o^oⁿ^e^y^.

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 ¹⁷
beginning of the 1990s. However, of this output in 1990, 89% was produced by the Detroit Big
Three—8.1 million units directly, and another half-million in three joint venture plants operated ¹⁸
by Japanese-owned firms in association with the Big Three, and also organized by the UAW.
About 1 million units in that year were produced by foreign OEMs in the United States. All were
Japanese-owned, 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, UAW-built 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 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

¹⁷^T^o^ta^{ls f}^o^r^Fⁱ^g^u^{re 2}^inc^l^u^d^e^m^e^dium^a^{nd he}^a^v^y^truc^k^s^{, but t}^h^e^s^e^a^r^e^le^{ss tha}ⁿ^a^ha^lf^-m^{illion u}ⁿ^{its a}ⁿ^nua^lly^{, a}^{nd d}^o
^{not a}^lte^r^the^tr^eⁿ^dsⁱⁿ^t^h^e^fⁱ^g^u^r^e^{, w}^h^ic^{h e}^s^s^e^ntia^ll^y^r^e^f^l^e^c^t^lig^{ht v}^e^hic^l^e^out^put^.
¹⁸^T^h^e^thr^e^e^plaⁿ^ts^w^e^r^e^G^M^-^T^o^y^ota⁽^F^r^e^m^{ont, C}^A⁾^,^k^now^{n by}^the^ac^r^ony^m^of^N^U^MMI⁽^N^ew^Uⁿ^ite^{d Motor}
^M^aⁿ^u^f^actu^rⁱⁿ^g^In^c.);^th^{e F}^o^rd^-^M^azd^{a “A}^u^t^o^A^llian^{ce” p}^l^an^{t in}^Flat^Ro^ck^{, M}^I^{; an}^d^,^t^h^{e Ch}^ry^sler-M^itsu^bⁱ^shⁱ
^“^D^iam^ondSta^r”^plaⁿ^{t i}ⁿ^N^o^rm^a^l^{, IL}^{. A}^{ll a}^r^e^s^{till ope}^ra^ting^,^a^lth^oug^h^Chry^s^l^e^r^ha^s^droppe^{d o}^u^t^of^its^j.^v^.^w^ith
^Mitsub^ishi.

around 5.5 million units in 2008, could resume its upward climb thereafter, to about 6.5 million ¹⁹
units by 2012.
Figure 3 and Figure 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 ²⁰
trailers (NAICS 3362), and automotive parts (NAICS 3363). 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.
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. ²¹
auto industry employs nearly 25% fewer factory workers today than it did in 2000.” 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.

¹⁹^G^l^oba^{l Insig}^h^t.^Aut^o^W^e^bc^as^t^,^pp^{. 33}^{, 4}⁰^-^41.
²⁰^Dat^a^o^r^ganⁱ^zed^uⁿ^d^e^{r t}^h^{e NA}^ICS^syst^e^m^h^a^{s b}^een^recal^cu^l^a^t^e^d^t^o^c^o^{ver t}^h^{e en}^tⁱ^r^e^p^e^ri^o^d^.
²¹^Au^t^o^mo^{tive News}^{, “}^Eⁿ^d^aⁿ^g^e^r^e^d^Spe^cⁱ^e^s^{: Fa}^c^t^or^y^J^obs^”⁽^N^ov^em^ber²⁶^{, 2}⁰⁰⁷⁾^,^p.^1.

Figure 3. U.S. Motor Vehicle Industry Manufacturing Employment
^Source:^{U.S. Dept. of Labor. Bureau of La}^{bor Statistics. “National Employment, Hour}^{s and}^Earning^s”
^{(November 13,}²⁰⁰^7).
^{* Annual rate.}
Figure 4. Employment Trends, Motor Vehicle and General Manufacturing
^Source:^{As for}^Figu^{re 3}^.
^{* Annual rate.}

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.
There are a number of reasons why auto manufacturing employment patterns may have differed
from those of industry in general.
• 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, ²²
then a subsidiary of a German company. This number has continued to grow,
despite the overall automotive employment decline since 2000.
• 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 ²³
jobs ...”
• 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

