As profits fall and sales slump at General Motors Corp. and Ford Motor Co., thousands of autoworkers gathered in Montgomery, Ala., yesterday to celebrate the opening of a $1.1 billion factory to build Hyundais.
The Alabama factory, the first in the United States for the South Korean company, is the latest in a parade of foreign-owned facilities springing up throughout the South. Each one -- Nissan Motor Co. opened a factory in 2003 in Mississippi, a Toyota Motor Corp. truck plant cranks up next year in Texas -- is another sledgehammer swing at the crumbling fortunes of Ford and GM.
A new U.S. auto industry is emerging in which no single company is as dominant as GM once was and the lines between foreign and domestic manufacturers are increasingly blurred. While Detroit suffers, the rest of the industry is doing rather well. Jobs and factory production are down in Michigan but rising in the South.
"It's a zero-sum game," said Walter McManus of the Office for the Study of Automotive Transportation at the University of Michigan at Ann Arbor. Detroit's factories already build more vehicles than they can sell, so 300,000 new Hyundai Sonatas flowing out of Alabama every year will just make GM and Ford have to cut their own production further, he said.
Asian-owned companies continue to take a greater share of the U.S. market with vehicles that consumers perceive as having better quality and better value than the American competition. Even as Ford and GM scramble to catch up with improved products, the foreign companies use greater efficiency and higher profit margins to widen their lead. Toyota has so much cash on hand that it has been able to absorb losses on gas-electric hybrid technology to spark the Prius phenomenon.
"There's a touch of unfairness to all this," McManus said. That's because the rules are different for outsiders building new plants than they are for old-timers dealing with an aging infrastructure and workforce, such as GM and Ford.
Hyundai's non-unionized plant, for example, will pay most of its 2,000 employees a starting wage of $14.46 an hour, far below the $20-plus hourly wages for comparable United Auto Workers members in Michigan. The Hyundai workers also will have to contribute $14.54 every two weeks for health coverage, which is free to employees under UAW contracts.
There is no pension available to the Hyundai workforce; instead, employees have a 401(k) plan.
By contrast, GM, Ford and the Chrysler Group of DaimlerChrysler AG carry more than 800,000 retirees and family members on their pension rolls at a total cost of $11 billion per year. The companies estimate that about $1,500 of the cost of building each vehicle goes toward health care -- several times what Hyundai pays.
That's part of the reason Hyundai can offer a laundry list of safety features on the new Sonata, quality that ranks near the top of the auto industry and a price that undercuts competitors at Honda and Toyota -- and still make more profit than GM.
Those factors "create winners and losers, and they create enormous change and adjustment" for the industry, said Dana Johnson, chief economist for Detroit's Comerica Bank. "It's very positive for the Southeast in particular, and very challenging for the Midwest and Michigan in particular."
Alabama has especially benefited from the procession of automakers to that region. Its defunct railroad, steel and textile industries have been replaced, with Mercedes-Benz building a plant in the town of Vance in 1997 and Honda locating a van factory in Lincoln in 2001.
