Auto Industry Jobs in the 1980's

Table 1. _ U.S. new car sales of American automakers, Japanese transplants and imports,
and total Imports, 1979-90
[Numbers in thousands of units]
‘American Japanese Japanese Total
automakers transplants Imports Imports
Year Percent Percent Percent Percent
Sales of of Sales of imports of
total total total total
8163 | 76.7 0 0.0 1,848 17.4 | 2,328 | 21.9
6401 | 71.3 0 0 1,977 | 220 | 2397 | 267
6,044 | 70.8 0 0 1892 | 222 | 2326 | 273
5,665 | 71.0 0 0 1,801 226 | 2,222 | 27.9
6,660 | 72.5 50 5 1916 | 209 | 2,386 | 26.0
7,744 | 74.5 134 13 1,906 183 | 2442 | 23.5
7,906 | 71.6 221 20 | 2218 | 201 | 2841 | 257
7,675 | 67.0 466 44 2,386 | 20.8 | 3,249 | 283
6,402 | 626 618 60 | 2173 | 21.3 | 3144 | 307
6,735 | 63.6 766 7.2 | 2,103 198 | 3,067 | 28.9
: 6,064 | 624 | 1,009 | 104 | 1,911 19.7 | 2698 | 27.8
1990. 5500 | 592 | 1,943 | 144 4,721 18.5 | 2453 | 26.4
Nore: For the purposes of this table, the term, “American automakers,” denotes General Motors, Ford, Chrysler,
and American Motors.
Source: Automotive News (Detroit, m1, Crain Communications), various issues.

automakers’ establishment of U.S.-based pro-
duction facilities. While this had been a tradi-
tional approach for U.S. automakers (that is,
establishing plants in other countries), until the
early 1980's, there had only been one major
foreign-owned assembly plant in the United
States—Germany’s Volkswagen. Honda Mo-
tors became the first Japanese “transplant,” be-
ginning operations in 1982 at its Marysville,
OH, assembly plant.

Several factors prompted the Japanese to
transfer production to the United States. First of
all, doing so would reduce shipping costs mark-
edly and accelerate the distribution process.
However, this did not by itself represent suffi-
cient reason for the transfer. laa.wqluatary re-
-etrwint- agseements which were contineed
threwgtout the deeade—and the fear of addi-
tigpal barriers—were the primary influences on
taiVepemame decision. These restraint agree-
ments limited only the domestic sale of auto-
mobiles produced in Japan; those Japanese
vehicles built in the United States would be
exempt. Additionally, the relative disparity be-
tween American and Japanese wage rates nar-
rowed during the 1980’s, attributable largely to
the decline in the value of the dollar. Ie #9807"
fox-example; heuriy.compensation for Japanese
automebile-weskes.amaunied (0 only 43°yer-
cent.of that of their American counterpess, in
U.S. dollars; by 1988, the Japanese received 75
percent ef compensation earned by Amerieens.°

By 1990, seven Japanese automakers were
building vehicles domestically (at eight facto-
ries), and Volkswagen, previously the only for-

22 Monthly Labor Review February 1992

eign manufacturer stationed in the United States,
had ceased U.S. production. (See table 2.) Some
of these companies have formed joint ventures
with members of the Big Three—Toyota with
General Motors, and Mitsubishi with Chrysler—
and produce automobiles under both labels.
Others, such as Honda and Nissan, have estab-
lished independent factories.

The transplants’ share of domestic produc-
tion has increased steadily since the early 1980's.
By 1990, their output amounted to 1.5 million
units, or 15 percent of all cars and trucks pro-
duced in the United States. (See table 3.) In
contrast, U:S: autommkers’ share.of.total aute-
mobile production fell from 97 percent in 1979
to 82 percent in 1990. The share of new car
sales from transplants and imports combined
rose from 22 percent in 1979 to 41 percent in
1990.

Besmeea.1987.and 1990, Americas-compa-
nies closed seven assembly: plamts—five Gen-
eral Motors and two Chryster—because of

7 way. Only one new plant
opened, the General Motors Saturn factory, a
multi-billion dollar project designed to win back
purchasers of Japanese automobiles.

The movement of Japanese assembly plants
into this country has also induced many Japa-
nese motor vehicle parts manufacturers to ex-
pand to the United States, although most major
components continue to be imported. The trans-
plants’ apparent reluctance to utilize compo-
nents made by U.S. manufacturers provided an
extra incentive for Japanese parts companies to
move their production base.’ Moreover, the fall


'6 Projections were made by the Office of Employment
Projections, Bureau of Labor Statistics, unpublished data.

