You are currently browsing the category archive for the ‘Uncategorized’ category.
Ford is on top now, but the history of Ford Motor Company is that it reverts back to self destructive behavior when sales are good and demand is high. Lets take a look at the past two cycles (I call them “good quality-bad quality” cycles) that nearly put the company into the ash bin of industrial history. First lets go back to the early 70s, when the bad quality cycle was in control. Ford was like an alcoholic that, after a binge that almost destroyed it, it went on the wagon, only to fall off the wagon when things got good again.
During the 60s Ford had tremendous sales growth. In order to meet demand they cut corners on quality. Remember the Pinto? Yeh, it was bad design. But it was also how the Pintos were built in the factories. There was no excuse for not “making the numbers” in the auto plants. If it looked like a car it was “good enough” to sell. If it lasted through the 12 month warranty period before it broke down, it met all of Ford’s quality standards. But the good times came to a screeching halt when the Arabs cut off our oil in 1973. Car sales dropped through the floor, and the bad quality Ford tried to shove down customer’s throats for eight or ten years came home to roost.
Quality standards were tightened during the 74-75 recession, and Ford built some very good cars. Quality control inspectors which had previously been ignored, because whatever was produced was “good enough” when sales were booming, got some respect. When they rejected parts, they stayed rejected. Machines were repaired. Components were scrupulously inspected. Ford made cars during the recession like they SHOULD have been making cars all along. But then something strange happened.
The oil embargo ended, and the good times were back. Car sales went through the roof. Assembly plants could not keep up with demand. It was time for Ford to fall off the wagon and return to the bad quality cycle. In the bad quality cycle the only standard was “are we going to make our numbers?” Components were “good enough” if they met production quota. Machines were patched up until what they ran looked approximately like a car part. The greatest sin was to shut a machine down until it was properly repaired. During the bad quality cycle at the Sharonville Transmission Plant we ran impellor housings that, if you dropped one on the floor the blades would fall out. We assembled torque converters using cheap plastic stators that were cracked, chipped, and you sometimes had to hold it on the bottom or the bearings would drop out. We ran oil pans that had metal thinout so bad that, if you held it up to a strong light, you could see shadows through the oil pan. We ran torque converters that would not rotate internally, so we pumped the sides out on an “expanding machine” that forced hydraulic pressure into the converter until the sides pushed out enough for it to rotate. By 1978 Ford began to pay the price for the bad quality cycle.
Rating agencys consistently rated Ford as one of the lowest quality cars produced in America. People were lining up to sue Ford over the junk they were selling. The suits from Dearborn decided that the answer was to come up with advertising slogans that would convince people that Ford made good quality. Remember “At Ford Quality Is Job One”? How about “Nobody sweats the details like Ford”? It did not help. Ford sales all but collapsed. There are three car dealers on one of the busiest streets in Cincinnati. A Ford dealer, a VW dealer, and a Toyota dealer. The Ford lot was jammed full of cars that would not sell. Salesmen stood in a cluster, watching people drive into the VW and Toyota dealers. Both lots were nearly empy. At the VW dealer the salesman would not even come out from behind his desk. If you wanted to order a VW he would put your name on the waiting list. His best guess was a two month wait. At least the Toyota salesmen would come out to the lot. Then he would take you back to his desk and put your name on his waiting list.
Not to pick on Ford alone, of course. Chrysler quality was even worse, and they would pay you $50 simply for test driving a Chrysler. But Ford quality made the headlines because of transmissions that were jumping out of park and into reverse and running over people. More than 200 were killed and 1400 injured, and Ford Motor Company became the only corporation in American History to be charged with reckless homicide for building defective transmissions. Then Ford received the largest recall in automotive history when 23,000,000 Fords were recalled for bad transmissions. Ford would have gone bankrupt if they were forced to fix 23,000,000 cars. So President Reagan let them off the hook by allowing them to send out stickers to 23,000,000 Ford owners advising them that the transmission in their cars “could cause injury or death.”
Bad quality nearly killed Ford Motor Company, nearly killed GM, and probably will still kill Chrysler. Ford has made tremendous improvements in the quality of their products, and, because of that, and the fact that they did not take any government money, they are on top of the heap. But those who fail to understand the past are condemned to repeat it. If Ford reverts back to its bad quality cycle the American people are not likely to be forgiving, and it will topple Ford from its place at the head of the line. Let us hope that Ford has learned from its past mistakes and continues to produce top quality vehicles.
Years ago, when I was growing up, one of my best friend’s father told me there is not a nickel’s difference between any of the “isms.” All of them find a way to control the working people to keep them working to support a handful of filthy rich white guys at the top of the pyramid. It took most of my life to realize that he was right.
Oh, yes. I was raised on “god bless America because we are free.” I was ready to go marching off to protect us from the hoards of ‘godless communists’ who would spread the red tide over all the world, stealing away our precious freedom. I was taught that if you work hard and a get a good education it will be rewarded, and you, too, can take your place beside the handful of filthy rich white guys at the top. I guess I was 30 or so before I began to question the accuracy of these suppositions.
My first job after earning an MBA, where I learned that to get rich you have to use “OPM” (other people’s money), and you have to learn to manipulate people, was at Procter and Gamble. The seed of doubt was planted in graduate school. They did not teach the value of hard work, honesty, and being debt free. They taught that if you want to be one of the filthy rich white guys it was stupid to work hard. What you had to do was finess your way into power structures, borrow up to you eyeballs so you could rub elbows with the elite, and, while you were glad handing them at a cocktail party, learn to stab them in the back and take what they have. But this seemed more like how the Nazis or Communists operated. Weren’t we superior to them because we achieved freedom by working hard and following the golden rule?
