Automakers' Woes Have Little Impact On Engineers—At Least for Now

DN Staff

June 27, 2005

6 Min Read
Automakers' Woes Have Little Impact On Engineers—At Least for Now

John Narney recently returned to the automotive industry after a decade working in the heating-air conditioning industry. He had been job-hunting for nine months with hardly a call for an interview. But things changed when he looked back at an industry he'd left more than a decade ago.

A key factor in his decision to get back into autos is that it is "a field where there will always be work," the MSME says. While he could only go to a handful of HVAC manufacturers, the auto industry holds myriad opportunities.

"People are always going to be making cars in North America; the percentage of the gross domestic product tied to the auto industry is huge," says Narney, who became a senior engineer at Siemens VDO Automotive's Newport News, VA, facility in April.

The auto industry is indeed huge. It accounts for 3.7 percent of America's GDP and is responsible for 6.6 million jobs nationwide, about 5 percent of private sector jobs, according to the Alliance of Automobile Manufacturers, a trade group headquartered in Washington, DC.

That means that when companies like General Motors enter downturns as severe as GM's current skid, engineers may feel an impact. However, it may well be lessened because many foreign companies have established engineering-oriented operations in the U.S. in recent years.

"The American auto industry has been buoyed by investment from international companies," says Georges Ucko, vice president of the Chicago-based Invest in France Agency. He adds that 80 French automotive companies have established facilities in the U.S.

That could be a plus given the current state of American manufacturers. GM recently lost over $1 billion in a quarter, nearing the levels that nearly sent it into bankruptcy in 1992, while Ford predicted a loss in its second quarter. They cite a slowdown in SUV sales, which is rippling throughout the industry. Visteon, which was once Ford's electronic operation, lost $1.5 billion last year, while Delphi Corp. expects to lose a few hundred million this year.

Big impact

Their collective well-being is critical for both the U.S. economy and the engineering profession. The industry's broad span encompasses jobs for many engineers. "There's no real way to get accurate statistics, but I'd say 20 to 25 percent of U.S. engineers are in some way tied to the auto industry," says Steven Szakaly, economist at the Center for Automotive Research in Ann Arbor, MI. That's higher than many estimates of 5 to 15 percent because it includes engineers at companies such as Intel and Panasonic that design chips and LEDs for automotive applications, he explains.

Engineers haven't yet been hit by layoffs at GM. And if problems linger long enough to impact them, some engineers might not find it as difficult to find jobs as in earlier industry downturns.

That's largely because of globalization. Over the past few years, many foreign companies have established operations in the U.S., many of them in the R&D areas that employ many engineers. "Toyota, Honda, and other foreign companies are coming in. That's where the growth is," Szakaly says. Toyota, second only to GM in automotive output, has seen solid growth and profits in recent years, as have other foreign automakers.

Foreign capital is no longer considered in the negative light of the era when U.S. jobs were flowing overseas. Now that money and jobs are coming here, even once hard-hit states like Michigan are embracing foreign capital. "We want to attract international investment," says Michigan Governor Jennifer Granholm.

It's not just the big automakers like Hyundai and Nissan that are putting major operations in the U.S. France's Faurecia has slated more than $50 million for new facilities in Michigan. Aisin World Corp. of America, an arm of the Japanese maker of a variety of automotive components, has been beefing up its U.S. operations. And John Carroll, senior vice president of business development for the Detroit Regional Chamber, notes that 11 Chinese companies have set up shops in the Detroit area, reversing the common flow of companies into China.

Though automakers are investing a fair amount in the U.S., another aspect of globalization is increased competition. That has stripped away some of the perks that were once associated with automaking. "Things are tighter than they used to be, there's not as much money as there was 10 years ago," Siemens' Narney says.

Regardless of how much temporary belt-tightening the industry may go through, most observers feel autos and engineering will remain closely linked fields. "There's a strong demand for trained engineers. While they may see some temporary dips, the long-term prospects are good," Szakaly says.

Big 3's role shrinks
Slow sales of SUVs like the Yukon sparked a huge loss for GM. Industry watchers also note that while the major automakers still drive the industry, their role for engineers has diminished a bit. As automakers outsource more design and manufacturing work in electronics and other fields, the role of so-called tiers of suppliers is rising. "As the tiering system evolved, it became clear that GM, Ford, and Daimler Chrysler would not be the customer for many suppliers. Their customers will be the Tier 1 and Tier 2 suppliers," Carroll says. The strong defense market has also become competitive in this field, which has many of the same technologies and ruggedization requirements as the auto industry. If engineers are hit by layoffs, they might be able to switch fields. "We've gone to Detroit recruiting, with job fairs supported with extensive advertising. We're under pressure to find structural designers, and Detroit has auto designers who are doing structural work," says Jim McNeely, staffing director at Northrop Grumman's Integrated Systems Sector in El Segundo, CA. A related segment of the transportation industry, working for the military, also offers opportunities for engineers. The Tank Automotive Research Center will have a budget of more than $500 million this year, and the U.S. Army's National Automotive Center will have nearly $12 billion in procurements, says Dennis Wend, director of the NAC, based in Warren, MI. One thing that hasn't changed is the key role of the Detroit area. Though foreign manufacturing operations now exist in many states, Michigan remains the center of development work. "Seventy-one percent of top 100 Tier 1 suppliers are headquartered in the Detroit area," says Carroll. He adds that more than 150 companies have R&D facilities in Michigan.

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