Auto Bailout: Southern Workers Watch and Worry

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Just A Northern Problem?

For many workers in Lincoln, the drama of the last-minute rescue of Detroit seemed distant.

"Really, [they] don't feel that the bailout has anything to do with them," says Debra Cochrum, 63, a former Honda employee who is now treasurer of the UAW's Alabama branch, which keeps an organizing operation just down I-20 from the plant. "They think that the Northern people created this mess and that's their problem."

Still, some workers and residents interviewed in Lincoln say they're pleased with Friday's $17.4 billion bailout.

"It doesn't do anyone no good if those boys go under," says Donald Snow, 39, who has worked on the assembly line at the Lincoln plant for seven years. "What a lot of these guys at the plant don't realize is that it's all connected. If Detroit goes down, the suppliers get hurt. If the suppliers get hurt, we get hurt."

Southern benefits are far lower

According to CSM Worldwide, 58% of GM's suppliers—and 65% of Ford's—also provision the Asian transplant factories. A GM, Ford, or Chrysler bankruptcy could send hundreds of supplier companies into bankruptcy or liquidation, jeopardizing production at Honda, Toyota, Nissan, Hyundai, Mercedes, and BMW plants for months.

The fate of the Detroit companies could ripple through the South in other ways. One of the goals of the restructuring envisioned in the bailout is to close the gap in wages—and other costs—between GM, Ford, and Chrysler and the transplant factories. Southern autoworkers make less than their northern counterparts: UAW workers make an average of $29 an hour, vs. about $25 for a Toyota worker in the U.S., according to the Center for Automotive Research in Ann Arbor, Mich. However, if you factor in the expense of health-care and other benefits for active workers, plus pension and health-care costs for retirees, a UAW worker costs about $76 an hour, vs. $58 for a Toyota worker.

Why? The automakers have been in business for a century in the U.S. Many autoworkers go to the assembly line after high school and then put in 30 years. At age 48, they're seventeen years from qualifying for Social Security or Medicare, and they count on the hard-won pension and health-care benefits the UAW has negotiated over the decades.

Yet experts agree that the pay of Southern auto workers is benchmarked to the wages of UAW workers in the North. If the UAW were to make concessions and Northern wages dropped drastically, Southern workers' salaries might be held down as well.

Issue No. 1: Jobs

"Southern workers should take no glee in Detroit's problems because their pay is absolutely dependent on what the UAW gets paid," says George Hoffer, an economics professor at Virginia Commonwealth University who has studied the auto industry for 40 years.

The issue that most heavily weighs on the minds of the Lincoln plant's workers is preserving their jobs. In the wake of recent production cutbacks, rumors have spread that some part-time workers—who make up a sizable share of the plant's 4,000 employees—could be laid off if the economy continues to worsen.

After a hard day of physical labor, several of the plant's workers are unwinding at a local bar. As they sip beer and shoot pool, opinion seems split between those who feel that the best way to maintain job stability is to unionize and others who fear unionization would price Honda out of Lincoln, forcing the plant to shut its doors permanently.

Elvis Cox, 41, worked in the steel industry and was a member of the United Steel Workers Union before he took a job seven years ago at Honda's Lincoln plant. Cox says he lost his job when his steel factory closed because it couldn't meet the union's financial demands. He is content with his post—which, after all, pays more than most in the area—and doesn't want to make any waves that could endanger the income that supports his family.

Could the union secure pensions?

Cox has pointed advice for those seeking to unionize: "If you don't like the job, then quit," he says. "What's the purpose for a union? What's the purpose?"

Snow doesn't want a union to bring his pay up to the level of the UAW workers; he simply wants to know that his job will be there and that his pension will be strong. "All I want is long-term security," he says shaking his head. "I can't do this job for too long. It's just so hard—physically."

When companies like Honda, Hyundai, and Mercedes-Benz opened plants in Alabama over the past 15 years, they did so in a state whose blue-collar employees had been decimated by the exodus of textile work to Mexico, China, and other parts of Asia in the 1980s. It was not uncommon to hear stories that those who signed on at Honda's Lincoln plant had previously worked simultaneous jobs with no benefits. Many workers fear that rocking the boat will chase the automakers to Mexico, or to some other state.

In the South, employers come first

Thus, historians agree that unionizing southern plants would require a dramatic cultural shift.

"In the North you work for the UAW first and the company second," says Hoffer at Virginia Commonwealth University. "It's just never been that way in the South. You work for the company first."

That attitude certainly is reflected in previous failed attempts to organize the transplant factories. Two decades of work by the UAW to force a vote at a Toyota factory in Georgetown, Ky., have yielded no results; votes at a Nissan plant in Smyrna, Tenn., were rejected out of hand by workers in 1989 and 2001.

"There is considerable tension between the union and Southern autoworkers," says John Heitmann, a history professor at the University of Dayton in Dayton, Ohio, who has studied the auto industry for a decade. "It's in part due to the strong strain of individualism that's a part of the South. There's no real compassion for union brothers down there."

Burnsed is an editorial assistant for BusinessWeek based in Atlanta.