The Multinational Monitor

JANUARY/FEBRUARY 1990 - VOLUME 11 - NUMBERS 1 AND 2


C O R P O R A T E   P R O F I L E

The Autocratic Automaker

by Eric Mann

For the past three-quarters of a century, General Motors (GM) has symbolized the corporate domination of U.S. economic, cultural and political life. From the early entrepreneurial capitalism of its founder Billy Durant to the scientifically- managed profit-maximizing leviathan of the Alfred P. Sloan years to the insecure colossus of the current Roger Smith era, GM, more than any other single corporation, has placed its stamp on a society that boasts that the business of America is business. Since its incorporation in 1908, the one unifying theme that has characterized GM's behavior is the idea that management's monopoly of power, policy and profits is a "right" to be protected at all costs. In that context, militant workers who want strict enforcement of their contract, safety advocates who want cars that do not maim and kill passengers, environmentalists who demand non-polluting automobiles and public transportation, communities that want GM to pay its fair share of taxes; and even compliant government officials who merely ask GM to abide by already gutted safety and environmental laws are all perceived by GM's management as the enemy.

GM's power was amassed during the post-World War II period when cheap fuel and the absence of foreign competition allowed it to impose its will on domestic and foreign markets. But since the U.S. defeat in Vietnam, the rise of OPEC and the continued advance of Japanese imports, some countervailing power to U.S. corporate interests has emerged--and GM has adapted poorly.

In the past decade, GM's share of the U.S. auto market has fallen from 46 to 35 percent. Moreover, that trend is accelerating. While it took six years (1980 to 1986) for GM's share to drop 5 points, in the last three years, its share has dropped another 6 points.

GM corporate strategies

In the late 1970s, when the rise of imports began to reduce GM's market share, the standard criticism was that arrogant GM managers, believing "small cars mean small profits," had refused to downsize its car lines, thereby leaving open the entire low- end of the market to Japanese imports. In an attempt to catch up, GM invested nearly $70 billion over a 10 year period to upgrade its plants, equipping them with the latest state-of-the- art computer-aided design and computer-aided manufacture processes (CAD/CAM). It purchased H. Ross Perot's Electronic Data Systems for $2.5 billion and Hughes Aircraft for $5 billion to diversify and integrate its holdings.

At the time, it appeared that GM had made all the right moves. EDS was supposed to provide computer software for the new CAD/CAM manufacturing process while Hughes would provide microprocessor technology to put GM cars on the cutting edge--as well as guaranteed profits from cost-plus defense contracts. GM was spending money hand-over-fist in the belief that capital improvement, technological gadgetry and the sheer force of its corporate will would reestablish its dominance.

The question of what went wrong is still a source of muddled analysis by market experts, but several problems are apparent:

  • GM initiated an internal reorganization. Formerly organized in five somewhat independent companies (Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac), GM is now supposed to be "streamlined" into two: the big-car group, Buick, Oldsmobile, Cadillac (BOC) and the smaller-car group, Chevrolet, Pontiac, Canada (CPC). This reorganization, according to industry analysts, has produced palace intrigues with each fiefdom sabotaging the changes, a proliferation of vice presidents and an indecisive management chain of command that is fatally slow in reacting to changing market demand. As a result, GM products take six to eight years to go from conception to manufacture; in Japan the process takes only four years.

    At the time, GM's reorganization was praised as bold and visionary, but no longer. Earlier this year, auto industry analysts J.D. Harbour and Associates published a study which concluded that GM's reorganization diverted the company's attention from improving productivity and product development, a mistake in priorities which could wipe out 60,000 jobs in the early 1990s.

  • GM's purchase of Hughes has also proven to be a mistake thus far. GM overestimated the profits it would gain from technology transfers from Hughes' aerospace research to its auto division. And the Gorbachev-induced thaw in East-West relations poses ominous threats to defense contractors--and with them Hughes' profits.

  • GM's main business problem is design and marketing: it has failed to anticipate (or create) customer tastes, and failed to produce attractive, safe and dependable products that can generate customer interest if not loyalty.

For the past decade, the business press has alternately run "GM turns the corner" and GM-bashing articles as plan after plan to recapture market share fails. For example, in 1988, Business Week, in a glowing promo piece on newly-appointed GM president Robert Stempel, predicted that in place of the look-alike models that had caused GM's market share to decline, Stempel would preside over a new, distinctly designed model line. Charles M. Jordan, design staff vice president, proclaimed, "We're dedicated to having a strong image from a block away." Pointing to the new bold look of the Oldsmobile Cutlass Supreme, Jordan said, "It's got its nose down and it sneers at you." Unfortunately for GM, however, the customers sneered back. In December 1989 the Wall Street Journal reported that the Cutlass Supreme "is dying. Olds has sold only 93,242 of the new Supreme -- less than half the capacity of the plant building them."

