The social and labour impact of globalization in the manufacture of transport equipment

With the advent of Japanese exports to the United States and Europe and the subsequent establishment of transplants, the introduction of teamwork (whether through completely autonomous teams, semi-autonomous ones, production cells or group work, etc.) seemed to be a prerequisite for lean production, which was viewed as a response to global competition.

In fact, one of the main concepts to have come out of the 1990 Womack study[1] was the idea that lean production was the way of the future. However, the shelf life of lean production was relatively short, since:

… less than a decade after MIT’s International Motor Vehicle Program (IMVP) proclaimed, in The machine that changed the world, that lean production was the new millennium – “a better way of making things which the whole world should adopt as quickly as possible” – a new book[2] from MIT’s Industrial Relations Section is proclaiming a Post-lean world. As millenniums go, the Era of Leanness was apparently short-lived.[3]

Nevertheless, there is no doubt that after the invention of the assembly line by Henry Ford, the introduction of Toyotism, as lean production is often termed, was probably the second most important revolution affecting the organization of work to hit the automobile industry in the past century. As already mentioned, this was often perceived as the wave of the future, if not as the “only way”,[4] with companies rushing to emulate what they thought were Japanese work methods.

Teamwork was an essential ingredient of lean production as it had evolved in Japan. The use of teamwork is also interesting to study since it represents the breakdown of previous systems of work organization and a realignment of relations between workers, management, works councils (where they exist) and trade unions. In one of the most comprehensive attempts at empirical research, the French research group GERPISA[5] undertook a study of over 20 factories belonging to 12 major companies in nine countries with the help of nearly 30 investigators.[6] For the sake of clarity they were grouped according to the three basic schools of thought: the Fordist model (F), the Kalmar model(K) and the Japanese (Toyota) model (J). While these three ideal categories represent broad generalizations (and do not exist anywhere in the pure state), the use of archetypal models nevertheless permits the presentation of complex research findings in a clear and logical framework. [7] Figure 5.1 shows these three basic poles and variations in between. The researchers used a common questionnaire. Eight specific indicators of the degree of acceptance or implementation of teamwork, along with other lean production indicators, were ranked on a scale of one to ten (see table 5.1), and the results plotted in the form of radar graphs (figure 5.2) which show the ideal rankings for each of the three models.

Basically, the neo-Fordist model of today is represented by those companies which – although they still adhere to the basic principles of Henry Ford’s assembly line – nevertheless feel the need to introduce some new principles in order to respond to competitive pressure. Under the Fordist model operators were low-skilled, specializing in one job with poor career prospects. Only relief workers were multiskilled. The Kalmar model (or experiment by Volvo),[8] in addition to its use by well-known companies in Sweden, also applies to the organization of work by many companies in Western Europe (especially Germany) which have responded to the slogan “humanization of work” in order to attract and retain workers, and employs such concepts as group work (Gruppenarbeit). At Kalmar in particular an attempt was made to break the monotony of the assembly line by introducing autonomous groups, industrial democracy, rewards for multiskilling and the election of spokespersons. Finally, the original Toyota model, as embodied in transplants, represents the closest companies come to introducing Japanese methods outside the country that invented them. Workers are supposed to be multiskilled and in fact improve on this through job rotation. Supervisors play a technical support role, whereas group leaders have a social as well as a technical role. Peer pressure is also important for the functioning of the group.

With the above models in mind the study found that the factories fell into five broad categories. The first was the “neo-Fordist type (FF)” and included Ford Dearborn (United States), Peugeot-Sochaux (France), Citroën-Aulnay (France), and Volvo-Ghent (Belgium). With the exception of Volvo-Ghent, teamwork – in the best of Ford traditions – had not yet made an appearance at any of these factories. There was little multiskilling, no group work and trade union opposition to lean production, with wages being set according to the job.

