Oct. 13 (Bloomberg) -- At the Sporty O’Toole’s bar in Warren, Michigan, hundreds of jobs for United Auto Workers members won in new labor agreements at nearby car factories may mean something good is on tap: three new servers to keep the beer flowing.
Just-negotiated contracts at General Motors Co., Ford Motor Co. and Chrysler Group LLC promise 20,000 jobs for at least 34 factories, with Michigan having the biggest share. Those jobs may spawn 140,000 more nationwide, including 5,600 at places like O’Toole’s, according to a preliminary analysis by the Center for Automotive Research in Ann Arbor, Michigan.
“I’m starting to see business improve and the smaller shops around here are ordering more sandwiches,” said owner Boyd Cottrell, 55, whose lunch business was cut in half during the economic slump that included the 2009 bankruptcies of GM and Chrysler. “But it needs to get better.”
The four-year UAW agreements, if ratified by auto workers, would bring the first significant new hires from the three largest U.S. automakers in a decade and among the largest number of all-new auto jobs since the early 1980s, said Kristin Dziczek, a labor analyst at the Center for Automotive Research.
Michigan’s 11.2 percent unemployment rate exceeds the national average of 9.1 percent, and about 800,000 jobs have been lost since 2000, according to state data. Ford, which avoided the government bailout, also cut jobs as it reduced costs to weather record losses.
Sporty O’Toole’s, which Cottrell said he bought three years ago, used to have about 20 people in for lunch of pizza or a burger from nearby auto plants and other businesses. Now the crowd has dwindled to about 10 or less, he said. If the business returned, he could probably add three more workers, he said.
The bar is down the street from a GM transmission plant slated for 360 new jobs and a $325 million investment. The UAW has said Ford and Chrysler pledged to add jobs in factories nearby, which may increase business at the smaller parts-making and tooling shops that surround his bar, Cottrell said in an interview.
For each new worker hired by the automakers, seven other jobs are created either by suppliers or because of the added income, said Debbie Menk, project manager at the Center for Automotive Research, based on a preliminary study.
Using that multiplier, the 20,000 jobs the UAW says are being created may add 140,000 new positions including 14,444 manufacturing jobs for parts suppliers, 12,872 in construction, 10,029 in retail and 10,408 for professional services such as advertising, engineering and legal jobs, the data showed.
The new jobs may pay about $35,000 annually for the union workers at the automakers and an average of $20,000 a year for the spinoff workers, or about $3.5 billion in total new wages, said Robert Dye, chief economist at Comerica Inc. in Dallas.
“This is the kind of antidote we need to the gloomy economy we’re dealing with because the central issue is jobs,” Dye said in an interview. “These new auto workers are going to need to buy homes, groceries and even new cars. It all circulates back.”
The up-tick at Michigan auto factories, along with growth in other industries such as biotechnology, may help the state add as many as 70,000 jobs this year, said Michael Finney, chief executive officer of the Michigan Economic Development Corp.
“We know there is this incredible multiplier effect that happens so we should continue to see job gains,” Finney said in an interview. “Having the auto industry back in a growth mode is really a catalyst.”
‘Jobs, Jobs, Jobs’
A tentative agreement at Chrysler adds 2,100 jobs for new models and upgraded vehicles between now and 2015, the UAW said yesterday. The 26,000 Chrysler UAW members are scheduled to vote on the contract starting this week. Ford has said it will add 12,000 new positions and GM discussed at least 6,400 jobs.
“It was a jobs, jobs, jobs agenda,” General Holiefield, who runs the union’s Chrysler unit, told reporters yesterday in Warren, Michigan. “We placed more focus on that than we did pretty much anything else.”
The tentative deal completes the UAW’s negotiations for 113,000 workers at GM, Ford and Fiat SpA-controlled Chrysler. The union reached new four-year labor agreements with GM on Sept. 16 and Ford on Oct. 4. UAW members at GM approved their contract last month. Union members are still voting at Ford.
All three accords boost pay for entry-level workers while senior production employees forgo raises. The starting wage had been about the $28 an hour paid to long-time workers. New hires will now be paid $15.78 an hour and can earn as much as $19.28 by the end of the contracts. All newly created jobs will pay the lower wage, leading to fewer spinoff positions.
The U.S. will sell 3.7 million more cars and trucks in 2015 than this year if current projections hold, said Michael Montgomery, senior economist at IHS Inc. in Lexington, Massachusetts. IHS estimates U.S. auto sales will rise to about 16.2 million in 2015 from 12.5 million this year, he said.
“That’s real jobs making these cars but the economy has to recover enough for those extra vehicles to be sold,” he said in an interview.
U.S. auto demand, which fell to 10.4 million cars and trucks in 2009 from a peak of 17.4 million in 2000, will eventually recover because about 13.25 million wear out each year and need to be replaced, he said.
The recovery can come none too soon, said Dennis Miller, who owns Miller’s Bar in Ford’s Dearborn, Michigan, hometown. Miller has resisted firing any of his 24 employees even as business collapsed, he said in an interview.
Four plants in the Dearborn area will get new investment as part of the agreement, the UAW has said.
“The recovery so far has been pretty minimal,” Miller said. The bar had peak lunch crowds of 1,400 patrons several years ago for the $4.75 ground round burger and other fare, he said. That has slid now to 1,000.
“I’ve been working here since 1970,” Miller said. “I’ve seen a lot of downturns and this is the worst by far. I sure hope it’s going to get better.”
--With assistance from Tim Higgins and Craig Trudell in Southfield, Michigan and Bill Koenig in Detroit. Editors: Kevin Miller, Bill Koenig
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