Joe Szczesny, who covers the auto industry for the Oakland (Mich.) Press, argues that the root of GM's problem is cultural and political--that its worldview was shaped when the United States ran the world, Dwight Eisenhower ran the country, Ozzie Nelson ran the family and everyone drove a Chevy.

Now, according to Szczesny, minorities and women play a far greater role in shaping U.S. popular culture. GM, which for years made great gains by projecting itself as "the establishment," has dramatically missed the changing culture and tastes of a new generation of consumers. GM's ad campaign, "This is not your father's Oldsmobile" reflects an effort to change its stodgy, patriarchal image. But deep down GM executives still love how the company looks and cannot fathom why others do not share their self-infatuation.

Despite declining market share and a crisis of consumer confidence, GM (and all it stands for) will not fall by itself. As a true multinational, GM can compensate for losses in its North American auto operations. In 1988, the corporation declared $4.8 billion in earnings. Because of a diversified earnings strategy, the now lucrative European division (with profits of almost $2 billion) along with GMAC financing and Electronic Data Systems have brought 1989's profits over the $4 billion mark again. In the case of GMAC, the "loss" in North American auto operations is misleading, since GM's control of the selling and financing of the vehicles means that the entire package is actually a profit maker: without the sales of more than 3 million vehicles there could be no profits from the high interest rates on auto loans.

In terms of its image problems, the personalization of the media criticism of Roger Smith may redound to GM's benefit, since Smith will be retiring as GM chairman in a few months. His predicted replacement by Robert Stempel will provide the superficial changes our society often confuses with substantive reform.

Finally, despite the real loss of market share, GM can earn huge profits without regaining lost sales. GM has taken notice that Ford, with 24 percent of the United States auto market, made far greater profits in 1987 and 1988 than GM, with 35 percent of the market, did. In addition, GM has seen its own European division earn $2 billion with only 11 percent of the market. By further squeezing its own workers, GM hopes to stabilize its market share and increase its profit-per-unit margin.

GM's labor relations strategy: bringing "the team" to the shop floor

From the early days of the industry, GM and Ford competed in many areas, including the best methods of exploiting their workforce. Ford's development of the moveable assembly line and the attacks on skilled workers who were seen as far too technically and economically independent created a situation by 1910 in which the line could determine the pace of the worker, rather than vice versa. For the next 80 years the battle between worker and the line has been at the center of shop floor conflict.

During the 1930s, the Flint sitdown strikes, in which militant workers occupied the factories, symbolized the workers' desire to control the conditions of their labor. In the first years after GM finally recognized the UAW in 1937, the union workers had enormous powers on the shop floor--stopping or threatening to stop production at a moment's notice and in so doing winning many immediate grievances.

The response of GM management, after its unsuccessful efforts to defeat the union, was to limit the scope of the union's decision-making arena and to reestablish firm management control. This was done through a complex historical process, including the development of "management rights" clauses in union contracts that restricted the union's collective bargaining to issues of wages, hours and working conditions and the establishment of a formal grievance system in which direct and collective democracy on the shop floor was transformed into "representative democracy" in which "individual" grievances were "negotiated" by specialists while power was taken out of workers' hands. The union was further weakened by the red- baiting of many of the union's most militant and courageous members by the incumbent UAW leadership.

By 1950, labor-management relations had been so codified that a five-year contract was signed between the UAW's Walter Reuther and GM's Engine Charlie Wilson which Fortune magazine called "The Treaty of Detroit." General Motors "gained control over one of the crucial management functions, long-range scheduling of production" and in return, the workers received relatively high wages, protection against inflation through cost-of-living allowances and a benefits package that could provide the safety net that U.S. society denied most other workers.

For almost thirty years the Treaty of Detroit set the parameters of GM's labor relations-stability, high labor costs and because of GM's control of the world market the ability to pass most of those costs on to the consumer through regular raises in the sticker price. But when changes in the international situation pitted GM against far more powerful forces, the corporation broke the treaty.

In 1982, its appetite whetted by Chrysler's massive contract concessions and needing a cheap source of capital for retooling its factories, GM convinced the UAW leadership to reopen an already signed contract and give away billions of dollars in wages and benefits. After the initial vociferous opposition of local UAW officers was quieted by GM and the International union, the contract was reopened, giving GM more than $2.5 billion in concessions.

Subsequently, under the direction of then-UAW Vice President for GM affairs Donald Ephlin, the International union raised advancing the corporation's interests to a full-blown strategy called "non-adversarial labor relations" or "jointness." Tragically, the UAW International, with many nominal socialists on its board, did not go to Western Europe or Scandinavia to examine social democratic modifications of capitalism based on strong unions. Instead, top UAW officials went to Japan with GM executives in a "jointness" program sponsored by the University of Michigan to copy a model in which the union's explicit role is to enforce labor discipline and productivity.

