Auto Parts Industry

Parts employment at historically high levels
Production employment in the U.S. auto industry has fallen slightly in the last two years, but remains at historically high levels. A conservative measure of parts industry employment shows a peak of 666,300 in 1997, edging down to 661,800 in 1999.

The real significance of these figures isn’t found in the modest year-to-year changes of the recent past, but in where parts employment stands historically. In 1995, U.S. parts employment surpassed the previous record of 615,900, set in 1978. It has remained higher ever since. In 1999, for example, the U.S. parts industry employed 7 percent more workers than it had twenty years earlier. That puts the parts industry in sharp contrast to other core UAW industries and to U.S. manufacturing generally, which have shed thousands (or, in the case of the manufacturing sector as a whole, millions) of jobs in the last two decades.

A note on how the parts industry is defined in this brief: when tracking industry employment and earnings, the UAW Research Department looks at six government-defined "standard industrial classifications" that ship more than half their output to the auto industry. Many other industries also supply the auto industry, but are not primarily automotive. As a consequence, parts workers in these industries are not included in our employment tally, which is best viewed as a “lower bounds” estimate of the industry’s size. Broad trends in employment and earnings aren’t likely to be affected by our choice of definition.

Statistics in Brief

Labor Law, Unions,
& Workers' Paychecks

Auto Parts Industry

Household
Finances

International Trade

Employment Situation

Employment in
Major UAW Industries

Consumer Prices

U.S. Merchandise
Trade Balances

Noteworthy News

Growth in independent sector
All of the growth in parts industry employment has been in the independent sector. The chart on the previous page shows the 1978-1999 trend, both overall and for independents (the bottom portion of each bar). Over the period, employment in independent firms shot up from 373,000 to 537,000 – an increase of nearly 44 percent. Not only has employment in independent suppliers grown in absolute numbers, it also accounts for a much larger share of total parts industry employment. In 1978, parts employment was split roughly 60-40 between independent firms and the parts-making operations of the Big Three automakers. By 1999, the split was closer to 80-20.

Dramatic declines in average pay, unionization
Hourly earnings in the parts industry averaged $16.55 in 1998, according to data compiled by the Bureau of Labor Statistics. That figure is boosted by overtime premiums, which are included in the published averages. Even so, it represents a shocking 20 percent decline in purchasing power from 1978.

These industry averages don’t tell the whole story. For example, the 1999 figure of $16.55 includes the hourly pay of parts workers at the Big Three (including the now-independent Delphi). Pay at independent firms tends to be lower – often, much lower. The UAW Research Department’s rough estimate of straight-time earnings in the independent sector (calculated by backing Big Three parts employment out of industry totals, and adjusting for overtime premiums) puts average pay at around $14 an hour.

Behind the falling pay of parts workers is a dramatic decline in unionization levels in the parts industry. No comprehensive figures for all of the unions with a presence in the industry are available, but a look at UAW coverage shows a drop of roughly 50 percent since 1978.

Sales and profits generally strong
Not surprisingly, given record U.S. car and truck sales, parts manufacturers had a strong sales year in 1999. Profits for most of the industry’s major players were strong as well, despite intense cost pressure from customers (not to mention, in many cases, the need to digest recent acquisitions). The table on the next page summarizes 1999 results for selected companies. Some of the companies on the list – most notably Federal-Mogul – have been punished by Wall Street for not boosting their earnings enough. Federal-Mogul has responded with a restructuring plan that entails job cuts of 1,500 from a world-wide workforce of 50,400. (Among the locations affected by the plan is the UAW-represented seal plant in Milan, MI.) Other parts makers have responded to lagging stock prices by announcing stock buy-back programs (Dana) or are considering returning to private ownership (Lear).

Other developments to watch
The Big Three automakers made headlines early this year with plans to develop a massive on-line purchasing exchange. In the first flush of press coverage, parts industry representatives reacted cautiously. Some expressed concern that this new purchasing tool would further reduce parts makers’ bargaining power in dealings with their assembler-customers.

More recently, the automakers have assured suppliers that on-line puchasing will not be used (at least initially) for major parts and systems. Office supplies, yes; braking systems, no. In their development of the new purchasing system, the automakers will continue to distinguish between suppliers of commodities and suppliers of strategic parts, systems, and modules. It is the former that will face the most intense price pressure.

1999 Financial Results
(in millions)

Next: Household Finances