²²^C^R^S^R^e^por^{t R}^L³²⁸⁸³^,^U.^S^.^A^u^t^o^mo^tⁱ^{ve In}^du^st^{ry: R}^ecen^t^Hi^st^o^r^y^an^d^Issu^es^,^by^Ste^phe^{n C}^o^oⁿ^e^y^aⁿ^{d B}^r^eⁿ^{t D}^.
^Y^a^c^obuc^c^{i; p}^p^.^31-³³^pr^e^s^eⁿ^{t t}^h^is^c^a^l^c^u^la^tion,^ba^s^e^d^{on U}^.^{S. C}^o^m^m^e^r^c^e^D^e^{pt. f}^o^r^e^ig^{n inv}^e^s^t^m^e^{nt da}^ta^.
²³^Cen^t^{er f}^o^{r A}^u^t^o^m^o^tⁱ^v^{e Res}^earch^(CA^R^).^T^h^{e B}ⁱ^g^L^e^a^{ve: T}^h^{e F}^u^t^u^r^e^o^f^Mi^chⁱ^g^aⁿ^’^s^A^u^t^o^mo^tⁱ^{ve I}ⁿ^du^st^ry^{, pre}^s^eⁿ^ta^tioⁿ
^by^Se^aⁿ^Mc^A^linde^{n to R}^S^Q^E^Ec^o^nom^ic^O^u^tlook^C^onf^e^r^eⁿ^c^e⁽^N^ov^em^be^r^{15, 2}⁰⁰⁷⁾^,^p.^23.^A^s^p^e^cⁱ^a^{list in t}^h^e^s^u^ppl^ie^r
ⁱⁿ^du^st^ry^f^o^recast^s^t^h^at^“h^al^f^o^f^t^h^e^estⁱ^m^at^ed⁵^,²⁰^{0 su}^pp^lⁱ^e^rsⁱⁿ^t^h^{e Un}ⁱ^t^e^d^S^t^at^{es are exp}^ect^ed^t^o^dⁱ^sa^p^p^{ear o}^v^{er t}^h^e
^ne^x^t^fⁱ^v^e^y^e^a^r^s^{... A}^bout^one^-t^hir^d^w^{ill lik}^e^l^y^fⁱ^{nd ne}^w^buy^e^r^s^,^a^{nd t}^h^e^re^s^t^w^{ill g}^o^out^of^busⁱⁿ^e^s^s^.^”^De^{troit Fre}^e^Pre^s^s^,
^“^C^om^pone^{nt C}^r^is^is^:^Su^pplie^r^s^D^wⁱ^ndling^”⁽^N^ov^em^be^r^28,²⁰⁰⁷⁾^.

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 ²⁴
sharing the loss.” 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 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 ²⁵
new hires to get less in pay or benefits, the number is sure to grow soon.”
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.

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

²⁴^P^r^of^{. J}^a^m^e^s^R^ube^ns^te^in,^q^uote^dⁱⁿ^Au^tomo^tiv^e^Ne^ws^{, “}^E^nda^ng^e^r^e^d^Spe^cⁱ^e^s^...^,”^p.³⁴^.
²⁵^De^{troit Fre}^e^Pre^s^s^{, “}¹⁵⁰^,0^{00 C}^u^t^s^Eno^u^g^h^?^”⁽^N^ov^e^m^be^r^{5, 20}⁰⁷⁾^.

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 ²⁶
customers nationwide. Sean McAlinden of the Center for Automotive Research has described ²⁷
this as “the retreat to the core ... Michigan as the Alamo!”
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 ²⁸
continues to bring with it a substantial number of new automotive supplier plants.
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 ²⁹
Labor Statistics (BLS) in NAICS 3361-62-63. 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
Alabama).
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 persons working in the industry or at least one light motor vehicle assembly plant. Excluded

²⁶^C^R^S^R^e^por^{t R}^L³²⁸⁸³^,^U.^S^.^A^u^t^o^mo^tⁱ^{ve In}^du^st^{ry: R}^ecen^t^Hi^st^o^r^y^an^d^Issu^es^,^by^Ste^phe^{n C}^o^oⁿ^e^y^aⁿ^{d B}^r^eⁿ^{t D}^.
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^Chⁱ^cago^.
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^and^I^s^s^u^e^s^{, by}^Ste^pheⁿ^C^o^one^y^{and B}^r^eⁿ^{t D}^.^Y^a^c^o^b^u^c^cⁱ^{, p}^p^.³⁵^-³⁶^.
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^a^s^s^e^m^b^l^y^plaⁿ^ts⁽^N^A^I^C^S³³⁶¹⁾^f^o^r^a^{ll s}^t^a^t^e^s^{, b}^ecau^{se o}^f^f^e^d^e^ral^d^a^t^a^dⁱ^scl^o^su^{re r}^u^l^e^s.^T^o^t^a^l^s^f^o^{r st}^at^{es t}^h^at^h^a^d^on^{e o}^r
^tw^{o lig}^{ht v}^e^hic^l^e^a^s^s^e^m^b^l^y^plaⁿ^ts^w^e^r^e^c^o^m^p^le^te^{d by}^inf^o^r^m^a^{tion s}^upp^lie^{d t}^o^C^R^S^by^the^O^E^Ms^t^h^e^m^s^e^lv^es^.

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.
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 ³⁰
unalloyed negative development for Michigan. 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 2000-06 was accounted for by ³¹
the net loss of jobs in Michigan.