Ephlin emphasized that the old "culture of confrontation" threatened to bankrupt the auto industry, which, in his view, "was competing for its very existence." According to this logic, closing plants, reducing labor costs, speeding up workers and even eliminating jobs were now legitimate union objectives, since increasing GM's profitability was the key to saving the jobs of the survivors.

Believing that union militants were threatening GM's profitability and therefore the future of the union, Ephlin, UAW President Owen Bieber and other International officers have engaged in the systematic repression of union dissidents. Outspoken local union officers are regularly undercut by the International union. With the implementation of so-called Japanese management techniques, a growing army of union-appointed, company-paid supervisors, angrily called the "thought police" by some workers, patrol the assembly lines to enforce the contract, pressure workers to keep up with a sped-up line, quiet dissidents and spread the gospel of cooperation.

In an industry with one of the highest injury rates, this new industrial policy--and speed up in particular--has intensified the threat to workers' health and safety. Crawling in and out of a car 60 times an hour to install a part, or shooting an air gun non-stop for 8 hours causes permanent back and wrist damage. But the fight by union militants to reduce the pace of work is seen as a threat to labor productivity.

The chemicals and toxins used in the production process are also taking a toll on workers' health. There is a great need for a systematic study of the chemical processes in auto plants today, one that the UAW's fetish of insuring corporate profitability has assiduously avoided. A courageous group of workers in GM's Lordstown, Ohio assembly plant have formed "Workers Against Toxic Chemical Hazards," a grassroots group spawned by the frightening number of worker deaths from cancer, leukemia, stroke and other work-induced diseases. A "morbidity study" done at the workers' initiative confirmed that there is a dramatic, statistically significant, higher incidence of deaths at the plant than in the general population. But again this movement has developed in objective opposition to the impotent health and safety department of the International union, since the structural changes in the production process needed to protect the workers will involve new epoxies and paints and new organization of work--"production costs" which are not consistent with the "lean-and-mean" corporate strategy.

What does the future hold?

The most promising development that might reduce GM's unchecked power is the formation of the New Directions Movement of the UAW. Growing out of then incumbent assistant regional director Jerry Tucker's campaign for regional director in the Southwest UAW region, New Directions has directly confronted UAW policies of "jointness." Tucker lost the election by only two-tenths of a vote, and immediately charged fraud. Two years later, a federal district court found the UAW International guilty of election fraud. Instead of being installed, however, Tucker had to face another election. Out of power for two years, operating out of his home, Tucker organized an amazing eight-state coalition and was elected in September 1988.

With more than two years of his 3-year term already elapsed and the International union sabotaging his efforts to function as regional director, Tucker had to attempt to deliver representation as "the incumbent" and simultaneously to prepare for an immediate re-election fight within weeks of assuming office. Another insurgent, Don Douglas, the president of a large GM local in Pontiac, Michigan, ran for a second seat on the International Executive Board as a New Directions candidate in the 1989 elections. The International union decided to spare no effort or expense in its attempt to defeat the New Directions candidates. The International's efforts were successful, and both Tucker and Douglas were defeated. Again, however, the International has been accused of committing massive fraud and numerous illegalities. Tucker's appeal is presently in court.

In the fall of 1989, New Directions organized a formal founding meeting. Attended by more than 550 UAW members, the conference initiated a national progressive caucus to challenge the policies of the International UAW.

The New Directions Movement will face many challenges as the rhetoric, if not the substance, of jointness dissipates. To begin with, the new UAW vice president for the GM department, Stephen Yokich, in an effort to distance himself from Ephlinism, is talking a more militant line and has moved away from some of the rhetoric of cooperation.

Similarly, GM management is caught in a dilemma--how to create the illusion of cooperation while slashing its workforce. From GM's point of view, there is strong pressure from stockholders and management to accept the permanent loss of market share, to close "excess capacity" plants permanently and to lay off at least 60,000 workers. The ideological appeal of "jointness" will be severely weakened as GM once again swings its costcutting ax. As Robert Stempel had to admit, "jointness isn't job security"-- although for years management has been telling the workers that it is.

With GM poised to close as many as four major assembly plants and Stephen Yokich feeling great pressure from the New Directions Movement to stand up to the corporation, future labor relations at GM will most likely take on a more overtly confrontational posture, corroborating New Direction's assertions that the interests of the workers and those of the company are fundamentally at odds.

As GM and the International union are forced into an at least superficially more confrontational mode, New Directions will have to fight strong forces of cooptation as Yokich attempts to portray himself as the "reasonable militant" and New Directions as the "unreasonable militants."

