Auto Bailout: Southern Workers Watch and Worry

Workers at Honda's Lincoln, Ala., plant support a Detroit rescue more than politicians do. They fear cuts, too

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The tiny town of Lincoln, Ala., is 706 miles from Detroit. But as the U.S. recession deepens, the distance between this Southern enclave of the American auto industry and the Big Three's headquarters to the North seems to be shrinking.

At the edge of the 4,500-resident town looms a massive Honda plant, marked only by two tall towers bearing the Japanese automaker's name and by the sounds of industry that drift into Lincoln on otherwise sleepy afternoons. The plant, which opened in 2001, makes Honda Odyssey minivans and Honda Pilot SUVs.

Like other "transplant" factories set up by Japanese, Korean, and European companies in the South, the Lincoln Honda plant has no union, reflecting a wariness in the region about a typically Northern institution. Many in the South feel that General Motors (GM), Ford Motor (F), and Chrysler—and their unionized workers—have no one but themselves to blame for their difficulties. That opinion came through loud and clear during the debate that left Congress killing a legislative bailout of the Detroit car companies. Sen. Richard Shelby (R-Ala.) blasted the Detroit companies as "dinosaurs" and the bailout legislation as "a bridge loan to nowhere."

Yet it was also clear in a visit to Lincoln on Friday, Dec. 19—the day that President George W. Bush announced he was extending a $17.4 billion lifeline to GM and Chrysler—that some workers and residents here think the woes of the auto industry are not entirely due to mismanagement or the high costs of pensions and health care for Detroit's retirees.

Stalled Foreign automakers

The souring U.S. economy is hurting the Japanese companies to which Detroit automakers are so frequently and unfavorably compared. Honda has been cutting production to match its plummeting U.S. sales, and its leaders in Japan are sending ominous signals that things are expected to get worse in 2009. On Dec. 17, Honda CEO Takeo Fukui said the company probably will earn 62% less this fiscal year than what it had projected just six weeks earlier. That sense of alarm was reflected in the latest November results, which showed Honda's U.S. sales were down 32%, roughly in line with declines at other companies.

The transplant factories have responded by chopping work hours and production. In October, Mercedes-Benz offered buyouts at its Vance, Ala., plant, which makes SUVs and crossovers. Earlier this year, Nissan offered buyouts to white collar workers at its Tennessee headquarters, as well as to line workers. On Dec. 15, Toyota announced it would delay the opening of a factory in Blue Springs, Miss., where it was to start U.S. production of the Prius hybrid gas-electric car. Toyota workers at the company's brand-new San Antonio pickup truck plant were idle from August to November.

Honda says it will sharply cut the number of vehicles it produces in the U.S. and Canada in the coming year. While no layoffs have yet been announced in Lincoln, Honda has pulled back on production several times: In January it plans to reduce the number of vehicles built there, from 1,300 a day to 1,150. The plant was closed for two days in August and in the fall a second Friday shift of workers was eliminated.