At P&G I saw capitalism in action. But it was not like the system that I learned about growing up. I quickly learned that hard work had nothing to do with moving up the ladder, nor did abilty or education. It was all about fitting in, and nothing else. To succeed you had to become a good Proctoid, also known in the hallowed halls of P&G as the “Corporate Master Race.” If you became a good Proctoid you did not have to work hard, or be very smart, or accomplish much. All you had to do was fit in, not rock the boat, learn when and how to speak, and live, act, and dress like a good Proctoid. If things did not make sense to you, but were entrenched in the corporate culture, it was neither smart nor safe to point these things out.
I went back to my reading. Wasn’t being a good Proctoid a whole lot like being a good Communist or a good Nazi? Didn’t both of these isms condition people to fit in and not ask questions or challange the prevailing culture? Didn’t they have penalties for asking the wrong questions or stepping out of line? I did not want to be a good Nazi, a good communist, or a good Proctoid, so I quit and went to Ford Motor Company. At Ford I found honesty and openess the very first day on the job.
My boss had a sit down with me and explained that the UAW was a pack of lazy, lieing thieves who cheated Ford out of an honest day’s work on every shift. My job would be to catch them, write them up, and fire them. My job was to be a super prick, and then the UAW would fear me, and that would intimidate them into doing the jobs they were paid to do. I had learned at P&G not to ask the wrong questions, so I went out on the manufacturing floor to be the super prick that Ford was paying me a king’s ransome to do.
What I learned was that the more I tried to find men not working, the more they did not work. It seemed to me that if we wanted them to work we had to treat them like human beings and not prisinors of war. I discussed this with my boss and he accused me of “collaborating” with the work force. Ford wanted an “us versus them” mentality in the auto plants, which made no sense to me.
Another thing that did not make sense was the quality of the cars we were building. It was terrible. We received the largest recall in automotive history for transmissions that had killed over 200 people. I understood why the quality was bad. It was bad because the work force “got back” at Ford for being treated like jail inmates. But mostly it was bad because Ford wanted it to be bad so people would get sick of paying for repairs and would buy a new car. This did not seem like the capitalism that I had learned about.
The capitalism I had learned about would result in constant innovations and quality improvements because corporations would compete against each other and the ones who made the best quality would win. Was I the only one who picked up this concept in school? Why are products getting worse instead of better? Do you remember the appliances and vehicles and clothing from 50 years ago? All of it was better than what can be purchased today. A Hoover sweeper from 1920 is far superior from a Hoover sweeper from 2009. Has capitalism failed?
The communists conditioned people from birth to be good communists. Hitler conditioned Germans to be good Nazis from a very young age. We condition people from birth to be good consumers. We teach them, subconsciously, that what they have defines how important they are. So they spend their lives working to buy things they don’t need that constantly break down so they will be “normal” to their peers and feel good about themselves. Communism and Nazism controlled people with fear. We control people with economic bondage. In all three systems the handful of filthy rich white guys at the top keep their positions through mass thought control. All that differs is the control techniques that they use. My friend’s father was right. There is not a nickel’s difference between any of the isms.
The UAW is voting against concessions that would put their compensation in line with the compensation imposed by the government on GM and Chrysler when they took the bailout. Ford is now at a competitive disadvantage due to higher labor costs. This disadvantage could result in more jobs being cut in the U.S. and sent to slave wage nations. It could even sink Ford Motor Company.
Ford is struggling under a debt load that is more than double the debt of its two domestic competitors after the bankruptcy and bailout. Ford has shown losses every year since 2005 and will certainly show a loss this year. They do not expect to return to profitability until 2011, at the earliest. They have made tremendous strides in improving quality and the work atmosphere in their plants. Ford has come a long way and is now the top U.S. car company. It would be a foolish move if the UAW fails to agree to wage and benefit concessions that will put Ford on an even playing field with GM and Chrysler. It could kill the goose that laid the last golden egg in Detroit, and that would be tragic for the nation.
Capacity utilization in the domestic auto industry is now just 62%. What this means is that many plants have been shut down, and tens of thousands of auto workers are unemployed. Also unemployed are tens of thousands of other people who have depended on the auto industry, such as suppliers, retail stores, construction companys, etc.
Over the past 40 years we have seen a number of industries brought down by unreasonable demands of labor. This would include the steel industry, the railroad industry, and parts of the chemical industry. The Monogahala Valley in Western PA used to be the home of more than 100,000 steel workers. Now the estimated number of steel workers is 9,000, and most are employed in small specialty steel companys, rather than the immense mills that were a mile long and a half mile wide and employed upwards of 8,000 men each. What happened to these mills? In a word, the union.
In the fifties and sixties the USW (United Steel Workers) pushed for constantly increasingly wages and benefits. By 1960 they had negotiated 13 weeks paid vacation, and a steelworker made far more than the average college graduate. During this time Japan, Germany, France, and other nations that had been flattened by war built new, modern steel mills and could sell steel much cheaper that the U.S., largely due to outrageous labor costs and antiquated mills.