The second group can be called “neo-Fordist with lean tendencies (FFJ)” and includes Renault-Flins (France), Renault-FASA (Spain), Fiat-Melfi (Italy), Saab-Trollhättan (Sweden) and General Motors Brazil. This truncated Japanese model is one that is still in transition since, while borrowing the technique of teamwork, it has either not adopted all of its accompanying measures, or encountered strong union resistance. Certain elements of industrial democracy exist, while supervisors are still assigned an important role.

The next category was the “Northern European type (FKJ)” of employee relationship represented by Volvo, Volkswagen and Mercedes, all of which, through the adoption of a number of techniques, have been able to disguise their underlying Fordist leanings. They have introduced lean production and elected team leaders (spokespersons), giving them trade union support.

The next major category is a rather ambiguous one, termed the “Japanese-American type (FJJ)”, found in the NUMMI and Saturn plants (both in the United States), and Opel-Antwerp (which is similar to the FFJ model). At NUMMI:

… team leaders are appointed by a joint committee containing representatives of management and the union, which chooses from a list of candidates who have received training and meet criteria fixed by management (multi-skilling, technical competence, leadership qualities). In the same way, the union’s strength explains why some of the decisions on life in the workplace are negotiated with management.[9]

At Opel-Antwerp, on the other hand, team representatives are nominated by management once it is clear that they have the support of the team.

The last model, the “Japanese type (J)” of employee relationship includes two Toyota plants (Tahara and Kyushu) and Nissan-Kyushu and, despite being very close to the archetypal model, nevertheless exhibits European and American influences. For example, team leaders must be approved by the workers after they have been appointed.

One of the main concepts associated with lean production (or Toyotism) is that of teamwork and hence the team leader.[10] Under the traditional Japanese system these are appointed, and their function is rather one of providing training and filling in when a worker is absent or falls behind. Under systems with leanings towards democracy, team leaders are, ideally, elected. There are several advantages and disadvantages associated with each of these approaches. First of all, appointed team leaders will enjoy the full support of management, but not necessarily that of the workforce they are to lead, while on the other hand, completely elected team leaders may well have the full support of the workers, but may not necessarily be in tune with management or may even lack leadership qualities (or even ability as trainers). Between these two extremes there are several other possibilities: one is the joint selection of team leaders by a management/trade union committee; another is to obtain confirmation by the workforce once the leader has been appointed; the third alternative is to have a slate of candidates, certified as being acceptable to management in terms of leadership and training capabilities, from which one could then be elected by the workforce. Any such elected team leader would then enjoy the confidence of management and the legitimacy of democratic election.[11]

An interesting twist occurs in the following example from the United Kingdom. Here it was found that team leaders coexisted with traditional foremen and shop stewards; the ultimate problem was that shop stewards would remove from the bulletin board any notice in which they considered that team leaders had exceeded their competences.[12] Team leaders in such a situation cannot have any real function other than the training and replacement role assigned to them under the traditional Japanese model. Another problem area might be their role vis-à-vis trade unions and perhaps even works councils in countries where teams are really autonomous.

Interestingly, researchers have discovered a phenomenon whereby team members exert pressure on weaker or slower members who cannot keep up the pace.[13] This can lead to these employees either changing teams or resigning. The net result is that under such a system, the team actually takes over a management function, without management having to intervene and dismiss the slower worker concerned. Another feature of teamwork is job rotation, involving exchanging jobs between team members every two hours. Not every worker can necessarily keep up, and other studies have found that such job rotation effectively discriminates against disabled workers, if everyone is expected to do the same job.

When it comes to pressure to remain competitive in today’s global market, Australia is no exception. It too has embarked on a process of introducing teamwork in order to be able to respond more flexibly. In an interesting study[14] of the four car manufacturers (Ford, General Motors, Toyota and Mitsubishi) and 34 of their component suppliers the following results emerged. All of the establishments were unionized; 70 per cent reported a unionization rate of 100 per cent, while another 17 per cent reported a rate of over 80 per cent. The study found that despite the fact that 50 per cent of the companies sought to introduce self-managed work teams and another 36 per cent semi-autonomous teams, it was in fact more common to find semi-autonomous (directed) work teams (in 61 per cent of cases), plus project teams (in another 22 per cent), compared to self-managed teams in only 17 per cent.

