When the U.S. auto industry introduced the assembly line early in the century, it revolutionized the way the American worker was paid. With a firm grip on the pace of production, U.S. manufacturing industries installed the hourly wage system -- which has prevailed ever since.
Now the auto industry once again has become a laboratory for pay in America as manufacturers search for new ways to tie blue-collar wages to corporate performance.
General Motors Corp., for example, is examining the concept of "gain sharing," in which blue collar employes, working closely with management on the factory floor, are rewarded for their contributions to both quality and productivity.
These experiments may well change both the way millions of people are paid in this country and how a whole range of products outside the auto industry are manufactured.
But market forces unlike those of the early days of the industry are behind the new pressures for change. The assembly line permitted development of the mass production capabilities needed to meet vast, unmet consumer demand for an emerging product. And the hourly wage was a means to stabilize the industry work force.
Today, the search for a new pay system in America is the result of a much different challenge -- shrinking domestic markets, largely caused by foreign competition. U.S. manufacturers are searching for new ways to compete in a post-industrial society.
The current focus for change is the new Saturn project announced recently by General Motors. GM Chairman Roger B. Smith said his company was going outside the current corporate structure to create Saturn Corp., a completely new car company for the American market.
Saturn's basic objective is to produce up to 500,000 subcompact cars annually, beginning by 1990. Its overall goal is to change domestic auto production methods radically, to strip 60 worker-hours from the average 130 hours GM now uses to build one car, and to come up with a pay system that more closely reflects production costs and corporate performance.
Ford and Chrysler are working on similar projects with similar aims. Ford calls its program Alpha. Chrysler has Concept 90.
In announcing the Saturn project, Smith said GM was giving the new company a "clean sheet" to build its cars. This would include a new relationship with the United Auto Workers union and the way its members would be paid, he said.
Neither Saturn nor UAW officials have offered any details on what type of pay system might be devised at the new GM company. But besides "gain sharing," company officials are using such terms as "pay-for-knowledge" (also known as "versatility premium"), and "employe involvement" to describe the system they hope will emerge eventually.
The push for a new wage system for the U.S. auto business follows a decade of decimation and change for the industry's work force. Imports rose from 15.2 percent of overall U.S. auto sales in 1970 to 23.4 percent in 1984 (reaching an all-time high of 30.5 percent in the third quarter of 1982).
Since 1979, the auto industry work force has been cut more than 40 percent -- a loss of 656,000 jobs.
The erosion of jobs and the wave of imports appear to have created a new setting for labor-management relations in the industry as employer and worker search for ways to meet competition. These efforts at cooperation are intensifying as the major Japanese auto companies begin to set up manufacturing operations on American soil using techniques and traditions from their home country.
But not all will be imitation on the part of the Americans. GM's Smith, for example, said the Saturn operation will be designed "to leapfrog the Japanese." And George Hoffer, an economist and auto industry analyst at Virginia Commonwealth University in Richmond, predicted that the "Japanese mystique will disappear" as more Japanese auto makers are producing vehicles in this country.
By 1990, the Japanese will be able to make as many as 900,000 cars a year in the United States, according to Maryann N. Keller, a director and analyst at New York-based Vilas-Fischer Associates.
Japan's Honda Motor Co. Ltd. and Nissan Motor Co. Ltd. built a total of 234,111 vehicles in the United States last year. Both companies, which so far operate without a union, are planning to expand U.S. production facilities.
Toyota Motor Corp. and General Motors Corp. have formed a joint-venture company, New United Motor Manufacturing Inc. (NUMMI), to build up to 250,000 subcompact cars annually in Fremont, Calif. Production began last Dec. 4. Toyota also is allowed to build its own cars here under the joint-venture agreement.
Mazda Motor Corp. last December announced plans to invest $450 million in a new auto assembly facility in Flat Rock, Mich., where it plans to build 240,000 small cars annually. Mitsubishi Motors Corp. also is considering the possibility of assembling cars in this country.
The Japanese are coming here with new work rules, new production methods and a resolve to create a domestic work force that is willing to share the risks as well as the rewards of free enterprise. They are seeking a basic attitudinal change, one that would make employes more like entrepreneurs.
The Japanese objective is simple. At home, they enjoy an advantage in production costs over their American competitors estimated at more than $1,500 a car. They want to retain as much of that advantage as possible in their assembly operations in the United States.
U.S. auto industry analysts say the Japanese are traveling a difficult road. This country's car business traditionally has been characterized by inflexible work rules, an imbedded hourly-wage mentality and executive compensation practices that seem to assume guaranteed returns on investments, analysts say.
