The Wall Street Journal

“NURSING AMBITIONS: In Shift, Auto Workers Flee to Health-Care Jobs Many Seek New Starts In Field That Bled Big 3; Detroit's Next Migration”

By JEFFREY MCCRACKEN

September 11, 2007; Page A1

DETROIT -- In the mid-1960s, Horace Warren joined one of the largest worker migrations in U.S. history. He moved here from Alabama to take a job in the booming auto industry, and for more than 40 years Detroit's Big Three provided jobs for Mr. Warren and his children.

Now his family is part of a huge new wave of migration away from the auto industry. As manufacturers here attack bloated costs by trimming excess workers with expensive union jobs, they have offered buyouts that have let tens of thousands of employees launch new careers. Among these former auto workers, the most popular choice is the very field that auto-industry executives have blamed for their competitive woes: health care.

In the past year, both of Mr. Warren's daughters have left auto-manufacturing jobs to attend nursing school. His youngest, Angela Davis, built engines for 11 years at a Chrysler plant here. But when Chrysler Group offered her a $100,000 buyout, she decided on nursing. "We know a lot of money goes to health care from the auto makers," the 35-year-old mother of three says. "They talk about it all the time -- especially during our contract talks."

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The Detroit work force's massive transition is on display this week, as the United Auto Workers union negotiates with the Big Three American manufacturers -- General Motors Corp., Ford Motor Co. and Chrysler LLC -- on a labor deal to replace the four-year UAW contract that expires Friday. (See related article2.)

Detroit's auto makers would like to replace many of their older employees with workers they hope can be hired under a cheaper labor agreement. The manufacturers are seeking to offer new employees, as well as thousands of temporary workers already on jobs at the plants, a "second tier" wage-and-benefit package. Union representatives confirm those discussions. People familiar with the talks say the UAW is more likely to agree to lower compensation for a limited number of jobs, such as janitors or material handlers.

A centerpiece of the auto makers' strategy is their bid to persuade younger workers to leave UAW jobs, often helping them find professions that pay comparable amounts. The manufacturers are holding up these efforts as an example of socially responsible cost-cutting, and perhaps as a key to restoring their labor competitiveness.

Represented by the UAW, Detroit's auto workers have long received wages and health care plus a "30-and-out" retirement plan that provides a full pension and health care for retirees and their spouses after three decades of service. Those benefits have made Detroit's labor costs the highest in the auto business: The three makers estimate that unionized workers cost them more than $70 an hour, factoring in benefits and retirement, compared with $40 to $45 for Honda and Toyota. Health-care costs alone increase the price of Detroit-brand vehicles by as much as $1,000 to $1,500 compared with a U.S.-made Toyota, they estimate.

Beginning last year with GM, companies started offering early retirements or lump-sum buyouts of up to $140,000. In the past 18 months, GM has persuaded 34,400 unionized workers to take early retirements or buyouts, with Ford and Chrysler cutting 27,000 and 6,400 union jobs, respectively. Since the last labor agreement went into effect in 2003, UAW membership at GM, Ford and Chrysler has fallen from 317,000 to about 180,000.

Last year, Ford began offering a buyout package that covers schooling, following an internal 2005 study that showed many of its younger workers would leave if given a chance to attend college. Under this plan, Ford agrees to pay former workers half of their annual pay for four years -- typically $25,000 to $30,000 annually -- plus health-care benefits and up to $15,000 each year for school. Workers surrender retiree health benefits but retain whatever Ford pensions they've earned.

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Ford says 40% of its former workers who are going to school are studying in medical fields -- more than half specializing in nursing, followed by radiology, dental hygiene and pharmacology. "Health care is where the jobs are," says Marty Mulloy, Ford's head of labor relations, who helped develop Ford's education buyout plan and is handling this summer's UAW contract talks.

GM and Chrysler say they do not track their former hourly workers' career choices. But the UAW and Michigan colleges say many GM and Chrysler workers are applying for nursing and other health-care programs. Both manufacturers have asked Ford about its education buyout plan, people familiar with the labor talks say.

Former auto workers say they are drawn to health care because the jobs pay well and are less vulnerable to being outsourced. Registered nurses currently have an annual mean salary of nearly $60,000, the Bureau of Labor Statistics says. Dental hygienists earn about $62,000. By comparison, auto-manufacturing jobs currently pay about $54,000.

Workers say the jobs are also a welcome break from repetitive work. Chris Pengov, a 48-year-old native of Norwalk, Ohio, spent the past 15 years with Ford, most recently tightening lug nuts and installing rims and tires on Econoline vans and other vehicles at a plant in Avon Lake, Ohio. "A mind is a terrible thing to waste," he says. "That's what happens working on the line."

Mr. Pengov, who has a 23-year-old daughter and a 4-year-old granddaughter, says he had been researching a move to health care for the past few years. In January, he was among what he estimates were 600 Avon Lake workers to accept a buyout or early retirement. (Ford declined to provide plant-by-plant information on early worker departures.) Mr. Pengov took an education buyout and is now in his second semester at Mercy College of Northwest Ohio in Toledo. He says he is considering specializing in radiology or health-information services.

"Either way I will absolutely, positively be 100% happier," he says.

Former UAW members are also being pushed toward health care by auto makers and government officials, who note a growing demand in the field. The American Association of College Nursing estimates the U.S. currently has 126,000 nursing vacancies. By 2014, the U.S. will require 1.2 million new and replacement nurses, according to the U.S. Bureau of Labor Statistics, as many of the nation's 2.9 million nurses retire and aging baby boomers need increasing amounts of care.

