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ARAB OPEN UNIVERSITY
B200 UNDERSTANDING BUSINESS BEHAVIOR
FINAL EXAM CASE
September 29, 2004
Saturn Corporation, a Subsidiary of General Motors Corp.
Some years ago when Roger Smith was the C.E.O. of General Motors, he began
a multi-billion dollar plan to completely automate GM's automotive assembly
plants. $10 to $15 billion worth of high-tech equipment went into these plants.
And then they had to go in and rip it all out. Why? Because the human factor
could not adapt to that level of technology. Smith found out the hard way that
technology must be implemented slowly and over time, and even then there is no
guarantee that it will work.
Saturn Corporation began from that experience. GM's establishment of Saturn as
a whole new organizational structure, a structure built from the ground up, which
is directly linked to Smith's automation failure. They said, quite frankly, 'We're
going in the wrong direction'. They were not sure they could turn a giant like
General Motors around, but they thought that may be they could start a new
organization that focused heavily on the human dimension. (Harvey Kalahas,
1995)
General Motors (GM) began in 1908 with the purchase of several existing
automobile manufacturers. By the mid 1960s, General Motors had the highest
worldwide market share in the auto industry. Soon thereafter, General Motors
became the biggest company in the world, with over 1,000,000 employees
worldwide.
The Saturn Corporation is a subsidiary of General Motors that
manufactures and sells small cars. From its initial planning process, conducted in
1983 by a "Committee of 99" consisting of GM managers and United Auto
Workers (UAW) union representatives, Saturn was conceived of as a full
partnership between the union and the company. The decision to create Saturn
was motivated by company and union desire to build and sell a small model in
the United States that would compete well against imports and to create jobs for
UAW members. The decision to create an entirely new company at a Greenfield
site was made after management concluded that GM could not competitively
manufacture a small car in the U.S. under the existing labor contract and
management policies.
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Key Events
Several key events have shaped the GM-UAW labor-management experiment
taking place at Saturn: equal partnership between union and management in the
design of the organization; the emergence of co-management; the importance of
performance and image; the introduction of conflicts and controversies about
Saturn’s future within the union and GM after its original champions retired; and
concerns over Saturn’s long-term viability as expressed during 1998 contract
negotiations.
Joint Approach to Organizational Design: The Committee of 99
The Committee of 99 developed an organizational design that makes the
employee trade union UAW (United Auto Workers) an institutional "partner,"
participating in consensus-based decision-making from the shop floor to the
levels of senior management. This structure is overseen by a series of “decision
rings” at the department, plant or business unit, manufacturing policy, and
strategic policy levels of the organization. Through the partnership’s
arrangements, the UAW becomes an important part of strategic decisions made
regarding supplier and retailer selection, choice of technology, and product
development. An initial 28-page collective bargaining agreement outlines the
basic principles governing the relationship and the team-based system of work
organization.
The partnership process is complemented by employment practices designed to
ensure that employees have the knowledge, skills, and motivation to contribute to
the performance of the enterprise. Saturn requires all employees to take a
minimum of 92 hours of training each year. In 1995, 20 percent of compensation
at Saturn was contingent on the completion of this minimal amount. In addition,
more than 80 percent of the workforce is guaranteed employment security for life.
Work organization at Saturn is based on self-directed work teams of 10 to15
members, who are cross-trained and rotate responsibility across the tasks in their
unit. Teams have collective responsibility for hiring new members and electing
their own team leaders. The next level of organization, called modules, covers an
average of five to seven teams and conducts weekly governance meetings in
which teams are represented by their leaders.
Teams also have responsibility for quality assurance, job assignments, record
keeping, safety and health, material and inventory control, training, supplies, and
housekeeping.
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The sprawling Saturn plant, a $3.5 billion initial investment, began in mid-1990,
and built 280,000 cars in 1994. It is an integrated complex that manufactures
engines and transmissions, stamps sheet metal, molds plastic parts, and
assembles the final vehicle. The plant is built on a Greenfield site, 30 miles south
of Nashville and 100s of kilometers away from older centers of auto
manufacturing. Despite its decidedly rural location, all the 6,700 or so skilled and
production workers are members of the United Automobile Workers (UAW) and
are experienced GM workers, many from urban plants in the North. Saturn began
with a joint GM-UAW study team in 1983--the "Committee of 99"--in which the
union selected over half its members, many from the shop floor in existing GM
plants. Given a clean slate to redesign auto manufacturing, the committee
produced technical innovations as well as Saturn's unique organizational
structure. One of the most visible technological changes is the way Saturn
assembles cars: instead of a conventional assembly line, there is a system of
wooden "skillets" (moving work areas) on which both the car and worker ride,
lessening the strain on the worker and potentially improving quality. The plant
hired its first several thousand workers after an intensive selection process from
a pool of all GM workers; since late 1990 Saturn has recruited from a narrower
pool of laid off GM workers and, beginning in 1992, from among GM workers
whose plants had permanently closed. Saturn's workers bring considerable union
experience as well as a diverse manufacturing background. Mike Bennett, the
president of the UAW local union, estimates that about 600 people had held
union office in their previous plants, which gives local union politics a particularly
intense character. About 27 percent of the workforce is African-American or
Latino and 22 percent are women.