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^{in t}^h^e^sta^t^e^,^w^h^ic^{h it a}ⁿ^no^unc^e^d^w^{ill be}^m^o^v^e^{d to}^Vⁱ^rgⁱⁿ^ia^{. A}^l^{so, f}^o^re^ig^n-ow^ne^{d a}^u^to^pa^{rts su}^pplie^rs^ha^v^e^num^e^r^ous
^ope^ra^tio^{ns in}^the^sta^t^e^.
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Figure 5. U.S. Motor Vehicle Manufacturing Employment by State

ⁱ^{ki/CRS-RL34297}
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Table 1. Motor Vehicle Manufacturing States
^{Heartland Auto Belt}
^Employment^{Chg. fr.}^{Chg. fr.}^{% of}^{% of}^{Rel. to}
⁽²⁰⁰⁶⁾²⁰⁰⁰¹⁹⁹⁰^US^State^US
^(Thousa^nds)^Total^Mfg.^Avg.^(=1.0)
^Michigan^{214 -116}^-83^20.1^32.9^4.4
^Ohio^{127 -37}^-22^11.9^16.0^2.1
^Indiana^{124 -15}⁷^11.7^21.9^2.9
^{Other Leading Auto}^Manuf^a^{cturing States}
^Tennessee^{54 -5}¹⁸^5.1^13.5^1.8
^Kentucky^{53 -2}²⁵^5.0^20.3^2.7
^Illinois^{39 -9}^-2^3.7^5.8^0.8
^California^{39 -7}^-6^3.7^2.6^0.3
^Texas^{35 0}⁹^3.3^3.8^0.5
^Alabama^{35 15}¹⁹^3.3^11.6^1.5
^Missouri^{32 -6}⁰^3.0^10.6^1.4
^{Other Auto Man}^ufa^{cturing S}^tates^a
^{N. Carolina}^{28 -5}⁴^2.6^5.1^0.7
^{S. Carolina}^{25 1}¹²^2.4^9.9^1.3
^{New York}^{24 -11}^-18^2.3^4.2^0.6
^Wisconsin^{22 -9}^-9^2.0^4.3^0.6
^Georgia^{21 -4}¹^2.0^4.7^0.6
^Mississippi^{13 1}⁰^1.2^7.4^1.0
^Virginia^{13 -1}³^1.2^4.4^0.6
^Kansas^{9 -1}^-2^0.8^4.7^0.6
^Minnesota^{7 -3}^-1^0.6^2.0^0.3
^Louisiana^{5 0}¹^0.4^3.1^0.4
^Delaware^{3 -2}^-1^0.3^10.1^1.3
^{U.S. TOTAL}^1,06⁴^-251^-54^100.⁰^7.5^1.0
^Sources:^Depart^{ment of}^Labor.^{Bureau of}^{Labor Statistics. “Quar}^{terly Census}^{of Em}^{ployment a}^nd^{Wages” for}
^{state data; U.S. tota}^{ls from “National Employment, Hou}^{rs and}^Ear^nings.”
^a.^{More tha}^{n 2}^0,00^{0 motor ve}^{hicle manufa}^cturing^{jobs, or at least one assembly}^{plant in}²⁰^06.
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 ³²
the national average of 4.7%.
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 in 2007.
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.
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

³²^D^e^{pt. of}^L^a^bor^{, B}^L^{S. “}^U^ne^m^p^lo^y^m^eⁿ^{t R}^a^te^s^b^y^Sta^t^e^,^”^m^a^{p a}^{nd t}^a^ble⁽^D^e^c^e^m^b^e^r^{5, 20}⁰⁷⁾^.

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 quotient.
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%.

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 ³³
workers “who assemble or make parts for these vehicles.” Therefore, it was argued that a
statutory “anti-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 ³⁴
manufacture at domestic plants.
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 ³⁵
to sharp increases in gasoline prices. 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, ³⁶
it is widely believed that it cannot be profitable to do so.
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
Yearboook 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

