Why AL Car Makers are Hanging Tough

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As Detroit's Big Three automakers try to stay alive, many foreign automakers in the U.S. are holding their own. Much of their success can be attributed to their location.

Car Country

Alabama is considered by some to be the heart of the south, but to car makers like Mercedes Benz, Honda and Hyundai, Alabama is "Car Country," and the state has rolled out the welcome mat.

"The companies coming in it's been good because the economy's here. We've needed a boost and it's brought in jobs, not only car manufacturers themselves, but the companies that have to supply us with stuff," Hyundai worker Randy Williams explained.

The Hyundai plant located in Montgomery is just one of several foreign automakers wooed here by the state. It is a move that has put thousands of people in Alabama to work.

Neil Wade heads Alabama's Economic Development Office.

He commented, "We have about 130,000 Alabamians employed in the automotive industry. Most of those are in suppliers or in people supporting the automotive industry so the ripple effect, when you bring a Mercedez in and they're going to hire 2,000 direct workers, you can use a multiplier of five or six to one with a number of other jobs that are going to be created."

The Difference a Union Makes

While Chrysler and General Motors wait for billions in government bailout loans, foreign plants like Hyundai and Honda are moving forward.

Why the big difference? Unions - or lack of them.

Wade added, "the assembly plants are not union, but we are a right to work state and what that means is that the workforce in plants makes the decision whether they would be union or they would not be union and that's something that we celebrate is it's the workforce that makes the decision not that a company comes in and forces and says we're going to be union or not."

That means lower wage and benefit costs which add up to big savings for foreign car companies.

Wade went on to say, "I think the Big Three really can learn from the automakers in the Southeast. I think there are a lot of lessons in terms of how they have set up their operations, how they train and also the products that are being produced at these assembly plants."

Money in the Bank, Good Credit

With the U.S. recession hurting sales across the board, production has slowed down somewhat in the foreign car plants, but for the most part, money in the bank and good credit ratings are helping them ride out the storm.

For example, Hyundai's workers - including all benefits - make almost $28 an hour, less than half the typical GM union worker.

That's because GM must cover pension costs for current workers and pay for the needs of its retirees to the tune of more than $37,000 per person per year.  GM has 363,000 retirees.  In America, Huyundai has zero.

On the other hand, Chrysler has stopped all U.S. production for one month, leaving 4,000 union workers without a regular paycheck.

In January, Ford shut down 10 plants for an extra week to save money, and GM is stopping construction of an engine plant in Michigan.

The Big Three's leaders say these moves combined with government help and massive restructuring will make a difference.

Rescue or Reward?

But former Montgomery Mayor Bobby Bright, who helped to bring Hyundai to his city, said any bailout is a big mistake. "I think the bailout is rewarding in my opinion poor management, decades of poor management," said Bright.

Residents in Montgomery gave CBN News their take on why foreign automakers are not asking for a government bailout.

"I would assume it would be because they're not in the financial that those other companies are I believe that to be a good thing," said Montgomery attorney Dean Mooty.

However, many in the foreign auto industry in Alabama want to see the competition succeed.

Hyundi employee Randy Williams said, "We need them to keep producing because losing any of the Big Three would hurt the United States economy too much. We definitely don't need them to go out of business."

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CBN News
Charlene Israel

Charlene Israel

CBN News

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