The facilities consist of four manufacturing areas (Power train, Body Systems,
Vehicle Interior Systems, General Assembly) and three support operations
(Central Utilities Complex, Service Parts Operation, Northfield.) Certain parts
such as tires, glass for windshields and doors, electrical and electronic
components, floor coverings, and some specialized plastic and metal parts are
imported for assembly. However, major parts such as the space frame, exterior
panels, engine and transmission, and major interior components are
manufactured on-site, and the entire vehicle is assembled on-site.
Major processes include plastic molding, metal stamping, welding, cleaning,
painting, sealer adhesive application, metal casting, machining, heat treating,
component and vehicle assembly, vehicle fluid fill, and wastewater pretreatment.
Over 170,000 tons of raw materials are used in site operations, including items
such as steel, aluminum, plastic, paint, sealers, etc. Natural gas is used for
heating, and electricity is provided by the state of Tennessee. Water is supplied
by the City of Columbia. Saturn is a major source of air emissions under
regulatory classifications. Air emissions are primarily related to painting and
foundry operations. Storm water is collected in a series of ponds and then
directly discharged to the storage and treatment center of Carters Creek.
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Industrial process, cooling tower blow down waters, and sanitary wastewater
receive on-site chemical and physical pretreatment and then is piped to the City
of Columbia for further treatment.
Product scrap and industrial process waste comprise more than 90% of all nonproductive output, general trash, packaging waste, and hazardous waste
comprise less than 10%. About 85% of scrap and waste is recycled (primarily
metals), 13% land filled (primarily paint sludge, wastewater treatment sludges),
and general trash, 2% receiving other treatment such as incineration.
Emergence of Co-Management
As the organization took shape, local union officials and management added
another unique feature. At the department or module level, management
responsibilities became shared by two "module advisors," who are partnered.
Each "partnership" at the department level consists of union module advisors
who are partnered with non-represented management module advisors. This
feature of the partnership makes Saturn the boldest experiment in comanagement found in the U.S. today.
Until 1994, jointly-selected UAW crew coordinators maintained responsibility,
along with their non-represented partners, for managing crews across several
departments, which is the responsibility of superintendents in GM's more
traditional plants. However, in 1994—as a result of a negotiated agreement and
in response to considerable pressure from unionized workers—the 14 UAW crew
coordinators became elected officials with the authority to file grievances.
Performance and Image
Saturn uses as its marketing slogan and logo the following phrase: "A Different
Kind of Company. A Different Kind of Car." Thus, it builds on its partnership with
the UAW and several other distinctive features of the company’s practices—such
as its fixed price, no-haggle (no bargaining), retail sales and service strategy—in
positioning the company and its products in the minds of consumers. To date,
this approach has been very well-received by the market. According to the J.D.
Power Customer Satisfaction Survey, within two years of its first production run in
1990 and in every year since, Saturn achieved higher ratings in initial vehicle
quality, in satisfaction after one year of ownership, and in service than any car in
its class. Only Lexus and Infiniti, two upscale models costing three times as
much as Saturn, received higher customer satisfaction ratings.
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WHEN YOU THINK OF SATURN CORP., what image comes to mind? Do you
picture a car? Do you see people? Most people picture the latter: Instead of
seeing a car zooming down a winding, scenic road, they see people, whether
they be car owners, salespeople, or employees.
Now, what image comes to mind when you think of Buick or Ford? Most likely,
you think of that car zooming down the winding road.
The difference between Saturn's image and that of other car companies is no
accident. This differentiation--captured in Saturn's slogan, " Different Kind of
Company, A Different Kind of Car"--is a key competitive strategy that has been
built in from Saturn's beginnings in 1985.
"It goes back to our objective in 1985 to launch a competitive small car in a very
crowded market," said Steve Shannon, director of consumer relations at Saturn
Corp. "There were a lot of outstanding players in the marketplace--competitors
like Honda, Toyota, Nissan, and Mazda. We admitted to ourselves that, unless it
was really different, the last thing the world needed was another small car."
The competitors presented another challenge for Saturn: attracting customers
who had given up on domestic cars and were happy buying imports. "We knew
that we were dealing with extremely satisfied owners of Hondas and Toyotas,"
said Shannon. "In some ways, it was risky for them to give up a satisfying
experience with an import. We knew we couldn't come out the first day making
quality claims, We knew we had to demonstrate our cars' quality first."
