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Bringing Auto Manufacturers Home

posted by Diane Eastabrook, Chicago Bureau Chief at 6:03 PM on 04/23/07

Photo of Diane EastabrookIn a few months Ford, General Motors, and Chrysler will begin negotiating a new labor agreement with the United Auto Workers Union. Experts say what is going on outside of Michigan may have as much influence on the negotiations as what is going on inside the state.

In the past decade, the number of auto assembly jobs in Michigan has fallen 30 percent. But, Indiana, Michigan's neighbor to the south, has seen auto assembly jobs increase more than 90 percent. How could there be such a huge disparity in two traditional rust belt states?

Auto transplants are the reason. Toyota and Subaru are already producing vehicles in the Hoosier state and Honda will be making them there soon. The moves of those companies are, in turn, attracting auto parts suppliers to the state.

While both Indiana and Michigan are traditional union states, Indiana has been more welcoming to non-union companies. It also has a more favorable tax climate and is closer to the South, which is home to other transplants and their suppliers.

As Toyota looks to unseat GM as the biggest seller of vehicles in the U.S. and Korean companies vie for a bigger slice of the American pie, auto production here will no doubt continue to grow.

Toyota says at least 25 states are dangling potential sites before it for future production. Could Michigan, the home of U.S. auto production, be among the beneficiaries? James Schrager, management professor from the University of Chicago's Graduate School of Business, says that is unlikely unless the domestic auto companies gain back ground from the UAW.

Schrager thinks Michigan has been keeping an eye on Indiana and officials there could influence the upcoming talks. That could have implications on workers throughout the U.S. and their employers.

Do you think Michigan can regain its dominance of U.S. auto manufacturing? Or, is a central hub for American auto manufacturing a thing of the past?

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The difference is not between Michigan and Indiana. The difference is between a Japanese company that has chosen to build autos in the US with US labor and an American company that sources 95% of its components from Asia.

I am not surprised. The Hoosier State is more business friendly and has lower taxes and smaller unions that have largely been responsible for the decline. Michigan has relied souly on the struggling auto industry and this has been mostly responsible for the demise of the Wolverine Sate.

On the other hand, Indiana is more diverse and business friendly and has lower taxes and smaller unions. Indiana has seen moderate economic growth compared to Michigan's stagnate growth. It is also closer to the South, where the jobs are going.

Way to go, Indiana! Sorry, Michigan. I'm glad I dont live there anymore.

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