March 29, 2023

Auto Turnaround Is a Boon for Ford Chief

Ford said on Friday that it paid Alan R. Mulally, the chief executive, about $21 million last year, and paid $14.8 million to its executive chairman, William C. Ford Jr.

Mr. Mulally’s bonuses dropped to $4 million, from $5.4 million in 2011, with a steep drop in his stock awards and other compensation to about $15 million last year, from about $22 million the year before. Those reductions were based on the company’s falling short of overall performance targets, especially cash flow goals.

Despite the decrease, he remains among the highest-paid auto executives in the world, earning at least $20 million for a third consecutive year for his role in streamlining the nation’s second-largest carmaker and returning it to consistent profitability.

Over all, the company earned $5.67 billion in profits last year, a 5 percent drop from 2011 excluding one-time valuation changes.

Its profits were hurt last year by big losses in the troubled European market, but Ford continued to post record pretax profits in its core North American market. The company also was returned to investment grade by ratings agencies, and it reinstated its dividend.

Mr. Mulally, who is 67, was recruited to Ford in 2006 just as the Detroit automakers were tumbling into a financial crisis that would force the company’s two main rivals, General Motors and Chrysler, to seek government bailouts and file for bankruptcy.

Ford survived without federal help and has thrived since, posting pretax profits for 14 consecutive quarters through the end of 2012, while improving revenue and market share.

G.M., the largest American car company, paid Daniel Akerson, its chairman and chief executive, about $11 million last year.

The company has not yet revealed its compensation data for 2012, but last month submitted documents to Congress that said it was proposing to pay Mr. Akerson $11.1 million this year.

G.M. said that figure was the same level as Mr. Akerson received in 2012, making his compensation among the highest for seven bailed-out companies that remain under pay restrictions imposed by the Treasury Department.

Chrysler’s chief executive, Sergio Marchionne, received $1.2 million in compensation in 2012. That does not include his pay as chief executive of Chrysler’s parent company, the Italian automaker Fiat.

The pay levels at G.M. and Ford far exceed what the companies were paying their executives a few years ago, when the automakers were losing billions of dollars, shutting factories and eliminating thousands of hourly and salaried jobs.

In 2005, for example, Mr. Ford, who then served as chief executive and chairman of Ford, agreed to take no compensation until the company became profitable again.

He then recruited Mr. Mulally from the aircraft company Boeing, a move that started Ford’s revival.

Since joining Ford, Mr. Mulally has earned more than $160 million in compensation. He also has been given stock awards totaling about $126 million, according to figures compiled by Bloomberg News Service.

“We believe our 2012 performance clearly shows our management team performed exceedingly well in a difficult environment,” Ford said in a statement.

Mr. Mulally has indicated that he will retire from Ford by 2014. The odds-on choice to succeed him is Mark Fields, who was promoted to chief operating officer in December after leading the company’s Americas division for several years.

Mr. Fields earned about $8.6 million in total compensation from Ford in 2012, a slight increase from the previous year.

The healthy pay packages come as Ford and other automakers anticipate another strong year in the revitalized American car market.

Sales of all new vehicles have risen 8 percent through February, compared with the same period a year ago. The industry is on track to sell more than 15 million new cars and trucks in 2013 — the first time that level has been reached since 2007.

While Ford’s executives are enjoying the rewards of the company’s comeback, so are its workers.

Because of its hefty earnings last year in North America, Ford will pay an average of $8,300 in profit-sharing checks to each of its 45,000 union workers in the United States.

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Media Decoder: Ford Turns to the ‘Crowd’ for New Fiesta Ads

Four years ago, the Ford Motor Company brought out the Ford Fiesta subcompact with an innovative program that recruited young drivers – members of the target audience for the new car – to help introduce it through blogs and other social media. Now, that effort is being expanded into the realm of marketing as Ford plans a crowdsourcing initiative to create advertising for the 2014 Fiesta.

