The Honda Vote
Don't fret about 'offshoring' in Anna,where foreigners are bringing good jobs
By Richard J. Newman

ANNA, OHIO--Most of the 1.2 million engines produced each year at the sprawling Honda factory here go into Hondas: the Accord, the Civic, the Odyssey minivan. But last year the Japanese automaker got a new marquee customer for its Ohio power plants: General Motors. The world's biggest automaker tapped Honda to provide 50,000 high-output V-6 engines for the new Red Line version of the Saturn Vue SUV--a 250-horsepower V-6 that's similar to the one in the top-tier Accord.

The "offshoring" of U.S. jobs is a familiar story by now, especially in the auto industry, as GM, Ford, Chrysler, and their myriad suppliers have sought cheap labor in Mexico, China, and other locales. But while the Big Three have been shipping work overseas, foreign-based carmakers have become more Americanized than ever--and found ways to reap the biggest profits in the industry while still paying high wages to U.S. workers.

Asian and European auto companies and their suppliers now employ 216,000 Americans in manufacturing jobs, nearly one fourth of the industry total. The same companies have also been eagerly hiring well-paid American engineers and technical specialists, especially as they try to sell more profitable SUV s and pickup trucks--uniquely American products. Honda's new role as a supplier to GM further blurs the distinction between foreign and domestic brands. The once tiny footprint of foreign-based carmakers "is much more than tokenism," says David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. "It's strategic planning."

Yet the domestication of foreign automakers remains obscured by the furor over outsourcing. In April, when Democratic presidential candidate John Kerry was discussing hybrid-electric cars like the Toyota Prius and the Honda Civic hybrid, he quipped, "I don't want Toyota and Honda to be the seller of these cars" --evidently unaware that Honda is one of Ohio's biggest employers. The Japan-baiting was meant to appeal to domestic unionized auto workers. But in central and western Ohio, where about 16,000 nonunion Honda workers live, the comment may have backfired. "I heard from multiple people complaining," says Eric Phillips, head of economic development for Union County, where Honda's Ohio operations are headquartered. "It was not taken very well in this area."

One reason the role of foreign automakers is not center stage is that their arrival was largely a ploy to avert trade restrictions. In the early 1980s, as Japanese brands gained a toehold in the U.S. market, Honda, Toyota, and other importers agreed to assemble some cars in the United States in lieu of tariffs or other penalties. The initial impact was minimal. When Honda opened its first U.S. car factory in 1982--an Accord plant in Marysville, Ohio--engines and most other major components were shipped from Japan.

But as auto production has become more sophisticated, business strategy--rather than trade politics--has dictated a larger presence in the world's most profitable market. In the '80s and early '90s, Honda executives in Japan decided that providing local jobs and contributing to the community were essential to building brand image in the United States. Cheap land and energy offered advantages unavailable in Japan. Building cars in dollars instead of yen would help reduce foreign-exchange risk. It is now less expensive to build an Accord here than to ship it from Japan.

Today, an archipelago of Honda facilities dots the bucolic landscape of central Ohio. A 950-person R&D staff in Raymond--including about 550 well-paid engineers--now designs nearly half of Honda models sold in the United States. Amid incessant clamor at the Anna plant--Honda's largest engine factory worldwide--2,800 workers on two shifts pour molten steel, operate clanking presses, and work arm in arm with mechanical robots to assemble engines. The engines supply two Ohio assembly plants and another in Ontario, Canada. Overall, Honda's U.S. plants build about 60 percent of the Hondas sold in the United States. An additional 20 percent come from Canada, where they're built largely with U.S.-made parts. Only 16 percent of Honda vehicles sold here are imported from Japan.

Honda also buys nearly $13 billion worth of parts from 620 suppliers in North America, with Ohio a prime beneficiary. "Anywhere you go in the state, you'll find somebody who supplies Honda," points out Paul Schumann, a metallurgical engineer at Anna. "Some are American companies, some Japanese transplants. But those are Americans working there."

Big Three executives and union officials point out that Honda has several advantages domestic automakers don't. While Honda offers its Ohio workers full medical benefits and a pension plan, it has hardly any retirees to support. About an hour's drive west, at United Auto Workers Local 696 in Dayton, the worker-retiree pyramid is inverted: The local represents about 1,600 fully employed members, working for auto-parts supplier Delphi--and about 3,500 retirees. Honda's newer factories are also far more efficient; and a nonunionized workforce allows Honda more freedom to invest in labor-saving technology.

No to unions. On the factory floor at Anna, many workers wear antiunion buttons on their white coveralls. Several UAW efforts to unionize have failed. "Honda has so much stuff in place for improving things, you really don't need a union," says Tammy Ferguson, a supervisor on a disk-brake line. While lower sales have slowed production recently and some retiring workers have not been replaced, Honda has had no layoffs since the recession started in 2001. "It's very easy to see the wealth Honda has brought to the area," says Schumann. "There are all these new homes, affluent-looking homes, that used to be farms."

Meanwhile, at Delphi, the threat of outsourcing to cheaper foreign suppliers persists. Honda, by comparison, has been bringing more work in-house, where it can monitor quality and efficiency more closely. "I look at Honda, and they're not trying to outsource," says Wesley Wells, AFL-CIO executive director for the Dayton area. "They're trying to insource, because of quality." Others point to Honda's long-term vision with envy: "Japanese companies are in it for the long haul," says Rick Tincher, a Delphi industrial hygiene technician.

There's little information suggesting whether U.S. employees of foreign firms are more likely to be Republicans orDemocrats. But clearly they are less likely to line up in lockstep behind the unions, which have been a customary base of support for the Democratic Party. "At a union shop, they're going to do what the boss says," notes Mark Engle, another metallurgist at the Anna plant. "Here, there's a lot more independent thinking." That could lead to a brand-new designation in Ohio politics: the Honda vote.