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JAMES FLANIGAN

It's Not Your Father's Car Industry--or UAW

September 01, 1996|JAMES FLANIGAN

A look behind the issues in the automobile industry contract negotiations, which will move toward strike or settlement in the next two weeks, illustrates the dilemma as well as the achievements and potential of the United Auto Workers and, by extension, workers, union or not, in all U.S. industry.

The UAW must innovate and adapt to skillful and competitive ways to make more cars with fewer workers, even as doing so tends to reduce union ranks.

"Job security is the critical issue" in this year's negotiations to renew contracts expiring Sept. 14, says a union official. But a contract doesn't really guarantee job security anymore.

The union is not in command of job security, and company managements aren't either. The competitive market is in charge: critical customers comparing price and quality with the models of scores of competitors, putting pressure on all to reduce costs.

U.S. car makers have made great strides, but they still lag in productivity behind the U.S. plants of Japanese manufacturers, according to Harbour & Associates, a Troy, Mich., research firm that the motor industry relies on for efficiency statistics.

Nissan at its plant in Smyrna, Tenn., can make a car in 27 hours, according to Harbour. General Motors takes 46 hours for the same work; Chrysler, 43 hours; Ford, 38 hours; Honda, 31 hours; and Toyota, 29.4 hours.

What that means is a labor cost penalty of $802 in the price of each vehicle GM sells, says James Harbour, head of the firm.

There are other factors involved in competitiveness, to be sure, but that cost differential must be made up in incentive financing, price rebates or lower profit margins for the company and its dealers.

Pretty soon lower profits inhibit investment in new models and the business begins to fade. Only a half dozen years ago, there were serious fears that even mighty GM--$170 billion in annual sales, 243,000 employees and an army of suppliers and vendors depending on it--could actually go out of business.

Yet the competitive market has goaded U.S. car companies and UAW workers to great achievements. Productivity has increased sharply for all the companies. And competitive pressure has forced U.S. workers to acquire new skills and knowledge, which happen to be their surest defense against low-wage competition.

Cars are made more efficiently, not through manic speedups of the assembly line, as in Charlie Chaplin's "Modern Times," or automation gone mad, as in "Metropolis."

Those gloomy visions never considered today's collaboration between design and production so that car parts fit together more easily, or planning so that cars move smoothly through production without bottlenecks, errors and piled-up inventories.

"We do one or two stampings of body panels now where we used to do three or four," says Karl Mantyla, a UAW official at Ford. The design of those body panels makes possible considerable savings on expensive die casts and time-consuming processes.

And those savings allow more cars to be produced at less cost and with fewer workers. Ford's UAW work force remains at about 105,000 employees, about the same as a decade ago--but half of what it was in 1979 when the firm nearly went under. Yet the company produces 30% more vehicles than it did a decade ago.

Chrysler has more UAW members today than in the 1970s, because the company has come back from the dead to be one of the industry's strongest.

General Motors has gone from 329,000 UAW members 10 years ago to 235,000 at present and has more to cut. It is reducing its work force by attrition, not by mass layoff.

Fewer workers will be needed, for example, when GM's Arlington, Texas, plant changes over to production of sporty Tahoes, Yukons and Suburbans, which demand fewer production steps than the Cadillacs, Buicks and Oldsmobiles produced at Arlington today. Laid-off workers will have a chance for jobs until retirement at other GM plants.

"The trend is inexorable; cars will be produced by doing things differently, with less wasted motion," says analyst Maryann Keller of Furman Selz, a New York institutional investment firm.

Note well: All this change is being accomplished without major labor strife such as is seen these days in the streets of Europe and even of Japan, where the competitive global economy also is demanding changes in work rules.

In the U.S., the last really big auto strike was 1970. Two key plants of GM were struck early this year as the UAW made its point that it couldn't be taken for granted.

But chances are there will be no strike in the U.S. auto industry this fall, even if there is a work stoppage in Canada.

Rather, adaptation to new relationships will be the pattern. To further improve production, manufacturers are now working more closely with parts suppliers.

The UAW aims to organize at nonunion parts-making companies as a way to renew its growth. The union has shrunk to 800,000 members from a 1970s peak of 1.5 million.

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