Executives of Ford plan to announce on Tuesday morning, at a session of Social Media Week in New York, that they intend to recruit 100 socially-connected consumers to produce a year’s worth of advertising for the next Fiesta, which would begin appearing in the spring.

Information about the initiative will be available on a special Web site,

The would-be Madison Avenue ad executives will be asked to create video clips that could serve as commercials, on television or online; digital ads; ads for social media like Facebook and YouTube; and even ads for magazines and newspapers.

Crowdsourcing as a way to create advertising has been a popular trend for several years as marketers seek to take advantage of new technologies to forge closer ties with consumers.

Ads created by consumers have even appeared in high-profile venues that include the Super Bowl, for brands like Doritos and Mennen Speed Stick, and during episodes of “American Idol,” where Coca-Cola ran one such commercial, with a Valentine’s Day theme, on Thursday.

Automotive brands have also taken part in the trend, among them the Chevrolet division of General Motors, which ran a crowdsourced commercial during Super Bowl XLVI last year.

But looking to nonprofessionals to come up with a year’s worth of ads is unusual, if not unique. “This is Ford’s first completely user-generated campaign,” said James Farley of Ford.

Although “there are some risks,” Mr. Farley acknowledged in a phone interview last week, he likened the experiment to the leap that marketers took decades ago with a new medium called television.

“There are new rules, new things to learn about,” said Mr. Farley, who is executive vice president for global marketing, sales and service and Lincoln.

For instance, Mr. Farley said, “if you ask people to help you produce advertising, they expect to see what they do without a lot of filters.”

“You have to be extremely careful about providing too much help,” he added.

That was a lesson Ford Motor learned in 2009, Mr. Farley said, when the company introduced the Fiesta by giving cars to 100 young men and women and asking them to share their experiences on blogs, Facebook, Twitter and YouTube.

“We had a traditional ad campaign, and we had a digital ad campaign we created with them,” he said, and the latter ads were “a little overdeveloped; they sounded like a company trying to be young.”

This time around, for what the company is calling Fiesta Movement: A Social Remix, 100 young men and women will be lent cars, this time the 2014 model. Some will be alumni of the Fiesta introduction, some will be new recruits and some will be celebrities.

Just like the original version of the Fiesta Movement, the drivers of the cars will be supplied with gasoline, insurance coverage and equipment like cameras, then asked to complete tasks (“missions” in Ford parlance) that involve the cars.

And just like last time, the participants will be asked to share their experiences in social media. But this time, the content they create will also be the basis for Fiesta ads in other media.

Although there will be “zero” professionally-produced ads for the 2014 Fiesta, Mr. Farley said, that does not mean the ads will be of less than professional quality.

“We’re going to shape them to be a Ford Fiesta message, not just ‘We’re having fun on the dime of a big company,’ ” he added.

As for the professionals at the advertising agencies that work with Ford, among them units of WPP like Team Detroit and Hudson Rouge, cry not for them. They will continue to create campaigns for other Ford and Lincoln models.

Mr. Farley declined to discuss what the company would spend on ads to be based on what will be created by the participants in the next installment of the Fiesta Movement. But, he said, the money saved on production costs might be added to the budget.

During 2010, the first full year of introductory advertising for Fiesta, Ford spent $102.9 million in major media to promote the car, according to the Kantar Media unit of WPP. Ad spending fell to $42.8 million in 2011.

During the first nine months of 2012, ad spending totaled only $2.1 million, compared with $40.7 million during the same period of 2011. The decline reflects Ford’s intent to ramp up spending again in 2013 to promote the major changes in Fiesta for the 2014 model.

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G.M.’s Profit Rises Despite Weakness in Europe

G.M., the nation’s biggest carmaker, said it had net income of $900 million in the quarter, compared with $500 million in the same period a year earlier. Revenue increased to $39.3 billion, up from $38 billion.

The company said strong sales in the surging United States market helped it post a $1.4 billion pretax profit in North America.