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In Michigan, health care is the only industry in demand across the state, says Andy Levin, the deputy director of the state's department of labor and economic growth. Michigan projects a shortage of 18,000 nurses by 2015. "Every hospital in Michigan needs nurses, and every school has a nursing waiting list," he says. "The health-care industry is a growth sector we want to foster."

Already, demand for nursing courses exceeds the number of teachers. To address a staffing shortfall, Michigan Gov. Jennifer Granholm is seeking $45 million for a three-year program to train 500 nursing teachers, a bid that is expected to encounter difficulties amid a state budget crunch.

Health care has long been a huge budget item for Detroit's auto makers. Last year, health care cost the three more than $10 billion combined, more than they spent on steel for their cars and trucks. The manufacturers figure that over coming decades, they will be obligated to pay about $95 billion in retiree health-care costs for current workers, retirees and their spouses. In this summer's talks, the manufacturers are proposing to eliminate the $95 billion obligation from their books by providing some portion of it -- about 70%, those involved in the talks say -- to a UAW-managed health-care trust.

While union representatives have resisted the Big Three's proposal to pay new hires a lower wage, the UAW says it is considering a health-care proposal for new hires that would be cheaper for the auto makers. Under the existing agreement, the auto makers guarantee certain benefits, a system that has grown more expensive as health-care prices have climbed. Under the new proposal, manufacturers would instead guarantee newer hires a defined contribution to their health-care plans, those familiar with the talks say.

Detroit's manufacturers hope such changes will help them to reverse the high cost of decisions they made a decade or more ago. Ford and Chrysler in particular went on a hiring spree in the 1990s to feed a growing U.S. appetite for sport-utility vehicles. Ford continues to employ thousands of extra UAW workers that it hired from 1992 to 1999, when truck sales were booming and Ford hoped to pass GM as the country's largest auto maker. In recent years, Ford kept these workers on its payrolls even when there was no work.

Kenneth Kidd, whose father moved north from Alabama in the 1960s for an auto job, wound up on the line in 1996. A one-time telecommunications operator for the U.S. Army, Mr. Kidd took a job building Ford SUVs at the Michigan Truck plant in suburban Detroit. The work was so boring he took up smoking and brought books for idle moments. But with earnings of up to $80,000 a year, he bought a four-bedroom, brick colonial home in Ypsilanti, Mich., and sent his wife to nursing school.

Mr. Kidd says members of his father's generation would have stuck things out, but that younger workers are more likely to try new things. "I knew from my first week on the job I couldn't stay forever," he says. Like other UAW workers who took buyouts, he doesn't blame his ex-employer for cutting costs. "It's business," he says.

Mr. Kidd is now studying nursing, and says he would like to work in an emergency room. "It's a job where you have to think fast, act quick, get it done right now," he says. "Exact opposite of life at the plant."

Horace Warren has witnessed the migration into the auto business and, now, the massive flow back out. Mr. Warren and an older brother moved to Michigan from Selma, Ala., part of the post-World War II wave that brought African-Americans to cities like Detroit and Cleveland. "Quite a few of us came there for the jobs. You could just walk into the plant and get one," Mr. Warren recalls. He worked for Chrysler Group in Detroit until he retired in 2001.

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His daughter Angela Davis joined the work force in the mid-1990s. An aunt with a UAW job told her Chrysler's Detroit engine plants were hiring as the company ramped up production of Jeeps and Dodge Ram pick-ups. "She said to the whole family, 'Go down and apply at the state employment office, there are some openings,' " she recalls.

Mrs. Davis says she had always thought about pursuing a nursing career. But she took a job on a line at Chrysler, building V-6 and V-8 engines. Typically working a shift that kept her at the plant until after 11 p.m., she attached oil caps, belts or other parts to hundreds of engines a day.

Mrs. Davis said she eventually made about $27 an hour and as much as $80,000 a year. She bought a three-bedroom brick colonial home in Detroit. "It's a great paycheck," she says. "But it was only a paycheck."

As rising gasoline prices undermined sales of big Chrysler trucks, Mrs. Davis lost her overtime. She was laid off entirely for a few months early this year, collecting a lesser salary. When she did have work, her shift kept her away at night from her children, especially her 7-year-old daughter.

"The reality check was when I dropped my daughter off for first grade last year and she said, 'See ya tomorrow, Mom.' It hit me that I never get to see her after school," she says. "That sealed it. When the buyout came, I couldn't accept it fast enough."

Mrs. Davis is using some of the $100,000 she received from Chrysler to attend Oakland University in Rochester, Mich. This summer, she finished nursing prerequisite classes in Humanities and English Literature (she received A's) and Statistics (she got a C). Now she is part of an incoming 75-student nursing program at Oakland called DAWN, or Displace Auto Worker to Nursing. Mrs. Davis hopes to become a pediatric nurse. "Health care feels more secure," she says. "The ball will be in my court, not with the UAW or the Big Three."

Mrs. Davis hopes to graduate in 2010 and then retrace her father's journey, relocating her family to the South, where unemployment rates are lower than Michigan's 7.2%, the highest in the U.S. "Every time I visit down there it just feels like home," she says.

Mrs. Davis's older sister, Denise McDonald, also took a buyout from Chrysler after five years and has enrolled in nursing school at a Michigan community college.

Their father says he's sorry to see that the auto industry isn't providing jobs that retain young workers. He's also sad that his daughter and others are considering a move from Michigan. "Every week at my church I hear about two or three more young people moving South or Southwest," Mr. Warren says. "Too bad, because Michigan needs to keep its young people."

Write to Jeffrey McCracken at jeff.mccracken@wsj.com3