Migration Consternation

Is the American automotive engineer an endangered species?

Until recently, only automotive manufacturing jobs in the U.S. and the rest of North America were at risk of being sent overseas due to availability of cheaper labor.

Now, there is concern about higher-skill jobs, such as those in engineering, moving out for much the same reason.

The 2003 Ward's Supplier Survey finds that although to now there has been little sourcing of high-level engineering work overseas, the prospect of losing these jobs to lower-cost regions weighs heavily on survey respondents working for both auto makers and suppliers in North America.

About 18% of supplier respondents and 28% of OEM respondents say their companies are sourcing high-level engineering work to lower-cost regions such as Bangalore, India, (where both General Motors Corp. and Delphi Corp. have technical centers).

And a whopping 74% of respondents from both groups say investment in technical centers by suppliers and OEMs in lower-cost areas threatens the job security of U.S. engineers.

“The overseas engineers outsourcing and unrealistic pricing will further weaken the U.S. auto makers against the Japanese,” says one supplier respondent. “The U.S. industrial capability, including intellectual property, is disappearing.”

“If other industries are indicative of what might happen in the auto industry, one might expect that (movement of higher-level jobs overseas) will occur,” concurs John Henke, head of Planning Perspectives Inc. of Birmingham, MI, an automotive research and consultancy firm.

Henke says the cheaper overseas engineering labor is difficult for the industry to resist.

The disconnect between staff overseas and in North America, where most vehicle design and development takes place, concerns Henke, as does the ability for North American consumers to afford a new vehicle if high-paying jobs are being exported to other regions.

“They're reducing the market by putting money overseas,” says Henke. “It's a threat not only to individual jobs but also to the overall economy of the country.”

One OEM respondent dissents, saying, “Currently only IT (finance, etc.) applications and CAD (line data, meshing) are threatened” by the trend of overseas sourcing, not engineering work.

Engineers in India typically earn a starting salary one-tenth what their American counterparts receive. That's a big draw for Western businesses seeking inexpensive, highly educated work forces.

For years many companies have sourced only customer service or accounting work to the country. Now, not only are automotive heavyweights such as GM and Delphi flocking there, but also information-technology companies such as Texas Instruments Inc. and Microsoft Corp.

Henke says the notion of sourcing high-level jobs to lower-cost areas is so new that little research has been available to guide automotive companies in their decisions. He says the movement may result in more white-collar workers becoming unionized at the Big Three.

“You have the engineers at Chrysler (Group) already unionized, and if the other domestic (engineers) perceive the threat is great enough, they will do it, too,” Henke says. “It will cost GM and Ford (Motor Co.) in the long run if that happens.”

The Ward's survey finds the continual movement overseas of manufacturing work remains a contentious point with many auto industry employees.

Some 30% of supplier respondents say their companies are under pressure from OEMs to build manufacturing operations in China.

Of those, 31% say the Chinese facilities were built largely to provide lower-cost components for the North American market. Some 15% say Chinese operations would supply markets in China and Asia, while 54% say the facilities would provide parts to both Asia and North America.

Within North America, 43% of supplier respondents and 42% of OEM respondents say they see production moving outside the U.S. and Canada to lower-cost Mexico.

This follows a trend found two years ago in the Ward's 2001 Supplier Survey, in which a majority of respondents (52%) said demand for supplier capacity outside North America was increasing.

“The Big Three are selling out their country of origin to Asia for cheap parts and they don't care about consequences,” says one supplier respondent in this year's survey.

“Large OE automotive businesses,” another supplier respondent writes, “are no longer ‘American’ companies with loyalty to American workers or consumers. When we lose most of our jobs and are unemployed, who will have money to buy their expensive vehicles? Perhaps the Chinese and Indians.”

An OEM respondent has dire concerns about the allure of low-wage regions.

“Shipping technical jobs to Mexico and India,” he writes, “is killing the American auto industry permanently.”