Suppliers want more legal immigration to fix labor shortage at factories

DETROIT — Reduced immigration levels are contributing to a labor shortage that is putting a squeeze on the supply base, according to suppliers and economists.

Sandy Stojkovski, North American CEO of German supplier Vitesco Technologies, said the company has had trouble finding enough hourly workers for its factories in the region, an issue she said is common throughout the supply chain. She pinned the problem in part on "very limited legal immigration" into the U.S., which has put a cap on the number of workers available in a tight labor market, especially as the population ages and more workers retire.

Her suggestion: Make it possible for more potential industrial workers to enter the country.

"I really see this as a necessary next step to ensure that we're able to get the talent in all the different areas we need, legally, in this country," she said during a panel last week at the Motor and Equipment Manufacturers' Vehicle Supplier Conference in Novi, Mich.

Immigration is likely to play a crucial role in the 2024 presidential election, the outcome of which could have significant ramifications for the auto industry.

Former President Donald Trump, the front-runner for the Republican nomination, has vowed a return to the hard-line immigration policies he pursued in his previous term, restricting legal and illegal immigration — policies President Joe Biden's reelection campaign has called "extreme."

The possibility of a shift in immigration policy will be closely watched by the auto industry, as will policy proposals related to trade and electrification.

"Politics and geopolitical tensions are going to drive the economy," said Steven Blitz, chief U.S. economist at TS Lombard.

"Just know that the real volatility to the [economic] outlook doesn't rest with any fiscal policy, or rest with any normal economic momentum — plus, minus or indifferent," he said. "It rests with politics."

A tight labor market and higher labor costs have already contributed to reduced post-pandemic supplier profits, along with higher costs of raw materials, shortages of key components such as microchips, and inconsistent new-vehicle production schedules.

The seasonally adjusted civilian labor force participation rate in the U.S. has slipped over the past 16 years, from 66.4 percent in January 2007 to 62.7 percent in October 2023, according to the U.S. Bureau of Labor Statistics. That figure began to decline around the 2007-08 financial crisis, reaching 62.4 percent in September 2015.

The labor force participation rate climbed to 63.3 percent in February 2020 before the COVID pandemic sent the participation rate plummeting as workers were laid off and many older workers chose to retire.

The figure has yet to recover.

"We expect it to continue to decline as the population ages," said Michael Robinet, executive director of automotive advisory services at S&P Global Mobility. "We haven't had any meaningful immigration. That, obviously, is going to impact the bottom of the market significantly. The availability of new workers coming in is going to be a problem."

Although the number of new U.S. immigrants has risen since the pandemic sent the figures plummeting, it still remains below levels seen in the previous decade. According to the U.S. Department of Homeland Security, about 1.02 million people obtained lawful permanent resident status in the U.S. in 2022, down 16 percent from the 1.19 million people who did so in 2016.

"You're still short of the trend you had from 2012 to 2016, so you're still short labor," Blitz said.

Combine that phenomenon with older workers retiring and the Gen Z population being smaller than the preceding millennial generation, and there are fewer potential workers left to fill jobs at supplier factories and elsewhere, Blitz said.

A lack of labor availability makes it even more important for suppliers to offer competitive wages, and to make sure employees are treated well and "feel like they're a part of something," said Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners.

"Those are the ones that are most likely to keep their workers," Wakefield told Automotive News. "If they were treated well during the COVID period and it's a safe work environment and they feel valued, they're less likely to jump the next day."

Chris Nielsen, chief quality officer at Toyota Motor North America, said the industry should work with educators and organizations around the country to inform younger workers about opportunities in the auto sector.

"I don't think the labor availability issue will solve itself just through actions by our HR teams," he said at the MEMA conference. "It has to come from leadership, and from a message across the industry to attract the next generation of people."