" Jim Schwartz and Jim Stone, “New Car Buyers,”
‘American Demographics, April 1987, p. 36.

'® Bureau of Labor Statistics, Office of Productivity
and Technology, unpublished data.

'° Global Competitiveness, p. 2-5.

APPENDIX: Related industries

This article focuses on the motor vehicles and
equipment industry (SIC 371) because the bulk of
automotive manufacturing jobs are classified in that
industry. However, in addition to the 800,000 jobs
that comprise SIC 371, there are jobs devoted to the
manufacture of automotive parts that are classified
in several other industries.

Industries which primarily produce motor ve-
hicle parts and components include: automotive and
apparel trimmings (SIC 2396); flat glass (sic 3211);
automotive stampings (SIC 3465); steel springs,
except wire (SIC 3493); carburetors, pistons,
rings, valves (SIC 3592); vehicular lighting equip-
ment (SIC 3647); and engine electrical equipment
(sIC 3694), These industries had a combined em-
ployment level of 2803000 in 1990. It should be

noted, however, that not all of these jobs necessarily
involve the production of parts for automobiles—
but a large proportion do. Furthermore, there are
additional parts manufacturing jobs in industries
outside of this list.

Chart A depicts the composite series formed from
summing the employment in these seven industries;
the aggregate series has been adjusted for seasonal
variations. A comparison with chart 1 shows that
total employment in these “auto-related” industries
closely followed the trends in sic 371 during the
decade. Employment in both series improved sharply
after the recession of 1981-82, leveled off during
the mid-1980’s and experienced small cyclical fluc-
tuations, and then peaked in early 1989, well before
the beginning of the 1990-91 recession.

However, the breadth to the U.S. auto industry
extends well beyond these industries. Hundreds of thou-
sands of jobs are also indirectly tied to the produc-
tion of automobiles. For example, other manufactur-
ing industries supply automakers with raw materials
such as steel and plastics. Many jobs in the service-
producing sector are also attributable to the auto
industry. Some of these services are inputs to the pro-
duction process while others, notably wholesale and
retail, deal with the finished product.

— _
Chart A. Employment in auto-related Industries, s onally adjusted, 1982-90
Employment Employment
(thousands) (thousands)
325 326
300 300
275 275
250 250
225 226
200 fe ranew 1 1 ue n n 1 L 200
1982 1983 1984 1985 1986 1987 1988 1989 1990
NOTE: Shaded areas denote recessions as designated by the Nationa! Bureau of Economic Research
en

Monthly Labor Review February 1992. 27


Auto Industry Jobs in the 1980's

Table 3.
transplants, 1979-90

[Numbers in thousands of units)

U.S.-based motor vehicle production by American automakers and Japanese

‘Japanese transplants ‘American automakers

Year Percent Percent Percent | Percent

Production | Change of total | Production | Change of total
1979... 0 0.0 11,098 feces 97.4
1980... 0 0 7,667 30.9 95.7
1981... oO Qo 7,614 0.7 95.4
1982. 2 ceceeee 0 6.785 10.9 98.7
1983... 75 4,920.9 8 8,900 31.2 93.6
1984.... 239 217.5 22 10,462 17.6 95.8
1985 . 361 51.1 34 11,095 61 95.1
1986 . 617 70.9 54 10.688 -37 94.0
1987. 738 19.2 67 10,097 5.5 92.0
1988... 882 19.9 8.0 10,122 2 91.9
1989. 1,263 43.4 114 9,615 -5.0 86.4
1990.0... 2 1,494 18.3 154 8,152 ~15.2 82.4

‘American Motors.

various issues.

NoTE: For the purposes of this table, the term, “American automakers,” denotes General Motors, Ford, Chrysler, and

Sources: Motor Vehicle Manufacturers Association and Automotive News (Detroit, mi, Crain Communications, Inc.),

overall employment in the United States, be-
cause the transplants would have obtained more
of their component parts from overseas.

