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San Antonio Auto Industry Gains Employment Momentum

The Texas city’s manufacturing jobs reached 52,000 last fall, its highest level in more than two decades; employment in auto manufacturing more than doubled over the last 20 years.

(TNS) — For years, San Antonio city leaders had tried and failed.

Throughout the 1980s and 1990s, they wanted to bring an automotive plant to the region — the gold standard in economic development, a win that could generate thousands of jobs and boost tax revenue.

But it wasn't working. Automotive supply lines at the time were centered on Detroit and other parts of the Midwest, not South Texas. Automakers such as Saturn, Mercedes-Benz and Hyundai all rebuffed San Antonio's recruitment pitches.

And then Toyota came along.

In early 2003, the Japanese automaker announced it would build a pickup factory in San Antonio, a decision that capped off six "frantic, exhilarating" months of negotiations, as Bexar County Judge Nelson Wolff described them in his 2008 book "Transforming San Antonio." Local and state officials put together a package of subsidies worth more than $100 million to attract Toyota to the South Side.

Toyota's factory, which cost about $2 billion to build and began producing full-size Tundras in 2006, effectively launched the auto industry in the region. And its growth has exploded in recent years.

"What Toyota does is demonstrate that this is, in fact, a viable location for an automotive plant," said David Marquez, director of community and economic development for Bexar County. "It fits our community."

Manufacturing employment in San Antonio topped 52,000 last fall, its highest level in more than 20 years, according to the Bureau of Labor Statistics. Across Texas, the number of people working in factories today — just over 900,000 — is slightly lower than it was in 2002.

Within the manufacturing industry — which includes producers of everything from satellites to fast-food fryers — automakers and their suppliers are rising fast. Employment in auto manufacturing has more than doubled over the last two decades, a sign of the statewide shift toward vehicle production.

You can see their ascendancy in San Antonio.

The commercial truck and bus manufacturer Navistar International in March unveiled its recently-completed, high-tech truck factory on the far South side, where it will soon pump out diesel and heavy-duty electric trucks.

Tesla suppliers, such as ElringKlinger AG and Saueressig, are setting up production facilities in San Antonio to ship parts to Tesla's new $1.1 billion Gigafactory just outside Austin, where the company currently makes its Model Y sedan. (The only other major vehicle manufacturing plant in Texas is General Motors' facility near Dallas.)

Transmission maker Aisin AW completed work on a $400 million plant in Cibolo last fall, and heavy-equipment manufacturer Caterpillar builds engines at a plant in Seguin.

Toyota itself also recently completed a $400 million expansion of its plant, where it soon will produce the Sequoia SUV alongside the Tundra pickup.

Meanwhile, San Antonio's automotive industry is beginning to push beyond production, into higher-skill, higher-paying engineering.

The reconstituted DeLorean Motor Co. is setting up its headquarters, with plans to hire 400 employees, many of them engineers. They'll work on the new electric DeLorean model and technologies that the company may incorporate in the vehicle, such as hydrogen fuel cells. DeLorean will produce the car in Canada.

Navistar set up an engineering center eight miles from its South Side factory to test and validate parts for its electric trucks.

The shift to automotive research and development could make San Antonio a hub for high-wage jobs in zero-carbon transportation in the years ahead, city officials say. DeLorean said its San Antonio employees will earn about $140,000 annually on average.

"The long-term play is to get more of the value-added work. So when you see Navistar coming here, they didn't just bring a truck factory, they brought their engineering plant," Marquez said. "That's what our county strategy has been from the beginning."

Nearly two decades ago, Toyota was interested in San Antonio's workforce and cheap electricity when it was considering sites for a plant. Also, the Tundra had a lot of sales potential in Texas, so Toyota's marketing department thought it would be smart to build the trucks in the country's largest pickup market.

But a longtime personal friendship was also a big factor in the world's largest automaker's decision built a plant in San Antonio.

The Toyota Multiplier

Then-Mayor Henry Cisneros led the city's first trade delegation to Japan in 1985, where he befriended Naoko Shirane, a relative of Toyota's founding family. The city hired her and her husband to promote San Antonio to Japan corporations.

Over the years, Shirane helped set up meetings between Cisneros and Toyota officials, and facilitated informal communications between them — contacts that proved invaluable when the company began scouting locations for a U.S. Tundra plant.

