Weekly News Review | 9 October 2017 | Automotive Purchasing and Supply Chain Automotive Purchasing and Supply Chain

Talking Point

The human cost of electrification

With the news this week that Ford is in talks with the UAW union in the US about how avoid job losses as the carmaker plans to cut $14 billion in costs and move its powertrain production away from petrol and diesel engines to EVs and hybrids, I was put in mind of a conversation I had recently with an engineer from McLaren.

He pointed out that an internal combustion engine has about 450 parts and that an EV powertrain has about 45. This obviously means far fewer automated and manual casting, forging, machining and assembly operations. Needing far fewer people. The ramifications for the whole automotive industry are profound; how many of the operators working on powertrain lines for OEMs and tier suppliers can be ‘up-skilled’ to jobs in production control and IT? How can there possibly be enough of these ‘back office’ jobs to accommodate unskilled and semi-skilled workers for, as Jim Hackett, Ford’s CEO, said in a presentation to investors this week, “EV production will give us a 30% reduction in (man) hours per unit.”

So, without a boom in vehicle sales, the sums just do not add up for the unions and their members. A boom is unlikely as the global car parc is reaching saturation; aside from China and other developing markets, the growth in vehicle sales is not accelerating in the way it did 5, 10 or 20 years ago. And with OEMs enthusiastic about car sharing and various other ‘non-ownership’ personal transport schemes, the OEMs seem to be almost encouraging fewer sales.

Ford is in an unusual position at present; traditionally seen as the technology leader, over its competitors in the Detroit Big Three, it has lagged behind GM in EV and hybrid technology, and models on the road; while GM’s Volt and Bolt models took some time to capture the public’s interest and grow confidence in electric vehicles, the General is now definitely ahead in the EV/hybrid race. Ford talks of more partnerships, with Mahindra in India and Zoyte in China but almost in the same breath it embraces ride-sharing initiatives such as Lyft. Even with tie-ups with commercial users like DHL and Dominos Pizza, there is a definite shortfall of demand and thus jobs, on the horizon.

Henry Ford’s offer of $5 a day in 1914, double the average wages at the time, is starting to look like a truly attractive proposition and may prove to have been the best time to be an auto worker. The carmaker and indeed the whole industry needs to recognise the oncoming employment challenge and plan on how to not only reassure the unions but also modify its vehicle plans and production strategies to keep up its end of the automotive industry employment bargain.

Simon Duval Smith

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