The Resurgence of the U.S. Auto Industry

 

The past few decades have slammed the U.S. auto industry with several catastrophes. These crises illustrate the high price of lost opportunity and the extreme importance of innovating in this prototypical manufacturing enterprise as it attempts to meet the demands of a post-industrial knowledge economy. While many legislators and public onlookers continue to assume that the problems lay in management and labor issues within the automotive industry, with the idea that just reducing labor costs and relaxing union work rules can alleviate the industry’s problems.

A more clear and rounded look this industry is necessary, especially since it accounts for approximately 1 in 22 jobs in the U.S.; the lessons we can learn are pertinent to other industries which are bound to face similar challenges.

The auto industry in the U.S. has been energized in the past few years as a result of a renewed commitment to quality, advanced production and management methods, a beneficial relationship between administration and workforce, and an improved relationship with suppliers. One example of recent success is Ford’s profit of $6.2 billion in 2011, $7.2 billion in 2012, $8.3 billion in 2013, and $6.9 billion in 2014. Workers were given profit sharing checks of $6,200 for 2011, $8,300 for 2012, $8,800 for 2013, and $6,900 for 2014.

The United Automobile Workers union represents autoworkers at the Big Three U.S. car manufacturers: Ford, General Motors, and Fiat/Chrysler. It is a constructive partner in the U.S. auto industry’s resurgence. The UAW is transitioning from a union that primarily threatens to withhold labor to one that primarily enables work. This is evident in the expertise the union now brings to discussions of quality, safety, predictive and preventative maintenance, workforce development, team-based operations, and other such topics.

Two decades ago, it would have been considered an important accomplishment to have two or three products built on the same platform and the same assembly line. Today, there are a number of plants that can produce as many as six distinct products on the same assembly line, which allows for much more flexibility in responding to variations in product demands.

The UAW has also played a constructive role in ensuring the financial viability for automakers. One example can be found in the union’s agreement to a lower the entry wages in 2007 of $14.20 for up to 20 percent of the workforce. Once this threshold was reached, workers would receive the higher regular wages. Also in 2007, the union agreed to the formation of a separate Voluntary Employee Benefit Association (VEBA) arrangements with the Big Three auto manufacturers. These independent entities, which were funded to take responsibility for retiree health care, dramatically helped reduce automakers’ liability for health benefits, and provided retirees with much greater reassurances of continuity of benefits than if they had relied on companies that might declare bankruptcy.

The U.S. auto industry’s commitment to assisting displaced workers and helping them to adjust to the post-industrial economy should be used as a model for other industries in similar situations. Following the auto industry’s most recent crisis, for example, Ford did not make a single involuntary layoff. All 50,000 workers who lost their jobs did so through voluntary separation packages. These and other comparable programs far exceeded what most displaced workers experienced during the recent recession. The impact on individuals, families, and communities was far less severe than it would have been otherwise.

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