Work Organizational Reforms and Employment Relations in the Automotive Industry
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Work Organizational Reforms and Employment Relations in the Automotive Industry

American Employment Relations in Transition

Kenichi Shinohara

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eBook - ePub

Work Organizational Reforms and Employment Relations in the Automotive Industry

American Employment Relations in Transition

Kenichi Shinohara

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About This Book

General Motors (GM)'s attempt to adapt the renowned Toyota production system for its own automotive manufacturing plants had historically produced disappointing results. Why was it not sufficiently successful? This book aims to shed insightsinto GM's failed attempt through the analysis of work organization reforms and labor-management relations on production-system efficiency.

The book examines collective bargaining agreements between automakers and the United Auto Workers union and the arbitration rulings in retrospect to illuminate the critical role continuous improvement activities initiated by production workers would play in enhancing performance management. It also looks at the impact of the meritocratic system in Japanese auto plants on performance success. As GM begins operations at its new electric vehicle assembly plant, Factory Zero, the book analyses thechallenges of such production for both employment relations and workforce deployment.

The book will be a useful reference for those interested in acomparative study of management styles and abetter understanding of Japanese manufacturing practices.

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1 Achievements and challenges of work organization reform in the US auto industryAn overview of the research

DOI: 10.4324/9781003282426-1


After the 2008 economic crisis that resulted in General Motors (GM) and Chrysler filing for bankruptcy, Detroit’s Big Three automakers began to change their management style. In the past, GM, Chrysler, and Ford had relied on offering financial services to their customers for a significant portion of their profits. GM’s financial arm GMAC, for example, provided financing to GM customers and offered mortgages. But in the post-bankruptcy period, the three automakers were forced to focus on their core business of auto manufacturing. Faced with a cash crunch, GM sold 51% of GMAC to the private equity fund Cerberus in 2006 and began making bold efforts to reform management of the production process and improve labor–management relations. Such reform, however, is an ongoing process.
The automobile industry is on the cusp of dramatic change and automakers worldwide are struggling to survive and thrive amid global competition. The intensification of global competition in the auto industry that began in the 1970s is especially interesting from the perspective of employment relations theory. The purpose of this research is to identify and describe the dynamics of work organization at GM, including the company’s past and more recent reform efforts.
Toyota, Volkswagen, the Renault–Nissan–Mitsubishi Alliance, and other global automobile manufacturers have continued to reform and improve their production systems in recent decades. General Motors’ Global Manufacturing System (GMS) was conceived in 1996 as a management innovation strategy in response to increased global competition. GMS is designed not only to affect the production department directly, but also to enable broader reform in collaboration with other departments, including R&D, sales, purchasing, product design, and engineering, with the aim of improving productivity and product quality. GMS extends not only to other departments within GM, but also to external suppliers. Ultimately, the United Auto Workers labor union (UAW) has become involved in GMS, further increasing its impact.
In discussing the current international competitiveness of automobile manufacturers, it is necessary to take into account cutting-edge technological innovation in recent years in the areas of electric cars and self-driving vehicles. Another important development is consolidation within the industry and the development of new alliances which include companies outside the industry. These changes have been widely reported in the mass media. However, the degree to which innovative technologies and changing relationships among competitors will be successful cannot be predicted, and as such, these are not suitable for empirical analysis.
In such circumstances, organizational reform at major automobile manufacturers has made considerable progress. The research described in this book focuses on GM’s GMS, the cross-plant and cross-region equipment purchasing and integration strategy designed to make GM’s global factories more efficient and raise quality levels. Without GMS, it is impossible to understand the reality of GM today. Although GMS spans the entire company, the core of reform takes place in the production department. In the United States, GM management must negotiate labor agreements with the UAW that cover workers’ wages, benefits, and conditions of employment. The chapters in this book will analyze the development of GMS, describing its historical development and the structure of GM’s work organization, especially with regard to labor–management relations. In order to accurately understand employment relations at the shop floor level, we will analyze the structure and history of work organization at GM, the seniority rule, all arbitration records concerning transfer and promotion, the development of the team concept, and GMS.

Research on American work organizational reform: The case of the automobile industry

