The new trend in automotive hiring: Amazon

With sales flourishing and low employment rates, recruiting workforces over the past few years have been hard prior to the coronavirus pandemic.

As businesses are slowly slipping back to normal, automotive companies now face a new challenge, Amazon.

With a starting wage of $15, about 20 percent more than what auto parts plants usually pay to start, the online marketplace plans to recruit 100,000 hourly U.S. and Canadian workers.

Recruitment troubles

This is making auto-sector expansion a bit tougher than usual.

“Not just Amazon, but all of the employers who have done well through the pandemic while the auto industry was stalled, like Home Depot, food companies, grocery chains, and medical-sector companies,” said Dietmar Ostermann, U.S. automotive advisory leader for PwC.

Many other factors are affecting automotive manufacturers’ production expansion as they continuously compete for hourly labor with these major corporations and large gig economy employers.

Automotive employers are getting creative and reevaluating how they can secure talent in order to compete with other business segments. According to Keilon Ratliff, vice president and automotive lead at Kelly Professional & Industrial, this includes waiving some of the traditional hiring contingencies, such as drug testing as well as background screenings.

“You now have different sectors all looking for the same talent, and people are amending some of the qualifications that they have on the front end,” he said. “Companies have had to adjust those processes in order to compete.”

Auto manufacturers have been dealing with some of the lowest unemployment rates in America since World War II. Trying to recruit workers in a market where there is little available work has been quite difficult.

Although thousands of American workers were laid off and are coping with a recession, the recruitment of factory workers has been aggravated by COVID-19 this year. People are now more hesitant to take a job in a factory. Additionally, with the availability of unemployment benefits of up to $25 an hour, it beats out the bait of lower wages to go work in the risky, dangerous quarters of an assembly plant.

It’s all now coming to a head.

“There is a significant shortage of workers in the auto industry right now,” Ostermann said.

Different strategies

Employers are trying to get new hiring projects on track while some are simply returning to previous production levels. But the shortage of workers is a blockage. With about a tenth of a much-needed workforce missing, this can hold back volumes and hinder efforts to operate a plant efficiently.

David Kalb, president at Applied Tech Industries, a Tier 2 specialized automotive coatings provider in Chesterfield, Mich., said that shortly after the industry came back online, he has not been able to find enough workers to keep up with production commitments.

“We had to go to 10-hour shifts, six days a week because we couldn’t get good help, other than the people we had,” said Kalb, who services 12 auto assembly plants.

Kalb had to outsource some work to competitors, in addition to working extra hours. “Just in trying to find people, we’ve added more temp agencies. We had to increase our pay by a couple of bucks an hour because that’s what the market was doing at the time,” he added.

Additionally, others have asked salaried engineers to fill gaps on assembly lines.

“There’s definitely a battle for talent,” Ratliff said. “Customers are experiencing higher turnover rates. As we’re looking to engage with the workforce, there’s lower enthusiasm to go back to work due to COVID. The war for talent became that much more challenging.”

Some employers are even considering making their wages more competitive and are teaming up with organizations that have a connection to the manufacturing workforce.

The Texas Workforce Commission, which is a state agency that provides workforce development services to support the state’s economic development activities, creates grant programs that aim to increase the available worker pool by connecting incoming or expanding companies with those workers.

Texas is currently awaiting the arrival of a new Tesla Gigafactory truck plant southeast of Austin, which is expected to pull in more suppliers and incite local parts companies to expand production, creating the need for more auto workers around Austin. With the University of Texas, state government offices, and Dell Technologies as a major local employer, the area is hardly hurting for jobs. But now a new Apple campus there plans to hire 15,000 people.

“You can have all the great tax incentives and benefits and be a nonunion state and all these things that Texas has, but if you don’t have the workforce that is ready to meet those needs, that’s going to hurt that recruitment,” said James Bernsen, deputy director of communications at the state commission. “A key input is having that workforce, and that’s really been our strength.”

Brexit Could Cost Auto Industry Several Billion Dollars

Britain’s separation from the European Union could cost carmakers and suppliers up to $13 billion unless cross-border trade remains tariff-free and unbureaucratic, said BMW Chief Financial Advisor, Nicolas Peter.

During a virtual roundtable discussion on Thursday, Peter told journalists that BMW has spent about a million dollars this year to prepare for Brexit.

“The auto industry association ACEA has estimated that it could cost carmakers and suppliers 10 to 11 billion euros ($11.7 billion to $12.9 billion),” Peter said. “We need tariff-free trade. And even then, it needs to be seamless. We have a just-in-time manufacturing system so the administrative processing at customs needs to be efficient.”

He also suggested that Britain continue to keep pace with European Union emissions requirements so that carmakers can offer the same cars in all European markets.

“Strong demand for electric and hybrid cars has helped BMW stay ahead of projected fleet emissions reduction targets for 2020”, Peter added.

At this moment, BMW is on track to meet its full-year targets after a recovery in auto sales led by China helped the manufacturer overcome the COVID-19 pandemic.

Peter asserts that BMW will meet both its full-year forecasts and the European Union-mandated CO2 targets this year. He cited a boon from China, where car sales rose by a fifth in September compared to a year ago.

“The third quarter was much better than the second quarter, but with different speeds in different markets and regions,” Peter said to the reporters on a call.

The German carmaker has projected an automotive earnings margin, before interest and taxes (Ebit), between 0-3 percent this year, and for sales to be significantly lower than last year after the pandemic shut down both factories and dealerships. Earlier this week, the company said that deliveries of BMW-brand vehicles were down 11 percent this year through September.

Additionally, the company is trying to increase sales of EVs to meet emissions regulations in Europe which will get stricter in 2021. Peter said that he sees the company meeting those demands this year and next year.