³³^{U.S. Ho}^use^.^Com^m^itte^e^{on Ene}^r^gy^a^{nd Com}^m^e^r^c^e^,^Subc^om^m^itte^e^on^Ene^r^g^y^a^{nd A}ⁱ^{r Qua}^lit^y^.^H^e^ar^{ing on}
^Alte^rnativ^e^F^u^e^l^{s, In}^fr^as^tr^uc^tur^e^,^and^Ve^hic^l^e^s⁽^J^uⁿ^e^7,²⁰⁰⁷⁾^.^T^e^s^tim^on^y^of^A^l^aⁿ^R^e^uthe^r^,^L^e^gⁱ^s^l^a^tive^Dⁱ^r^e^c^t^or^—
^U^A^W^{, p. 2.}^Mor^e^f^r^e^que^ntly^c^ite^{d is}^the^U^A^W^c^{ount of}^“¹⁷^,⁰^{00 s}^m^a^{ll c}^a^r^pr^od^uc^ti^{on j}^obsⁱⁿ^the^Uⁿⁱ^t^e^{d Sta}^t^e^s^.”^Se^e^,
^f^o^{r exa}^m^p^l^e,^De^{troit Ne}^ws⁽^d^e^tⁿ^ews.^co^m^),^“A^u^t^o^Ind^u^s^t^r^y^Back^{s CA}^F^E^Deal^{” (D}^ece^m^b^{er 2}^,²⁰⁰⁷⁾^.^Ta^b^l^{e 2}^be^low
^pr^ov^ide^s^da^ta^on^e^m^ploy^m^e^{nt a}^t^indivⁱ^d^u^a^l^a^s^s^e^m^b^l^y^plaⁿ^ts^.
³⁴^T^h^e^aⁿ^ti-^ba^c^k^s^liding^pr^ov^is^io^{n, a}^t^§1⁰²⁽^b)⁽⁴⁾^,^r^e^q^u^ir^e^s^tha^t^pr^o^duc^e^r^s^of^“^dom^es^tic^a^l^l^y^m^a^nuf^a^c^t^ur^ed”^c^a^r^s^m^u^s^t
^m^a^inta^{in a}^f^l^e^e^t^f^u^e^l^e^c^onom^y^a^v^er^a^g^e^f^o^r^s^u^c^h^v^e^hic^l^e^s^of^e^ithe^r⁹²^%^of^the^s^t^a^nda^r^d^f^o^r^c^a^r^s^,^or^a^t^le^a^s^{t 27.}^{5 m}^p^g^,^a^s
^cu^rren^tly^req^uⁱ^red^f^o^{r cars.}
³⁵^C^R^S^R^e^por^{t R}^S²²⁶²^0,^T^h^{e 20}⁰⁶^In^crea^{se i}ⁿ^U.^S.^Mo^t^o^{r V}^e^hⁱ^cl^{e I}^m^p^o^r^t^s^f^r^o^m^J^a^paⁿ^,^by^Ste^phe^{n C}^oone^y^.
³⁶^De^{troit Ne}^ws⁽^d^e^tⁿ^ews.^co^m⁾^,^“^S^u^b^c^o^m^p^a^c^t^Sa^le^s^B^oom^”⁽^D^ec^em^b^e^r^10,²⁰⁰⁷⁾^.

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 future.
For both domestic and foreign OEMs, assembly plants producing small, fuel-efficient vehicles in
the United States have declined in number and as a share of total plants operated since the 1985-

90 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.
• 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 ³⁷
States appear to be still following the 1970s dictum of Henry Ford II, “minicar, miniprofit.”

³⁷^Q^uote^dⁱⁿ^D^oug^la^s^B^rⁱⁿ^k^l^ey^,^Wh^{eels fo}^{r th}^{e Wo}^rld⁽^N^e^w^Y^o^r^k^{: P}^e^ng^{uin B}^ook^s^,²⁰⁰³⁾^,^p.⁶^66.^Oⁿ^t^h^e^s^a^m^e^pa^g^e^a
^C^h^r^y^s^l^e^r^ex^e^c^u^tiv^e^f^r^o^m^the^s^a^m^e^e^r^a^is^qu^ote^d^a^s^s^a^yⁱ^ng^{, “}^E^v^e^{n if}^w^e^don’^{t be}^lie^v^e^{in s}^m^a^{ll c}^a^r^s^,^w^e^ha^v^e^{to b}^u^il^d
^t^h^em^.^T^h^ere’^{s a l}^a^w^.^”

Table 2. Four Decades of U.S. Small Car Manufacturing
^{(numbers of plants)}
¹⁹⁷⁵¹⁹⁸^{5 199}^{0 199}⁵²⁰⁰^{0 200}⁵²⁰⁰⁷
^A^B^{A B}^{A B}^{A B}^{A B}^{A B}^{A B}
^UAW-^Orga^nized:
^General^Motors³¹¹^{29 4}^{27 2}^{22 3}^{23 2}^{24 2}^{23 1}
^Ford²²²^{15 2}^{15 2}^{16 1}^{15 1}^{18 1}^{14 1}
^Chrysler^a¹¹¹^{9 1}^{7 0}^{11 1}^{9 1}^{11 1}^{11 1}
^{Foreign-owned}^b^{3 2}^{4 1}^{4 1}^{4 1}^{5 1}^{5 1}
^{Total UAW}^c⁶⁶⁴^{56 9}^{53 5}^{53 6}^{51 5}^{58 5}^{53 4}