But in Europe, General Motors, like many other automakers, is continuing to absorb big losses from the worst sales environment in nearly 20 years. The company said it lost $700 million in the quarter.

The company had modest success in its other international operations, reporting a $500 million profit in Asia and a net income of $100 million in South America.

The fourth quarter capped a transitional 2012 for G.M., its third full year of operations since its bankruptcy and $49.5 billion government bailout in 2009.

While it is struggling to restructure in Europe, the company is in the process of introducing several new models in the United States, including revamped versions of its highly profitable pickup trucks.

G.M. also negotiated a sale of the Treasury Department’s ownership stake in the company.

For the full year, G.M. said it had net income of $4.9 billion compared with $7.6 billion in 2011. Executives said the 2011 profit included $1.2 billion in one-time gains on asset sales.

For the year, revenue grew to $152.3 billion, up from $150.3 billion in 2011.

G.M.’s chief executive, Daniel F. Akerson, said the company had a solid year in 2012, and said its future performance would depend on growing sales with new models.

“This year our priorities will be executing flawless new vehicle launches, controlling costs and delivering more vehicles to our customers at outstanding value,” Mr. Akerson said in a statement.

G.M.’s big profits in North America will directly benefit its 49,000 hourly workers in the United States, each of whom will receive profit-sharing checks of up to $6,750 for their work in 2012.

G.M. made several accounting changes in the fourth quarter, the largest of which was a one-time, noncash gain of $34.9 billion to restore valuation allowances for deferred tax assets in the United States and Canada. The gain was balanced by a $26.2 million charge to erase good will tied to its North American operations, a $5.2 billion charge for impairment of European assets and a $2.2 billion charge related to its salaried pension plans.

The write-down of European assets reflected the troubled state of the company’s business on the Continent.

For 2012, G.M. had a pretax loss of $1.8 billion in Europe, which was more than double the $700 million lost the previous year. By comparison, the North American division earned a pretax profit of $7 billion in 2012, down from $7.2 billion the year before.

G.M. executives were cautious about predicting better overall results this year, particularly in Europe.

Daniel Ammann, G.M.’s chief financial officer, said the European market would continue to deteriorate this year. However, the company is sticking with its prediction that it will break even there by mid-decade.

“We feel better and better about the things we can control,” Mr. Ammann said.

Mr. Akerson said that cost cuts would continue in Europe. He said G.M. eliminated about 2,500 jobs there last year and expected the same number of cuts in 2013. He declined to say whether the company might close any more plants beyond the announced shutdown of a factory in Germany by 2016.

“We’re going to be smart about how we cut costs, and not just close plants,” Mr. Akerson said.

G.M.’s profit in the beginning of the year may be thinner than last year because of the marketing and manufacturing costs associated with selling older truck inventory and introducing the new models.

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Toyota Sold Nearly 9.75 Million Vehicles in 2012

Toyota Motor Corp. released its tally for global vehicle sales for last year Monday at a record 9.748 million vehicles — a bigger number than the estimate it gave last month of about 9.7 million vehicles.

It was already clear Toyota had dethroned General Motors Co. as the Detroit-based automaker fell short, selling 9.29 million vehicles.

GM had been the top-selling automaker for more than seven decades before losing the title to Toyota in 2008.

GM retook the sales crown in 2011, when Toyota’s production was hurt by the quake and tsunami in northeastern Japan.

The latest results show Toyota’s powerful comeback.

Global vehicle sales for the maker of the Camry sedan, Prius hybrid and Lexus luxury model surged nearly 23 percent from the previous year. Overseas sales jumped 19 percent, while sales in Japan, where the economy has been troubled, recovered a whopping 35 percent.

Volkswagen AG of Germany, the world’s No. 3 automaker, sold a record 9.1 million vehicles around the world.

All three automakers play down the significance of the sales ranking and say they are focused on making attractive products.

