Article — From the August 2009 issue
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Article — From the August 2009 issue
Bill Londrigan was a researcher with the AFL-CIO’s building-trades division when, in 1986, Toyota broke ground for its first fully owned U.S. assembly plant, on a tract of Kentucky farmland twelve miles north of Lexington. Honda and Nissan had recently opened their own non-union facilities in the United States, and organized labor feared the consequences of losing further ground in the auto industry. Londrigan was part of the contingent sent from Washington to prevail upon Toyota to hire union builders; he ended up staying on in the Bluegrass Region, and in 1999 he was elected president of Kentucky’s AFL-CIO. When I visited Londrigan late last winter at the union’s state offices—two rooms in a storefront three miles from downtown Frankfort—he flipped across his desk a booklet that he had prepared for the battle with Toyota two decades earlier. The pamphlet detailed the scope of the vertically integrated supply chains, called keiretsu, that Japanese car companies had brought with them to America from Japan and that some believe violate U.S. antitrust laws. On its cover was a black dragon hovering ominously above the middle United States. Londrigan guided me to a specific passage and then began to read it aloud. “The euphoric welcome Japanese keiretsu factories receive when they announce their locations in American towns and counties is reminiscent of the Trojans’ joy when they first viewed the Trojan Horse. The historical warning that sad episode produced—‘Beware of Greeks bearing gifts’—seems to be lost on this generation of Americans, or has at least escaped the attention of U.S. economic development officials.”
Londrigan waved his hands in disgust. “I said back then that in the long run this wasn’t going to be a good thing. Guess what? The long run is here.”
States in the South and lower Midwest did euphorically welcome Japanese car manufacturers; indeed, they paid for the privilege of opening the gates. To land Toyota, in 1985, Kentucky outbid thirty-five other states by offering $147 million in direct investment, nearly twice what Illinois used to lure Mitsubishi earlier that same year and five times what Tennessee gave Nissan in 1980. In addition to nearly boundless governmental support, financial and otherwise, these regions had failing agrarian economies with little competing industry and a glut of prospective employees. At the plant Toyota opened in Georgetown, Kentucky, assembly jobs lacked the pensions and benefits enjoyed by members of the United Auto Workers union, but they did offer pay that was close to the standard set in Detroit and well above the state’s industrial average of roughly $8 an hour. For the first 3,000 openings, applications poured in from 142,000 Kentuckians, of whom 28,000 were chosen to undergo a multistage winnowing process that lasted two and a half years. With their younger, more carefully selected, and non-union workforces, Japanese automakers were able to run their U.S. plants with far greater flexibility than their American competitors could. At Ford and General Motors factories, the number of different job classifications ran into the hundreds. At Toyota, the number was three; the Honda facility in Marysville, Ohio, had only two. Workers at these non-union plants were rotated wherever needed. Tooling and other skilled labor was contracted out, often to firms the companies controlled, and temporary employees were added or culled depending on swings in demand.
Since 1986, GM, Ford, and Chrysler have collectively lost a quarter of the U.S. market, with their combined sales dropping from 72 percent to 46 percent at the end of last year. Even before Chrysler’s and GM’s recent bankruptcies, the so-called Big Three had shed nearly half a million hourly employees since 1985. General Motors, the largest company in America for much of the past century—with, at its 1970 peak, 395,000 union employees working in 150 U.S. factories—planned to survive the current crisis by slimming its workforce to 38,000 union laborers and 34 plants. GM’s competitive disadvantage has most often been illustrated by the $50 billion it owes its retirees in health care and other benefits, a fixed cost that, critics of unions like to argue, adds an additional $1,600 to the price of every vehicle produced. But this statistic is misleading: the staggering inefficiencies of American auto companies go far beyond any gains that once were won by labor. For the past two decades, the three car manufacturers have spent less than their foreign rivals on the development of new fuel-efficient cars, focusing instead on ever-bigger SUVs and light trucks. GM’s failure to successfully manage costs—as well as its own size—can be seen in its 13,650 U.S. dealerships, with each one, even in 2007, selling an average of only 280 cars; Toyota, by contrast, had 1,450 U.S. dealerships selling 1,800 cars apiece.
With Detroit in shambles and showing few signs of recovery, I traveled to central Kentucky this winter to witness what has become the unchallenged model for how cars are made in America. Toyota is currently the world’s leading automaker, and its Georgetown plant is the company’s largest facility outside of Japan. It is Toyota, not General Motors, that now sets pay and work standards for the industry. Veterans at UAW plants still earn an average of $28 an hour, and long-serving workers at Toyota Georgetown make upwards of $26. But hourly wages at Toyota’s new San Antonio plant top out at only $20, and workers at the recently opened Honda factory in Greensburg, Indiana, earn at best $18 an hour. Moreover, the starting hourly wage for full-time employees at all non-union automakers is now in the low teens—a pay grade that has already been adopted by the American car companies.
What is collapsing along with Detroit is an American archetype, the premier twentieth–century dream of what it means to be a manufacturing worker in this country. From the $5 day at Ford in 1914 through the yearly cost-of-living raises and benefits negotiated by the UAW, the auto industry came to symbolize blue-collar upward mobility and empowerment. The real income of autoworkers doubled from 1947 to 1973; and because many other union as well as non-union firms adopted auto-industry pay rates, the bottom half of American earners saw their income increase during this period at the same pace as that of the top 10 percent of wage earners. But with auto plants now closing and jobs furloughed, with UAW contracts renegotiated and defined benefits swapped for stock in greatly diminished companies, the archetype is no longer operative. UAW membership fell from 1.5 million in 1979 to 460,000 by the end of 2008, and it is sure to drop further. With the future of the Big Three in doubt, what remains of organized auto work also hangs in the balance.
Before I left Londrigan’s office, he described for me a moment, a quarter-century ago, when a different outcome in the South had seemed possible. Negotiations between the unions and Toyota over the building of the Georgetown plant were at an impasse. During one meeting, eleven union representatives sat motionless across a table from their Toyota counterparts. Then, all at once, the union men methodically unlaced their ties and pulled them taut across their foreheads, knotting the fabric in the back. “It was the ceremonial hachimaki,” Londrigan said proudly. “We were demonstrating our total commitment, that we were engaging in mortal combat.” After a few tense moments, the Japanese in the meeting came around the table to shake hands with the union reps. Although the event signaled the start of a protracted fight, Londrigan felt that the two sides were finally viewing each other as equals. “They respected us,” he said. Eventually, Toyota would agree to the use of union construction workers; Honda would follow by hiring union labor to build its new engine plant in Ohio. But the labor victories pretty much ended there. In 2009 it is hard not to see Londrigan’s anecdote as a relic from a more hopeful era, a scene that could have been pulled directly from the Michael Keaton movie Gung Ho, released around the same time as that meeting. In the film, plucky union workers and the hidebound Japanese who take over their auto plant in the American heartland come to understand and appreciate one another. As a result, the unionized workers, the foreign-owned company, the town, and even the auto industry itself all benefit. The movie’s tagline: “When East meets West, the laughs shift into high gear.”
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