Gm's Saginaw Solution
Back in the early 1990s, General Motors Corp.'s steering-column plant in Saginaw, Mich., was a typical GM dinosaur. It used decades-old mass-production techniques in which each worker added parts to every column that rolled by. They complained of the numbing, repetitive nature of their jobs. Productivity growth was flat, reject levels were high. Most of the plant's output went to GM assembly plants, a captive market that put little pressure on Saginaw to improve.
Then, in 1993, with GM's parts operations hemorrhaging red ink and the implied threat of a sale hanging over Saginaw's head, plant managers and the United Auto Workers local agreed to join hands and fix their problems together. The process has been painful and is by no means complete. Yet today, Saginaw enjoys sharply rising productivity and even won a contract in 1995 from a Toyota Motor Corp. assembly plant in Georgetown, Ky. "I've always been critical of how GM makes parts, but Saginaw's quality has been impressive," says Ronald E. Harbour, vice-president of Harbour & Associates Inc., an automotive consultant in Troy, Mich.
Saginaw holds important lessons for GM and the UAW as they continue labor talks under way since early June. A flash point in the bargaining over a new national labor pact is how to make Delphi, GM's sprawling components division, more competitive. GM says it must retain the right to subcontract work to cheaper outside suppliers. Already, Delphi has sold 14 parts units since 1992, and it recently announced plans to close or sell four more plants, threatening thousands of UAW jobs. Of the 59 Delphi plants represented by the UAW, a dozen are unprofitable, says GM parts chief J.T. Battenberg III. And the money-losers are at risk. "The key is to lose what you're not competitive in," Battenberg says. The problem is predominantly with GM, since Ford Motor Co. and Chrysler Corp. already buy more parts from outsiders.
The UAW thinks GM is taking the easy way out. Only four years ago, say officials, Delphi had 50 troubled parts plants. GM has restored half to profitability not by cutting pay but by adopting the Saginaw approach: streamlining production, giving workers more responsibility, and instituting lean manufacturing techniques. Indeed, GM's labor cost gap with Ford and Chrysler continues to shrink, according to a new Harbour & Associates study (chart). So the union wants Delphi to take the same tack with the remaining dozen money-losers and is pushing for a ban on outsourcing in the new labor pact.
HANDY STICK. The problem is that both sides have a point. Delphi probably could fix many remaining problems and avoid most outsourcing. But the task is a difficult one that requires commitment, goodwill, and a degree of flexibility that has often been lacking in both camps. Meanwhile, GM doesn't want to get locked in, since it wishes to retain outsourcing as a stick with which to prod recalcitrant locals. "Historically, we have not done a good job of building trust," concedes Battenberg.
Saginaw shows how important that trust can be. After marathon talks and a contentious local election, the union penned a deal in 1993 that slashed job classifications from 160 to 12 and formed teams around specific steering products. It scrubbed job assignments based on seniority and agreed to rotate workers among jobs. Teams began to plan everything from production techniques to vacations. In return, GM pledged 40 hours of additional training for all 2,000 workers and doled out raises of 29 cents an hour for employees who agreed to job rotations. "We couldn't fight the company tooth and nail anymore," says Mike Evans, a 28-year veteran of the plant.
The results have been dramatic. The new work methods have boosted morale and allowed workers to find more efficient ways of doing their jobs. Each production "cell" is autonomous and receives components already assembled by a nearby team, giving the groups unprecedented control over their work. UAW workers are also involved in the design of the unit, including the placement of machinery and the work station's ergonomics. All this helped to lift productivity by 14% last year. Quality defects are down 58%.
MANY HOLDOUTS. Still, Saginaw isn't where it should be. Even after three years, GM has failed to convert nearly a fifth of the workforce to lean manufacturing. Walk through the plant and you'll see yesterday and today side by side. In some spots, teams of eight or so work on machines set up around a common area, with each worker changing jobs every few hours. Some even have their own business cards for company-sponsored marketing trips to Toyota's Georgetown plant. Nearby, though, a traditional assembly line still snakes through part of the building. GM has yet to spend the money to convert the aged line and is loath to lose production during the changeover. "We still have a long ways to go," says Gary Shepherd, an official at Saginaw's UAW Local 699.
GM has had less success remaking other Delphi plants. Some are still plagued by combative labor relations, and GM is often quick to outsource. In fact, all 14 of the plants Delphi sold are performing better and still supply GM. Battenberg concedes that Delphi lacked the management depth to fix some plants. He also argues that it was a matter of priorities. "Could we have turned these 14 businesses around?" asks Battenberg. "Probably, yes. But there wasn't enough money, so something else would have suffered."
In recent months, Saginaw has become something of a showcase for GM and the UAW alike. Battenberg has toured the plant with Vice-Chairman Harry J. Pearce and influential GM Director John G. Smale. And leaders of a dozen or so other UAW locals have trekked up to the complex about 80 miles north of Detroit. The lesson is clear: Change is difficult, but it's possible, even at a strife-ridden company such as GM. The question is whether both sides will remember that message when their pact expires in September.