On the whole the study found that the introduction of work teams had proceeded in a broadly cooperative spirit of union-management collaboration, and that this positive industrial relations climate had provided Australia’s automotive industry with a competitive advantage,[15] although given the introduction of lean production, directed rather than self-managed teams seemed to be more appropriate. The positive outcomes for industry were obvious in terms of quality, productivity and timeliness, whereas the benefits for employees, though positive, were not as widespread. The downside included “increased job pressure, demanding work standards, management co-optation and team peer pressure”.[16]

5.2. OSH issues: The right-sizing of benchmarking

One significant issue here is the important question of the impact of new forms of working on employees’ health and safety at plant level and on their social lives outside the assembly plants. Little has been written on this from an international perspective, although the work of the Canadian Auto Workers suggests that additional research is desirable.[17]

Only a few studies have been carried out on occupational safety and health (OSH) problems in the automotive industry, and although benchmarking has been around for some time as a management tool, workers have often disputed its accuracy since they claim it ignores the human side of the impact of lean production. To balance the equation, the Canadian Auto Workers union (CAW) came up with the idea of benchmarking their employers on OSH and conditions of work issues. Among the more thorough studies was one conducted by the CAW in collaboration with the Labour Studies Programme of McMaster University (Hamilton, Ontario), with the financial support of the Ontario Government. One study was for the auto parts industry and the other for assembly. The one for auto parts[18] studied 16 factories representing a cross-section of the industry and covered over 1,600 workers involved in moulded plastic (five plants), casting metal parts (three plants, of which two manufactured wheel and brake components), stamping/assembly (six plants, of which two were for bumpers, two for radiators and oil coolers and two for seat assembly), glass (one plant) and electronic circuit boards (one plant). Their headquarters were in Canada (six), the United States (seven), Europe (two) and one was a joint Japanese/American operation. The main results were as follows:

The other study, on assembly plants,[19] looked at 2,400 workers in nine workplaces of CAMI, Chrysler, Ford and General Motors. Figure 5.3 plots the relative positions of the companies based on responses to questions related to physical and social conditions at work. Irrespective of where companies are situated in the diagram, what is interesting is that there are differences between them.

The study on CAMI[20] also identified OSH issues which had not been mentioned before in the lean production literature such as repetitive strain injury (RSI). Workers described working conditions as “overburdened”. “Andon cords” were used as a safety valve that allowed workers to ask for help (yellow cords) or stop work (red cords).

The recent negotiations in the United States between the United Auto Workers union (UAW) and DaimlerChrysler have produced some significant improvements in ergonomics, reduced exposure to metalworking fluids and renewed funds for health and safety training and research (see box 5.1).

Box 5.1 .
Health and safety gains at DaimlerChrysler

These include:

an awareness and responsibilities training programme for all DaimlerChrysler employees;
additional training for members of the local joint committees on health and safety;
the introduction of risk assessment and hazard control for high-risk jobs, giving priority to engineering solutions over procedures or personal protective equipment;
the involvement of union safety representatives in official health and safety inspections, with access to all reports concerning violations of local, state or federal codes;
the introduction of medical surveillance procedures to establish the respiratory effects of metalworking fluids, and reduce currently agreed exposure limits for machining fluids by 50 per cent;
consultation on the introduction of stricter exposure limits for chemicals, including solvents, carbon monoxide and diesel exhausts;
access to company reports on environmental issues that have an impact on employee health and safety;
the review of health- and safety-related preventative maintenance programmes;
more frequent health and safety audits, with improved training for audit team members;
improvement of ergonomic design and the review of current lifting guidelines, in order to improve working conditions;
development of an emergency response plan to deal with health and safety emergencies;
stricter enforcement of health and safety requirements for all contractor employees on DaimlerChrysler sites.

Source: International Metalworkers’ Federation (IMF) website: http://www.imfmetal.org and United Auto Workers website: http://www.uaw.org.