“Rather than going after numbers, we hope to make fine products, one by one, to keep out customers satisfied. The numbers are just a result of our policy. And our policy will continue unchanged,” said Toyota spokeswoman Shino Yamada.

Still, the recovery for Toyota is impressive. Like other Japanese automakers, Toyota’s production was devastated by the March 2011 disasters, which disrupted supplies of crucial components. Flooding in Thailand, where Toyota has factories, also hurt car production.

Before that, it struggled against a crisis of massive recalls in the U.S. over defective floor mats, gas pedals and brakes, involving millions of vehicles, some recalled over and over, that hurt its reputation for quality.

Toyota officials have vowed to scrutinize quality, and have held back product development to minimize recalls.

From the middle of last year, it was hit by another kind of problem — a widespread boycott of Japanese products, including Toyota cars, in China over a territorial dispute.

But sales growth in other parts of the world, including the U.S. and Asian nations such as Indonesia and India, was more than enough to offset such losses.

Toyota is planning to sell 9.91 million vehicles globally in 2013, putting it back on track toward its earlier goal of 10 million vehicles — a target that it had made a special effort to play down after its recall crisis.


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Battered by Crises, Toyota Declares a Rebirth

The Crown, the preferred ride of staid Japanese executives, had gotten an edgy makeover. With a new oversize grille, vamped-up hybrid engine and an unveiling at a fashion mall, there was nothing stodgy about this car.

“Reborn,” read a logo beamed onto a large screen.

“My initial reaction was: ‘You’re kidding! Please, not pink,’ ” Akio Toyoda, the Toyota chief executive and a scion of the Japanese automaker’s founding family, told reporters at the event. “But being reborn does mean taking on new challenges.”

Toyota has spent much of the last year trying to leave behind what has been a tumultuous four years in which the automaker booked its largest loss ever, became embroiled in a recall scandal, struggled with a decimated supply chain after the 2011 tsunami and weathered the punishing effects of a strong yen.

One by one, the pieces have been falling into place.

In 2012, Toyota leapfrogged General Motors and Volkswagen to regain its title as the world’s largest automaker, selling 9.7 million vehicles, a record for the company. Now the company is on the cusp of a recovery, analysts say, that could put it on track to post the kind of growth promised before the crises.

“Toyota is now in the position — for the first time in years — where it is beating market expectations while its peers are disappointing,” Clive Wiggins, a Tokyo-based autos analyst for Macquarie, said in a recent note to clients. “We expect earnings to continue beating expectations over the next three years.”

Last week, Toyota agreed to pay more than $1 billion to settle a class-action suit over claims that its electronic malfunctions caused its cars to accelerate without warning, one of the largest payouts ever for an automotive lawsuit. Toyota still faces personal injury and wrongful death lawsuits, as well as an unfair business practices case brought by 28 attorneys general in the United States. But the company’s $1.1 billion charge against earnings for the class action was seen as a significant step toward closing the chapter on its recall problems.

There have been other signs of change. The company supply chain bounced back more quickly than predicted, profits are on the rise and the yen has started to weaken after the newly installed prime minister, Shinzo Abe, promised to drive down that currency.

And there is a loud message of change being sounded through the stepped-up emphasis on design — with both Toyota and Lexus models getting new looks, including the pink Crown. “It’s actually a beautiful color,” Mr. Toyoda said.

Toyota’s rebound has been centered in the United States, where its sales increased 28.8 percent last year to 1.88 million vehicles through November. That’s more than double the industrywide increase of 13.9 percent over the same period.

The biggest contributors have been stalwart products such as the Camry, and the expanded line of Prius hybrid models. Through November, combined sales of Prius cars had risen 81.3 percent in 2012, as the company continued to dominate the hybrid segment.

The company is also betting on a revamped version of a perennial also-ran, the Avalon sedan. Sales of the current version of the car were down 5 percent last year. The new model, with its wide-mouth grille and sculptured headlamps, reflects the company’s efforts to appeal to younger buyers. Toyota is trying to shave 10 years off the average age of buyers, now in the mid-60s.