The U.S. General Accounting Office (GAO)
estimated the net job effects stemming from the
operations of Japanese transplants in 1987. The
study assumed that the transplant automobiles
had a domestic sourcing ratio (the proportion of
parts and components made in the United States)
of 30 percent, versus that of American auto-
makers of 90 percent; these ratios affect the
number of jobs devoted to motor vehicle parts
manufacturing. The GAO estimated the trans-
plants’ effect under several different displace-
ment scenarios: if transplant production
displaced American production at a one-for-
one rate, then the net employment effect would
be a loss of 52,000 jobs; if at a 70-percent rate,
the loss would be 27,000 jobs. At the other
extreme, if the transplants’ displacement ratio
were zero, that is, if their production only dis-
placed imports, the net effect would be a gain of
33,000 jobs.

While the GAO report noted that the trans-
plants have fewer job classifications than do
traditional manufacturers, data from the BLS
Occupational Employment Statistics (OES) sur-
vey do not indicate any significant shift in the
industry’s occupational mix during the 1980's.
It may well be that the transplants, assuming
that their occupational patterns differ from do-
mestic automakers, are too small to affect the
industry averages.

Exports. The success of U.S. automotive ex-
ports also influences the employment level. Al-

24 Monthly Labor Review February 1992

though the bulk of U.S.-made motor vehicles
and parts are purchased for domestic consump-
tion, nedtty:16-percent of the industry's outpet,
in dollar terms, was destined for direct export im
1989.9 This implies that approximately 10 per-
cent of motor vehicle employment is attribut-
able to export demand.'® In 1989, 1 million
motor vehicles were exported; three-fourths of
them to Canada.!! The ability of U.S. auto-
makers to compete in overseas markets depends
not only on the nature of their product offer-
ings, but also on the relative prices of the goods.
Economic growth by foreign countries remains
a major factor as well.

Business cycle. Competition in the domestic
and export markets is of critical concern to U.S.
automakers, especially given the slack demand
that has characterized the industry recently.
Because automobiles are big-ticket items, sales
are heavily influenced by the business cycle.
Production and employment sometimes experi-
ence wide swings because sales are so cyclical,
as evidenced during the early 1980’s. Higher
interest rates discouraged consumer spending
on big-ticket items at the end of the decade.
New car sales dropped sharply in 1989 and
1990, and the industry’s employment level re-
flected this weakness.

Employment is generally considered a coin-
cident indicator; that is, employment cycles tend
to closely correspond to aggregate economic
cycles. However, motor vehicles employment
typically reaches a high point and begins drop-
ping prior to a recession.’ Over the lest four
recegaions, motor-vehicles employment reached



in the value of the dollar erased much of the
price advantage of importing parts from Japan.
The chance of domestic content legislation man-
dating that U.S.-made autos contain certain pro-
portions of U.S.-made parts was another factor
in the production transfer.

The competition that characterized the 1980's
can be expected to intensify in the 1990's, as
Spreign producers attempt to continue to in-

L.Sependuotive capacity ja;a mar-
ket that already has too much industry capacity.
Nissan, for instance, plans to expand the capac-
ity of its Tennessee assembly plant 75 percent
to 465,000 units, annually, by 1992. Toyota
will increase the capacity of its Kentucky plant
from 200,000 to 240,000 units by 1992 and
plans to build an additional factory at a nearby
site, with production beginning in late 1993.
With their growing capacity and production ley-
els, the transplants are also adding jobs and’
raising their share of ermpféyment in the indus-
y-Iegitmuid-be-neied, however, that much of
thiw employment growth is a replacement for
jobs that were lost from traditional U.S.. auto
plants, rather than net growth.

Influences on job trends, prognosis

Although the structure of the automobile indus-
try has changed significantly since the late
1970's, the employment level continues to be
determined by a number of basic factors.

Foreign competition. The definitive issue af-
fecting motor vehicle employment is the in-

tense competition for sales in the domestic mar-
ket. Because of the transplants, the issue is no
longer simply one of U.S. automakers versus
foreign automakers; as far as U.S. employment
is concerned, a distinction must be made be-
tween auto assembly plants in the United States
and those located in other countries. The Japa-
nese remain the focus of this competition.

In 1990, Japanese companies produced 1.5
million automobiles in the United States and
exported another 2.5 million from Japan-based
assembly plants. The Japanese initially entered
the U.S. market with small, inexpensive, fuel-
efficient cars. Gradually, however, they have
expanded their range of products to include
larger, more powerful and more expensive ve-
hicles. Japanese automakers currently offer com-
pact cars and sports cars, as well as light trucks
and minivans. Three Japanese automakers—
Honda, Toyota, and Nissan—began competing
in the luxury car market in the late 1980's;
competition that was not widely anticipated a
decade earlier.