The challenges of entering a saturated market and attracting customers were
addressed through Saturn's efforts to differentiate itself in two respects: selling
the company rather than the car and developing a relationship with customers,
Selling the company
To demonstrate the quality of its cars, Saturn first had to persuade people to buy
them--a difficult task in a crowded marketplace,
"Given that you have created a world-class car, how do you convince people of
that fact?" asked David A. Aaker in his article "Building a Brand: The Saturn
Story."(1) "The obvious tactic, used by all carmakers, would be simply to tell
them why it is world class--the relentless pursuit of perfection or the ultimate
driving machine. The story would build upon specifics, such as safety features,
exterior design, fuel economy, acceleration performance, comfort, road tests,
endorsements by car magazines, guarantees, how nimble and quick it handles,
and its finish. The focus would be on the car, using unrelenting logic and mindnumbing facts."
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But Saturn realized that this approach wouldn't work. "People would find it
difficult to believe such a claim, even assuming that the advertising, which would
surely look like a dozen others, would be noticed," said Aaker. Instead, Saturn
opted for another approach: having employees and customers focus on the
company's culture and values.
"Our approach is very different," said Shannon. "It's, 'Hey, we make a pretty good
car, but most important, the car comes from a company that has clear values and
philosophy. It's made by dedicated team members in America. We stand behind
our customers and products."
In its first year, Saturn's advertisements centered on employees' commitment
and pride in starting a new company and car line. For example, television
commercials illustrated how employees traveled worldwide to get ideas on how
to make a world-class car, how they moved their families to Spring Hill, TN, to
begin the new company, and how proud they were in seeing the first car come off
the production line.
In the second year, advertisements centered more on customers' experiences
with their new cars and on the car retailers (Saturn's term for dealerships). One
of the most memorable commercials featured a schoolteacher, Judith Reusswig,
who wrote a note introducing herself to the employees building her car.
"In the auto industry, the advertising is generally noted for over promising claims,
such as 'This is the latest and greatest' or 'This is the new revolution in cars,"
said Shannon. "Our focus is different. We focus on real owners and real stories."
To reassure potential buyers, Saturn also offers a money-back guarantee: Within
the first 30 days or 1,500 miles (whichever comes first), an original purchaser
may return his or her car for a full refund or replacement.
Developing relationships with customers
Once a potential purchaser reaches the retailer's door, the next differentiation
strategy--developing relationships with customers--begins. "Some of the best
examples of being a different kind of company exist at the retail level," said
Shannon. "We have an outstanding car, but it's the whole experience--the
shopping, buying, and ownership experience where we have made our mark.
"A lot of research told us that people didn't like buying a car. It was an unpleasant
experience. So we really reinvented the whole retail experience, especially for
cars that start at $10,000. It's one thing to buy a $40,000 or $50,000 Mercedes,
BMW, or Cadillac and--expect a certain type of treatment. But most people who
are spending $10,000 or $12,000 haven't had that experience. It is in that area
where we are trying to build a competitive advantage."
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Reinventing the whole retail experience began in 1988 when Saturn handpicked
26 retailers. Empowered by Saturn, these retailers wrote their own franchise
agreements and set up screening programs for new retailers that wanted to join
Saturn to ensure consistency among all retailers. They also developed objectives
that provided team incentives and priorities so that the salaried sales consultants
(Saturn's term for salespeople) do not focus on meeting monthly quotas. The
compensation and incentive system they developed is based more on group
efforts to satisfy customers than on individual sales results. The retailers even
went outside their industry to find sales consultants so that old car-sales habits
wouldn't be brought into this new environment of low-pressure selling.(2)
In 1989, the Saturn Northfield Training and Development Center was opened in
Spring Hill. At the center, sales consultants learn not only about Saturn's cars but
also about its culture and philosophy of treating customers intelligently.
"Training is critical to developing and passing on Saturn's whole unique way of
doing business," said Shannon. "Retailers make a significant commitment in
terms of expense and time away from the retail facility to send people to
Tennessee for periods of up to two and three weeks to get people trained both in
the subject matter and in the culture and philosophy"
Perhaps even more revolutionary than retailer training or low-pressure selling is
the no price-haggling policy. The retailer sets a firm price that allows for a
reasonable profit margin. "We probably had some retailers that thought, 'Gee, I'd
love to do business that way, but I'm not sure it can work,'" said Shannon. "After
five years, we have shown that it does work."
All of these practices lead to a different shopping and buying experience for
customers. When customers enter the retail facility, they are not pressured nor
do they hear the classic phrase? "If I can get this price for you, would you buy it?"
followed by the salesperson's prolonged visit to the manager's office. "It is a
hassle-free shopping experience," said Shannon.
The attention doesn't stop
When new car owners leave the retail facility, they are sent off with cheers and
clapping. Saturn's relationship with these customers, however, doesn't stop when
they drive away. An ongoing relationship continues at both the retailer and
corporate level.
