The Talent Drain

How the U.S. auto industry can overcome a troublesome talent void

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Since this country’s founding, no single invention has had a more profound effect on daily life in America than the automobile. And through the efforts of pioneers such as Henry Ford, David Buick, Ransom E. Olds, Louis Chevrolet, John and Horace Dodge, Walter P. Chrysler and many others, Detroit has been proudly carrying the torch as the Motor City for more than 100 years.

But since the glory days of 1908, when Ford’s first Model T was assembled on Piquette Avenue and people flocked to Detroit for employment, the industry has undergone tumultuous change. And today, the domestic auto industry is in its darkest days ever. Aggressive competition from abroad, skyrocketing commodity prices, eroding supplier relationships, and a floundering U.S. economy have led to a reversal in fortunes, contributing to massive layoffs and buyouts, declining sales growth, and mounting questions about the industry’s long-term viability.

Much of the scrutiny on the automotive industry has focused on these problems, but one critical issue has remained dormant: the talent drain. With baby boomers fast approaching retirement age, a mass exodus of skilled engineers, designers, and managers will follow. Though quietly acknowledged in some circles, the stark reality is that Detroit is in store for a major talent shortfall.

What started as an industry with numerous playsers has been reduced to three principal U.S. automakers, and the Detroit Three — General Motors, Ford, and Chrysler — are struggling to maintain nearly half of the market share of U.S. new vehicle sales. As with any other industry, the strength of its workforce will play a crucial role in shaping its future success.

“Anyone can buy facilities or technology,” says Nancy A. Rae, Chrysler’s executive vice president of human resources and communications. “The real competitive advantage is your people.” Rae believes the current
industry hardship has presented strategic opportunities for external recruitment. In addition, recent studies, including a year-long analysis by Mc- Kinsey & Co. called “The War for Talent,” consistently reveal that securing talent — smart, sophisticated, globally astute workers — will become one of the most important corporate resources over the next several years. 

In 2011, the first of the nearly 77 million baby boomers (those born from 1946 through 1964), which represent 42 percent of the current U.S. workforce, will hit the prime retirement age of 65, although many will exit long before that. Their attrition could signal trouble for automotive companies in filling their chairs with enough qualified, talented employees. According to data compiled by Gantz Wiley Research, a global firm that develops employee and client opinion surveys, the manufacturing industry will be among the hardest hit because of baby-boomer retirements.

Currently, baby boomers fill many of the auto industry’s most skilled and senior jobs, and possess the greatest institutional knowledge. Thanks to near-workaholic habits, they are among the most aggressive, creative, and demanding workers in the industry. As automotive companies try to account for the anticipated talent shortage, they will confront external pressures of
globalization, demographic trends, and competition from other industries, adding a level of strain in their recruitment and retention efforts not previously experienced.

The continual need to reduce internal company costs is compounding matters for the auto industry’s human-resources professionals, according to Paul Czamanske, president and CEO of Compass Group Ltd., an executive search and consulting firm in Birmingham. “They’re concerned because of the buyouts and cost reductions that are being mandated,” he says, “and they’re losing valuable talent in the process.”

Although demographic trends indicate a talent void on the horizon, only some automotive companies are taking note. A recent study by Spencer Stuart, a leading global executive search and consulting firm, suggests that attracting new talent may be a relatively low priority for the industry at this time. Of the 350 global automotive executives surveyed, only 15 percent indicated “attracting top talent” was one of their company’s top three strategic priorities. And while more than half of new hires come from within the automotive industry, three quarters of the survey respondents believe it will be important for automotive companies to recruit from outside the industry.

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