Although the impact of imports on employ-
ment is not precisely known, it is clear that it
reduces the number of U.S. motor vehicle jobs
because imported vehicles compete directly
against domestic automobiles. The case of trans-
plants is less clear. To the extent that cars sold
by transplants displace imported sales, trans-
plants would have a direct positive effect on
U.S. employment in the motor vehicle industry.
To the extent that they displace sales of Ameri-
can automakers, the transplants would reduce

Table 2. Japanese automobile assembly plants based in the United States, 1982-90
Produc-
Company Location tion 1989 1900 Current | unionized
began |Production| production | capacity
Total 1,262,876 | 1,493,884 | 1,815,000 | ......
Honda. .... Marysville, on | 1982 | ‘362,274! '435,437| 360,000] No
Nissan oo... e eee cee eeeeeeee | Smyma, TN 1983 | 238,641] 235,248 | 265,000] No
New United Motor Manufacturing
(Toyota and General Motors) ...... | Fremont, ca 1984 | 192,471} 205,287} 240,000] Yes
Mazda (with Ford).............-..5 Flat Rock, MI 1987 | 216,501] 184,428] 240,000! Yes
Diamond-Star
(Mitsubishi and Chrysler) Normal, 1 1988 90,741] 148,379] 240,000) Yes
Toyota Georgetown, ky | 1988 | 151,088] 218,155] 200,000] No
Subaru-Isuzu ..... Latayette, IN 1989 11,160| 66,950] 120,000] No
Honda........... wees ... | East Liberty, o# | 1989 a) 0) 150,000 | _No
* Honda Marysville production level includes Honda East Liberty production as well
Sources: Motor Vehicle Manufacturers Association and Automotive News (Detroit, mi, Crain Communications),
various issues.

Monthly Labor Review February 1992 23


Auto Industry Jobs in the 1980°s

definition, means that employment growth lags
increases in output. But continued productivity
growth is necessary for U.S.-based automakers
to compete effectively with imports and to take
advantage of future export markets.

Outsourcing. The purchase of foreign-built au-
tomotive components by American companies
and Japanese transplants has remained a con-
tentious issue for U.S. autoworkers. The use
of such parts displaces domestic employment—
real and potential—by transferring demand
abroad. Between 1982 and 1986, imports of
aytomotive parts by the Big Three automakers
rose from $2.7 billion to $5.6 biltionpbetween
1984 and 1986, those by Japanese transplants
inér@esed from $0.5 billiow to $1.6 billian.'”

Captive imports. The prevalence of captive
imports—vehicles that are imported by U.S.
companies from foreign automakers and sold
under domestic labels—also affects employ-
ment. The domestic-sponsored imports are
largely subcompact models, intended to bolster
American automakers’ sales in one of the more
competitive market segments. Sales of captive
imports exceeded 330,000 units, accounting for
about 6 percent of Big Three car sales in 1990.

THE AUTO INDUSTRY'S EMPLOYMENT LEVEL is
derived from the demand for new automobiles.
Because the industry traditionally experiences
high labor productivity growth, future employ-
ment growth is dependent on healthy consumer

Footnotes

demand. Short-term demand for autos will al-
ways be highly cyclical, because cars and trucks
are big-ticket items, making sales subject to the
economy’s overall health. Government fiscal
and monetary policies, with their influence on
interest rates and disposable income, are impor-
tant determinants of the economy’s vitality.
Longer term demand is largely a function of the
size and income of the population, as well as
the nature of the existing stock of automobiles.
Population projections indicate that the
industry’s pool of potential consumers should
grow more slowly in the 1990's than in the prior
two decades. As for the stock of automobiles,
by the end of the 1980's, there were a large
number of cars in use, and the average age was
historically high. However, strong demand for
replacement vehicle purchases depends on the
relation between future income growth and price
changes; in the 1980’s, income growth proved
fairly sluggish. And price changes depend on
the prevalence of government regulation, to the
extent that it affects industry costs, which will
also affect demand, if automakers choose to
pass increased costs to consumers.