The Avalon, which was designed and engineered in Michigan and is being built at Toyota’s assembly plant in Kentucky, is also a test of how much Japanese officials can delegate decision-making to the company’s subsidiaries. Promoted as Toyota’s most American vehicle ever, the Avalon is the first Toyota prototype not developed in Japan but at the sprawling Toyota Technical Center near Ann Arbor, Mich., where 1,100 employees work.

Hiroko Tabuchi reported from Tokyo and Bill Vlasic from Detroit.

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DealBook: G.M. to Buy Back Shares From U.S.

A General Motors plant in Hamtramck, Mich.Rebecca Cook/ReutersA General Motors plant in Hamtramck, Mich.

10:04 a.m. | Updated

The Treasury Department said on Wednesday that it planned to sell off its entire 32 percent stake in General Motors within 15 months, eliminating another reminder of the bailouts precipitated by the financial crash of 2008.

The news comes a week after the Obama administration completely sold off its entire holdings in the American International Group, one of the most controversial rescues of the market crisis.

According to a plan outlined on Wednesday, the Treasury Department will sell a little less than half of its stake, or 200 million shares, back to General Motors for $5.5 billion by year end. The purchase price of $27.50 is about 8 percent higher than the car maker’s closing price on Tuesday.

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The Treasury Department will then sell its remaining 300.1 million shares within the next year to 15 months, depending on market conditions. Those sales could be through stock offerings or other means.

“This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of G.M. among customers, and it demonstrates confidence in G.M.’s progress and our future,” Dan Akerson, the car maker’s chairman and chief executive, said in a statement.

The Obama administration has moved quickly in the past few months to unwind some of the most contentious bailouts struck in recent years.

General Motors

It stepped in and helped rescue both G.M. and Chrysler in the middle of 2009, as the two American car makers struggled to survive amid the economic downturn. Hoping to forestall a liquidation that the government said would more than 1 million of jobs, the Treasury Department provided financing to the two car makers and to Ally Financial, G.M.’s former financing arm.

Ultimately, the administration invested about $49.5 billion in G.M., helping guide the company through a relatively quick Chapter 11 filing that shed an enormous amount of its debt load. It re-emerged as a public company in late 2010.

Since then, it has performed fairly well, having reported rising annual profits for the past two years. The company’s health has improved to the point that it is growing parts of its business, notably by creating a new internal lending arm with two acquisitions worth $7.7 billion.

G.M. said that its strong balance sheet — with about $32 billion in cash and equivalents as of Sept. 30 — paved the way for the latest stock buyback.

The Obama administration and G.M. have repeatedly emphasized the need to restoring the company as a fully private enterprise, worried that the taxpayer-financed bailout might hurt its ability to compete in the market place. Indeed, G.M. initially garnered the nickname “Government Motors” after word of its impending bailout emerged.

“The government should not be in the business of owning stakes in private companies for an indefinite period of time,” Timothy G. Massad, the Treasury Department’s assistant secretary for financial stability, said in a statement. “Moving to exit our investment in G.M. within the next 12 to 15 months is consistent with our dual goals of winding down TARP as soon as practicable and protecting taxpayer interests.”

The Treasury Department has already divested its stake in Chrysler, selling it last year to Fiat, the Italian car maker that had been a crucial ally during the American company’s bankruptcy.

The government still owns about 74 percent of Ally, though it has recovered about $5.9 billion of its investment in the lender.

Unlike the A.I.G. rescue, however, the government’s wind-down of its G.M. bailout is expected to lose money. The Treasury Department’s break-even pricepoint is generally estimated at about $53 a share, following the car maker’s I.P.O.

But the Treasury Department has long argued that the auto makers’ bailout was always expected to be unprofitable, offset by both the A.I.G. rescue and the bank recapitalization program.