New methods and technologies were perfected and used in the mills in Europe and Japan. U.S. steel companies tried to adopt these new methods, and the USW fought them every step of the way because for them it meant fewer jobs. Eventually the entire U.S. steel industry began to shut down, and for a few years, in Pittsburgh, conditions were every bit as bad as they were during the Great Depression. Steel and coal towns along the Mon and Yaug rivers became nearly deserted rural slums because all the jobs had disappeared.
The railroad industry suffered a similar fate. The union negotiated job descriptions during the era of the steam trains. As new technologies were developed, the union demanded that the jobs negotiated during the steam train era be retained. One example was the fireman. The job of the fireman was to shovel coal into the boiler of the steam engine. Of course when diesels replaced coal fired steam engines in the fifties, firemen were no longer needed.
Yet the union demanded that the job of the fireman be retained, since it was negotiated into the contract. There were wildcat strikes and work stoppages. The railroad companys caved and agreed to pay a fireman to ride on every diesel engine, even though he had no function, and could not be assigned other work, since his job description was “fireman.”
A problem soon developed. There was no place on a diesel engine for a fireman to stand. He had to stand in the cab, holding on to the sides. There was no place for him to sit. So the union demanded that the company provide a seat or a cot for the fireman to sit or lay on so he would not get in the way of the engineer. The railroad companys again caved in to union demands and provided a cot for a non working fireman to lay on every single trip of every diesel train. This was labeled “featherbedding” by the Pittsburgh Press. No one could believe when Penn Central Railroad, the mighty “Pennsy” went bankrupt. It had been the largest railroad company in the world at one time, much as GM was once the largest auto company in the world. Of course union demands were not the only thing that took the Pennsy down. But it was certainly a major factor.
I am familiar with the auto industrie’s version of union “featherbedding.” There were rigid job descriptions, and you could not assign a man to work “out of classification.” Thus we had guys sleeping on makeshift beds in the men’s room. We had guys who worked no more than 3 or 4 hours per shift but got paid for 8. No company can absorb these kinds of costs indefinitely, as we saw when the “Mighty Pennsy” folded, and now, the mighty GM. Will Ford be next?
I am very familiar with the necessity, years ago, for labor unions, which fought for basic human rights, the dignity of the working man, and fair treatment and fair pay. Indeed, the unions have built the middle class in this country. Unfortunately, they went crazy and are now destroying the middle class that they have built. The prosperous, growing middle class that took decades, struggle, and sometimes violence to build is now being dismantled, and the union has played a large role in that dismantling.
Even with wage and benefit concessions imposed on GM and Chrysler, auto workers still make a darn good living. An awful lot of people wish that they made that kind of money. Many wish that they had a job, any kind of job, paying any amount of money. The UAW would be foolish indeed to push Ford into sending even more jobs to slave wage nations, and possibly pushing the company over the edge. Ford has come a long way since the nightmare days of the 70s when I made notes for my book. Lets hope the UAW does not kill the last chance that Detroit has for a comeback.
Both were economic empires controlled by a handful of super rich white guys who became rich and powerful at the expense of the common people. Both used the same basic methods, called by different names. One system has failed, and the other is failing. Lets take a look at the methods, what they were called, and the results.
The Soviet Union used a system of snitches and spies to make sure everyone stayed in line. Every Red Army unit had a “Political Officer” who was not under the control of the Army officer corps. He reported to the Secret Police. His job was to look, listen, and report. He reported conversations, read memos, and monitored the “correct thinking” of the unit. If there was any “incorrect” thinking or speech, it became a matter for the Secret Police. If an officer was involved, he could get years in prison. If it was an enlisted man, terror tactics were used. I traveled behind the Iron Curtain during the Soviet years. Every apartment complex had a guy whose job was simply to look, listen, and report. Incorrect thinking and speech were immediately addressed.
The Corporate System has HR people. They also have a system of snitches. Recently they have begun to install cameras so people can be watched constantly. If you are in management your personal life is under the microscope. You have to toe the corporate line. People watch what they say, and how they say it, because there are consequences for “incorrect” thinking and speech. I worked at P&G in management right out of college. I learned that there is correct behavior and incorrect behavior for “P&G People.” One of the “correct” behaviors for a P&G manager is to be a regular church goer. My boss explained it to me this way” “You are no longer Bob Dewar. You are an up and coming P&G manager. People in your community have expectations of what a P&G manager is. Now I don’t give a rat’s ass about your religous beliefs. But have enough respect for the company to get up on Sunday morning, get a suit and tie on, get your wife dressed for church, go out to your car, wave to your neighbors, make sure they see you. Then go out and eat someplace, or whatever you want. The important point is that people think you are going to church. P&G people all go to church.” P&G People are so distinct in Cincinnati, their home base, that everyone calls them “Proctoids” because they are contolled like robots, fearful of stepping out of line.
The Soviet Union used fear and terror to control. The corporate system uses money. You want a good job, good benefits, a good salary? Then you have to play our game. If you don’t play our game we will can your butt and you won’t be able to live in a nice house, drive a nice car, and provide well for your family.
The Soviet System promised that “from each according to his abilities, to each according to his needs.” The Corporate System promises that if you get a good education, work hard, and are dedicated, you will get a “good job” and be prosperous. A good “Soviet Man” and a good “Corporate Man” are separated only by terminology.
The old Soviet Union lies in ruins. Most of the people are poverty stricken and have lost faith and trust in the system. A handful of very rich ones learned quickly to adapt to capitalism and exploit the collapsing empire by utilizing their connections to take control of resources and exploit the losers from the system.