^d⁰⁰^{3 1}^{8 4}^{9 3}^{11 2}^{17 2}^{18 2}
ⁱ^{ki/CRS-RL34297}^Non-UA^W
^g/w^Source:^Op^{erating plants}^from^A^{utomotive N}^{ews Market Data Book}^{, various years. Small cars are defi}^{ned as cars}^{in the}^su^{bcompact or}^{compact classes}^by^{Ward’s Automotive}
^s^.or^Yearbook^{, and/or the E}^nvironmeⁿ^{tal Protection Agency (EPA).}
^le^ak^Notes:^{Light vehicles include pas}^{senger ca}^{rs and light tr}^{ucks, t}^{he latter including pick}^{ups, minivans}^{and SUVs. Smal}^{l cars are as list}^{ed in}^{Table 2}^{. Small cars may be th}^{e sole}
^{product of a}ⁿ^assem^{bly plant or}^{one of several lines of light vehicl}^{es produced in a}ⁿ^asse^{mbly plant.}^{For the p}^u^r^{poses of this}^ta^{ble, any plant}^that^{has a}ⁿ^assem^{bly line}
^://wiki^{devoted solely to smal}^{l cars is defined as one plant. I}^f^a^{plant p}^{roduces small cars as}^{well as other light vehicles, the s}^mall^{car assem}^b^{ly line is counted as one pla}^{nt an}^{d all}
^h^ttp^{other light vehicle lines are cou}^nt^{ed as another}^{plant. For exam}^{ple, New United Motor Ma}^nu^factu^{ring In}^{c. (NUMMI) of F}^{remont, CA}^{, a UAW-organized j}^{oint venture}
^between^GM^{and Toyota operate}^{d by Toyota, produces small cars}^{(Toyota Coro}^lla/^{Pontiac Vibe) o}ⁿ^{one asse}^{mbly line and a light tr}^{uck (Toyota Tacoma pickup tr}^uc^{k) on}
^{the other. I}ⁿ^{this ta}^{ble, NUMM}^{I is counted as two}^plants.
^{A: Total Light Vehicle Assembly Plants. B: Smal}^{l Car Plants}
^a.^{Chrysler includes}^{statistics for A}^{merican Motors w}^{hich Ch}^rysler^{acquired in}¹⁹^87.
^b.^{Volkswagen, NUMMI, Diamond-S}^{tar (Chrysler-Mits}^{ubishi), Auto Alliance (Ford-Maz}^da).
^c.^{Includes Ch}^ecker^{Motors (closed 19}^{82) a}^{nd Inte}^{rnational Harvest}^{er (light trucks a}^{nd SUVs; closed 198}^{0). Neither}^compan^{y p}^roduce^{d small cars.}
^d.^{Honda, Nissan, Toyota, BMW, S}^ubar^u-Isuz^{u, Mercedes-Benz, Hy}^u^{ndai, Kia}^.

Table 3. Identification of Small Cars by Manufacturer
^{(as defined for}^T^a^{ble 2}⁾
^UAW-^Orga^{nized Plants:}^Non-UA^{W Plants:}
^{General Motors}^a^Honda^a
^{Chevrolet Cobalt/Pontiac G5}^Civic
^{Chevrolet Vega}
^{Chevrolet Chevette}
^{Chevrolet Cavalier}
^{Saturn SC, SL, and SW}
^{Saturn Ion}
^Ford^a^Nissan
^{Ford Focus}^Sentra
^Pinto^{(production moved from United}^{States to Mexico in 1}⁹⁹⁹⁾
^Escort
^Chrysler^Subaru
^{Dodge Cal}^iber^a^Legacy^a
^{AMC Gremlin (ac}^{quired f}^{rom American Motors)}
^{Dodge Omni/Plymouth Horizon}
^{Dodge Neon}
^Volkswagen⁽¹⁹⁷^8-19⁸⁸⁾
^Rabbit/Golf
^NUMMI^(T^oyota/GM)
^{Toyota Coro}^lla^a^a
^{Pontiac Vibe}
^{Chevrolet Nova}
^{Geo Prizm}
^{Chevrolet Prizm}
^{Toyota Vo}^{ltz (export only)}
^Source:^{As for}^T^{able 2}^.
^Note:^{Many vehicles were}^{sold i}ⁿ^{multiple versions}^unde^{r differe}^{nt name}^{plates (e.g., Chevy Cavalier, Pontiac}
^{Sunbird, Cadillac Cimarron). This}^{table lists only the most widely sold version.}
^a.^{Vehicle still}^{in production in Unit}^{ed States.}
Table 4. U.S. Small Car Manufacturing Assembly Operations
^{(as of September 2007)}
²⁰⁰^{7 Assembly}^Anno^{unced Plan}^or
^Location^Operation^Commitment
^UAW-^Orga^{nized Plants}
^{General Motors}^{Lordstown, Ohio}^{Chevrolet Cobalt}^{Alpha vehicle, 20}¹¹
^{Pontiac G5}^{(compact rear-wh}^{eel drive)}
^Ford^{Wayne Assem}^bly^{Ford Focus}^{Continue p}^roduction
^{Wayne, Michigan}
^Chrysler^{Belvidere, Il}^linois^{Dodge Cal}^iber^{Continue p}^roduction
^NUMMI^{Fremont, California}^{Toyota Coro}^lla^{Continue p}^roduction

^{Pontiac Vibe}

²⁰⁰^{7 Assembly}^Anno^{unced Plan}^or
^Location^Operation^Commitment
^Non-UA^W
^Plants
^Honda^{East Libert}^{y, Ohio}^{Honda Civic}^{Continue p}^roduction
^Green^sb^urg,^{(under const}^ruction)^{Begin Civic production 20}¹⁰
^Indiana
^Subaru^{Lafayette, Indiana}^Subaru^Legacy^{Continue p}^roduction
^Sources:^Autom^{otive News}^{, va}^{rious dates; Global In}^sight.^{North Am}^{erican Light Vehicle Ind}^{ustry Forecas}^{t Report}^,
^{various dates. GM data also from}^{UAW GM Re}^port^{on G}^M^plantⁱⁿ^{vestment commitme}^{nts f}^{rom Sep}^{t. 200}⁷
^{contract agreem}^{ent, not}^pu^{blicly confirmed by}^Gene^{ral Motors.}

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 ³⁸
customers in retail sales).