Shares in G.M. were up 5.7 percent in early morning trading, at $26.93.

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Fiat’s Plan to Go Upscale Is Met With Skepticism

Instead of closing factories that are operating at less than half of capacity and throwing thousands of people out of work, Fiat will attempt to do what BMW and Mercedes have done in Germany. It will make Italy a production center for the company’s pricier brands, like Alfa Romeo and Maserati, which Fiat will then try to export to the United States and fast-growing markets in Asia.

The ambitious plan has been received skeptically by analysts who doubt whether Alfa Romeo can play in the same league as the German brands — each of which sells more than four times as many cars in Europe and already have strong positions in America and China.

“Alfa has too little volume,” said Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen in Germany who generally admires Mr. Marchionne.

Even in Italy, where Fiat is the largest private-sector employer, Mr. Marchionne’s vow not to close plants won only muted praise. Many in the country complain that he has not kept past promises to invest in new Fiat brand cars.

“Fiat’s words are good, fair and realistic,” Roberto Cota, the president of the Piedmont region, told the news agency Ansa. “But as president of the region I await facts.”

What is more, any good will generated by Mr. Marchionne’s show of commitment to Italian jobs was overshadowed by a decision this week to fire 19 workers at a factory in Naples. That came after a court ordered the company to rehire 19 others who had been dismissed, ruling in favor of their claims of discrimination.

If the firings seemed vindictive to the company’s critics, Fiat said in a statement that it had “no alternative but to employ the necessary mechanisms to reduce the company’s existing work force by the same number.”

During a week in which Ford and General Motors reported another quarter of huge losses in Europe, Mr. Marchionne illustrated just how different the crisis on the Continent is playing out compared with the one on the other side of the Atlantic in 2009.

European automakers cannot count on U.S.-style bailouts from strapped governments. And even if countries did try to prop up their national champions, they would probably run afoul of European Union rules.

In Europe, the government role usually consists of trying to prevent car companies from cutting jobs, even in response to huge financial losses. Calls by Mr. Marchionne for a coordinated, industrywide reduction of factory capacity have not led to any action. So the carmakers are left to fight among themselves for higher shares of a shrinking market — a competition that not all can win.

“The market is going to be a lot tougher than people think,” Mr. Marchionne said during a conference call with analysts Tuesday. “This is truly not for the fainthearted.”

Not that the car business is immune to politics in the United States, where Mr. Marchionne has been drawn into the fray. The Republican presidential candidate, Mitt Romney, has been running television commercials contending that President Barack Obama “sold Chrysler to Italians.”

In fact, many analysts credit Mr. Marchionne — who grew up partly in Canada and has dual Canadian and Italian citizenship — with rescuing Chrysler from oblivion. The rescue saved the jobs of more than 55,000 company employees, mostly in the United States and Canada.

“If it wasn’t for Marchionne Chrysler wouldn’t be around,” said Paul Nieuwenhuis, a director of the Center for Automotive Industry Research at Cardiff University in Wales.

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Toyota Cuts Profit Forecast by 54%

Net income at Toyota, which analysts say is likely to lose its title as the world’s biggest automaker this year, is expected to fall 54 percent, to 180 billion yen ($2.3 billion) in the fiscal year that ends in March, the automaker said in a statement.

Global sales are likely to fall to 7.38 million vehicles, down from an earlier forecast of 7.6 million, Toyota said.

Those sales numbers are expected to put Toyota behind General Motors, which sold 7.48 million units last year and is on a big recovery push.

The lower profit projections, meanwhile, could put Toyota behind rivals closer to home. Nissan forecasts a 290 billion yen net profit this year, while analysts said that the South Korean automaker Hyundai could earn more than $6 billion this year, according to Bloomberg News. Toyota still produces more cars than any of its Asian rivals, however.

Toyota has been hit especially hard by Thailand’s worst flooding in decades, which has killed more than 600 people, damaged millions of homes and inundated hundreds of factories.

