Congress Embraces Jobs, Growth Created by Foreign Carmakers
By Sholnn Freeman
Washington Post Staff Writer
Saturday, August 19, 2006
Sen. Lamar Alexander has backed a measure to outlaw burning of the American flag and supported a move to recognize English as the national language. He also takes what he calls a pro-American stance on issues related to the U.S. auto industry, but his view doesn't sit well in Detroit.
Alexander believes that for the sake of jobs and economic growth, Detroit's automakers have no choice but to embrace the forces of globalization. His view, echoed by many of his congressional colleagues, reflects a growing acceptance of the swelling numbers of Japanese, German and Korean autos built and sold in the United States.
Foreign-based automakers employ 101,000 people, according to the Association of International Automobile Manufacturers, a District-based lobbying group for the overseas automakers. In the next three years, these manufacturers will invest $9 billion in new factories, adding 9,000 more jobs.
This growth helps explain why scarcely a murmur of discontent has been raised -- outside of Michigan -- over a potential alliance between General Motors Corp. and two foreign automakers, Nissan Motor Co. of Japan and Renault SA of France. It also provides insight into why Congress has resisted pleas from Detroit's Big Three to turn their high labor and health-care costs into a national priority.
"There's a new definition of the American auto industry," said Alexander, a Republican from Tennessee. "Twenty-five years ago, it was the Big Three companies in Detroit. Now the definition is any company that makes a substantial number of cars and trucks in the U.S. and has a big payroll here, pays big taxes here and buys supplies here."
Supporters of Detroit's automakers say the changing view is partly the result of partisan politics, but others say U.S. sentiment has shifted gradually in line with the realities of the global auto market. Today, Chrysler is part of a German company. Nissan is constructing a new North American headquarters in Tennessee, where it already has a car assembly plant. Alabama is home to major manufacturing facilities of Mercedes-Benz, Honda Motor Co. and Hyundai Motor Co. In all, foreign manufacturers operate 16 assembly plants on American soil, with a 17th opening soon, compared with 48 run by U.S. automakers.
"When you have imported cars with such a ubiquitous presence -- and many of them made in the U.S. now -- it makes this a far less sensitive issue for many Americans," said Harley Shaiken, a labor economics professor at the University of California at Berkeley.
While foreign-owned plants have sprouted in many parts of the country, most have chosen to set up in the nonunionized South. Alexander said that with their wide-ranging operations in the United States, the foreign automakers have altered the political game book.
"Nissan has great support because of its new plant in Canton," Mississippi, he said. "Kentuckians are proud of Toyota because they are in Lexington. Ohioans like Honda. And South Carolinians are proud of BMW because it has a plant there."
Senators whose states have attracted foreign auto plants -- and jobs -- not surprisingly are proponents of globalizing the U.S. market. Sen. Richard C. Shelby (R-Ala.) said Detroit automakers need to revamp their business model.
"The way they do business has to change or they won't be around," Shelby said. "The competition has been brought to our shores. We learn from each other. There is a lot that our automobile manufacturers can learn in the world."
The Detroit automakers, however, contend that the pressure from overseas should raise alarms in Washington. The U.S. companies, struggling to revive their fortunes by slashing costs, benefits and payrolls, are troubled by what they perceive as an unsympathetic ear from Congress and the White House. They say the lack of a U.S. auto policy is putting them at a disadvantage to their fast-rising foreign rivals.
"If you look around the world, most countries have a version of economic patriotism," said Robert Lutz, GM vice chairman in charge of global product development. "They are proud of their own industries. The U.S. is the only major country that, if anything, has negative economic patriotism. I think some people in the United States, in leading government circles, actually detest the American automobile industry. They don't like us."
Lutz said foreign automakers have been "very clever" in building political support for their U.S. operations. He said their decisions on where to locate plants are not based only on economic factors but also on how many representatives and senators the carmakers can win to their side.