It will be difficult for the Japanese to alter this culture. But all of the Big Three domestics -- GM, Ford Motor Co. and Chrysler Corp. -- are acting as if the Japanese will succeed.
"That is the reason behind Saturn," Hoffer said.
"The main reason for Saturn is to break away from old union contracts and to establish flexibility in the workplace. GM no longer wants to have people on one specific line doing one specific job. The traditional auto assembler clearly will have a less important role in the cost of production," Hoffer said.
That does not mean assembly workers will disappear. "You can't make a car without them, but there will be fewer of them. Their wages, as a result, will not be that much of a problem in the overall scheme of things," Hoffer said.
For example, to get 500,000 cars a year, Saturn officials will hire 6,000 production workers -- 3,000 per shift on a two-shift workday. GM would have had to hire about 10,000 production workers to get a similar output in 1975 and about 8,000 people to get a comparable yield in 1980, according to some industry analysts.
By assigning workers multiple tasks -- the completion and quality of which would be aided by high-technology tools -- Saturn would further lower the cost of production wages, Hoffer said.
GM's assembly workers currently receive an average base wage of $12.82 an hour, including cost-of-living allowances, according to UAW spokesman David Mitchell. GM would be able to increase those wages with relatively little pain by having a smaller work force that worked more efficiently.
NUMMI, which will negotiate with the UAW in the spring, is looking at a program comparable to gain sharing. NUMMI appropriately calls its program the "Suggestion Plan." Like gain sharing, the NUMMI plan would reward individual workers or worker teams based on their specific contributions to better product quality and efficiency.
"That kind of thing is very big at Toyota," said Tina Bunyard, a spokeswoman for the company. NUMMI currently has an average base wage rate of about $11 an hour. But "attendance awards" and other bonuses could lift that rate up to GM's average $12.82 hourly level, NUMMI officals said.
GM and Ford already have profit sharing, which means that workers share a part of those companies' annual earnings. GM's profit-sharing pool last year was $282 million -- an average of $515 for each of the company's 547,000 employes -- out of earnings of $4.5 billion.
"Since 1985, we've always asked for profit sharing from the companies," said the UAW's Mitchell. "The companies said 'no' until 1982, when they didn't have any profits to share."
A ranking Chrysler official said last week that the company would push for profit sharing in contract negotiations scheduled next October. Mitchell said the UAW "does not regard profit sharing as a substitute for wage increases. We believe in wage increases, cost-of-living allowances and profit sharing on top of wages."
Mitchell said "there are really no fundamental changes" in the way the union approaches worker compensation." But he added that the union is not inflexible. "The UAW has always bargained based on the realities at the given bargaining table," he said.
With the growth of domestic production of Japanese cars, both the UAW and U.S. auto makers are being forced to rethink those realities, according to Audrey Freedman, labor economist at The Conference Board in New York.
Mazda is a case in point, Freedman said. The Japanese auto maker has invited the UAW to represent what are expected to be 3,500 workers at its planned assembly facility in Flat Rock, near Detroit. But she said that Mazda is likely to push programs such as pay-for-knowledge.
GM officials said that they already are conducting some pay-for-knowledge experiments.
Nissan officials in Tennessee said that their comparable pay plan, which they call the "versatility premium," is running at top gear.
"We see no reason to have four maintenance men doing four separate maintenance jobs, when one can do all four," said Wayne L. Wright, Nissan's vice president for human resources in Smyrna.
"The better they become" at doing many jobs, "the more they earn," said Wright, who added that Nissan's U.S. workers receive a base hourly wage "in line" with the $12.82 paid at GM and Ford.
In terms of hourly wages, "Our competitors are well aware that they pay too much. We're guilty of that, too," Wright said. Average hourly wages at GM and Ford are $3.60 above the $9.22 average for all manufacturing workers in the United States, according to the latest (October 1984) final figures provided by the Bureau of Labor Statistics.
But Wright said that Nissan is getting more for its money because most of its 2,300 employes are trained to do more than one job. "This works to the benefit of the employes, as well," he said. "It upgrades their skills, makes them transferable and, when one job goes down, they don't have to go home."
Increasing plant and worker efficiency, and designing compensation plans to better support those goals, probably is the best way to cut costs, Wright said.
Peter J. Pestillo, Ford's vice president for employe relations, agrees with that assessment.
"I think one of the ways to produce cars more efficiently, and therefore cheaper, is to use your work force more effectively," Pestillo said. "Workers know how to save effort and give you yield and the kind of quality you need. To the extent that you engage them in that, you get it."