The 1980's marked a transitional period for
the auto industry, reflecting increased competi-
tion for domestic sales. The next few years will
also represent a challenging period for Ameri-
can automakers and autoworkers, because they
must continue to maintain their quality and pro-
ductivity gains while also adjusting to new mar-
ket conditions and uncertain demand. o

'The automobile industry is classified as sic 371,
motor vehicles and equipment, in the Standard Industrial
Classification Manual.

2 Douglas Dyer, Malcolm S. Seltzer, and Alan M.
Webber, Changing Alliances (Boston, Harvard Business
School Press, 1987), p. 35.

2 Production and sales statistics were obtained from
various issues of Automotive News (Detroit, MI, Crain
Communications, Inc.)

“ Employment data are from the Current Employment
Statistics survey and appear in Employment, Hours, and
Earnings, United States, 1909-90, Volume I, Bulletin
2370 (Bureau of Labor Statistics, March 1991).

5 Automotive News, May 1, 1989, p. 22.

* Based on unpublished data from the Office of Pro-
ductivity and Technology, Bureau of Labor Statistics,
August 1989.

” US, Global Competitiveness: The U.S. Automotive
Parts Industry, USITC Publication 2037 (U.S. International
Trade Commission, December 1987), p. 5-I

8 Foreign Investment: Growing Japanese Presence in
the U.S, Auto Industry, GAO/NSIAD-88-111 (U.S. General
Accounting Office, March 1988), pp. 22-23

26 Monthly Labor Review February 1992

* Shipments data are from the M3-1 release (U.S. De-
partment of Commerce, Bureau of the Census, 1990);
export data are from Trade and Employment, various
sues (U.S. Department of Commerce, Bureau of the Cen-
sus, 1990).

" Of course, if American transplants are taken into
account, the “exported” percentage would be greater than
10 percent.

World Motor Vehicle Data (Detroit, Motor Vehicle
Manufacturers Association of the United States, Inc., 1991),
p. 329.

2 Recessions are designated by the National Bureau of
Economic Research, Inc., Cambridge, MA.

"8 US, Department of Commerce, Bureau of Economic
Analysis, unpublished data, and Bureau of Labor Statis-
tics, Employment and Earnings, various issues. It should
be noted that much of the rise in average prices reflects
quality improvements and increased options.

"1991 U.S. Industrial Outlook (U.S. Department of
Commerce, International Trade Administration, January
1991), p. 3

'S Historical data in this section are from the Current
Population Survey. See Bureau of Labor Statistics, Em-
ployment and Earnings, various issues.



Christopher J.
Singleton

Christopher J. Singleton is
an economist in the Office
of Employment and
Unemployment Statistics,
Bureau of Labor
Statistics.

Auto industry jobs in the 1980’

a decade of transition

Employment in the industry fluctuated sharply
during the decade as US. automakers

contended with foreign competition,
changing demand patterns, and the

gone tremendous structural change in the
past decade.' Once the world’s dominant
motor vehicle producers, U.S. automakers faced
increasingly fierce competition from foreign
manufacturers during the 1980’s. This stiff com-
petition, coupled with highly cyclical demand,
has resulted in fluctuating output and employ-
ment growth for the U.S. motor vehicle indus-
try. Theimdastry’s strong long-term productivity
growth rate, in the context of moderate de-
mand, has also depressed employment growth.
Traditionally one of the U.S. economy’s largest
employers, the industry affects, both directly
and indirectly, the job prospects of hundreds of
thousands of workers. Its lack of sustained em-
ployment growth during the 1980's has there-
fore had a ngfiggable negative impact on the
U.S. economy, particularly the manufacturing
segment. (See appendix for a more inclusive
definition and discussion of “automobile manu-
facturing” industri
This article provides a historical overview of
the U.S. automobile market, focusing on fac-
tors that affected output and employment trends
during the crucial decade of the 1980's. It de-
scribes the competitive pressures faced by
American automakers and presents the primary
issues affecting the industry’s future economic
vitality and employment requirements.

T he U.S. automobile industry has under-

History of the market

Until the late 1970's, the nature of the Ameri-
can automobile market had remained fairly con-

18 Monthly Labor Review February 1992

business cycle

sistent throughout most of the twentieth cen-
tury. The “Big Three” automakers—General
Motors, Ford, and Chrysler—dominated the
market, with imports controlling a rising, but
hardly destabilizing share. Huge capital require-
ments and economies of scale created barriers
to entry and perpetuated a concentrated market
structure.