The disaster disrupted production at plants as far away as the United States, causing a net shortfall of 230,000 vehicles, Toyota said — almost four times the number at Nissan. Toyota says waters are now receding and most regions are back to normal output.

The flooding came just as Toyota and other Japanese manufacturers rebounded from the earthquake and tsunami that struck Japan in March, which severed supply chains and caused the company to suspend or reduce production at plants both in Japan and overseas.

A shortage of electricity after the nuclear disaster at Fukushima has also complicated efforts by Toyota to put production back on track.

Meanwhile, a stubbornly strong yen has weighed on Toyota’s bottom line by making production in Japan more costly and by eroding the value of its overseas profits. Toyota still makes more than half of its cars in high-cost Japan, a setup that analysts have warned hurts the automaker’s competitiveness.

Toyota, based in Toyota City, Japan, hopes that its new models will revive its fortunes. At the Tokyo Motor Show, which started last week, the automaker’s chief executive, Akio Toyoda, showed off a plug-in version of its popular Prius gas-electric hybrid vehicle.

Toyota shares, which have fallen 18 percent this year, dipped 0.4 percent in Tokyo before the forecast announcement.

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Center for Automotive Research Predicts Sharp Gain in Auto Jobs

DETROIT — Employment in the auto industry will return to prerecession levels by 2015, with carmakers and their suppliers adding about 167,000 jobs by then, according to estimates by an auto industry research firm.

The job growth would represent a 28 percent increase over current levels but would still replace only about a third of the jobs lost in the last decade. And much of the increase is made possible by labor agreements ratified this fall that allow the Detroit automakers to hire more workers on the lower of their two pay scales.

The industry group, the Center for Automotive Research in Ann Arbor, Mich., said it expected the Detroit automakers to hire 14,750 hourly employees in the next four years. They would receive entry-level wages of $16 to $19 an hour. Workers hired before 2007 earn about $29 an hour.

The group projected that about 15 percent of the new jobs would be at Detroit automakers, and nearly 80 percent would be at suppliers. Foreign automakers would account for the rest.

Sean McAlinden, the group’s chief economist, said that about one in six hourly workers at the three Detroit companies would be earning entry-level wages in 2015. They will account for 23 percent of hourly workers at Chrysler, 17 percent at General Motors and 12 percent at Ford, he said.

Currently, about 5 percent of hourly workers at the three automakers are paid entry-level wages.

Mr. McAlinden said that he expected the companies eventually to stop using a two-tier wage system but that it would most likely survive past their next contract negotiations with the United Automobile Workers union, in 2015. Chrysler’s chief executive, Sergio Marchionne, unsuccessfully pushed to eliminate the system during this year’s negotiations, though he said he did not propose cutting wages for any existing workers.

The two-tier system was created in 2007 to help the automakers cut labor costs as they were hemorrhaging money, but only recently were they able to begin hiring new workers in large enough numbers for the savings to have a noticeable effect on the bottom line.

“This was the only real option for lowering labor costs and increasing employment,” said Kristin Dziczek, director for the labor and industry group at the Center for Automotive Research.

The automakers have said the new contracts would result in a minimal increase to their labor costs, which was their overarching goal during the negotiations, while the union tried to recover some of the concessions it had given up in recent years.

Mr. McAlinden estimated that the new contracts would add $114, or 8 percent, to the companies’ average per-vehicle labor costs by 2015. The increases range from $85 a vehicle at G.M. to $166 at Chrysler, though Chrysler’s per-vehicle labor costs would remain the lowest of the three, at $1,293.

About 590,000 people now work in the auto industry, 13 percent more than in July 2009, when G.M. emerged from bankruptcy, Ms. Dziczek said. That figure is expected to grow to 756,800 in 2015.

Much of the job growth will happen in Michigan, where the three Detroit automakers cut more than half of their jobs since 2001, she said.

