Detroit's Downturn: It's the Productivity, Stupid
There has been a lot of finger-pointing about who has put the American auto industry in a ditch, sending it hat in hand to the taxpayers' ostensible representatives in Washington. There seems to be a broad consensus that Detroit's problems were caused by inept and arrogant management, unimaginative car design, poor quality -- though this has improved somewhat over the past couple of decades -- and overpaid union workers. While there is less agreement on how much to weigh each of these factors, only the latter is attributed to the UAW. There also seems to be some dispute over what their compensation actually is, but most agree that it's uncompetitive with the foreign transplants, largely in the south, though Honda builds cars in Ohio. Of course, the fact that the non-union companies are in the south has resulted in predictable accusations that southern Republicans are playing politics and trying to destroy the union to the benefit of their home-state companies -- ignoring the fact that General Motors has a plant in Tennessee, the home state of the most prominent bailout opponent, Senator Bob Corker.
The UAW is seen to have been the winner of the current round because, while the Senate Republicans held up the Congressional bailout to them (though it should be noted that their votes weren't necessary to pass it -- only to provide political cover to the Democrats, who had sufficient Republican votes to push it through), the White House capitulated and seems on the brink of offering them the money anyway.
But almost all of the discussion, when it comes to UAW culpability, has been on wages. The even larger issue, though, is the elephant in the room that seemingly no one discusses, even when given a political opportunity. For instance, I saw a "debate" on Fox News recently in which the Democrat defending the union said that it was partly management's fault because of the poor quality of the cars, and the Republican failed to respond. And it's not like people are unaware of it, at least people familiar with the industry. The issue isn't wages -- though those are a problem -- so much as work rules. UAW work rules, which have evolved over the many decades since the passage of the Wagner Act, are the biggest reason that General Motors is uncompetitive with its non-union American counterparts.
What are work rules? They are agreements negotiated in the contract between management and the union covering how the employees are to be classified, how many breaks they get, how much time off they get, who can do which jobs, how discipline is to be enforced, etc. The goal of the rules is not to enhance productivity or production quality. It is to provide opportunities for featherbedding, increase numbers of (overpaid) jobs for union workers, and minimize how much they have to actually work. This is important because it's at least in theory possible that the industry could be making money even at current wages, if they could be provided with the flexibility to increase worker productivity. When you blame management for the quality and cost problems in the auto industry, first consider stories like this:
As a former supervisor of UAW workers at a GM facility, I will say that poor management and union malpractice made the Detroit Three uncompetitive long before the government sent in their arsonists.
To put it bluntly, the UAW takes the hard-earned money of the best workers and spends it defending the very worst workers while tying up the industry with thousands of pages of work rules that make it impossible to be competitive. And the spineless management often makes short-sighted decisions to satisfy the union and maximize immediate benefits over long-term sustainability.
The strength of the union and the weakness of management made it impossible to conduct business properly at any level. ...
I supervised a loading dock and 21 UAW workers who worked approximately five hours per day for eight hours' pay. They could easily load one-third more rail cars and still maintain their union-negotiated break times, but when I tried to make them increase production ever so slightly they sabotaged my ability to make even the current production levels by hiding stock, calling in sick, feigning equipment problems, and even once, as a show of force, used a fork lift truck and pallets and racks to create a car part prison where they trapped me while I was conducting inventory. The reaction of upper management to my request to boost production was that I should "not be naive."
One afternoon I was helping oversee the plant while upper management was off site. The workers brought an RV into the loading yard with a female "entertainer" who danced for them and then "entertained" them in the RV. With no other management around, I went to labor relations for assistance. As a twenty-five-year-old woman, I was not about to try to break up a crowd of fifty rowdy men. The labor relations rep pulled out the work rules and asked me which of the rules the men were breaking. I read through the rules and none applied directly, of course. Who wrote work rules to cover prostitutes at lunch? The only "legal" cause I had was an unauthorized vehicle and person and that blame did not fall on the union workers who were being "entertained" but on the security guards at the gate. Not one person suffered any consequence.
Another employee in the plant urinated on the feet of his supervisor as a protest to discipline. He was, of course, fired ... that is until the union negotiated and got his job back.
These are anecdotes, but there are too many of them, not just from her, but from many, to be merely anecdotal.
I grew up in Flint and my father was a GM executive. During college, I worked summers on the factory floors of AC Spark Plug and Fisher Body. As an (involuntary) member of the union, I could certainly see the benefits. At the age of twenty, I had one of the best jobs of my life for a few weeks.
I was in theory responsible for keeping parts flowing through the entire plant. They ran on little slidewalks, like you walk on in airports, far above the floor. There were gates to divert them to the proper lines, and tables where they would congregate and fill when lines were down, like reservoirs with dams. There was a robot that I could command to pull pallets off a rack and replenish the tables. And, as one might imagine, there were lots of things that could go wrong.