At the retailer level, sales consultants follow up with their new customers to
ensure their cars are running smoothly and to answer any questions. Retailers
also conduct (and finance) various activities for their customers. For example,
most retailers hold periodic service clinics in which Saturn owners learn more
about their cars and how to change oil, change a tire, or perform other
maintenance tasks. Some retailers set up car clubs--groups of car owners who
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get together to swap car stories and go on outings. (The car owners themselves
have even taken the initiative in setting up their own local car clubs. Others have
formed discussion groups on the Internet and Prodigy.)
At the corporate level, customers can give and receive information through the
“Visions” newsletter, corporate correspondence, and a toll-free 800 number. The
most publicized corporate interaction with customers has been the Saturn
Homecoming, which was held in June 1994. More than 600,000 Saturn
customers were invited to this event, which featured plant tours; entertainment by
Wynonna Judd and other musicians; displays by Saturn employees and
suppliers; local arts and crafts; and more.
The idea for the Homecoming event had been planted by customers. "We had
lots of people, Saturn owners in particular, who wanted to visit the plant," said
Shannon. "They would stop at the gate asking for tours, but unfortunately, we
couldn't accommodate all of them."
Once this seed had been planted, Saturn began planning its gala event. This
included benchmarking Harley-Davidson's 90th Anniversary Family Reunion, in
which more than 100,000 Harley motorcycle owners traveled to Milwaukee, WI,
in June 1993 to celebrate the company's 90th year in business. "While our event
was different in many respects, we learned a lot from Harley-Davidson. In fact,
we maintain a periodic dialogue with them."
Despite torrential downpours, about 42,000 showed up to participate in the
Homecoming, some driving across the country to attend it. As one participant
from Pittsburgh, PA, noted, "Once in Nashville, half the cars on the road were
Saturns. We saw them from all over North America--with all sorts of messages
on signs, soaped in windows, etc."(3)
In addition to the 42,000 people at the corporate Homecoming, another 100,000
participated in local retailer homecoming events. For example, retailers in Los
Angeles, CA, had a homecoming at Knotts Berry Farm, which was attended by
about 8,000 people. "This is a real testament to our retailers because, frankly, we
were so busy planning the event in Tennessee that, with the exception of giving
retailers some ideas on what to do, they planned, financed, and held the local
events on their own."
At the corporate and local homecomings, customers were able to learn more
about Saturn. Likewise, Saturn learned more about its customers. "The
homecomings taught us that there is a lot of interest in more affiliation with
Saturn," said Shannon. "So we are envisioning, probably in the second quarter of
1995, rolling out more formal invitations for Saturn owners to become involved in
car clubs."
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Maintaining the momentum
Much has happened since the first Saturn rolled off the production line on July
30, 1990. Since that historical day, the company has captured several auto
industry honors, including receiving the third-highest all-around customer
satisfaction rating in J.D. Power & Associates' 1994 Customer Satisfaction Index
and the second-lowest defect rate of any domestic car manufacturer in J.D.
Power & Associates' 1994 Initial Quality Survey."
Honors such as these are good overall, but there are some side effects. "We
were lucky enough in the early years that nobody took us seriously," said
Shannon. "Nobody thought we were going to accomplish anything, so nobody
paid too much attention to us. But now I think we have shown up on more radar
screens, so we have to keep one step ahead."
How will Saturn maintain its momentum if competitors start to copy Saturn's
practices, minimizing its differentiation? "What allows us to do the things that we
do is so tied to the corporate and retailer culture and values that it would be
tough to copy," said Shannon. "Someone might try to copy more tactical
programs, like an event or direct marketing program, but what keeps us focused
is the basic underlying attention to the customer. If you don't have customers
who feel good about the company and their cars, all of the slick marketing in the
world is not going to do anything for you.
"We can't take our eyes off the basic enabler: the relationship with owners. What
really makes Saturn work is the way customers are treated by both the company
and the retailer."
(American Society For Quality Control, 1995)
Saturn's productivity and profitability, however, are not as high as its quality
ratings. Yet, its productivity levels still remain near the top of those at GM’s other
plants. In evaluating profitability, a question arises: Should Saturn amortize this
investment alone, or should the rest of GM’s enterprise—which was supposed to
learn from this experiment—share in their costs? Regardless, Saturn generated
its first operating profit in 1993 after mobilizing its third crew and being pressured
by its GM parent to cut costs and move up the date targeted for achieving a
profit. Bonuses based on financial, productivity, and quality goals have been paid
to Saturn employees each year since 1993. The 1995 and 1996 bonuses totaled
$10,000 for each member, which is the maximum allowable under the contract.
Bonuses declined in 1997 and 1998, as Saturn’s sales declined.