³⁸^T^h^e^s^e^is^s^u^e^s^a^r^e^dis^c^us^s^e^{d in C}^R^{S R}^e^por^t^R^L³²⁸⁸³^,^U^.^S^.^A^u^tom^o^tⁱ^v^e^I^ndus^tr^y^:^R^ecen^t^Hi^st^o^r^{y an}^d^I^ssu^es^{, by}
^Ste^pheⁿ^C^o^one^y^a^{nd B}^r^eⁿ^{t D}^.^Y^a^c^obuc^cⁱ^,^pp^{. 4}³^-⁴^{6; a}ⁿ^{d C}^R^S^R^e^p^o^r^t^R^L³³¹⁶^9,^C^o^m^parⁱⁿ^g^Aut^o^m^o^tiv^e^and^Ste^e^l
^In^du^{stry L}^e^g^a^{cy Co}^st^Issu^es^{, by}^Ste^phe^{n C}^o^oⁿ^e^y^{, pp. 1-}^6.^Se^aⁿ^Mc^A^linde^{n of}^C^A^R^s^u^m^m^a^r^ize^s^the^im^pa^c^t^on
^co^m^p^an^y^m^aⁿ^a^ge^men^tⁱⁿ^The^Bi^g^Le^av^e^{, p.}^9.

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.
• 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. factories.
• 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% positive
vote.

• 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 close.
• November 14: UAW contract with Ford ratified by an 81% positive vote, ³⁹
completing the negotiation process.
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 ⁴⁰
company whose management was in transition, with respect to both structure and personnel.
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 ⁴¹
maintaining current production facilities insofar as possible was the key union goal.
The following analysis summarizes the changes in the UAW contract reached in these collective ⁴²
bargaining agreements.

³⁹^B^a^s^e^{d on}^De^tro^{it Ne}^ws⁽^d^e^tⁿ^ews.^co^m⁾^,^“^Tⁱ^m^e^line^:^T^h^e^R^o^a^d^{to R}^a^tif^ic^a^tion”⁽^N^ov^em^be^r^16,²⁰⁰⁷⁾^;^a^l^s^o^,^ibi^d^.^,^“New
^Er^a^B^e^gⁱ^ns^f^o^r^Bⁱ^g^3”⁽^N^ov^em^be^r^15,²⁰⁰⁷⁾^.
⁴⁰^Fa^ilure^of^Daⁱ^m^le^rChr^y^s^le^r^m^a^na^g^e^m^e^{nt to g}^a^{in si}^mⁱ^l^a^{r h}^eal^t^h^{care “gi}^v^eb^ac^ks”^f^r^o^m^t^h^{e UAW}^(coⁿ^t^ract
^m^odifⁱ^c^a^{tions) to}^th^ose^a^g^re^e^d^wⁱ^{th F}^o^{rd a}^{nd G}^Mⁱⁿ²⁰⁰⁶^is^sa^id^to^ha^v^e^be^eⁿ^oⁿ^e^of^the^m^o^tiv^a^ting^f^a^c^t^{ors in t}^h^e
^de^cⁱ^sⁱ^{on t}^o^s^e^{ll t}^h^e^C^h^r^y^s^l^e^r^G^r^oup.^A^u^tom^o^tiv^e^Ne^ws^{, “}^D^C^X^B^o^a^r^{d C}^h^ie^f^Aⁱ^m^s^{to U}^ndo^Sc^hr^e^m^pp^L^e^g^a^cy^”⁽^A^pr^{il 2,}
²⁰⁰⁷⁾^,^p.^3.
⁴¹^S^{ee t}^h^{e sect}ⁱ^o^{n on}^F^o^rdⁱⁿ^a^De^tr^{oit Ne}^ws^“sp^eci^al^rep^o^r^t^”⁽^d^e^tⁿ^ew^s.^co^m^),^“Hi^s^t^o^ri^{c UA}^W^Coⁿ^t^ract^{s F}^o^rged^f^r^o^m
^Aⁿ^g^r^y^W^o^{rds, Pic}^k^e^t^Lⁱ^ne^{s, Ha}^rs^{h Re}^a^lity^”^(Nov^e^m^b^e^{r 16,}²⁰⁰⁷⁾^.
⁴²^W^h^ile^the^r^e^a^r^e^m^aⁿ^y^pr^e^s^s^s^our^c^e^s^a^{nd a}^c^c^ounts^of^the^s^e^ne^g^o^tia^ti^ons^aⁿ^{d a}^g^r^e^em^eⁿ^ts^{, the}^be^s^t^s^u^m^m^a^r^y^of^the^fⁱ^na^l
^d^eal^{s are i}ⁿ^M^c^A^lⁱⁿ^d^eⁿ^,^The^{Big Le}^av^e^{, pp}^{. 1}⁵^-²^0,^47-⁴⁹^{. C}^o^m^p^le^t^e^s^u^m^m^a^rⁱ^e^s^a^r^e^pr^ov^ide^dⁱⁿ^the^f^o^llowⁱ^ng
^doc^um^eⁿ^ts^:^{UAW GM Rep}^o^r^t⁽^S^e^p^te^m^b^e^r²⁰⁰⁷⁾^;^UAW^Ch^{rysler Newsg}^r^a^m⁽^O^c^t^obe^r²⁰⁰⁷⁾^;^U^A^W^{Ford Re}^p^o^rt
⁽^N^ov^em^be^r²⁰⁰⁷⁾^.

