When General Motors Corp. Chairman Robert C. Stempel paid a visit to Saturn Corp.'s factory in Spring Hill, Tenn., on Oct. 4, he walked smack into a demonstration by the United Auto Workers. With negotiations under way for a new labor contract, plant workers had donned black-and-orange armbands and launched a work slowdown.
Another demand for higher pay? Not exactly. Saturn workers were complaining because management was trying to increase output of the popular compact at the expense of quality. Done right, high quality and high productivity should go hand in hand. But a year after the first car rolled out of the plant, Saturn is still rooting out manufacturing bugs, and working too fast can spoil quality. The workers knew that their jobs, in the long run, depended on making a top-notch product. Management seemed temporarily to have forgotten. "We were not going to sacrifice quality to get productivity," says Michael Bennett, president of UAW Local 1853.
The issue was settled on Nov. 13, when Saturn's 4,500 unionized workers approved their first labor pact since GM started the company in 1983. The union won a central demand: It delayed Saturn's plan to start tying 20% of workers' pay to aggressive quality and productivity goals. Management, in essence, conceded that Saturn's slow start, primarily its own fault, would have led to an immediate 20% pay cut. Saturn also eased off its production goal of 900 cars a day; it now produces 700. While these moves weren't good news for Saturn, they at least affirmed the revolutionary labor and management bond that has made the two sides working partners there. "In some cases, the union was absolutely right," concedes Saturn's president, Richard G. (Skip) LeFauve, who adds that the protests "refocused everyone to the sense of urgency to get the quality problems fixed." The quality dispute comes at a critical time for Saturn. Former GM Chairman Roger B. Smith launched the company in an effort to do what no U. S. auto maker has accomplished in two decades: profitably build high-quality small cars that compete with Japanese models. But Saturn has been blocked by a series of setbacks since production began (table). Early on, it was unable to turn out enough sedans and coupes to meet demand. In the 1991 model year, Saturn built just 50,000 cars -- one-third the original projection and well below capacity of 240,000.
WORD OF MOUTH. The problem with this is that Saturn buyers love their cars. A survey by California market researcher J. D. Power & Associates Inc. ranks Saturn sixth in customer satisfaction -- just below cars such as Lincoln and Mercedes-Benz, which cost three times Saturn's average $11,000 sticker price. Power also says Saturn owners recommend their cars to more people than the owners of any other brand, even luxury lines. And nearly 95% of Saturn buyers have paid full retail. That's almost unheard-of in a market where rebates average $1,600 a car. "In our first four months, we probably could have sold another 500 cars," says James W. Lupient, president of Lupient Automotive Group, which runs a dozen Minneapolis dealerships.
Anxious Saturn managers hoped to capitalize on this ground swell in September, when they boosted production goals by 13%, to 900 cars a day. But as soon as they did, the plant's defect rate spiked up. For instance, Spring Hill's just-in-time inventory system, which delivers components to the assembly line just as they're needed, leaves little room for error. If a problem interrupts production in the building that casts, machines, and assembles Saturn's four-cylinder aluminum engines, the final assembly line next door grinds to a halt just six minutes later.
As a result, even minor snafus can shut down the whole line. And there have been a raft of such glitches. For instance, Saturn sprays body panels with a new, water-based paint to avoid the environmental drawbacks of solvent-based paints. But it's hard to keep the coating's viscosity constant, so the paint line sometimes slows to a crawl while workers ensure even coverage. In addition, the molds for Saturn's plastic fenders produce an unsightly seam along one edge. So the company ships fenders 15 miles to a small independent shop in Columbia, Tenn., for hand sanding, then back to Spring Hill for painting. And computerized spot-welding machines in Saturn's framing department conk out regularly, sometimes requiring a software fix. Indeed, these and other problems were reasons the union wanted production slowed.
HIGH-FLOWN IDEAS. Saturn's cooperative approach to labor relations -- which includes involving workers in decision-making from the plant floor to the board room -- has caused other problems for management, too. The idea is to treat workers as co-owners who have as big a stake in the success of the company as executives or shareholders. This requires employees to work closely in production-line teams. But not everyone likes the practical application of such high-flown ideas. In a survey of union members last summer, about 6% said they were unhappy at Spring Hill and wanted out. The reasons varied. Some hadn't adjusted to teamwork. Others had personal problems, such as split families or unsold houses, that were caused when they transferred from other GM plants.
Although the proportion of workers who are disgruntled is small, GM went to extreme lengths in the new labor agreement not to let any dissatisfied employees poison the atmosphere. The contract offers severance pay for those who wish to leave, ranging from $15,000 to $50,000 depending on length of service at GM. Saturn officials figure that 25 to 100 of the plant's workers will opt to go. Such buyouts are expensive and usually are done only by companies trying to cut their work force. But Saturn decided that harmony was worth the price. "They don't want to be here, and they aren't very productive," says Thomas G. Manoff, Saturn's vice-president for finance, who doesn't plan to hire replacement workers.
Although Saturn managers are treading carefully in dealing with the company's startup woes, the pressure to move faster is growing. With GM's car sales mired in a yearlong slump, the company is careening toward a 1991 loss of $2.6 billion. And some $500 million of that is because of Saturn, analysts say. "We're all under the gun to help the mother ship," says Manoff. Union and management officials are confident that they can work out all of Saturn's kinks. If they do, it could be just in time to meet rising demand, assuming that Detroit's sales perk up next spring. Until then, GM's Stempel has little choice but to grit his teeth and bear the losses.
SATURN'S ROCKY START
OCTOBER, 1990 Saturns go on sale
JANUARY, 1991 Production lags seriously at just 4,245 cars. Saturn delays
opening 30 dealerships; pays 58 existing dealers an average $100,000 each to compensate for lack of cars
FEBRUARY Recalls 1,210 cars to repair faulty seat backs that could tip back
MAY Recalls and replaces 1,836 cars filled with bad engine coolant
SEPTEMBER October Consumer Reports advises readers to steer clear of Saturn
because of unproven reliability
OCTOBER GM Chairman Robert Stempel visits Spring Hill (Tenn.) plant and finds
that production workers are protesting a decline in quality
NOVEMBER UAW Local 1853 ratifies Saturn's new labor agreement, which delays
plan to tie 20% of pay to the plant's quality and productivity