5.3. Early retirement or hidden unemployment? [21]

One common characteristic of the automobile industry in most countries is the practice of early retirement, facilitated through a mechanism such as that known as the golden handshake. France has most recently implemented a scheme whereby workers can leave at the age of 55, two years before they become eligible for benefit under other state-funded early retirement schemes, and receive up to 65 per cent of their gross salaries up to the level of social welfare payments, financed first by the company (between the ages of 55 and 57), and then jointly with the State,[22] when existing early retirement schemes would kick in.[23] Signed between the employers’ organization for the metal trades and mining (Union des industries métallurgiques et minières – UIMM) and four out of five unions (CFDT, FO, CFE-CGC and CFTC, with the CGT abstaining), [24] the agreement covers 38 companies in the automotive industry in France (whether French or foreign-owned). Since the workers will stay on the payrolls of their respective companies until the age of 57, they could theoretically go back to work, but it is not expected that this will happen. Some 23,000 workers from two companies in particular are supposed to benefit from it immediately (12,500 at Peugeot (PSA) and 10,500 at Renault). Concluded for a period of five years, the agreement provides for the recruitment of one younger worker for every three who take advantage of the pre-retirement scheme. One of the eligibility criteria for entering the scheme is difficulty in adapting to new technologies.

At the moment the average age is 43 at PSA and 45 at Renault,[25] which these two companies find to be a big handicap when compared to their competitors, where the average workforce is in their 30s. In the United States, the average age of the 100,000 hourly workers at Ford is 44, while at General Motors it is 48.[26] However, at General Motors in Strasbourg the majority are aged between 25 and 29, and at Scania in Angers the average age is 29. In the United States, the average age at greenfield sites, such as Mercedes (DaimlerChrysler) in Tuscaloosa (Alabama), is 34.[27] Likewise in Germany, companies resorted to early retirements throughout the early 1990s, with laid-off workers being eligible for unemployment benefits. However, the use of unemployment insurance funds to finance what were in effect pre-retirement benefits on such a massive scale prompted the State to require the larger companies to make increased retroactive payments into the funds so that they could be used for the purpose for which they were intended.

The danger with such schemes is that they might grow into a “social right”, creating a Hercules’ Hydra for personnel managers and public bodies:

... if they cut the older ages off the age pyramid in a given year, the next wave of older workers passing the threshold is waiting, and the programmes have to be repeated over and over again. Thus, if one “head” is severed, other heads will grow, resulting in the problem of recurrent use, which is a financial burden for companies and the public budget. In addition, exclusive targeting of exits on older workers can also result in the loss of many technical and extra-functional qualifications (work discipline, punctuality, etc.). Taking age as the sole departure criterion especially neglects the significance of functional and extra-functional skills and might reduce the overall skill balance in plants. Therefore, while in general early retirement measures enable adjustments at lower costs, they could eventually have some negative side-effects as well.[28]

Besides being a solution to the problem of overcapacity, early retirement also addresses issues related to work organization, especially teamwork, job rotation, just-in-time and continuous improvement. Older workers are thought to be less capable of adapting to teamwork and keeping up with the pace of lean production. As the study on CAMI in Canada revealed, few workers thought they would make it to retirement age on the same job.[29] Another study of the auto parts industry in Canada found that workers aged under 50 in lean production facilities were more likely to report that they would be unable to maintain the current pace until age 60.[30]

Source: CAW: Working conditions study: Benchmarking auto assembly plants (Canada, 1996), p. 17.

5.4. Vocational training or a continuous
learning environment?

When the managing director of an auto parts company in the United Kingdom specializing in plastic injection moulding, leather covering and sub-assemblies (for Rover, Toyota, Honda and Nissan) recently asked 25 of his line managers how much time they would need in a week to keep abreast of developments related to all aspects of their work, the answer was “between five and six hours”.[31] When told they were expected to do this, they replied that they did not have time. When offered a reduced workload to free up the necessary time to fulfil this central business objective, they all found ways of reorganizing their work to devote time to their own learning process during working hours.