Fifty years ago, when the GM workers occupied the Fisher Body plants, GM Chairman Alfred P. Sloan observed, "What made the prospect of the UAW victory seem so grim in those early years was the persistent union attempt to invade basic management prerogatives." The task for New Directions will be to push the union beyond militant posturing and to once again invade those management prerogatives to advance the interests of workers and communities.

Taking On General Motors

While the company and the workers battle it out, there are new historical forces demanding to be heard, such as the growing environmental movements, not only among traditional white upper middle-class forces, but also in center cities where toxic fumes from factories and polluted and poisoned air are becoming urgent issues.

The automobile has to be radically redesigned and its use curtailed or mass movements will eventually rise up to get rid of it. The most minimal demands on the auto industry will involve radical retooling with dramatic changes in fuels and engine design, drastic improvements in fuel efficiency, electric driven and solar autos, combined with massive federal aid for low-fare, safe public transportation as the cornerstone of environmentally sound transit strategies.

The growing environmental movement will pose the greatest challenge to big business in the foreseeable future, and in so doing will present a challenge and opportunity for UAW reformers. As GM attempts to expand its profits by speeding up workers, shutting down plants, squeezing its suppliers and even its dealers, evading its fair share of taxes and opposing strict environmental regulation, it is creating the possibility of a powerful anti-corporate coalition that can confront GM with a multi-faceted program and raise new concepts of worker and community decision-making.

For the past seven years I have been helping to organize such a coalition in Los Angeles. GM has threatened to close its last remaining Los Angeles area assembly plant in Van Nuys, claiming that while the plant is profitable, its profit margins are not high enough. But for years we have countered with a Labor/Community Coalition threatening GM with a boycott of its products in Los Angeles, the largest new car market in the United States, if it ever closes the plant. The success of that effort so far, despite many setbacks and the firing of the most progressive officers of the local, has resulted from its challenging GM's "management rights." The coalition has rejected offers of severance pay and refused to settle for advance notice of a plant shutdown. Instead, the coalition has demanded a 10 year commitment to keep the plant open and brought its fight into the political arena where GM is most vulnerable.

In our case, the plant's workforce is 50 percent Latino, 15 percent black and 15 percent women and we have argued that there are significant civil rights aspects to the closing. The coalition has won enormous support from Los Angeles's large Latino and black communities, especially in the churches. Through years of marches, rallies, press conferences, speaking engagements in front of hundreds of unions and churches and thousands of petitions sent to GM pledging to boycott their products, we have thus far been able to prevent GM from closing the plant.

There are valuable lessons from the Van Nuys experience which can be applied more radically in a national as well as a regional context. For in the nation, as in Los Angeles, GM's long-term weaknesses are more political than economic. While alone, New Directions can begin to democratize the UAW and articulate an independent workers' agenda, in conjunction with a worker health and safety movement and a community-based environmental movement, its chances of shaping fundamental aspects of GM's policies will be dramatically improved.

For New Directions effectively to demand that GM retain all of its 314,000 hourly workers and keep all of its plants open will involve a multifaceted strategy combining contractual demands and state and national legislation to require GM to: slow down the pace of the assembly line so that workers' health and safety and to some extent the quality of the car can be improved; outlaw all overtime while the threat of layoffs exists; retool plants for producing environmentally sound public transportation vehicles; and pay for workers to go back to school if they are not needed on the shop floor.

But for the public to understand these issues, and to take the side of the workers against management, progressive union activists must reach out to the community. If New Directions members are marching with local communities opposing GM's efforts to gut the local tax base, are working with environmental groups to demand federal funds for mass transit (and UAW members to build them) and are willing to challenge the hegemony of the fossil fuel-driven engine, then the demand for "job security" which directly challenges GM's managerial power can become a popular and winnable issue.

E.M.

Of Salaries and Wages

When General Motors complained about its financial fragility, the UAW agreed to make massive concessions to the automaker. Since 1982, excluding cost of living allowances, hourly workers have received only two raises, of 2.25 and 3 percent. The traditional annual 3 percent wage increase has been abandoned. Profit-sharing provisions have led to a few small bonuses for workers, but these are not included in workers' base pay, so future raises do not build on them.

While workers' wages have stagnated, however, executive salaries at General Motors soared. Here are GM's Cheif Executive Officer Roger Smith's annual levels of compensation, not including stock options, bonuses and other benefits - which typically exceed $1 million - from 1980 to 1988.

1980: $275,000
1981: $475,000
1982: $548,634
1983: $625,000
1984: $642,000
1985: $725,000
1986: $750,000
1987: $867,000
1988: $983,000

Source: General Motors proxy statements


Eric Mann worked on GM assembly lines at the Southgate and Van Nuys plants in Los Angeles for five years. He is presently director of the Labor/Community Strategy Center in Los Angeles.


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