The failing Corporate System has left a trail of desolation that stretches from Detroit through the coal and steel towns to the nearly bankrupt state of California. A handful of super rich that have plundered the nation and stolen wealth from the people who produced it live in absolute luxury, much as the “new capitalists” in the failed Soviet System. Millions have lost faith and trust in the Corporate System and cry out for socialism as they lose what they have worked for all their lives and were betrayed by false promises.
Building Socialism in the Soviet Union: Millions were enslaved in communes and forced labor camps to enrich the handful of old white guys that controlled everything.
Building Corporatism in the U.S.: In the late 19th and early 20th centuries millions of immigrants came to the U.S. with the promise of freedom and prosperity. They were stuck in coal camps back in the hills, or industrial towns where they worked their lives away and never received the promised prosperity. In the late 20th century and the early 21st century factories were moved to China, Mexico, India and other slave labor nations, and the American work force was abandoned to further enrich the handful of filthy rich white guys at the top. The common working man steadily loses ground and watches any prosperity achieved by his grandparents, parents, and himself slip away in foreclosed houses, stolen pensions, and no medical benefits.
The promise of Communism: Happy workers, who live in a land of equality, will build quality products in great abundance for the masses. Result – Unhappy, enslaved workers that produce junk and there was shortages of everything.
The promise of Corporatism: Competition will result in the best man winning, and products will get better and better because competition will force steadily improving quality. Result – Products get worse every year, including cars that kill people, merchandise that breaks down immediately after the warranty expires, drugs that are more dangerous than the diseases they are supposed to cure.
Soviet attitude toward human beings: Use up and discard.
Corporate attitude toward human beings: Use up and discard.
Political Power in the failed Soviet System: Free elections, but only one candidate on the ballot, and if you do not vote for that candidate you will get a visit from the Secret Police.
Political Power in the failing Corporate System: Free elections with multiple candidates, but each and every candidate is in the back pocket of Big Money and will say whatever the polls tell him he needs to say to get elected. After the election you will never hear from him again until the next election.
The troubles in the auto industry go much deeper than incompetance and greed in a single industry. It is representative of how American Management has run the manufacturing sector for the past 50 years. The crisis on our shop floors goes to the very heart of the adverserial relationship spawned by an eliteist mentality at our best university business schools.
Lets go back a few decades to see how men used to advance in our manufacturing industries. Very often they started as a laborer on the shop floor. First they learned how to sweep floors and do menial tasks. Then they acquired enough seniority to move up to running a machine. In time they bid on other, more complex, machines. Finally, when they completely understood a specific department, they were promoted to foreman. As foreman, they knew every job in the department, and how to solve problems in that department, because they had worked every job. Later they might advance to department manager, plant manager, or higher. But as they moved up the ladder they had a firm grasp of operations, and had earned the respect of the men working in the factory. These men knew that their boss knew as much, or more, then they knew.
Our industrial history is replete with examples of men who moved up through the ranks and became legends. An example would be Alfred P. Sloan, who started as a floor sweeper in a General Motors Plant, then rose through the ranks to become CEO of GM. There is Barney Kroger, who sold from a vendor’s cart and then founded the Kroger Company. Every employee at GM respected Sloan. They may not have liked Sloan, but they deeply respected the man for his knowledge and experience. The same was true of Barney Kroger and others. In Pittsburgh there was a steel company that made the famous “Long Tom” guns for our World War II ships. When a machine broke down and held up production, the president of the company was not above taking off his necktie, crawling into the oily, grimey machine, and showing repairmen how to fix it.
In my own family there are two examples of men who started at the bottom, and I mean the very bottom, and retired from high level management jobs. We lived in a four room tarpaper shack with no indoor plumbing in an Appalachian Coal Patch. My two brothers had to drop out of school, one from sixth grade, and one from eighth grade, to work in the coal mines to help support our family. They later got on as manual ditch diggers at South Pittsburgh Water Company. In the 40s and 50s most ditching was still manual, pick and shovel work. But fourty years later one brother, the one who dropped out in sixth grade, retired as General Manager of South Pittsburgh Water Company. He had engineers, microbiologists, and accountants that reported to him. The other brother, the one that dropped out in eighth grade, retired as Superintendent. He reported to my other brother, who reported directly to the president of the company.
Could this happen today? Are there men and women in the corporate world working their way up the ladder based on job knowledge, hard work, and experience? The answer to both questions is no. Our system has attempted to substitute classroom training and pieces of paper for knowledge and experience, and this is a root cause of our decline as a great manufacturing nation. Furthermore, people who actually do the work have been degraded because they have chosen to work rather than pursue pieces of paper. No matter their knowledge, ability, and work history, if they do not have a piece of paper they are lesser people.
This notion that people who work with their hands are lesser people who are not worthy of respect is deeply ingrained in our management system. The prescription for success is to avoid going to work, and, instead, spend tens of thousands of dollars, or hundreds of thousands, to earn a college degree, which will then qualify you to be in charge of people who actually produce the products that keep America humming, and know what they are doing.
The rise of this so called “Professional Class” after World War II doomed American manufacturing. It wasted our skill bank and put our future in the hands of men who never really worked for a living. The current generation of managers grew up during the unprecidented prosperity of the 50s, 60s, and 70s. The message they received was that only the stupid, the unmotivated, or both, went to work in factories. The future would belong to those who got college degrees, and would be in charge of the stupid ones actually doing the work.