Mark Fields, president of the Americas division of Ford Motor Co., who is leading an overhaul of the No. 2 automaker's U.S. operations, blamed inconsistent government and industry collaboration for a "steady exodus" of U.S. auto jobs. Speaking to industry officials in Traverse City, Mich., last week, Fields said the "dismissal" and "cynicism" for U.S. automakers is "like nothing I've ever seen."
In contrast, Fields said, government and consumers in Asian countries view auto manufacturing as a strategically important industry that deserves support. Fields said that in the past four years, Detroit automakers have spent nearly $39 billion in the United States to develop new technology, more than foreign automakers have spent in America over the past 25 years.
Richard E. Dauch, co-founder and chief executive of Detroit-based auto parts supplier American Axle & Manufacturing, questioned whether GM needed help from Japanese and French automakers to help solve its U.S. problems. "We don't need to have the French running America," Dauch said to applause from the audience at the Traverse City gathering.
Sen. Debbie Stabenow (D-Mich.) said she was cautious about an alliance. Her focus, she said, is on keeping jobs in the United States and in Michigan, where GM is the largest private employer.
Leaders of the United Auto Workers union are cool to a possible deal, a stance that could be a stumbling block if negotiations progress. Alan Reuther, the UAW's legislative director in Washington, said the biggest obstacle to getting Washington to consider the problems of Detroit's automakers is GOP dominance of the federal government. "The Republicans are in control here, not us," he said.
When the oil crisis of the 1970s led to a rapid expansion of imported cars, Detroit attracted much greater sympathy. The nation was in a recession, with high interest rates and inflation. There was fear of Japan's growing economic power. In the early 1980s, the continued strength of imported cars and the possible failure of Chrysler provoked an intense national debate, leading to Chrysler's federal bailout and a voluntary restraint on Japanese imports negotiated by the Reagan administration. The Japanese and other foreign automakers responded by building plants in the United States.
Alexander was instrumental in getting foreign automakers to set up operations in the South. But the factories weren't welcome at first. At a Nissan plant groundbreaking in Smyrna, Tenn., in 1981, Alexander remembers, there was a protest where tacks and nails were spread out. News reports at the time indicated a law enforcement officer was knocked unconscious by a brick and a truck to be used in the event was vandalized.
"We had to walk through it," Alexander said. "The ugliness of the union demonstration backfired. It created a lot of goodwill for Nissan. There's been nothing but goodwill ever since."
Sen. Thad Cochran (R-Miss.) said "the lines are blurring" between an American company and a global one. Two years ago, Nissan completed a $1.4 billion investment in a plant north of Jackson, Miss., providing jobs for 4,100 employees. It assembles several models, including the Titan pickup and the Armada sport-utility vehicle. Some are headed to markets outside the United States, including China, Taiwan, Mexico and Canada.
Meanwhile, the U.S. automakers are undergoing a major restructuring. GM is closing all or part of 12 North American plants or production facilities and eliminating 30,000 jobs. Ford announced yesterday that it will cut production in the fourth quarter by 21 percent and earlier said it plans further job cuts. With the job losses, the Detroit automakers will employ 335,000 workers, still about three times the employment of foreign-owned car manufacturers. The Detroit companies spend $188 billion a year in the United States on auto parts, while the foreign makers lay out $50 billion, according to the Automotive Trade Policy Council.
Lutz said people who believe that foreign automakers would fill the void if Detroit automakers were allowed to "go down the tubes" are seriously mistaken. "Believe me, there is no comparison in terms of the number of jobs, the number of suppliers we use, the number of raw materials we purchase in the United States," he said.
He encouraged federal lawmakers to get out of Washington, talk to GM employees and test drive American-built vehicles. "I think some of these folks -- I know they are very busy, but they don't get out much. And they drive Japanese or German cars and they think Detroit is some horrible place in the Rust Belt. You hope that over time we can educate them."
Graphics editor Karen Yourish contributed to this report.
View all comments that have been posted about this article.