Ford Motor Co. revolutionized the produc-
tion process in the first part of the century with
the mass production of the low-cost Model T.
Henry Ford implemented an assembly line to
enable a greater specialization of labor. ud922,
he. estimated that 85 percent of his factory work
fosce required less than 2 weeks of training and
40. percent required less than 1 day.? General
Motors, meanwhile, revolutionized the in-
dustry’s marketing approach. The company seg-
mented its automobiles into a hierarchy of five
divisions, each targeted to a different level of
income. To induce consumers to purchase new
autos more frequently, General Motors intro-
duced the concept of an annual model change.

The production of automobiles accelerated
sharply after World War II to meet pent-up
demand, suppressed during the war. ML9¢bye

dale ‘Of Stitomobiles amounted td
3.4 maitivon’ units, with the United States ac-
counting for 3.1 millié#;’er 80 percent, of the
teen? (See chart 1.) The United Kingdom ranked
a distant second with 360,000 units, and Japan
was not then a factor in the world automobile
market, producing only 15,000 autos that year.
Accounting for about 85 percent of the U.S.
market measured by car registrations in 1946,


a-higit point 10 menths before the economy did,
on average.

Tgr-oontrest-metes vehicles. <i:
ploymerteetmeides with, rather than leads, the

economy at low points.

Current stock, Another factor affecting de-
mand involves the nature of the existing stock
of automobiles. Due to improved quality and
relatively high new car prices—especially when
compared with used cars—the average age of
the stock was historically high at the end of the
1980's. Normally, an aging stock of autos would
portend rising demand from replacement pur-
chases. But the typical consumer’s buying fre-
quency has diminished as a result of the
increased quality of automobiles, coupled with
the sharp price increases over the decade. The
latter factor is especially important, given only
modest income growth: average new domestic
car prices as a share of median family income
increased from 35 percent to 46 percent during
the 1979-89 period.’? Moseover, the average
maturity of automobile loans rose from 45
months to 54 months between 1980 and 1989,
which has also served to reduce consumers’
willingness to buy new automobiles.'*

Demographics. The size and characteristics
of the U.S. population also underlie the de-
mand for autos in the domestic market and will
influence demand in the 1990’s. With the post-
war “baby boom” being replaced by the “baby-
bust” generation, population growth moderated
in the 1980's; the civilian noninstitutional popu-
lation (aged 16 and older) increased by 12 per-
cent between 1980 and 1990, compared with
22 percent for the prior 10 years.'* (See table
4.) The Bureau of Labor Statistics projects con-
tinued moderation in the 1990's, during which
the population is projected to rise 11 percent.'®
Slower growth by the population of driving age
negatively influences demand, reducing the need

for increased capacity and thus additional jobs
in the automobile industry.

Sharp growth during the 1970's and 1980’s
by the 25 to 44 age group—the prime car buy-
ing ages—was a positive influence on automo-
bile demand. The growth rate was 32 percent
for the 1970-80 period and 29 percent during
the 1980's. This segment accounted for 43 per-
cent of the civilian noninstitutional population
in 1990. However, in contrast to the sharp in-
creases of the 1970’s and 1980’s, the 25 to 44
age group is projected to rise by only 2 percent
during the 1990's.

The mix—as opposed to the quantity—of
automobiles demanded is affected by such fac-
tors as income, educational attainment, marital
status, and age. Marketing studies have shown,
for example, that older buyers purchase a dis-
proportionate number of larger and more luxu-
rious cars, because income tends to be positively
correlated with age.'? Demographic trends such
as the aging of the U.S. population, thus present
certain implications for the nature of future de-
mand, and challenges to producers supplying
that demand.

Productivity. Additionally, there are impor-
tant supply-side considerations which affect
motor vehicle employment. First of all, the in-
dustry has historically benefited from high rates
of labor productivity. Output per hour grew at
average annual rates of 4.3 percent for all em-
ployees and 3.7 percent for production workers
during the 1979-89 period.'® Such productivity
growth reflects efficiencies gained from im-
proved or better utilized inputs, allowing
automakers—both suppliers and assembly
plants—to produce more output from a given
amount of labor. Duete prodectivity gains over
this 10-year period, the vehicles produced in
1979 could be protfticed with 25 percent fewer
workers in 1989. Increased productivity, by

Table 4. Index of civilian noninstitutional population by age, 1970,1980, and 1990, and
projected for 2000
11970=100]
‘Aged 16 and older | Aged 16 to 24 ‘Aged 25 to 44 | Aged 45 and older
Percent Percent Percent Percent
Year change change change change
Index | from | index | from | index | from | Index | trom
previous previous previous previous
decade | decade decade decade
1970. 100.0 100.0 | ..... | 1000 | ..... | 100.0 .
1980... 1224 | 224 1246 | 246 | 1924 | 324 | 1135 | 135
1990 1372 12.4 105.9 -15.0 170.7 28.9 126.6 11.6
2000... 151.7 | 106 108.8 27 | 1733 15 | 1862 | 23.4
Note: Index values for the year 2000 were calculated from projections made by the BLS Office of Employment
Projections.