This chapter summarizes research published since the 1980s on work organization reform in American automobile plants, identifying trends in work organization reform studies up to the present.
Traditional American labor–management relations are being transformed, and research has been trying to capture these changes. However, few studies have been able to accurately identify and describe the “work rules” of the new order in the workplace. Shinohara (2003) has provided a comprehensive survey of research on work organization reform in the United States from the 1980s to the early 2000s.1 One of the most prominent themes in this research is the introduction of the “team concept,” under which, it is argued, relations between union and management can become more cooperative, and worker satisfaction, autonomy, and motivation can improve. Studies also suggest that implementation of the team concept naturally leads to improvement in productivity and product quality. Is this happy scenario actually true? Is the term “team concept” a magic wand? Based on our research in the US auto industry, we argue that such a view is overly simplistic, naïve, and unsatisfactory: the “team approach” alone does not necessarily have a positive impact on productivity and quality. Also needed is a well-developed and systematic overall scheme, or detailed “master plan.”
For example, to truly understand work organization reform in the automobile industry, researchers need to ask and answer questions like these:
  • What kind of concrete systems did management introduce to raise the production yield ratio, that is, to increase the yield of satisfactory parts or products that require no repair?
  • How, concretely, did management negotiate with and persuade production workers to embrace the system of “build-in-quality?”
  • How does the conventional quality control system, that is, the control of quality at the final assembly process, fit in this system?
  • What kind of workloads do the production workers accept? Are such workloads semi-compulsory?
  • How is the target production yield ratio set, and who sets it?
  • How is the PDCA (Plan, Do, Check, Act) cycle carried out? Does it involve production workers?
  • How has the role of the quality control manager changed? How did quality control managers react to changes in their power and authority?
In other words, work organization reform that will raise productivity and quality levels requires comprehensive, detailed, and systematic planning and schemes that can achieve targets through the PDCA cycle. It is very difficult for management alone to set appropriate targets and attain them. New work rules are necessary, and agreement and compromise with labor is needed for operations to run smoothly. These are the kind of things that labor researchers must observe and analyze. However, with the exception of a small number of studies described below, these issues have been given little attention.
In the following sections, we take a close look at previous research on work organization reform in US auto plants since the 1980s.

Research trends during the 1980s: A boom in team theory

The goal of workplace reform is to more effectively utilize individual workers’ abilities and efforts. Both direct incentives, in the form of wages, and control systems, such as “performance management,” “progress management,” “management by objectives,” and the PDCA cycle, are important in order to maximize workers’ contributions.2
Wage management reforms undertaken by US automakers since the 1980s were characterized by a “broad-banding of job classifications,” which significantly reduced the number of wage and job classifications. This meant that all production workers basically worked for the same wage rate, except for team leaders and skilled trades workers. This situation made it quite difficult to introduce a merit pay system for union members in the US auto industry. In contrast, at auto plants in Japan, a merit system was introduced in the postwar period under which workers’ pay is influenced by individual performance.
To be sure, wage system reform in the direction of meritocracy—“pay-for-skill” or “pay-for-knowledge”—has not always been successful. However, most research on the US auto industry pays little attention to the wage system itself, and to the potential benefits of a merit pay system in work organization reform. Researchers’ neglect of the wage system is probably due to the fact that “equal pay for equal work” is seen as an unalterable fact of life in the context of adversarial labor relations. The merit pay system in Japanese auto plants, which is very important in motivating production workers, has also received little attention. This is a critical weakness in most research in the field of employment relations in the United States. Shinohara (2003) describes the typical gist of arguments made by American researchers as follows.
The purpose of work organization change [in the US auto industry] is to make relations between labor and management more cooperative. Changing the traditional approach of job control unionism can raise production workers’ skill levels and increase their involvement in decision-making. As a result of this, the organization becomes more efficient and is able to cope with innovation more flexibly, and productivity and quality improve. At the same time, worker autonomy increases and worker job satisfaction increases.3
As this quote from Shinohara shows, most research on organization reform in the United States does not investigate or address actual negotiations between labor and management about wages and performance management. Instead, it defaults to the motivational theories of human resources management and organizational behavior.4
In the 1980s, the case of NUMMI (New United Motor Manufacturing Inc.) was the focus of numerous research studies. As is well known, NUMMI was originally a GM plant in Fremont, California, which was closed in 1982 and reopened in 1984 as a GM–Toyota joint venture. At NUMMI, Toyota was primarily in charge of production control, and assembled cars were sold under both brands. Important research was conducted on NUMMI, focusing mainly on the team concept on the shop floor, QC (quality control) activities, and the spirit of cooperation among workers in the plant. The success of NUMMI caused many researchers in the United States to become interested in the Toyota production system. But these researchers, for the most part, paid little attention to the “wage management” and “performance management” elements of the Toyota system.
Academic interest in NUMMI is just one example of a “boom” in research about work reorganization that occurred in the 1980s. The essence of most of this research was to argue that things like the “team concept,” “flexibility,” or “commitment” are associated with improving productivity and quality. Few researchers, however, conducted fieldwork that looked at wage management and performance management systems in detail.

Research trends since the 1990s

Divergence versus convergence

One of the most prominent themes of research and writing on work organization since the 1990s is the question of whether forms of work organization are converging around a single “best” model, or diversifying. The success of Japanese manufacturers in the automobile, electronics, and other industries led some observers to believe that Japanese-style management and production systems were superior in delivering high levels of productivity and quality, and that they would therefore be imitated around the world, with work organizations converging on the “Japanese model.” In their book Converging Divergences (2000), Katz and Darbishire present an opposing view, arguing that work organization is diverging into four distinct models: the low-wage model, the HRM model, the Japanese model, and the joint-team model.5 Concerning the four models, they note that:
  • The low-wage model is based on traditional management style and does not involve unions.
  • The HRM model also does not involve unions; it is focused on a merit wage system and career development of workers.
  • The Japanese model includes the elements of merit pay, a seniority wage system, and enterprise unions.
  • ...

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