Shirane died in 2013.

Over time, Cisneros cultivated a friendship with Shoichiro Toyoda, the former chairman of Toyota and son of its founder.

"There should be no question that the reason we got on the list and prevailed was because of Cisneros' relationship to Dr. Toyoda," Marquez said.

When Toyota announced its decision to build the plant in San Antonio, the manufacturing industry in the region was in free fall. Companies were outsourcing jobs as product imports surged, clobbering the makers of more expensive domestic goods.

Manufacturing jobs peaked in San Antonio at 57,000 workers in 2000. But over the next three years, factory owners slashed nearly 20 percent of their workforce, eliminating more than 11,000 job.

The Toyota plant began turning those dismal numbers around when it opened the plant in 2006.

"There's always been manufacturing here, but I don't think San Antonio had been known as a manufacturing hub until bringing a big name like Toyota," said Leslie Cantu, a vice president at Toyotetsu Texas, which supplies brake pedals and fender aprons to Toyota's factory.

Parts makers have delivered some of the biggest jobs gains.

Marquez' first task when he took over the county's economic development department in 2005 was to establish a supplier park, located next to the automaker's plant, for Toyota vendors. The close proximity would cut down logistics costs.

Today, 23 on-site manufacturers supply parts to Toyota — everything from car seats to hood locks. Toyota's factory employs around 3,000, and its suppliers employ another 4,000 workers.

"There's a lot of benefits to the way Toyota set up this campus," Cantu said. "Reducing inventory, there's an impact on reducing costs so that we can be more competitive."

Toyotetsu supplies other Toyota factories, but Toyota's San Antonio operation was the first one where Toyotetsu opened a factory next door.

"At some of the other plants, you get your volume forecast, and you're just producing and shipping," Cantu said.

As Toyota developed the supplier park, the company asked Cisneros for a list of wealthy Hispanic business people in the city with the cash and the willingness to become partners in Toyota's parts suppliers.

Toyota wanted to diversify its supplier base and mirror the city's demographics. The company chose four men to lead different suppliers. Staffing expert Rosa Santana later became a partner in supplier Forma Automotive.

Cisneros is an investor in supplier Avanzar Interior Technologies, though he said in a 2020 interview that his "stake isn't that large."

Southern Shift

Auto manufacturing bolsters the local government budgets more than other industries.

Auto plants require big, expensive machinery that's taxed as property and generates more revenue for the area than an office building would.

"Advanced manufacturing is the best of both worlds: well-paying jobs and a tax base of hundreds of millions of dollars that pays into taxes for the community to be able to have the services and the quality of life that we want," Marquez said.

The geography of the auto industry has changed over the last 20 years, to San Antonio's benefit. The absence of strong unions in Texas — compared with the industrial Midwest and other parts of the U.S. — helped pull Toyota south, according to Wolff's book.

During a meeting in January 2003 at Toyota's North American headquarters in Kentucky, Wolff said a Houston Port Authority board member assured the automaker the port wouldn't be slowed by labor strikes. In the same meeting, a Toyota executive lamented a 2002 labor dispute in California that cost Toyota tens of millions of dollars.

Historically, the Big Three automakers — Ford, GM and Fiat Chrysler — built their factories near Midwest rail infrastructure. But supply lines have moved south as Mexico has emerged as a focal point of automotive manufacturing, particularly near the U.S.- Mexico border.

Last year, Toyota shifted production of the Tacoma pickup from San Antonio to plants in Mexico. The automaker operates factories in Guanajuato in central Mexico and Tijuana, across the border from San Diego.

General Motors runs a plant in the border state of Coahuila, which it's converting to build electric vehicles. The South Korean automaker Kia opened a factory in the border state of Nuevo Leon in 2016, and Volkswagen and Ford also own assembly plants in central Mexico.

The turn south is part of what brought Navistar to San Antonio.

Navistar, headquartered outside Chicago, operates a bus plant in Oklahoma and a truck factory near Monterrey in northern Mexico. Building the engineering facility in San Antonio, in between those cities, makes more sense logistically than placing it in Illinois, Marquez said.

"We're the ideal spot between Mexico and the U.S. — this fantastic bridge point," he said.

The Cost of Success

Courting big factories also has some downsides.