Although the German dual system of apprenticeship training is renowned, it has recently been going through a crisis. Part of this stems from the length and cost of the training. Generally speaking, the length of training – from three to three and a half years at DM30,000 a year – means that the total cost may be in the neighbourhood of DM100,000 per trainee.[32] Coupled with the fact that the trainee may emerge with inappropriate skills, this makes the proposition highly problematic. The reasons lie in the antiquated curriculum and the inability in today’s quickly changing world to predict three years in advance what skills will be required. Since teamwork is such an important element of lean production, the question obviously arises as to whether it can be taught.[33]

The first collective agreement in Germany on in-plant training was concluded in Nordwürttemberg/Nordbaden and Südbaden/Hohenzollern in 1987, covering about 940,000 workers, and included norms for the improvement of skills and qualifications.[34] The collective agreement stipulated that the employer should ascertain at regular intervals the future skill requirements likely to result from technological and organizational changes and consult the works council on the subject at least once a year. The works council also had the right to identify and represent the interests of the workers independently in this regard. It had the possibility of developing an alternative training plan which could be negotiated with management. The employer then had to plan the nature, extent and execution of training measures in agreement with the works council. The costs of training measures were to be borne by the employer, and they were supposed to take place during working time. Salaries and wages were to be paid as usual, and training was to be carried out subject to approval of the works council.

The first branch-level collective agreement in the TEM industry dealing with individual training was the 1998 agreement in the district of Nordwürttemberg/Nordbaden, under which employers were obliged to analyse the need for vocational training once a year and to consult the works council about the result. The only company-level collective agreement so far that actually entitles employees to vocational training has been concluded with the DaimlerChrysler company Debis AG. This company deals with financial services and information technology (IT) and is therefore not really representative of the overall workforce in the TEM industry. (In IT there is considerably higher demand for training, since work methods change faster than in other industries.) The employer has to pay for the training, but can cut the worker’s pay by half if the training is benefiting the employee only, whereas if it prepares the employee for a task needed at the company the employer has to pay the full wages during the training.

As shown in Chapter 1, motor vehicle companies (and their suppliers) together with aerospace firms account for over one-fifth of world spending on R&D. This means there is an enormous demand for scientists and engineers worldwide. However, as pointed out above, in addition to the mismatch between apprenticeship training and required skills, there is an acute shortage of engineers coming out of the various educational systems. This has prompted the Government of Germany to mount an advertising campaign in an attempt to encourage students to study engineering at university. Although the automobile industry feels hard hit, the shipbuilding industry is even worse off.

One of the fastest-expanding and most exclusive professions is that of automobile designer[35] (and designer of vehicles in general). Despite the fact that the design of a car is the most important factor influencing the actual purchase, automobile design is taught at only four schools in the world, only one of which offers courses at the postgraduate level (the Vehicle Design Course at the Royal College of Art in London). Needless to say, designers are highly sought after and often switch companies.

One of the more interesting questions emerging from the data available is: what will the workforce in the transport equipment manufacturing industry look like in the twenty-first century? Based on the data available, it is obvious that fewer and fewer workers will be directly employed for assembly operations. But this does not mean that the vehicles will build themselves, although automation and the use of robots are on the increase, signifying the end of the factory as we know it. Increased attention will be paid to the design of the vehicle, which will imply more scientific, IT and engineering jobs. Employment in the industry as a whole may remain stable or even increase as jobs which were previously done in-house are now done by suppliers, which may even install the component they produce. Financial services and leasing will also become more important. Some companies may want to own the dealerships and repair and rental agencies, whereas others may not.

Figure 5.4 depicts the interfaces between the labour market policy (LMP) of a given country and entries, ongoing employment relationships and exits (where most interventions take place in many countries).

Report for discussion at the Tripartite Meeting on the Social and
Labour Impact of Globalization in the Manufacture of Transport Equipment

Part 6

5. Emerging social and labour issues

5.1. Teamwork – A response to globalization?

5.2. OSH issues: The right-sizing of benchmarking

5.3. Early retirement or hidden unemployment? [21]

5.4. Vocational training or a continuous
learning environment?