A hierarchy of elitetism developed among this crop of future leaders. If you earned two degrees you were smarter than people who earned only one degree. If you went to a “big name” private college, you were better than those who merely went to state schools. Your bright and shining future would see you in charge of less smart men who went to lesser colleges, and who would be in charge of the really stupid people working with their hands in the factories.
While this was not a documented management policy, it was a deeply ingrained attitude throughout the corporate structure, as well as throughout society. You either went to college so you would “be somebody” or you were a loser. This meant that our manufacturing industries were men wearing suits, who were successful, managing the losers who built the products.
Unfortunately, it worked no better than the days of the Lords in their castles overseeing peasants who did all the work and served the Lords and Ladies. It nurtured a deep resentment and a distrust of those who ruled, and fostered a sense of outrage. Men who did not even understand what the machines did were the bosses of the men running the machines. They spent most of their time playing one upmanship and politics because if they stayed in one position too long, and did not advance, they would be seen as losers. Success was seen as working a series of management jobs in rapid succession, being on a job only long enough to grasp the bare fundamentals, and then being promoted to the next level. We ended up with a management structure that was not qualified to manage manufacturing plants, and a resentful work force who fought back by giving only the minimum required to avoid being fired.
It is little wonder that for years our productivity was stagnant, our competitive position in the world slid every year, and every year the quality of our products deteriorated. Maybe a Levi Strauss ad best sums it up: This Country Was Not Built By Men Wearing Suits.”
If the UAW wants a future, it has to let go of the past, and become an organization of professional, highly productive workers that companies will seek out. First lets take a look at the manufacturing sector today in the United States, and also how the UAW functioned up to this point.
U.S. manufacturing has been on a downward slide for at least 20 years. Most of these jobs will never come back. They have gone to low wage nations, and that is where they are going to stay. Membership in unions has steadily declined as well. So in the future there will be fewer opportunites in manufacturing, and most jobs will require trained, skilled workers.
But the UAW, as well as other shrinking unions, such as the steelworkers, coal miners, and others were geared to massive industries that required, mostly, grunt labor that were neither trained nor skilled. Membership in these unions, typically, required only that an employee be hired, survive the 30 day probationary period set up by the company, and then become a union member. Usually there were no educational or skill requirements. Many UAW workers had not even graduated from high school. Their job was mostly the result of luck, whereby they filled out the right application at the right company at the right time, were hired, survived the 30 day probation, and were admitted to the union.
The wages and benefits these union members received had nothing to do with what they produced. Wages and benefits were negotiated between the union and the company, and applied across the board to all members, whether they produced little or were very productive. Each worker received the same, regardless of his value to the company. This homogenized the work force, with each worker doing as little as the company would tolerate, since there was no reward for producing more or better quality. From my experience it produced a work force consisting of frustrated people who wanted to be highly productive, but were prevented from doing so, and a group of very happy, mediocre workers who could not survive if their livlihood depended on how much they produced.
The wages and benefits negotiated by the UAW were achieved by brute force. They either got what they demanded, or they went on strike and shut the company down. Eventually, the reasoning went, the company would see it their way, and agree to the demands, because if they did not they would eventually go bankrupt. They picked a “target” company out of the Big 3 to strike, knowing that the other two companies would continue to run, which provided the union with operating money for their “strike war chest.” The other two companies would also gain market share from the company that was shut down by the strike, thus putting more pressure on management to yield to the UAW demands. When the target company conceded, the UAW then went after the other two companies.
The UAW protected all their members, regardless of whether they produced or did not produce. They protected drunks, drug addicts, habitual absenteeism, and any and all violations of morality, ethics, or honesty. At Ford a UAW member attacked me with a knife. He was fired. But the UAW backed him completely and, after 4 months, he was returned to his job, with full back pay plus a factor for overtime that he would have had an opportunity to earn had he not been fired. All records of the incident were purged from his file. Another UAW member murdered his wife, and the UAW helped pay for a lawyer, and completely backed him, even though he admitted to murdering his wife. They negotiated with Ford to keep his job open, and his seniority running during the time that he was incarcerated. My biggest problem as a first line supervisor was getting sober workers that showed up for work. To fire a UAW worker, regardless of what he had done, required something akin to a Supreme Court ruling.
But that was then, and this is now. Today’s and tomorrow’s jobs will be awarded to skilled, trained people who produce. No company will be financially able to pay people who do not produce. Nor will they be able to tolerate a union protecting non producers via brute force. The laws of economics have not been repealed, and a person is only as valuable to a company as the work that he or she produces.
This new economy will take adaptation, and will not be easy. It has already happened in the coal fields. For 100 years coal miners were basically grunt laborers, shoveling coal. But a trained monkey can shovel coal. In today’s coal industry a coal miner is a highly trained, skilled computer savvy professional who has little need of a union because he can earn up to $100,000 a year and there is a shortage of skilled coal miners. His success depends entirely on his abilities and knowledge, as well as how much he produces, and companies compete for his services.
According to the Kiplinger letter, the UAW is mulling how to survive shrinking rolls, and is considering merging with another shrinking union, rumor being the shrinking United Steel Workers. But if they merge and continue to operate as they always have, they will continue to shrink as a significant part of American industry. So what do they need to do?
The need to become professional organizations that police their own ranks. They need to have entrance requirements. Members need to have qualifications to belong. They need to prove that they are productive, skilled workers with a strong work ethic. Management should not have to put up with workers who drink, workers who have attendance problems, or workers who do not produce. The union should take care of these kinds of problems.