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Conflicts and Controversies
Despite its successes, Saturn is a controversial topic within both the UAW
International Union and GM. Several years after Saturn was created, its original
champions within both the UAW and GM retired. Their successors were not as
committed to Saturn’s principles and partnership structure. Meanwhile, over the
course of the 1990s, GM and the UAW experienced an intermittent set of strikes,
largely over questions about outsourcing. These conflicts peaked during a sevenweek strike in the summer of 1998, which shut down nearly all of GM’s
production operations. At the end of this strike, both GM and UAW leaders
pledged to find a better way of dealing with these issues—yet what, exactly, this
promise means remains uncertain. GM continues to feel intense pressure to
outsource more of its component production to outside vendors. In fact, it
announced shortly after the end of the strike its intention to group component
operations into a separate division (Delphi), as well as to continue exploring
options for divesting component operations that are not competitive with outside
alternatives.
UAW leadership and the leaders of the Saturn local have been experiencing
considerable internal conflict over the past decade on a host of issues ranging
from the adequacy of representation on traditional issues to shift schedules,
overtime and shift premiums, and other administrative matters. Political factions
have also arisen within the local (similar to the dynamics at other UAW local
unions). For example, each election of union officers since 1992 has been hotly
contested.
GM management has also been skeptical about Saturn. On the one hand, the
corporation relishes the positive image that Saturn has achieved and urges other
divisions to learn from Saturn's experiences. On the other hand, while some
technical and marketing innovations have been adopted, there is little evidence
that significant learning from or diffusion of Saturn’s organizational principles has
occurred within GM. Moreover, in 1996 GM decided to accept the International
UAW’s proposal to build the second generation Saturn model in GM’s
Wilmington, Delaware plant—not in Spring Hill, as requested by the local union
and management. The labor agreement negotiated at Wilmington calls for some
use of teams and employee involvement, but does not include the full partnership
model found in Spring Hill; it remains a part of the national UAW-GM contract.
In 1998, GM announced that Saturn’s engineering, design, and parts sourcing
decisions would be integrated into the GM small car division as part of its overall
recentralization of these functions.
Finally, Saturn has somewhat of a schizophrenic (strangely diverse and
opposing) identity. On the one hand, it receives lots of recognition for its
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innovative organizational design and employee relations, as well as for favorable
customer satisfaction performance. On the other hand, many of the provisions of
the partnership are questionable under American labor and employment laws;
the co-management and shared governance structures have been criticized by
some business leaders as rescinding important managerial prerogatives
(diminishing the role of managers); and some union leaders are critical of the
many long-standing work rules that the union abandoned in return for this type
role in the governance and management process.
1998 Negotiations
Concerns over these developments came to a head in Spring Hill in 1998. In
April of that year, the union—in response to unionized workers concerns over the
long-term viability of Saturn—held a referendum over whether to continue the
partnership as specified under the local agreement or to return to the national
contract. Sixty-eight percent of the membership voted in favor of continuing the
partnership as specified in the Saturn agreement. Then, in the summer of 1998,
the union took a strike authorization vote and issued a 30-day strike letter in an
effort to resolve an ongoing dispute over both the formula for the risk-reward plan
and the broader issue of the future product stream planned for Spring Hill. These
negotiations produced an agreement that included the following provisions: GM
would build a Saturn Sport Utility Vehicle at Spring Hill; the union would be
included in the sourcing decisions affecting Saturn products; moreover, four
factors (cost, quality, brand image, and job security) would be considered in
making sourcing decisions; and a compromise resolution to the parties’ different
interpretations of the risk-reward formula would be enacted.
These negotiations served to force a decision on Saturn’s future, which had been
either delayed or allowed to drift for several years. GM was forced to decide how
Saturn would fit into its larger centralization effort, as well as its common
engineering, purchasing, and platform strategies and structural realignment. It
also had to choose which—if any—future products would be produced at Spring
Hill. The result was that GM stated its continuing commitment to the Saturn
Partnership and reinforced this commitment by agreeing to build the Sport Utility
Vehicle in Spring Hill, as well as to give the union a voice in sourcing decisions.
Yet, despite these major compromises and commitments, GM continues to follow
its recentralization and outsourcing strategies. GM’s strategy remains rather
questionable— they are trying to accommodate the principles of the Saturn
partnership while simultaneously integrating Saturn into the corporation.
The negotiations involved considerable use of traditional bargaining tactics by the
union, including severe criticism of the commitment and competence of Saturn’s
senior management. A strike vote was held, the pace of production slowed, union
leaders went around Saturn management to pressure GM executives, and the
union used the leverage created by bad publicity. These strategies, in turn,
irritated Saturn management officials and fostered bad feelings.
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Summary and Implications
In a recent paper, Saul Rubinstein and I (Kochan and Rubinstein 1998) argue
that Saturn represents not only the most comprehensive labor-management
partnership model found in the U.S. but also an organization that embodies many
of the principles of what is meant by a “stakeholder” corporation:
1. Saturn was designed to achieve both GM’s shareholders’ goal of making a
small car profitably and the workforce and union’s goal of building small cars
in the U.S. with U.S. workers and UAW members; this fact implies that the
success of the firm should be measured against these multiple objectives.