Monthly Labor Review February 1992 25


_ - _ - —_
Chart 3. U.S. car sales by American automakers, Imports, and Japanese
transplants, 1979-90
Units Units:
(thousands) (thousands)
12,000 12,000
 Wehiprenr-sens
|
© Import sales
10.000
10.000 @ fig Three and American Motors
8.000 8,000
6.000 6,000
4.000 4,000
2,000 2.000
i ° °
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

NOTE: The first Japanese transplant began operations in the United States in 1982.

SOURCE:

— - —
marked the beginning of Japanese assembly
production in the United States, and a portion
of domestic employment became directly tied
to their operations.

Employment fell by 45,000 during the 1986-
87 period, as sales of domestically produced
cars declined in 1987—the first such drop since
1982. Import sales fell as well, although at a
slower rate, causing import penetration to reach
a record leve) of 31 percent in 1987. In contrast,
light-duty truck sales continued their healthy
gains; apparently, some U.S. consumers
switched from car to truck purchases. ‘Truck

sades-is an area where tS. automakers main- |

tained a sipwiitent teadsever the-competition.
Motor vehicle employment experienced mod-
erate growth in 1988, reversing the losses of the
previous 2 years. Unfortunately, these job gains
reflected volume swings rather than long-term
growth; they were short-lived, lasting only until
January 1989. By the end of the decade, there
was a huge number of automobiles on Ameri-
can roads. Meanwhile, rising interest rates damp-
ened demand. Even vigorous price rebates could
not advance sales sufficiently. The automakers
were forced to trim their production plans to
reduce high inventories, and this resulted in the
temporary idling of numerous plants. Sixty thou-

Automotive News (Detroit, Ml, Crain Communications), various issues.
——

Nee eee el

sand jobs were lost between January and De-
cember of 1989, #f@ewoekumreeaiag: te test: 3
months of 1989 was the lowest for any fourth
quarter since the recession year of 1982; and

in 1990. The weakness that was evident at the
end of the decade continued, with automakers
reducing their work force by 65,000 jobs in
1990. The year began with a loss of 90,000 jobs
in January, reflecting the temporary closure of
many factories for inventory adjustment; most
resumed production soon thereafter, and the
industry reversed these losses the following
month. However, as in 1989, the year was char-
acterized by numerous production cutbacks. On
a quarterly basis, the job declines accelerated
through the end of 1990. This coincided with
the recession that began in July—18 months
after the industry’s employment began falling—
as well as with the Persian Gulf crisis and the
resulting surge in oil prices and the sharp de-
cline in consumer confidence.

Auto transplants

The increasing competition in the 1980’s for
U.S. market share was typified by Japanese

Monthly Labor Review February 1992 21


Auto Industry Jobs in the 1980's

dustry on two levels. From a macroeconomic
perspective, the oil price hikes retarded the
economy’s growth and, thus, the demand for
big-ticket items such as autos. At the
microeconomic level, the oil shock accelerated
the trend away from larger cars towards those
with smaller engines and greater fuel efficiency.
As a result, foreign producers, particularly the
Japanese, captured market share from Ameri-
can automakers because of the latter’s empha-
sis on large models. (See chart 3.) The
Americans subsequently reduced the engine size
of many of their models: in 1978, 11 percent of
all domestically produced cars contained four-
cylinder engines, compared with 66 percent with
eight-cylinder engines. Just 2 years later, 33
percent of U.S. cars were built with four-cylin-
der engines; those with eight-cylinder engines
represented only 30 percent of the market.>
Despite this new emphasis on smaller en-
gines by American car manufacturers, import
penetration jumped 9 percentage points between
1978 and 1980, rising to 27 percent of the do-
mestic market, as measured by share of U.S.
new car sales. (See table 1.) In addition to greater
fuel efficiency, this shift in consumer prefer-
ences for imports also stemmed from percep-
tions of imports’ superior quality. The U.S. work