If they changed to this kind of an organization, then companies would compete to hire UAW workers and the decline in membershipship would be over.The UAW needs to adjust to a world where a worker is compensated for what he produces, and not how much brute union force he has backing him up. Like it or not, that is the world that we now live in, and that is not likely to change in our lifetime.
Is Ford trying to convince potential buyers that their quality is good, or are they trying to convince themselves? Lets take a look at how Ford achieved quality that “cannot be beaten by Honda or Toyota.”
Before we do that, lets look at how Ford came to be known as “Fix Or Repair Daily.” Ford is probably the most notorious of the Big Three for defective quality. They had massive quality recalls, including cars that blew up on rear end impact (Pintos) and paid survivors hefty sums of money to keep quiet (Wall Street Journal). They had the largest recall in automotive history because of defective transmissions that killed over 200 and injured 1400. Only action by President Reagan saved Ford from bankruptcy on this massive recall (23,000,000 defective Fords). More recently they had defective ignition switches that caused Fords to catch fire, and many of those law suits are still in the courts, including a lady in Texas who watched her son and his girl friend get burned alive in a Lincoln. That case will be heard next March.
So how did Ford achieve “quality that cannot be beat by Honda or Toyota?” They didn’t. What they did do was try for 35 years to improve their image by advertising. If you hear or see something enough times, you will believe it. When they realized that the company might not survive because of decades of building shoddy cars, they made an effort to improve quality. Lets take a look at that.
First, they paid Toyota consultants to advise them on how to improve quality. But when the Toyota people looked at the Ford production system, they concluded that quality could not be improved, nor could productivity, unless Ford completely overhauled the way they did business. Then Ford hired Dr. W. Edwards Deming. Dr. Deming was a mathemetician who became known as “the father of quality.” He worked with Toyota, GE, IBM, and other corporate giants to advise them on how to improve, and maintain, a high level of quality. But Dr. Deming was unable to work with Ford.
He stated that Ford top management was the worst that he had ever seen. They were distrustful, conniving, and made up of competing cliques that fought each other. In one rancorous meeting, at Ford headquarters, it almost came to blows. Every suggestion made by Dr. Deming was opposed by one or another of the management cliques, fearing changes that would reduce their power in the organization. Dr. Deming visited various Ford plants, where he found embedded hostility, distrust, and a virtual war between management and the UAW. In frustration Dr. Deming gathered up his stuff and walked out, stating that the Ford system was a relic of the past that could not and would not change.
So how has Ford achieved quality that “cannot be beat by Honda or Toyota.” They hired Allan Mulally. Mr. Mulally immediately realized that if Ford did not change, immediately and drastically, it would not survive. He started to make changes, from the top down. He forced the company to build better quality. And, finally, after years and years, Ford has matched the quality of the imports. This is good, and I hope that it continues. But being an ex Ford supervisor, I have my doubts.
The economy will improve, and so will Ford sales. And then, if the past is repeated, Ford will go right back to its “get the numbers” mentality. Their high quality rating will slip back down below Toyota and Honda. I have seen this movie before. During the terrible 1974-75 recession, when I was a supervisor at the Sharonville Transmission Plant, Ford cracked down hard on quality. For about a year and a half we produced top quality transmissions. But then sales went crazy, and Ford could not keep up with demand, so they ditched all their quality rules and made whatever transmissions they had to make to reach production quotas. That is when Ford made the deadly transmissions that killed and injured, and received the largest recall in automotive history.
I hope that I am wrong. But I don’t think so. Ford sales are headed up, because of customers stolen from GM and Chrysler, both of which are headed for the ash bin of auto history. The data shows that Ford did not succeed in pulling many customers from Toyota and Honda. My best guess is that when economic recovery takes hold, and sales skyrocket, Ford will be like an alcoholic that falls off the wagong, and will go back to producing the same junk that gave birth to the slogan Ford = F ix O r R epair D aily.
The Big Three have dug their own grave with mismanagement, greed, and bad quality. There is an old saying: Screw me once and shame on you, screw me twice and shame on me. Lets take a look at how the Big Three have opened the doors and literally invited in foreign competitors by deceiving and cheating the American car buying public.
Sometime in the fifties they concocted a fabulous money making scheme: Planned Obsolescense. They engineered cars to start breaking down sometime after the warranty expired. Parts that were hard to get to, and expensive to replace, failed first. When people got tired of spending money on repairs, they would opt for another new car, or so the theory went. Since all of the U.S. car companies did the same thing, if you got sick of a Ford, and bought a GM, it would not matter, because someone who was sick of their GM constantly breaking down would buy a Ford.
Then they tried to increase profits by applying pressure to vendors who supplied parts. They wanted cheaper, cheaper, cheaper. The only way parts manufacturers could cut costs was to cut quality. They bought cheaper materials, made people produce more, and cut inspection. When I was at Ford I saw a steady decline in the quality of purchased components. At one point I had to assign men to cull through purchased parts to find good ones, and what passed for a “good” part kept declining until we used everything Ford purchased, because none of the components met written quality specifications.
Then there was the war in the auto plants. The war between management and labor. Management used techniques from the 1920s, and the UAW fought them at every step. Both quality and productivity were casualties of these in-plant battlegrounds. Sabotage was sometimes passive, where bad quality was let go out of indifference. Other times it was intentional, active sabotage because producing bad quality was seen as a blow against the enemy: dictatorial managers, some of whom belonged behind bars.
