Ford Workers Vote for the Past : Labor: The UAW pact would revive a parts-supply system that produced red ink and falling auto sales.
The announcement last week that United Auto Worker members have ratified a new three-year contract with Ford is good news--that is, if you’re living in the past. Central to the new agreement is the fiction that union jobs can be made more secure by restricting auto makers from buying parts from outside vendors. Actually the reverse is true. Independent parts suppliers are the lifeblood of the auto industry--70% of the value of each new car is produced by outside suppliers (window glass, brakes, plastic consoles, weather-stripping, seats and other components), the very jobs that the UAW wants the Big Three to take back and do themselves.
We’ve been down this road before. Not too many years ago, Ford, GM and Chrysler manufactured most of their own parts or owned the companies that made them. But the quality of those parts was no better than the cars themselves. And the costs were exorbitant. Worse, high-cost, low-quality parts led to high-cost, low-quality cars.
It was an invitation to the Japanese, who saw opportunity and moved swiftly. Japanese auto makers captured 30% of America’s domestic market by 1982. Suddenly the Big Three were awash in red ink; in 1980-82 they lost more than $7 billion and laid off hundreds of thousands of workers. We paid a high price but we also learned a lesson: A tightly coordinated chain of suppliers who can deliver high-quality, low-cost parts on time is a critical factor in today’s competitive international marketplace.
Nowhere can this be seen more clearly than at New United Motor Manufacturing Inc., a joint-venture established in 1984 by GM and Toyota in Fremont, Calif. The old GM plant that today houses NUMMI once employed 5,500 workers, but it was closed in 1982 because it was unmanageable, a victim of adversarial labor-management relations. Today, however, GM and Toyota have transformed it into an industrial powerhouse that produces some of the highest quality cars and trucks in the world. The initial work force of 2,200 has swelled to nearly 5,000. Workers earn about $20 per hour, enjoy bonuses and generous benefits, and, not surprisingly, they are among the most satisfied workers in the auto industry. The company pumps out more than 366,000 cars and trucks and more than $1 billion each year into the California economy.
I headed a research team that carefully examined NUMMI between 1989 and 1994, as part of a larger study financed by the state of California, private industry, the UAW and the Alfred P. Sloan Foundation. At NUMMI--as in the other companies we studied--we worked on the assembly lines and interviewed hundreds of employees from the top management and union leaders to workers on the shop floor. No one at NUMMI ever believed that long-term job security could be assured in any other way than by making a high quality product. The theory to which its leaders subscribed (which has since been borne out) is that product quality and employee satisfaction are prerequisites for expansion, and expansion is the only guarantee of job security.
It meant creating an environment in which a new cooperative mind-set could take root, developing a production system that harnessed employees’ talents, and building a network of external suppliers who could assure a continuous flow of high quality, low cost parts. Suppliers (many unionized) benefited as they shared in NUMMI’s expanding business, creating thousands of jobs themselves. All boats rose on the same tide.
But what is really at the heart of job security at NUMMI is a new compact between management and labor that exchanges conflict for cooperation. As we studied the company, we could see the outlines of this new compact in its infancy. Managers and union leaders alike knew that their survival depended on being able to work together productively. They consciously established the belief that management and the work force could function more productively and profitably as partners than as adversaries.
NUMMI’s no-layoff policy was a symbol of the company’s intent and probably the single most important instrument of creating this new philosophy. Layoffs had always been a sore point--auto workers had long felt they were treated no differently than pieces of machinery: At the first sign of a downturn, they were the first to be let go. The policy said the company would lay off no one unless it was compelled to do so. It also stipulated that before anyone was laid off, all contract work would be dropped and executives would take substantial pay cuts.
The value employees derive from feeling secure, especially in the face of anxiety shared by so many American workers, cannot be overstated. First, NUMMI’s policy is a visible, tangible reminder of the company’s commitment to fairness. It also brings forth a willingness on the part of employees to invest themselves more fully in their jobs. It meant setting aside mistrust and taking responsibility for improving the production system, even if it meant working themselves out of a job--because they knew they would be reassigned to a similar job somewhere else in the plant.
While the contract between Ford and the UAW may have been negotiated in a spirit of partnership, the reality is that it sets both sides up for defeat. Earlier this year at its bargaining convention, UAW delegates agreed on members’ job security and banning outsourcing as its two top priorities. But linking job security to restricting outsourcing ensures that one will undermine the other.
There is much to learn from what is emerging on the shop floors of U.S. industry, but the Ford agreement is further evidence that neither side has truly grasped what NUMMI is about. It will be interesting to see whether GM, when it comes to the bargaining table, looks to its competitor or to its joint venture for guidance.