2. Workers and union representatives were to be full and legitimate partners in
the governance and management processes of the firm, and
3. Workers share the risks and rewards of the firm’s performance with
shareholders.
Thus, more than any other U.S. case, Saturn illustrates a type of organizational
partnership and employment system that can be created when a union with a
vision of its
own participates in the design, governance, and management of the enterprise.
Workers have a strong voice on both traditional labor-management and broader
managerial or strategic issues. Principles of teamwork, continuous improvement,
quality, safety, ergonomics, and customer satisfaction are given high priorities.
Conflicts occur both within and across traditional labor and management
boundaries, but are managed and resolved differently than through the reliance
on traditional contract negotiations or grievance arbitration processes.
Whether Saturn’s limited profitability to date implies that this organizational
model inevitably redistributes some of the financial rewards across the different
stakeholders at the expense of shareholders is still an open question—one that is
likely to be the subject of considerable debate in the future. Thus, despite the
positive publicity that the UAW-Saturn partnership has received and its success
on the quality and marketing fronts, the ambivalent support from both parents
(UAW International and GM), leave the future of Saturn somewhat uncertain.
At the same time, GM and the UAW both realize that the traditional approaches
they have taken to their relationship in general have not addressed the
underlying competitiveness and job security challenges they face. Both parties
are examining future options. Whether any of the principles, practices, and
lessons from a decade of Saturn experience will be brought to bear on this larger
relationship remains to be seen.
Over the past several years—and particularly over the past year—the parties
have been caught in a downward, reinforcing spiral. The union was frustrated
with a lack of leadership and decision-making power within Saturn management
and the lack of support from UAW national leaders. Its renewed militancy has left
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some managers feeling they have been betrayed. At the workplace, the
partnership was put on hold. Workers, in turn, became demoralized, as they saw
sales and production fall; as the relationship deteriorated, they began falling into
traditional patterns. Therefore, performance declined, adding further to costs and
the frustration of management.
GM agreed to a settlement that is inconsistent with its larger strategy of
centralizing design, purchasing, and outsourcing components. It gave the union a
role in purchasing/sourcing decisions, using the criteria of cost, quality, brand
equity (image), and job security. They did so in this instance because the UAW
threatened a strike that would have imposed big economic and public relations
costs on the company—and might have signaled the death of the partnership
principles. How the new arrangement will be implemented and made to work in
the context of GM’s broader centralization and outsourcing decisions remains to
be seen.
Saturn represents the most far-reaching example of a labor management
partnership model, one that embodies more of the features of a stakeholder
model of the corporation than any other example discussed here. As such, it
suggests both some strengths and limitations. On the one hand, it shows that
multiple objectives of firms and employees can be achieved and balanced if both
labor and employer representatives share a commitment to building and
sustaining a partnership—that is, a legacy of mutual commitment fostered by the
first generation of leaders who built Saturn. Second, it demonstrates that this
type of employment relationship and the commitment to quality and customer
service resonates positively with consumers and has a positive market value.
But the case also illustrates the significant resistance that exists to sharing power
fully and redefining the basic mission, goals, and governance structures of the
American corporation—and, therefore, the difficulty Saturn has experienced in
sustaining support from leaders both within its parent labor and corporate
organizations. It also suggests that significant changes in labor and employment
laws, as well as perhaps in corporate law, would be needed to allow this full type
of stakeholder firm to emerge and survive in the United States. A further
limitation of the Saturn model is the fact that—like the other examples
discussed here—“non-represented” managers and professionals were not
formally included in the governance process. How to treat these employees
remains an open question.
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In October 1994, General Motors (GM) was reorganized so that Saturn Corp.,
previously autonomous, was grouped with the Lansing Automotive Division to
form GM's new Small Car Group. Some media questioned the move. For
example, USA Today reported, "The folksy image of Saturn as one swell car is at
risk of being sideswiped by General Motors' cost cutters."
Skip LaFauve, Saturn's president since 1986 and the new head of the Small Car
Group, disagrees:
"Saturn is being pulled into CM in a positive way. This relationship is for strategic
planning purposes, but Saturn is still responsible for its tactical operations. GM's
overall small-car strategy will benefit through the sharing of processes,
information, and development of components and subsystems, resulting in
greater efficiency and cost savings for Saturn and GM.
The Context
GM presses ahead with restructuring plans
By Jerry White
8 July 1998
With the company-wide vacation period ending Friday, General Motors is
intensifying its pressure on the United Auto Workers to end the two Flint,
Michigan strikes that have led to the virtual shutdown of its North American
operations. Negotiations involving top GM and UAW officials continued
throughout the holiday weekend. Although bargainers called the sessions
"constructive," no agreement has been reached.