Finally, there was benign neglect of maintainance. Machines were patched up and made to run, even if they were not running right, or could not run to the quality specifications. In Department 251 at the Sharonville Transmission Plant there was a machine that would run only if the operator put a gigantic rubber band on an arm that wobbled as it made up and down strokes. In Department 285 there was a machine that would not run parts that met specs unless the operator inserted the back of a paper match book between two slides whose bearings were completely shot. In the Press Room sometimes round parts came out of the presses round, and other times they came out egg shaped. In either case they were used to make transmissions.
So what was the result of all this mismanagement, greed, and indifference to the quality of cars being produced? In the seventies and eighties we had the largest recalls in automotive history. We had deadly cars that killed people in fires. We had transmissions that jumped out of park, into reverse, and killed hundreds of people. Consumers Report magazine stated that, in the seventies, the United States of America produced the worst cars of any industrialized nation. Bad automotive quality became an international disgrace to America, and 33 states passed “Lemon Laws” to protect consumers from the Big Three.
This, or course, gave a giant green light to foreign auto companies, who were selling so many cars in the United States that there was, at least in the case of Volkswagen, a three month wait to get your VW. In the meantime, Ford, GM, and Chrysler had their first near death experience, and Chrysler offered $50 to anyone who would even test drive one of their cars. I was in the new car market in 1980, went to a Chrysler dealer to test drive one of their cars, and the salesman could not even get it started. Needless to say, I passed on the $50 prize to test market the car.
The Big Three spent 30 years trying to undo the mistakes that would ultimately cause their collapse. Finally, after decades, American cars are now on a par with Toyota, Honda, VW, and others. Will it make any difference? If you had friends or relatives killed in poorly built American cars, or simply were disgusted with the junk Detroit pawned off on us, are you likely to switch from a Toyota, Honda, or VW that was top quality, to go back and try one of the cars from Detroit? My answer would have to be that this is highly unlikely.
That is why I am predicting that over the next several years Chrysler will fail, as will GM, and both will go back to the government to ask for more of our tax dollars. Ford stands a fighting chance of survival, but it will be an uphill battle all the way. Americans have long memories, and the competition for your car dollar is not going to get any easier going forward.
According to the New York Times, and Ford’s advertisements, quality is now equal to Toyota. I have two questions: Why did it take so long, and what has changed? Let’s look at that first question.
When Toyota first began to make significant inroads into our markets, it was because of quality. But that was 35 years ago. During the 70s the Big Three, and especially Ford, made the worst junk we have ever made. In fact, Ford received the largest recall in automotive history because of defective transmissions, and narrowly avoided bankruptcy. I helped make those transmissions, and was so disgusted that I was compelled to take notes, keep internal memos on bad quality, make an extensive collection of defective parts routinely assembled into Ford transmissions, and then write “A Savage Factory” based on what I had experienced.
Of course bad transmissions was not all that Ford made. They also made Pintos that exploded on impact and burned people alive. Later they made vehicles with defective ignition switches that caught fire and burned people alive. And that is not even getting into their SUVs that tended to roll over on sharp turns.
I do not want to just pick on Ford here. According to Consumer Reports, Chrysler made the worst over all quality of any American vehicle, and they advised against buying used ones, because people were dumping them and buying Toyotas. A discussion of GM quality would take too much space, so lets just say they made junk as bad, or worse, than Ford.
Why was quality so bad in American made vehicles in the 70s and 80s that 33 states passed Lemon Laws to protect consumers from the Big Three? There are three reasons, in my opinion. Reason number one, some high level manager, who no doubt received a bonus that would choke a horse, came up with a brilliant plan to increase sales: Planned Obselescence . They would engineer the cars specifically to break down sometime after the warranty expired, and keep on breaking down until people got sick of putting out money for repairs, and they would theoretically buy a new car. The specific parts engineered to break down were not necessarily expensive parts, but they were hard to get to. You might have to spring for $800 for a mechanic to rip your car apart to replace a $15 part.
Reason number two was pressure on vendors to cut costs, cut costs, cut costs. The vendors with the lowest priced parts are the ones who got the business. How did they cut costs? By cutting quality. They cut costs by going from 100% inspection to “statistical inspection” where every 20th, or 50th part was checked for quality. They cut costs by not maintaining their equipment. They cut costs by buying the cheapest raw materials on the market. They cut costs by upping the work load on their employees. The net result was the quality of component parts purchased by the Big Three steadily declined from the mid sixties to the mid eighties.
Now lets get to that third reason, which is covered in great detail in “A Savage Factory.” That reason is the never ending war with the work force. People were treated with contempt and disrespect. They were expected to be a machine, not a person. The work atmosphere in the auto plants was, argueably, the worst of any industry in the United States. There were periodic outbreaks of violence in the auto plants, including shootings, stabbings, and fist fights. I was attacked by a man slashing at me with a knife, and was a planned murder victum. Fortunately, the employee came to work so drunk he forgot to bring the gun into the plant.
UAW workers were not bad people. They were mostly good, hard working men who built up so much rage at the way they were treated that they fought Ford every way they could think of. And they thought of plenty. Sabotaging production. Sabotaging quality. Cutting wires on machines. One guy dropped a bolt into each transmission and it exploded on the test stands, like a bomb. He was terminated, proscecuted, and sent to jail. Sure, they made lots of money. In fact, some auto workers who never graduated from high school took home as much as a lawyer, or a doctor. But big money can only compensate for a short time when you hate the thought of having to to into work, and you phantasize about “getting back” at your employer.