A breaker might trip on the robot. A gate might jam, causing the reservoir to fill and the parts line to be depleted, making the workers below unable to complete the assembly of an oil filter. And when these things happened, what was I supposed to do? If a breaker tripped, I was supposed to put in a repair ticket for an electrician. If a gate jammed, I was supposed to put in a ticket for a pipefitter -- it may even have been a special subclassification for an assembly-line upper-level pipefitter. If a belt jammed, I was supposed to requisition a machinist, any of whom might be busy on other jobs. Or outside, taking a nap in their van. While waiting for them to arrive, assembly lines, perhaps even the entire plant, would be shut down, costing thousands of dollars a minute with workers sitting around unable to assemble the product.
I was an engineering student who had been tearing down and putting cars back together my whole life. I knew how to turn on a breaker. I knew how to unjam a pneumatic gate. The supervisor and I had an implicit agreement. I would ignore the rules and keep the plant running, and he would let me do whatever I wanted up on the catwalk, by myself. Most of the time I read or studied or even napped, while working sixteen-hour shifts at double time, but keeping one eye on all of the mirrors that showed progress or problems on the parts flow. When something went wrong, I fixed it, instead of putting in the repair ticket. Only once, when I napped a little too long and a line dried up, the supervisor came up and woke me. I still fixed the problem much faster than it would have been fixed had we waited for the skilled tradesman to show up, and he had no problem. As I said, it was a great job and all because of union rules.
But as someone interested in business and free markets, I could also see that this could not go on, when the foreign competition was becoming very appealing. When something can't go on, eventually it doesn't. That's where we are today.
And the rules don't just affect productivity -- they affect quality as well. When you can't discipline employees for being absent without leave, when you have to bring in unfamiliar workers to fill in for them, when you're missing half your plant during hunting season -- yes, the stories about avoiding buying cars built on Monday or Friday in the fall are true -- you can't expect to put out a quality product, regardless of how well or poorly designed it is. You particularly can't expect to do so when the union rules put all responsibility for quality and production on management, but give them no authority to manage the workers and provide the workers with no incentive to build a quality product if they lack the personal pride to do so. Volumes have been written about Japanese management style and worker teams and consensus, but even if GM/Ford/Chrysler management had wanted to do so, there was no chance of it with the UAW mindset. And as sometime auto industry (and union) observer Mickey Kaus has pointed out, this was not just an unintended consequence of work rules -- it was the goal.
I'm not unsympathetic to the workers. As noted above, I was one. It's a terrible, mind-numbing job. The reason that I was up in that loft was that I spent the first couple of weeks on the line, where I watched a woman assembling filter after filter, like an automaton, and wondered how she did it for hours. My job was to load the parts on the line from a bin to feed her efforts, and I quickly figured out I could just put the parts on one at a time at the same rate she built it and work continually, but that if I quickly filled it all the way to the back -- like the beginning of the checkout roller in a grocery line -- I had about forty-five seconds before I had to do it again and could read a couple of pages of a book. The supervisor observed me and shortly after I was promoted upstairs.
Yes, I can understand why they want to get paid a lot to do that kind of work. I wouldn't do it for less. Right now, I wouldn't even do it for what they make. But there are a lot of people in this country that do exactly that kind of work or worse, and get paid a lot less -- a lot less even than the non-unionized auto workers in the south. And because I didn't like what I was getting paid for what I was doing, I sought better work and pay, by improving myself and getting an education. Ultimately, while there are some people who may not be capable of that, I suspect that many of them are not as discontented as I would be to perform a repetitious job each day. And because people who could do other, more interesting, more challenging, even more productive things were making so much easy money in the shop, I suspect that over the years both Michigan and the nation has lost a lot of productivity by not providing them with incentives to go out and do them, rather than being a shop rat all their lives.
The auto workers and I grew up in a golden era that it was unrealistic to think could continue. They were so well paid and unproductive, not because the market valued their labor at their wages and their product at its prices, but because they had a foot on the throat of the industry management, thanks to the imposition of the government via the Wagner Act and the NLRB. When each contract came up for renewal, they could single out one company, use the strike funds accumulated from workers at all the companies, and literally threaten to kill it. The next strike, they could do the same to the next one, continually imposing new rules, benefits, and restrictions that strangled the entire industry slowly instead of cleanly killing one company at a time. Remember that too when you blame management for all the problems.
Some have claimed that the only goal of the Republicans was to break the union. Well, if that -- or at least breaking the work rules -- wasn't one of the goals, it should be, because there is no saving this industry without doing so in some form. After all, the union played a major role in breaking it. If we could do so, the Wagner Act, a relic of the Depression and New Deal, should be repealed or at least revised as well. Unfortunately, with the party and mindset that passed it over seventy years ago once again in power in Washington, they seem much more likely to dramatically worsen it and spread the infection to the rest of American industry.