SMALL-TOWN AUTO PRODUCTION

FORTY YEARS AGO, it seems like a perfect win-win: Locate an auto plant in a relatively isolated area, attract an eager workforce from miles around at bargain labor rates, and even have the states compete with subsidies. It certainly worked for Honda when it established its Marysville, Ohio, facility in 1982. And plenty of other automakers, foreign and domestic, caught onto the idea. 

Ah. But those were simpler times. Rural and small-town America had chronic unemployment. Gasoline was $1.20/gal. and an extended commute to the plant in 1985 was no big deal. There were significant differences between urban and rural costs of living and between northern and southern wages. And there was no Covid.

Today’s Challenges. Here are tidbits about “Small-town Auto Plants Face Challenges Once Hard to Imagine: Finding Workers,” by Larry P. Vellequette, Automotive News, July 24, 2022. He writes, “A weakness has been exposed in that once solid formula.” 

Vellequette says, “Record-high gasoline prices, the lowest unemployment rate in decades, a lingering pandemic and long-term demographic trends have left geographically isolated plants scrambling to find enough workers to fill their assembly lines. Automakers are being forced to raise starting wages on these once-coveted jobs just to stay ahead of other employers such as Amazon warehouses and fast-food franchises, as well as their own nearby suppliers and manufacturers in other industries.”

What’s more, Vellequette says, “The shortage of labor has made it harder for automakers to restock depleted dealer inventories and shown some of the downsides of building factories in far-flung locations.” 

Plus, the tradeoffs of “just-in-time” manufacturing haven’t made matters any easier. And economies of metro versus rural and northern versus southern locales are no longer profoundly different.  

Workers Are Hard to Find. “ ‘We’re looking under rocks for people to go to work right now,’ said Alex Sadler, who specializes in training and development for the economic development arm of the Tennessee Valley Authority and has worked on several automakers’ developments, most recently Ford Motor Co.’s Blue Oval City project.

Vellequette continues, “Just a few years ago, an automaker announcing a factory and thousands of resulting jobs would automatically see a flood of applications and resumes. That’s no longer the case, Sadler said, and automakers and other large employers are having to adjust to attract more talent. One example: helping with transportation to and from work, she said.”

The Old Magic Circle. An automaker would explore demographics within a 60-mile radius of a proposed facility. Ideally, there would be at least a couple significant population centers from which to draw employees. 

Chris Reynolds, Toyota Motor North America’s corporate resource chief said that the economics of small-town plants “don’t work as powerfully as they did, for a couple of reasons.” One is a relative paucity of new sites. He noted  that Toyota’s Huntsville, Alabama, powertrain plant used to “be a significant employer. Now you can throw a stick and you hit [another] significant employer in Huntsville.”

New Worker Spiffs. Alex Sadler observed that companies are having to be creative in getting sufficient bodies into the application pipeline: “You’re starting to see companies look at those barriers to employment, like child care, housing burdens, transportation burdens, shift timing and how can they work to be more flexible in eliminating some of those barriers, so that people have the option to go to work,” she told Vellequette.

Bonuses for relocation, for signing, and for continued employment are among the spiffs. “Everybody’s upping their game, so of course, we’ve had to increase our starting wage,” said Leah Curry, president of Toyota’s Indiana plant. 

Curry continues, ”We’ve increased our hiring bonus; when you get on, if you’re here for six months, you get a certain amount of money, and after a year, you get a certain amount of money. And then we’ve also increased our top-end wage to stay competitive.”

It’s a whole new game in small-town auto production. ds 

© Dennis Simanaitis, SimanaitisSays.com, 2022