Automotive suppliers, already pinched by cost-cutting requirements by Detroit and other carmakers, will remain under increasing pressure to shift production and jobs out of the United States to get cheaper labour, according to a new industry study that cast more gloom over the country’s manufacturing sector.
According to The Detroit News, the study, conducted by Roland Berger Strategy Consultants, will be formally released at the Society of Automotive Engineers World Congress in Detroit next month with a warning that low wages in China and elsewhere are likely to pull more jobs out of the United States and Canada.
“Nearly every supplier we’ve interviewed has indicated they are under increasing pressure to expand production outside North America,” Wim van Acker, managing partner of Roland Berger, told the paper. “Small and medium-sized suppliers will be impacted the most by these emerging changes.”
The Detroit News said dozens of US suppliers — pushed by routine demands for lower parts prices from carmakers — have already moved production to Mexico, China and other low-wage countries – in the past week, Tower Automotive announced it would be moving 500 jobs from a plant that makes frames for the Dodge Ram pickup in Milwaukee to Mexico.
Analysts reportedly say the most likely products to be moved overseas are smaller, lighter parts that can’t be made through automation, like wire harnesses or cloth seat covers.
Increasingly, the United States is not a competitive market to produce labour-intensive parts because of high wages and soaring health care costs, the paper said.
“It’s a case by case basis as to what makes sense to be produced elsewhere,” Ron Harbour, president of Harbour and Associates in Troy, Michigan, told the Detroit News. “Some more will go as companies decide what makes sense to be moved.”
The paper said Michigan has already lost 150,000 manufacturing jobs since 2001, and the pressure on automotive suppliers may push thousands more jobs out of the state and country.
“A lot of companies have put it off for so long that you have pent-up demand for moving production — now you’re seeing a flurry of activity,” Jim Gillette, director of supplier analysis at CSM Worldwide told the Detroit News. “The attitude is spreading that if you’re not ready to do business in these markets, you’re not going to be around in five years.”