force was sharply affected by the substitution
of foreign-built automobiles for domestically
produced ones. AMG FSH" epmadered ded
-Suly dO The ensu-
ing recovery lasted but 11 months and resulted
in growth of only 110,000 jobs. The economic
recession of 1981-82 severely affected the in-
dustry, and employment fell by 185,000 jobs
between June 1981 and November 1982, stem-
ming from a 14-percent drop in production.
The general economic expansion after No-
vember 1982, coupled with U.S. automakers’
increasing emphasis on quality control and cost
reduction, improved their competitive position.
The voluntary restraint agreements between the
United States and Japan, first negotiated in 1981,
also aided the industry. These pacts limited Japa-
nese exports, enabling domestic manufacturers
to improve their efficiency and quality. U.S.
motor vehicle employment rose in the mid-
1980’s as production and sales rebounded filam
, 000 jobs between: Decem-
bes 4982 and Ja , with more rapid
growth occurring at the beginning of the up-
turn—typical of cyclical expansion phases.
However, the employment level remained be-
low that of the late 1970's, This period also

Chart 2. Employment In motor vehicles and equipment, seasonally adjusted,
1979-90

Employment Employment

(thousands) (thousands)
1,100 = 1,100
1,000 }+ 1,000

900 + 900

800 |- 800

700 + 700

600 i L Lu 1 1 Ll mT 600

1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990
NOTE: Shaded areas denote recessions as designated by the National Bureau of Economic Research.
———

20 Monthly Labor Review February 1992


General Motors (38 percent), Ford (22 percent),
and Chrysler (26 percent), had the highest share;
the remaining portion of the market was di-
vided among smaller domestic firms. JasuerRmmpe?
hinacchese-chemmsbingeedastion;. the, United,
States attained its postwar peak in 1947 at 82
percent. But European economies soon began
recovering from the war and expanded output.

The automobile gradually became a more
standardized product, and numerous countries
obtained the requisite technology to establish
domestic industries.
enasechsn snamelprosaction taisof | mien,
unite until 1963, and were not areal force in the
world, market until the late 1960's to early

. American automakers’ longstanding
success in the U.S. market, coupled with early
Japanese failures, led to an underestimation of
the potential competition.

The 1970's represented a turning point for
automobile design. WS. auto manufacturers’
designe-crphesined-targe-semmy-due to the low.
gest of gasoline im the United States as well as
eEEEErTetensive hipiway syeem and
low. population densitiesin contrast, Japanese
automakers’ designs reflected the smaller car
preferences of the Asian and European mar-
kets. ‘and-1979-ineressed

‘tpdemend for more foeFefficient cars, and Te
Japanese were well-positioned to capture ‘an~
‘jwitiat portion of the U.S. market. The ensuing
growth during the 1980’s of foreign competi-
tion in the domestic market marked several sig-
nificant transformations of the domestic
automobile industry. Japanese producers priced
their automobiles very competitively and con-
sumers placed ii increasing emphasis on product
quality and value i in their purchase decisions.

fifi’ (both Japan- and U.S.-
‘pased) had captured 33 percent of att U.S. tar
sales; European firms, 5 percent; and Korean
companies, 2 percent.

Employment analysis

The 1980's. Pitmmniincember of 1979 atta
4988,.the motor vehicles. and.equipment indue-
try experienced 4 net loss of-105;000 fobs, (See
chart 2.) Thedevel-in December. 1989 of 835,000
represented only 80 percent of the industry’s
January 1979 peak employment level (1.1 mil-
lion). However, these figures mask the great
fluctuations in employment that characterized
the first half of the decade.*

The oil crisis that immediately preceded the
decade adversely affected the automobile in-

Chart 1. U.S. and worldwide annual motor vehicie production, 1946-90

Unite (millions) Unite (millions)
65 55
so + 50
45 + 45
4o + 40
35 + 35
30 fF World total so
26 + 4 26
20 | 4 20
15 United States total 15
10 f+ “aparece } °°
sf moe |
Pop a ere Oo OO EOE OD od)
1946 1950 1960 1970 1980 1990

SOURCE: Automotive News (Detroit, MI, Crain Communications), various issues.

Monthly Labor Review February 1992

Ee

19