Talks continue to focus on work rules and investment at the Flint Metal Center,
where workers struck June 5. GM has been pressing the union for a double-digit
increase in the minimum daily output of engine cradles before it proceeds with a
planned $180 million investment. UAW officials have said the company “backed
out” on its pledge to upgrade the metal stamping plant even after the union
instituted cost-cutting and productivity-boosting measures.
Behind the local issue, however, is GM's determination to win a clear victory over
the UAW. Having already lost $1.2 billion in the strike, GM is demanding the
UAW's full collaboration in accelerating its program of job elimination and further
cost-cutting, and an end to crippling local strikes.
Wall Street investors, citing GM's more efficient domestic and international
competitors, have expressed their dissatisfaction with the company's approach to
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plant closings, employee layoffs and the elimination of slow selling car models.
BusinessWeek magazine commented in its latest issue, "Clearly, GM's decadelong 'death by a thousand cuts' strategy of gradual downsizing isn't working." The
magazine Investors said, "We would applaud a broad restructuring that would
finally get GM in fighting trim. That would mean cuts in management and hourly
employees, and revamping products, marketing and manufacturing."
Citing sources close to GM, Tuesday's Wall Street Journal said the automaker
will cut an additional 50,000 jobs or 22 percent of its hourly work force of
224,000, even though it has already eliminated 64,000 jobs since 1992. GM has
invested billions of dollars in the past five years on new equipment and
redesigned vehicles that require fewer labor hours. The Journal said company
officials now feel they need to get a return on that investment, particularly in the
face of a reinvigorated Ford Motor Co., and the Daimler-Chrysler merger.
According to the Detroit News "GM executives are studying plans to replace
aging assembly plants staffed by aging workforces with new plants that would
employ a fraction of the workers now building cars in, say, Lansing or Lordstown,
Ohio. The concept, dubbed Project Yellowstone, would enable GM to introduce
world-class production methods akin to those it already uses in Eisenach,
Germany, Argentina and Brazil." In addition, the company is accelerating plans to
sell all or part of its Delphi Automotive Systems parts unit, which employ 68,000
UAW members.
The UAW leadership, fearing the further loss of membership and dues income
(employees belonging to the union pay union fees), has engaged in a series of
13 local strikes which have done little to stop the company's destruction of jobs.
The union officials are not opposed, in principle, to GM's downsizing, but have
pressed the company to work "with the union" in this process. As UAW Vice
President Richard Shoemaker said, "All the auto companies are trying to improve
productivity and we understand that. We've never told GM that we wouldn't help
them become more competitive."
BusinessWeek speculated that the UAW leadership could use the corporation's
downsizing approach to its advantage. Commentator Bill Vlasic wrote that UAW
President Stephen Yokich "could agree to the export of low-tech parts jobs in
exchange for a GM commitment to put new vehicles in aged US assembly
plants.... The union also wants to expand its membership. It could work with the
carmaker on that as well, giving GM the right to move, sell, or close parts plants
in return for GM support of UAW organizing efforts at outside suppliers. Ford
Motor Co. does it--and its profits and productivity don't seem to suffer because it
buys from union shops."
On the basis of such an arrangement, the UAW bureaucracy could collect union
dues from workers laboring in low-wage sweatshops worldwide, while GM was
guaranteed the cost-cutting benefit of purchasing from outside suppliers.
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In the meantime, GM has stepped up its plans, should the walkouts continue into
August, to use outside parts suppliers in order to bypass the struck plants in Flint
and restart selected assembly plants. The company has stated it would take legal
action if auto workers in the US or Canada refused to handle such parts.
GM has also renewed its threat to end medical coverage for 163,000 workers
idled because of the Flint walkouts. The 9,200 strikers have already been cut off.
In an internal voice-mail message to managers, GM Vice President Donald
Hackworth said the company would continue coverage for another week, but
added, "We have a contractual right to terminate coverage for UAW-represented
employees sent home."
The Workers Views
Workers grapple with the impact of globalization
By David Walsh
8 July 1998
Interviews with Striking General Motors Workers
Strikers see GM's actions in Flint as an expression of company executives' dishonesty,
greed and ruthlessness. "It's the big corporations; it's greed, money, power," as one 30year veteran described it. Greg spoke with astonishment about the salaries of company
executives. "The chairman of GM is getting 7.1 million dollars a year. 7.1 million. If I
had 7 million dollars, I'd retire. And he makes that every year! What's wrong with them?
Why do they want more all the time?"
The reality of a global auto industry is beginning to become part of workers' thinking.
Inevitably, however, especially given the union's nationalist and chauvinist policies with
which the unionized workers have been bombarded, there is confusion over the issue.
Some pickets referred somewhat disdainfully to the Mexican workers, viewing them as
virtual strikebreakers willing to work for anything and, in effect, stealing Flint workers'
jobs. At the same time, there were many expressions of sympathy, sometimes from the
very same individuals, about the conditions faced by auto workers south of the border.
