VW’s union rejection could hurt US economy, experts say

Analysis: Did voting ‘no’ on the UAW in Tennessee mean voting ‘yes€’ on disposable employees?

The Volkswagen plant in Chattanooga, Tenn., Feb. 14, 2014.
Christopher Aluka Berry/Reuters

The obvious loser in last week’s failed bid to unionize the Volkswagen auto plant in Chattanooga, Tenn., was the United Auto Workers. The union was counting on a victory at the German-owned plant, which stayed officially neutral in the unionizing effort but hinted it welcomed a platform for organizing other plants in the South.

But the vote — and the forces that had arrayed themselves against the UAW — could also represent a setback for the economy and blue- and white-collar employees, a number of auto-industry and economic experts suggested.

U.S. management and labor organizations have battled each other —with both sides wasting resources in the process — ever since Frederick Winslow Taylor used his “scientific” methods a century ago to de-skill and control production workers, explained James P. Womack, founder of the Lean Enterprise Institute in Cambridge, Mass., and a co-author of “The Machine That Changed The World.” For Womack, the acrimonious fight and vote in Chattanooga was part of a historical continuum that has often hobbled U.S. industry, especially in the face of international competitors who embraced much more collaborative approaches to management.

The vote was “shocking,” added Kenneth Dau-Schmidt, a professor of labor and employment law at Indiana University. The fundamental question that the workers faced was “simple: ‘Would you like to participate in these committees on workplace management and safety?’”

The bigger concern, argued Dau-Schmidt in a recent Marquette Law Review article, is that the U.S. “system of labor relations is yielding declining benefits for workers and undermining the position of the American economy as a whole.” Although there are several factors that contribute to the problems faced by American employees, including stagnating wages and growing wealth disparities, Dau-Schmidt said, “there is at least one underlying cause — the underrepresentation of employee voice in the American economy.”

Nor are these problems confined to hourly workers. In his book “Why Good People Can’t Get Jobs,” Michael Cappelli, a management professor at the University of Pennsylvania’s Wharton School, described a “Home Depot view” of the U.S. employment process in which companies hire new employees the way consumers buy a replacement part for a washing machine. Whether they are seeking software engineers or auto workers, companies want to hire precisely the skill set they need in a given moment and get rid of employees when the product lines change. 

Cappelli and Dau-Schmidt agree that a workplace culture based on short-term flexibility and the ability to hire and fire employees at will has created an economy that favors disposable employees, while giving short shrift to employee development and training.

In the process, companies and policymakers are fostering what experts say are a number of myths. These include the “skills gap,” which holds that the American education system is producing workers who can’t meet the demands of a competitive marketplace. Cappelli, by contrast, argues that what the American workplace lacks is not so much skilled workers as a willingness by companies to invest in their employees by training, or retraining, them when needs change.

Similarly, at least one reason some workers in Tennessee voted “no” to the union is that they believed union opponents, including local and national policymakers, that the UAW was a chief culprit in the decades-long decline of Detroit and the auto industry — a rewriting of history, according to a broad range of experts.

Prominent local Republicans not only threatened to withhold subsidies for a future VW expansion if the union prevailed, they warned that a successful unionization effort would hurt the plant’s competitiveness and drive business away from the state. In several local op-ed pieces, including one that compared the UAW to the invading Union army and another headlined the “UAW ate Detroit; Chattanooga could be its next meal,” Matt Patterson, an anti-union advocate financed by Grover Norquist, an anti-tax crusader based in Washington, D.C., charged that the UAW had “cannibalized” the auto industry, laying blame for the loss of 200,000 jobs at the feet of the union.

In fact, the U.S. auto industry has long recognized that its declining market share had more to do with sclerotic management than with the union. For example, Don Petersen, the CEO of Ford Motor Co. during the early 1980s, hired W. Edwards Deming, the renowned quality guru who riled many executives by charging that in Detroit “85 percent of the problem is management” and arguing that the only way to improve quality was to collaborate with those “closest to the system,” i.e. hourly workers. Back then, Deming’s participative improvement methods were widely credited with helping to turnaround an ailing Ford.

Similarly, General Motors teamed up with Toyota, in 1984, to reopen a shuttered auto plant in Fremont, Calif., as a way to learn the Japanese company’s fabled collaborative production system, which produced higher quality cars at lower cost. (The joint venture — known as NUMMI, for New United Motor Manufacturing Inc. — helped Toyota win its first manufacturing site in the U.S.) The plant rehired its old GM workers, who had once been known as the “worst workforce” in the auto industry, and retrained them in the Toyota production system. The plant, operating under a UAW contract, produced, among others, Chevrolet Novas and Toyota Corollas for the next 26 years. At the time, both labor and management credited the emphasis on quality and teamwork as a key to the plant’s success.

“What is being painted in Chattanooga is not entirely accurate,” said Kristin Dziczek, director of the industry and labor group at the Center for Automotive Research in Ann Arbor, Mich. Dziczek noted that, in the decades since Detroit confronted its first competitiveness crisis in the late 1970s and early 1980s, closer collaboration between management and labor has “closed the gap on productivity and safety.” Today, the quality between American plants and those of their foreign competitors “is almost indistinguishable,” said Dziczek.

Behind today’s pro- and anti-union rhetoric is a battle over two very different visions of economic development. Germany, with its unions and works councils — white- and blue-collar workplace advisory groups, which VW hoped to establish in Chattanooga with union support — is banking on its ability to market ever more sophisticated, high quality precision products that only a highly trained, collaborative workforce can produce.

Indeed, after the dust settles in Chattanooga, VW is expected to approach either The International Brotherhood of Electrical Workers or the International Association of Machinists and Aerospace workers to launch another organizing effort, according to Autoline Daily, a respected industry webcast.

By contrast, many U.S. companies are betting that they can stay a step ahead of low-cost producers by relying on a mobile, often transient workforce, with less and less training.

But the costs of a disposable workplace for American companies, as well as for its employees, are high. Apprenticeship programs, which were once ubiquitous in the U.S. manufacturing sector, have virtually disappeared.

The result, according to Cappelli, quoting one manufacturing expert, is “less preventative maintenance, more emergency breakdowns, and lower skilled workers.”

A decade ago, in Harvard Business Review, Peter F. Drucker, a leading management theorist, warned that the “attenuation of the relationship between people and the organizations they work for represents a grave danger to business … Developing talent is business’ most important task — the sine qua non of competition in a knowledge economy.” 

Andrea Gabor is the Bloomberg professor of business journalism at Baruch College/CUNY and the author of “The Capitalist Philosophers.”

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