If there is still any doubt that the policies of right-to-work states bring enormous benefits for the economy and workers, a story in the Wall Street Journal revealed that foreign auto companies soon “will build more cars and trucks in America than the Detroit giants.” And these foreign auto manufacturing plants are being built in right-to-work states.
I want to be very clear that it saddens me to see American car manufacturers lose much of their market share to foreign competitors. On the other hand, the surge in new factories means a surge in our economy and employment for U.S. workers.
Much of this decline in Detroit can be attributed to auto unions like the UAW that erode profitability and innovation with wage demands that make it hard for them to compete around the world. And this has seen UAW union membership decline in Detroit. Although the UAW is boasting about a rise in membership, this new growth is not in auto manufacturing; but in colleges and universities where the UAW is trying to unionize academics.
A Bloomberg story by Jaclyn Diaz confirmed the general consensus that “Labor leaders can blame themselves for the loss of members, Richard Berman, with the Center for Union Facts, reports that unions spend millions on political activities and officer pay, a questionable practice for labor groups struggling to maintain membership.”
It is estimated that 1.63 million manufacturing payroll jobs located in Indiana, Michigan, Wisconsin, and West Virginia in 2015 that the total for all Right-to-Work states exceeded the total for all forced-unionism states by more than 200,000 in 2016.
According to CNS News, “U.S. Commerce Department statistics, adjusted for regional cost-of-living differences according to an index calculated by the Missouri Economic Research and Information Center, a state government agency, show that in 2015 average annual compensation per right-to-work state manufacturing employee was $76,454. That’s roughly $3,800 higher than the average for states that still lacked Right to Work protections in 2015.”
Under right-to-work laws, states have the authority to determine whether workers can be required to join a labor union to get or keep a job. Currently, 27 states and Guam have given workers a choice when it comes to union membership. Labor unions still operate in those states, but workers cannot be compelled to become members as a requirement of their job.
How effective is the right-to-work movement in auto manufacturing? In the first quarter of 2018 foreign auto manufacturers are expected to produce 1.4 million vehicles in the U.S. The Big 3 share of American sales dropped to 44 percent in 2017.
The National Right to Work Committee reports that excluding Michigan and Indiana from the U.S. total, and considering just the 22 states that had Right-to-Work laws from 2005 to 2015, the Right-to-Work share of U.S. automotive manufacturing output grew from 41.4% to 53.0% over the decade. Real automotive manufacturing GDP in these 22 states grew by 58.3% from 2005 to 2015, but fell by 1.7% in the 25 states that still lacked Right-to-Work protections as of 2015.
Alabama has become a leader in attracting foreign car manufacturers. In 1997, Alabama was the nation’s fifth-poorest state, until Mercedes-Benz built an assembly line near Tuscaloosa. Toyota, Honda, and Hyundai followed with Alabama plants of their own. Kia built a factory just over the border in West Point, Ga. The auto parts makers came next.
Foreign automakers produce more than 60 different car and truck models in the U.S., sell them in the U.S. and export them to other countries from the U.S.
Honda opened its first U.S. plant in Marysville, Ohio, in 1982 and currently makes the Accord, Acura ILX and Acura TLX at that plant; Nissan opened its first U.S. plant in Smyrna, Tennessee in 1983 and Toyota opened its first U.S. plant in Georgetown, Kentucky in 1988, and since then, over 11 million vehicles have rolled off Toyota’s assembly lines in Georgetown.
If you want to see what happens when a union-run state competes against a right-to-work state, Illinois is the poster child. In 2017, Illinois lost out on an opportunity to build cars for Japanese automakers Toyota and Mazda with a price tag of $1.3 billion that would have employed 4,000 workers. Crain’s Chicago Business blamed the loss for Illinois’ lack of shovel-ready sites and the state's failure to adopt a right-to-work law. The plant was built in the aforementioned state of Alabama.
While not throwing in the towel, I came across a news item that revealed that the UAW is urging its members and Americans to buy American-made cars and trucks but only if they are made at unionized plants. With the exception of a small skilled-trades unit at Volkswagen's plant in Chattanooga, Tennessee, plants operated by Asian and German automakers in the U.S. are not represented by the UAW.
In the year 2000, GM, Ford and Chrysler sold more than two-thirds of the vehicles in the U.S. Today, they sell fewer than half of all new models.
This is a sad chapter in our history of achievement and innovation. Nobody wants to see the Big 3 fail, or worse, get bailed out again.
But there are lessons to be learned. I don’t think foreign car manufacturers have some kind of magic wand. The technology they use is available here; a talented labor pool is available here; and the desire to succeed is available here.
The big difference is that foreign manufacturers operating in the U.S. know how to control payroll and wages, and still allow workers to make a very good living.
If states want to be competitive and create jobs for their workers, they need to embrace right-to-work policies. It’s working in 27 states, and state officials owe it to their constituents.
The competition between states has never been more intense. Moving to a right-to-work policy brings enormous rewards. The three biggest states that have shunned right-to-work, are the same states struggling with a severe economic downturn.
It’s not just about business – it’s a matter of survival.
Neal Asbury is chief executive of The Legacy Companies.
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