Automakers look outside for white-collar expertise
Trend could turn Big Three into auto assemblers in a few years, analysts say, but unions are fighting hard to protect their fiefdom. US automakers, having retrieved lost ground from Japan, intend to sustain their competitive edge. Part 4 of a weekly series.
TOM WAMSER is a modest, clear-eyed man. For years, he says, he believed his prized skill as a maker of wood models for the design workshop at General Motors Corporation in Warren, Mich., guaranteed him more job security than most other blue-collar autoworkers.
Several months ago, however, GM began reassigning Mr. Wamser and his highly skilled, unionized peers to humdrum work and giving their challenging tasks to outside contractors or to salaried workers with computers.
As the father of five children, with a wife who was unemployed until late June, Wamser says he saw the quiet management shifts as a threat to his family's livelihood. So on June 2, he and 3,500 other members of the United Auto Workers (UAW) at GM's technical center went on strike.
Wamser is one of tens of thousands of United States autoworkers who feel their living standards are threatened by the Big Three automakers increasingly hiring outside companies to provide parts and services.
By ``outsourcing,'' the three companies reap big savings in labor costs, extending their competitive advantage over companies in Japan and Europe that pay higher wages to autoworkers.
Moreover, the US companies quietly sidestep organized labor and enlist a weakly unionized and comparatively compliant work force. Workers at independent parts plants earn about one-half the wages of assembly-line workers at the Big Three. Moreover, only 1 out of every 5 of them is unionized.
After a six-day strike, the hourly, highly skilled GM workers at Warren won assurances that managers would turn to outside contractors only after fully utilizing GM staff, says Earl Hartman, vice president for UAW Local 160.
Although Wamser and other UAW members express cautious satisfaction over the results of their strike, Wamser says he is worried about the seemingly relentless erosion of secure manufacturing jobs that have traditionally been the bedrock of the middle class.
``We're losing the American dream,'' he says, referring to the high living standards associated with stable, well-paying manufacturing jobs.
Over several weeks, Chrysler and GM employees involved in media relations declined to act on repeated requests for interviews with senior executives familiar with outsourcing.
Problems for US labor
The outsourcing trend has intensified two long-term problems for US labor: the decline in the number of high-paying, unionized manufacturing jobs and, by extension, the weakening of the organized labor movement.
``Outsourcing directly undermines union power,'' says Mike VanAcker, a leader of the 861 UAW salaried employees at the Chrysler Corporation technology center who walked out in late May for the same reason as their counterparts at GM.
The policy of shifting operations outside a company is in line with an incipient but increasingly popular business strategy called ``agile manufacturing.''
As part of the new method, articulated by auto executives and government officials in 1991, a company aims to break down traditional management practices that hinder close, flexible relationships with suppliers and consumers.
Outsourcing is not new. Ford and Chrysler have increasingly turned to outside suppliers since stumbling to the brink of bankruptcy in the early 1980s. General Motors began doing so early this decade after a severe fall in sales in North America.
But outsourcing in the past year has extended up the wage and skill ladder. The walkouts at GM and Chrysler illustrate that the Big Three's white-collar and highly skilled blue-collar employees are no longer shielded by their companies from the competition of outside workers.
The UAW apparently believes that at best it can fight a rearguard battle against outsourcing and otherwise use the trend to extract concessions from management.
The union last year negotiated a three-year contract with the automakers that required GM, the country's most financially troubled auto company, to accept the same wages and benefits package as Ford, the most profitable among the Big Three.
The move was viewed by industry analysts as a silent signal by the union that GM could emulate the methods of Ford in raising productivity and relying more on outside suppliers. In return, the union won about $2 billion in compensation for workers who were scheduled to be demoted.
``Older union leaders say, `We can't win, let's just cash out, there's nothing we can do before this big tidal wave,' '' says Sean McAlinden at the Office for the Study of Automotive Transportation at the University of Michigan in Ann Arbor, Mich.
The tsunami of outsourcing has yet to fully crest. Both Ford and GM have indicated that they plan to buy more from outside suppliers. Already, GM farms out 52 percent of the value of a vehicle; Ford, 63 percent; and Chrysler, 67 percent.
Union membership thins
If GM were to hire outside companies at the same level as Chrysler, it would eliminate as many as 60,000 jobs. Ford would cut 10,000 jobs, according to Mr. McAlinden. This would further undercut the UAW, which has already seen its membership shrink by about one-half since 1979 to 770,000 workers.
Since the passage of the North American Free Trade Agreement, the automakers have urged suppliers to exploit dramatically lower labor costs by shifting plants to Mexico.
If current trends continue into the next century, the Big Three will not be automakers but rather auto assemblers, industry analysts say.
The companies will pay a smaller force of unionized workers than today to make drivetrains and work at stamping and assembly plants. But auto components from headrests to brake pedals will come from parts suppliers that provide workers far less in wages and benefits than the assemblers.
As the recent strikes have shown, outsourcing threatens most salaried and hourly workers regardless of their skill level. The trend has taken many employees at the technology centers of GM and Chrysler by surprise, employees at the two companies say.
``There was a problem with the tech centers: They thought they were isolated, like college campuses within the corporation, and they didn't expect to be affected by real-world events like market share and sales,'' McAlinden says.
The stress from outsourcing is clear at the vast GM technical center in Warren, Mich. There, about 20,000 employees work at the headquarters for GM's North American Operations, the Chevrolet and Cadillac divisions, and design, engineering, and vehicle launch facilities.
GM has steadily shifted engineering, design, and other jobs from highly skilled union workers to salaried employees or to laborers at other companies, according to several employees.
``The place is infested with contract people,'' says the UAW's Mr. Hartman. In some cases, a GM employee has retired on a Friday and returned to his desk the next Monday working for another company, Hartman says.
At Chrysler's technology center in Auburn Hills, Mich., the salaried designers walked out because they say the automaker was increasingly hiring outside contractors to perform jobs traditionally held by the unionized employees. It was the first strike by the unit of UAW Local 412 since its founding more than a half-century ago, Mr. VanAcker says.