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 ⁴³
by the UAW (a “Voluntary Employees’ Beneficiary Association,” or VEBA). 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 ⁴⁴
higher than expected. 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 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.
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 UAW-administered VEBA, not by the companies. Thus, the
UAW will be responsible for any adjustments in coverage necessitated by any future shortfalls in
VEBA resources.

⁴³^For^de^ta^ils^oⁿ^t^h^e^le^gⁱ^s^l^a^tiv^e^ba^c^k^g^r^ound^of^VEB^A^s^,^s^e^e^C^R^S^R^e^por^{t R}^L³³⁵⁰^5,^T^a^x^Be^ne^fits^{for He}^alth^Insur^anc^e
^and^Ex^pe^ns^e^s^:^O^v^e^r^vⁱ^e^w^{of C}^u^r^r^e^{nt L}^a^w^aⁿ^d^Le^gis^l^ati^oⁿ^,^by^{Bob L}^y^k^e^a^{nd Julie}^{M. W}^h^itta^k^e^r.
⁴⁴^A^s^su^mmari^zedⁱⁿ^Fi^na^nc^{ial Tim}^e^s⁽^FT.c^om⁾^,^“^U^A^W^C^{ould H}^o^l^d^T^{op G}^M^Sta^k^e^”⁽^O^c^t^obe^r^{1, 2}⁰⁰⁷⁾^.

“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. ⁴⁵
They will not receive defined pension benefit.”
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.
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 an estimated increase in GM North American production of about 500,000
vehicles per year by 2011, he projects a savings of $981 per car in labor costs, and $676 in retiree ⁴⁶
health cost savings.
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

⁴⁵^Q^uote^d^f^r^om^McA^linde^n,^T^h^e^Bi^{g Le}^av^e^{, p. 17.}
⁴⁶^P^a^y^an^d^servi^{ce e}^s^tⁱ^m^a^t^e^{s ar}^{e f}^r^o^m^ibid.^{, p}^p^.^18-¹⁹^{; G}^M^s^a^vⁱ^ng^s^pe^r^v^e^hic^l^e^{on p}^.²¹^{. A}^not^he^r^a^c^c^{ount c}^o^m^p^a^r^ing
^G^M^w^{ith T}^o^y^o^ta^e^s^tim^a^t^e^s^tha^t^to^ta^{l a}^v^e^r^ag^e^hour^ly^c^o^s^t^s^a^vⁱ^ng^s^w^oul^{d br}^ing^G^M^dow^{n to}^a^b^o^u^t^$5^{0 pe}^r^ho^ur^,
^c^o^m^p^a^r^e^d^{to T}^o^y^o^ta^’^s^c^o^s^t^of^$47^pe^r^h^our^;^De^{troit Fre}^e^Pre^s^s^,^“Ho^w^Deal^Can^P^u^l^l^G^M^E^v^en^wⁱ^t^h^T^o^y^o^t^{a” (Oct}^o^b^e^r
²^,²⁰⁰⁷⁾^.

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 ⁴⁷
expected to drop to 150,000” by 2010. Thus, it was important for the UAW as an organization, ⁴⁸
as well as its current workforce, to secure such guarantees going forward.
• 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 ⁴⁹
be technologically speculative. 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 ⁵⁰

be shut.
• 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 ⁵¹
more than $15 billion in potential investments.” 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 ⁵²
Detroit-area plant, slated for closure after that. In a more favorable analysis,
McAlinden states Chrysler promised to “continue and/or expand production at 6 ⁵³
assembly, 4 stamping and 8 powertrain plants,” and “reversed 4 closures.”
• 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. Paul) was confirmed, though a year later than originally announced ⁵⁴
along with the closure of a casting plant and a transmission plant.