So by the early 80s even the Big Three understood that they were losing the market to better built, more reliable foreign cars. They made half hearted attempts to improve quality, but ten years later American cars were still at the bottom of the quality charts, and Toyota, Honda, and Nissan were building plants in the U.S. and selling so many cars that they could not keep up with demand.
Ford paid Toyota to advise them on improving quality. They hired Dr. W. Edwards Deming to improve quality. But Dr. Deming, in his biography “The Father of Quality” stated that Ford management was the worst he had ever tried to work with, and he had worked with Xerox, IBM, Procter and Gamble, Toyota, and many others. He said they were like warring street gangs, and he walked out on Ford, unable to work with the incompetent management. By the turn of the century Ford, GM, and Chrysler quality was still at the bottom of the charts, and Japanese quality was at the top.
So what has changed? Several things. For one, the old, hardcore managers have retired, died, or taken buyouts, and been replaced by younger, better educated managers. The UAW has responded favorably to a better qualified management group. The classic example here is Allan Mulally, the CEO. Mr. Mulally is a top notch, no nonsense professional who started making changes immediately, and improvement at Ford, as a result, was immediate.
Of course there is the fear factor. Everyone is well aware that the U.S. Auto Industry is close to extinction, and fear keeps people working, and cooperating. Then there is the purchased component problem. Many components are now imported from China, Japan, and other low wage nations, which can compete pricewise, and still turn out a quality product.
Will it last? Will the U.S. Auto Industry come roaring back? I do not think so. I think Chrysler is a goner, with GM not far behind. Ford may survive, but it will be a hard, uphill fight. They will have to convince millions of Americans that they produce top quality, and will continue to produce top quality. The survival of Detroit is still an open question.
There is a bitter dispute, in the auto world, about “buying American” versus “buying imports.” So we need to take a close look at exactly what an “American” corporation is and what a “foreign” corporation is. On one side of the dispute are the super patriot flag wavers. To them an “American” company is a company with a recognized name that they grew up with. Read Ford, GM, Chrysler.
But go to a Ford, GM, or Chrysler auto plant. What do you see? You see machines made in Germany, France, Italy. You see cars being assembled with components made in China, Taiwan, Mexico. You may see a Plant Manager or an engineer that talks funny because he is not from America. You may see fork trucks running around with “Toyota” on the label.
The super patriots say, yeh, o.k., but at least the profits stay right here in America. Not so fast. During the heyday of Detroit, when billions were rolling in, how much of it stayed in America? I cannot tell you to the penny. What I can tell you is all three auto companies spent billions in foreign countries building plants so they could abandon the American worker and exploit low cost foreign labor. They set up foreign plants manufacturing components and vehicles, and brought them to this country to deceive people that they were buying “American” products because they had American names.
Who owns these “American” companys? Do rich guys who live in big mansions on a lake somewhere, like Henry Ford and Andrew Carnegie used to, own these companies? No. Corporations today are multi national giants, owned by stock holders, mutual funds, hedge funds, etc. So people in Japan, France, or Brazil may own as much of what used to be an “American” company as people who live in the U.S. Stocks are traded like baseball cards. The “owners” of Ford yesterday are not the same as the “owners” today or tomorrow. So where do the dividends of these “American” companies go? France, Germany, Japan, or wherever the owners live. So is there a neat economic model showing that companies with American names, that USED to be exclusively in this country, provide jobs here and retain profits here. No, there is not.
Now let us take a look at “foreign” car companies. Go to a Honda, Toyota, or VW auto plant. What do you see? You see machines made in Germany, France, England. You may see fork trucks with an American name on the side. You will see mostly American supervisors. You will see American workers assembling components made in China, Japan, Taiwan, and Mexico. Who owns these “foreign” car companies? Some rich guy living in a mansion by a lake in Japan?
No. These, like all multinationals, are owned by stockholders, mutual funds, hedge funds from the United States, France, Japan, and countries all over the world. The “owners” trade stocks like baseball cards. The “owners” today will not be the same owners tomorrow. An “owner” may only be an “owner” for two hours, until the stock price reaches his price goal, and he sells to some other “owner.” Where do the dividends go from these “foreign” car companies.
A fair chunk of them go to American pensioners whose mutual funds and pension funds own the stocks. Ironically, the United Auto Worker pension fund has a lot of “foreign” auto stocks in the portfolio, and dividends from these “foreign” car companies, so hated by the UAW, go toward paying the pensions of retired U.S. auto workers.
How about the “profits”? Do they go back to the country of origin? Yes, some of the profits do. But billions have gone into American communites in the form of paychecks in areas where “foreign” auto plants are located. Not to mention the billions that were invested here to build the plants, employing construction workers, road crews, purchasing American concrete, steel, copper wire, and all the other materials that go into building an auto plant, and paying taxes to the communities.
So what is an “American” company, and what is a “foreign” company? These terms have little meaning in the real world of the 21st century. Multinational corporations, regardless of where they originated, or where they are headquartered, roam the planet like predatory vultures, searching for the lowest cost production areas. They want to sell their wares in countries with the highest standard of living, because they have the biggest markets and command the highest price.
Are any of these multinationals loyal to any particular country? No they are not. Ford will move production offshore at the first sign of a lower cost structure. Toyota will do the same. Both will try to sell in the United States, because that is where the money is. If you think that a company will be loyal to you because you are loyal to them, you live in a dream world. Buy the car that best fits your needs and wallet, no matter what name is on the dashboard. You are a fool if you don’t.