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Opinion: Let’s Admit It: Globalization Has Losers

Steven Rattner is a contributing writer to Op-Ed and a former counselor to the secretary of the Treasury and lead auto adviser. He has spent nearly 30 years on Wall Street.

FOR the typical American, the past decade has been economically brutal: the first time since the 1930s, according to some calculations, that inflation-adjusted incomes declined. By 2010, real median household income had fallen to $49,445, compared with $53,164 in 2000. While there are many culprits, from declining unionization to the changing mix of needed skills, globalization has had the greatest impact.

Yes, globalization. The phenomenon that free traders like me adore has created a nation of winners (think of those low-priced imported goods) but also many losers. Nowhere have these pressures been more intense than in the manufacturing sector, which I saw firsthand as head of President Obama’s Auto Task Force.

A typical General Motors worker costs the company about $56 per hour, which includes benefits. In Mexico, a worker costs the company $7 per hour; in China, $4.50 an hour, and in India, $1 per hour. While G.M. doesn’t (yet) achieve United States-level productivity in China and India, its Mexican plants are today at least as efficient as those in the United States.

G.M. has responded with inarguable logic. While reducing its United States hourly work force to 50,000 from 89,000 over the past five years, its Mexican hourly head count has risen, to 9,235 from 9,073.

Pressed by high unemployment and eager to keep jobs in this country, the United Auto Workers agreed that companies could cut their costs by hiring some workers at $14 an hour, with lower benefits. Most recently, Volkswagen arrived in Chattanooga, Tenn., with 2,000 much-welcomed jobs — but all with starting pay of $14.50 per hour. At this pay rate, although some workers will quickly exceed it at that plant, yearly income would be $30,000 per year, hardly the American dream of great middle-class jobs.

In these troubled times, any jobs are surely welcome. But we need to reverse the decline in incomes, and this requires a more thoughtful approach than the pervasive, politically attractive happy talk nostalgically centered on restoring lost manufacturing jobs.

So let’s start by acknowledging that just as occurred decades ago with agriculture, the declining role in our economy of manufacturing, which over the last half-century is down from 32 percent of the work force to 9 percent, will continue. Let’s also recognize that retreating into protectionism would turn a win-lose into a lose-lose.

And even if organized labor could force wage rates back up, that would hardly help domestic manufacturing compete against lower-cost imports.

Instead, we should follow the example of successful high-wage exporters in concentrating on products where we have an advantage, as Germany has done with products like sophisticated machine tools.

While America still leads in sectors like defense and aviation, our greatest strength, and a source of high-paying jobs, lies in service industries with high intellectual content, like education, entertainment, digital media, and yes, even financial services. Facebook, Google and Microsoft are all American creations, as are the global credit card companies American Express, Visa and MasterCard.

Achieving higher wages also requires a greater commitment to education; wages for those with college degrees rose 1.4 percent between 2000 and 2010, after inflation. Following the German model of greater emphasis on engineering and technical training would also be advantageous.

Finally comes the tricky question of what role government should play. The prospect of Washington lurching into the private sector is terrifying, as illustrated by the debacle of Solyndra, the solar energy company that failed with $535 million of taxpayer loans. While countries like China have put large resources behind industries they want to nurture, we should resist the temptation to plunge deeply into industrial policy. Particularly in its current dysfunctional condition, Washington is ill-equipped to pick winners and should concentrate its capital on infrastructure and other public investments that the private sector won’t make.

To assist the private sector, particularly young companies, which are the biggest source of new hiring, tax incentives could be used to foster the creation of well-paying jobs.

In addition, the Kauffman Foundation, which focuses on entrepreneurship, has identified other possible solutions, including providing visas to entrepreneurs, easing access to public financing markets and reform of the patent and regulatory apparatus. Sadly, Congress shows little sign of addressing all of this.

With global competition and its pressure on American wages intensifying, American workers deserve a more focused approach from Washington.

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