⁴⁷^Bu^sin^e^{ss Week}^,^“L^ab^o^{r’s Ne}^w^R^o^l^l^o^f^t^h^{e Di}^{ce” (Dece}^m^b^{er 2}⁴^,²⁰⁰⁷⁾^,^p^.³⁷^.
⁴⁸^T^h^e^f^o^llowⁱ^ng^s^u^m^m^a^r^y^is^ba^s^e^d^on^pr^e^s^s^r^e^por^ts^,^inc^l^udi^ng^c^o^m^m^e^nta^r^y^{on ba}^s^e^{d o}ⁿ^p^ubl^ic^ly^cⁱ^r^c^ul^a^t^e^d^U^A^W
^doc^um^eⁿ^ts^.
⁴⁹^T^h^e^f^u^{ll list is a}^t^{UAW GM Rep}^o^rt^{, p.}¹¹^{. Se}^e^,^a^m^ong^m^aⁿ^y^othe^r^aⁿ^a^l^y^s^e^s^,^De^{troit Fre}^e^Pre^s^s^,^“U^AW^Coⁿ^t^ract^:
^{Nuts a}ⁿ^d^Bolts”^(Se^p^te^m^b^e^r^29,²⁰⁰⁷^).
⁵⁰^G^l^oba^{l Insig}^h^t.^Aut^o^W^e^bc^as^t^{, p. 44.}
⁵¹^De^{troit Fre}^e^Pre^s^s^{, “}^T^oug^{h U}^A^W^Vote^”⁽^O^c^t^obe^r²⁸^{, 2}⁰⁰⁷⁾^.
⁵²^UAW^Ch^{rysler Newsg}^r^a^m^{, p.}¹⁴^.
⁵³^Mc^A^linde^n,^T^h^e^Bi^{g Le}^av^e^{, p. 49}^.
⁵⁴^Ib^id^.^{, a}ⁿ^d^U^A^W^F^o^r^d^Re^por^t^{, pp}^.^3-⁵^.

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 ⁵⁵
committed to moratoria on future outsourcing.
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 ⁵⁶
virtually permanent large Canadian automotive trade surplus. 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, ⁵⁷
while Michigan will gain 100,000 units. 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 ⁵⁸
sedans on an aging platform.

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 ⁵⁹
doesn’t remotely ensure success—that requires the right models and the right strategic vision.”
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

⁵⁵^Mc^A^linde^n,^T^h^e^Bi^{g Le}^av^e^{, p. 49}^.
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⁵⁸^Ib^id^.^{, “}^F^{ord W}^{ill C}^l^ose^Onta^ri^o^Plaⁿ^t”^(De^c^e^m^b^e^r^10,²⁰^07);^G^l^ob^a^l^Insig^h^t,^A^u^t^o^W^e^bc^as^t^,^p.^44.^T^h^e^la^tte^r^s^our^c^e
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⁵⁹^Q^uote^dⁱⁿ^De^{troit Ne}^ws^,^“New^E^r^{a Begi}ⁿ^s^f^o^{r Bi}^{g 3}^.^”

as a model of how the union-organized segment of the industry can respond to competitive
challenges.
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 investment.
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.
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 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.

Federal fuel economy standards for all light motor vehicles have been made more stringent in ^th⁶⁰
energy legislation approved in the 110 Congress. 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 ⁶¹
a different version with an identical section on automotive fuel economy. To assure passage, the
Senate removed most of the tax provisions. However, the Senate did leave in sufficient tax ⁶²
provisions to offset the federal revenue that would be lost from the auto fuel economy measures.
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 fuel-efficient vehicles, and to issue loan ⁶³
guarantees for parts and battery manufacturers for such vehicles.
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 ^th
introduced in the first session of the 110 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, co-sponsored by Senators
Joseph Lieberman and John Warner, was ordered to be reported by the Senate Environment and ⁶⁴
Public Works Committee in an 11-8 vote on December 5, 2007.

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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 ⁶⁵
is calculated to generate “as much as $40 billion from the sale of emissions permits.”
Another major issue for the automotive industry that may be faced by Congress in the second ^th
session of the 110 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 Korean-based 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 ⁶⁶
explicitly oppose congressional approval of the deal. GM, with a substantial stake in Korean ⁶⁷
manufacturer Daewoo, has remained neutral. 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 contemplated “would exacerbate
the totally one-sided auto trade imbalance between Korea and the U.S. and jeopardize the jobs of ⁶⁸
tens of thousands of American workers.”
BUFFER ZONE: DO NOT DELETE

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^le^tte^{r w}^a^{s s}^e^{nt to a}^ll^Me^m^b^e^r^{s of}^t^h^e^Se^na^te^.

^St^e^p^he^{n Co}^oⁿ^e^y
^Sp^{ecialist i}ⁿ^Iⁿ^d^u^s^tr^{ial Or}^g^aⁿⁱ^zatioⁿ^an^d^B^u^siⁿ^e^ss
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