Strike Points Out How Saturn Runs Rings Around Chevrolet
The current strike at General Motors marks a turning point for the giant company, for its successful new Saturn car and for its less than successful Chevrolet cars.
In fact, the current dispute may be a turning point for American industrial renewal. That’s how important and interlinked the issues are.
The strike itself, over the displacement of 240 tool and die makers in Lordstown, Ohio, may end quickly. It was called by the United Auto Workers as a warning to GM’s management that it won’t be able to proceed with plans--announced last December--to reduce the company’s union work force by 50,000 without hard bargaining and substantial pay settlements.
In a way, the strike is a tactical maneuver looking forward to negotiations on a new three-year labor contract next year. And some Wall Street analysts are already calling for GM to ignore union demands and get on with restructuring.
But issues are more complex and far reaching at GM, a company with $123 billion in annual revenues and roughly 350,000 employees that has suffered from half a century of mismanagement and bureaucracy in the corporate suite, as well as myopia in the union office.
And so a truly worrisome effect of the strike is that it has cut off the supply of parts to GM’s Saturn plant in Spring Hill, Tenn., and therefore closed down one of the most successful examples of labor management cooperation in recent U.S. history--and a highly successful new business.
Saturn, which began production less than two years ago and still has only 195 dealers nationwide, has sold 124,400 cars so far this year--a phenomenal success. If it could keep going at that rate it would triple the sales of 1991, its first full year.
The Saturn comes out of a new factory in which management and labor collaborate in decisions and turn out high quality automobiles. The consulting firm J.D. Power & Associates ranks the inexpensive Saturn ahead of Mercedes-Benz and right behind Lexus and Infiniti in customer satisfaction.
At the factory in Spring Hill, south of Nashville, work and quality control build on some techniques of Japanese auto makers but “at Saturn they do it better,” says Harley Shaiken, professor of work and technology at UC San Diego.
“In Japan, they listen to workers, but the system basically is authoritarian and hierarchical,” says Shaiken. “At Saturn there is real decision making, it is more American.”
Work is done differently at Saturn dealerships too. Sales personnel are paid a salary, plus a bonus based on dealership achievement--not a commission on sales of each car. So there is information about the car but little car-dealer hoopla. There is no haggling on price--Saturns are priced from under $10,000 to $13,500 and more depending on features. The only price bargaining might come in evaluating a trade-in.
Customers like it. “If Saturn could produce more cars, they could sell more,” says George Peterson, head of AutoPacific, a Santa Ana marketing consultant firm.
Which should be good news for GM because Saturn can produce more cars--Spring Hill’s production capacity is 325,000 cars a year, and plans for 800 dealers nationwide offer an expansionary vision.
Yet, incredibly, Saturn may be denied the funds or the ability to go forward. There is opposition from some GM executives and directors, who are disturbed that Saturn won’t turn a profit for years to come on the $3.5-billion investment that set it up.
That old bugaboo--short-term thinking--is at work. Technically, Saturn may lose $500 million this year--because amortization of the $3.5-billion capital investment will put its accounts in the red. But Saturn will start producing a full profit on that $3.5 billion by 1996 or 1997. That’s less than 10 years from date of investment to an established product in the U.S. market. An aircraft maker such as Boeing or a Japanese company, used to long payback periods, would be thrilled.
But GM’s directors these days, responding to institutional investors, are pushing for profits now. Their shortsightedness could endanger Saturn. And so could other opponents.
“Saturn is eating up Chevrolet,” says analyst Maryann Keller, author of a respected book on GM. Keller means that Saturn’s success only underlines Chevrolet’s failure. Sales of the Chevy nameplate, which accounts for more than a third of GM’s total car sales, have declined 26% in the last five years--and sales are falling further in 1992.
Once-proud Chevrolet has become a symbol of the old ways that have brought GM low--bureaucracy inside headquarters, work rules and union-management tension in Chevy plants and thousands of dealers trying to sell old-fashioned cars in old-fashioned ways.
Anybody with sense can see that the spirit of Saturn could be the salvation of GM. But the current labor troubles do not favor the obvious. First, idle plants cause GM to lose money, increasing pressure for short-term solutions. Second, mistrust between the UAW and GM increases, discouraging the cooperation that made Saturn a success.
So this is no trivial labor dispute. It casts a shadow over the best reception GM has had in years from the buying public.
The Rocket and the Slow Heartbeat
While General Motors is thrilled at the success of its new Saturn cars it worries about its old mainstay, Chevrolet,-”the heartbeat of America”-where car sales have lagged for five years.
Source: Ward’s Automotive Report
