May 01, 2015

Industry Highlight: Automobile Manufacturing Index

Due to strong domestic demand and a steady increase in exports, United States auto production is nearing an all-time high. According to, American automakers built 11.37 million light vehicles in 2014, among the higher output totals since the record of 12.59 million produced in 1999. Exports of American-made vehicles was over 2 million for the first time last year.

However, this growth in automobile manufacturing is not creating the jobs that analysts would expect, due to these American-made cars and trucks being made with parts imported from Mexico, China, and other foreign countries.

American Cars, Foreign Parts

In 2014, the U.S. imported a record $138 billion in car parts last year, equivalent to $12,135 of content in every American vehicle built. Mexico was the largest supplier of car parts to the U.S. last year, accounting for 34 percent of imports, followed by China at 13 percent. Since 2008, imports from China have more than doubled, while imports from Mexico have increased by 86 percent.

Percentage of U.S. Content for Car Models, 2010 vs. 2015

Industry Highlight: Automobile Manufacturing Index

Source: The Wall Street Journal

While the U.S. is manufacturing the highest volume of automobiles since 1999, and has hit a record with its volume of exports, the growth of parts imports has left the nation with a growing deficit in overall trade in cars and parts of $168.3 billion in 2014. This is compared to $156.2 billion in 2013.

How This Impacts Employment

The shift of parts production to foreign countries has shrunk an industry that has long been considered one of the largest sources of manufacturing jobs in the country. In 2014, employment at manufacturers of car parts averaged about 537,000, a decline of 36 percent from 2000. Meanwhile, while the output has grown, employment at manufacturers of completed vehicles declined 32 percent from 2000 to 2014. Industry experts attribute this decline in part to productivity improvements that include automation.

To compete in a growing global market, the larger U.S. automobile parts makers have invested in foreign countries. For example, American Axle, based in Detroit, has plants in Mexico, Brazil, Poland, the U.K., India, China, and Thailand. Only about 30 percent of the company’s employees are in the United States.

Wages in the sector have also been trending downwards. In 2014, the average hourly wage for production and other nonsupervisory workers at car-parts markers was $19.91, a decrease of 23 percent from a decade earlier. According to the Bureau of Labor Statistics (BLS), automobile manufacturers saw a wage decline of 22 percent to $27.83 in the same period.

Automobile Manufacturing Employment and Hourly Wages

Automobile Manufacturing Employment and Hourly Wages

Source: BLS

In 2007, U.S. automakers were concerned with how to close a $30-per-hour labor cost gap with their Asian rivals. Today, however, Fiat Chrysler Automobiles (FCA US) has labor costs for its U.S. workers that are on par with Toyota and Honda, and General Motors (GM) and Ford are at about $10 less per hour. According to the Center for Automotive Research, FCA US pays its workers about $48 per hour (with all benefits and bonuses included), while GM pays $58 per hour, and Ford pays $57 per hour. These per-hour labor costs averages include pay for temporary workers who are formally employed by staffing agencies, but work full-time alongside workers employed directly by automakers.

Average Hourly Total Labor Costs Per U.S. Worker by Auto Manufacturer

Average Hourly Total Labor Costs Per U.S. Worker by Auto Manufacturer

Source: Center for Automotive Research

Temp Workers at Auto Manufacturing Plants

The Center for Automotive Research (CAR) says that Japanese-owned plants utilize temporary workers as a larger percentage of their workforces than U.S. automakers. CAR estimates that Nissan uses temps for as much as 43 percent for its U.S. workforce, while Toyota uses them for 10 to 20 percent of their workforce. Meanwhile, at Ford, temporary workers make up about 2 percent of the workforce, and as much as 4 percent during high-production months.

According to Rick Hesterberg, a spokesman for Toyota, the company uses temporary workers to handle fluctuations in demand and to screen hires. Since 2011, Toyota has permanently hired 1,900 of its temp workers in its Georgetown, Kentucky plant.

“We’ve never produced so many cars in the U.S., but we’ve never made so few of the parts.” ~Sean McAlinden, Chief Economist at the Center for Automotive Research