Toyota's assembly plant is the biggest producer of volatile organic compounds in Bexar County. VOCs react with nitrogen oxides to produce ground-level ozone on hot days, which causes respiratory problems and aggravates asthma and other lung diseases. Asthma hospitalization rates in Bexar County are higher than in Texas overall, according to the Metropolitan Health District.

The Toyota plant emitted an average of 459 tons of VOCs each year from 2014 to 2020, according to the Texas Commission on Environmental Quality. The emissions come mostly from the plant's paint shop.

The Environmental Protection Agency last month proposed downgrading Bexar County's ozone attainment status because of excessively high ground-level ozone here. The region's relatively clean air and attainment status were originally part of San Antonio's allure for Toyota, according to Wolff's book.

Marquez wasn't worried about local emissions from the automotive industry, pointing to the high-tech automated paint shop that Navistar built at its plant, which he said uses a sophisticated system to filter emissions.

Navistar's plant only recently began operating, and emissions data for the site isn't available. But the company said last year that the facility "will be a minor source for all applicable emissions under the permit issued by the state of Texas."

"I've been in plants all around the world, and I've never seen that much attention to not letting any paint escape the skin of the truck," Marquez said. "That's what gives me a lot of optimism and confidence that these are industries that do fit who we are, because we are definitely concerned about nonattainment."

Another issue: workers starting in manufacturing often earn under $15.

In exchange for a $750,000 grant from the city, Navistar agreed to hire 600 employees by the end of 2024 and pay at least $12.38 an hour. In exchange for a $750,000 grant from the city, Navistar agreed to hire 600 employees by the end of 2024 and pay at least $12.38 an hour. However, most workers have to earn nearly $17 an hour under its agreement with the city.

While jobs in manufacturing often don't require a college degree, workers usually need to earn a series of training certificates to reach higher pay levels.

But even if the entry-level wages are relatively low in manufacturing, experience pays. The average manufacturing wage in Bexar County was about $68,000 last year, well above the countywide average annual pay of about $55,000, according to the Bureau of Labor Statistics.

"It's not sufficient just to send you to get that startup certificate and then do nothing after that," Marquez said. "Crafting an individual plan is how you overcome that — by not thinking of it as one class and then you're going to get into a career."

When it launches this summer, the city's Ready to Work job training program will offer courses for lower-income residents to learn manufacturing skills and find work in the industry.

The plan is for the city's workforce office to ask manufacturers which skills they need employees to have. The city and training providers will then craft courses to train workers accordingly.

The Ready to Work program is also meant to broadcast a message to manufacturers looking to come to San Antonio: "We have workers for you."

The city wants "to make sure Ready to Work is taking those job orders, so to speak, directly from industry and working very closely with them," said Romanita Matta-Barrera, chief workforce officer for the economic development nonprofit greater:SATX. "As individuals are going through the program, they're trained into job opportunities and not into joblessness."

Toyotetsu's Cantu has hired 29 workers from the city's Train for Jobs program, the precursor to Ready to Work. About 150 people have gotten jobs in manufacturing following its training, with most making at least $15 an hour. About 1,500 people in all have found work through Train for Jobs since it opened in September 2020.

To hire graduates of Ready to Work, employers have to pay them at least $15 an hour, a thorny requirement that wasn't a part of Train for Jobs — and one that many employers consider burdensome.

Smaller manufacturers that offer starting wages below $15 will likely be shut out of hiring employees who go through Ready to Work, said Rey Chavez, president of the San Antonio Manufacturers Association.

Marquez was also skeptical of the city mandating a minimum wage for graduates of Ready to Work.

"If we force (employers) to have a floor at $15 or $18 an hour, that may sound good on the front end, but that has a corrosive effect on who they can hire," Marquez said. "Someone may need to get into a $12 per hour job, but if we don't keep them on the escalator to the top, that's the problem."

Matta-Barrera said about half of the projects currently in greater:SATX's pipeline are manufacturing-related — suggesting the industry's growth in San Antonio is poised to continue.

"There are so many different on-ramps in (manufacturing) where you can make well above livable wages without necessarily requiring a four-year degree," Matta-Barrera said. "The focus is on high-wage, high-growth sectors, and manufacturing represents all of that."

(c)2022 the San Antonio Express-News. Distributed by Tribune Content Agency, LLC.
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