This contradictory attitude was summed up by a crane operator who noted that his
"Mexican brothers" were working for two dollars a day, but then added, "We shouldn't
have Mexican brothers to begin with." That led to the following exchange:
--What do you mean?
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--Well, they shouldn't have shipped our jobs down there.
--But the global character of the auto industry is a reality. You can't shut the borders.
--No, but you have to fight to save jobs here.
--How can you do that when they can close down here and find cheaper labor somewhere
else? There's a global economy, the question is, in whose interests is it going to be
operated, those of working people or those of a handful of billionaires?
--Well, that's why we're out here.
Greg, too, expressed this sort of ambivalence. Our conversation began with his asserting
at some length the superiority of Flint workmanship over that of every other auto plant,
and, more generally, the superiority of Big Three auto production over that of all of their
nonunion and foreign counterparts.
He noted that the auto companies had shifted their parts work to nonunion plants, but
now "Ford wants to get it back. Because they're not getting quality. They were making a
bracket for us at some other place. At first they produced a good bracket. Then they sent
it to a cheaper shop, and a cheaper, and eventually we got junk. It wouldn't do the job.
The same with frames they were building in Mexico. They fell apart...."
After he had gone on in this way for several minutes, I politely interrupted and said,
"Look, I don't know whether you build the best cars in Flint or not. I don't think it's the
issue. The car industry is worldwide. Like it or not, there are auto workers in Mexico,
Korea, Germany, and so on. In many cases, you're facing the same companies. What's the
difference between an auto worker in Flint or in Mexico or in Korea? Don't they have the
same problems?"
Greg agreed in principle. "Oh sure, I think all the workers here and everywhere should
get together, they should all be unionized. I mean, GM exploits people in Mexico. They
exploit them, they abuse them, they poison their water. They pay them two dollars a day,
and they're happy to get it."
I said I didn't think workers in Mexico were any happier than the pickets there in Flint.
He replied, "I was happy! The company has done this to us. We didn't do it."
The union bureaucracy has staunchly promoted chauvinism and American nationalism.
Outside the UAW Local 599 union hall in Flint one union official demanded that WSWS
reporters driving up in a Mazda get that "Jap car out of our parking lot." He blamed the
loss of thousands of jobs at Buick City and the plant's possible closure--to prevent which
the UAW has not lifted a finger--on the Japanese. He threatened to have the car towed
away until he noted the sticker which identified it as having been assembled in Flat Rock,
Michigan.
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In contrast to that, one picket captain at the Delphi East plant observed, "I used to be one
of those guys smashing Toyotas and Japanese cars. That's all we heard from the union
and the media, that they were taking our jobs. Today, I'm making parts for Japanese auto
companies."
The globally integrated character of the economy creates conditions for a new
relationship between US, Latin American, European and Asian workers, and the
possibility of more critical and politically conscious attitudes among American workers
toward US imperialist interventions. The hollowness and duplicity of patriotic appeals
under present conditions, in which workers in a variety of countries may be working on
the same end product, ought to become obvious. But there is the legacy of flag-waving
and militarism, encouraged by the AFL-CIO, to be overcome.
One individual who wrote into the WSWS recently described himself as "infuriated by the
evening world news tonight seeing all the auto industry going to Mexico and China. I am
also a Vietnam veteran and I fought for this country and to see it being handed over to
foreign countries is just appalling. I am curious as to why the UAW doesn't launch a
major campaign to all Americans with any patriotism left in them at all to completely
boycott General Motors!"
With regard to the UAW, the attitudes of strikers vary. There are workers close to the
union, who feel they have benefited from its policies. That is a distinctly minority
opinion. For the most part, workers' views of the UAW range from disinterest to open
distrust and disdain. These are workers who have lived through the transformation of the
union into a thoroughly corporatist organization, a body that has elevated labormanagement collaboration into its guiding principle. What do they make of this change?
There is no clarity on the issue. While there is a general perception that the union and the
company are "in bed" together, it is seen by many as a more or less natural or inevitable
process, forced on the UAW by changes in the character of the industry. Greg started at
GM in 1977. He told me, "When I first got here there was a lot of labor-management
hatred. Management would bust you for nothing. There was a lot of conflict between
workers and management. Then the union went along with the concessions [in the early
1980s]." He implied that the disruptive practices of the 1970s hadn't worked in the long
run, and now it was all brotherly love between union and company--and that didn't work
either.
Other strikers felt that while the UAW had closely collaborated with management, now
GM's ruthlessness had forced it into fighting. One worker commented, "See this picket
sign that tells you how well 'jointness' has worked."
The workers believe that it is pointless to cooperate with GM’s management as they
cannot be trusted. They witnessed their own working conditions and job security steadily
decline over the past 20 years.
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Kochan, Thomas A., Rebuilding the Social Contract at Work: Lessons from
Leading Cases; MIT Sloan School of Management, Institute for Work and
Employment Research, 1999
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