Over breakfast, a Washington lobbyist for one of the U.S. auto companies was thinking out loud about what strategy his troubled industry should adopt toward the Reagan administration. Thus far, he said, the industry's push for deregulation had worked well. But the big question was, What next? Turning to me, he asked, "If you were chairman of our corporation, what would you ask President Reagan for?"
My answer caught him by surprise: peace between the administration and organized labor.
Quite simply, for the U.S. auto industry to have any chance of regaining its stride in world competition, the divisive gap between government and labor must be closed.
To return to health, U.S. auto makers must overcome two key competitive advantages currently enjoyed by the Japanese: quality and cost. In the area of quality, available statistics indicate that brand-new U.S.-made autos contain an average of five defects per car compared to 0.5 per car for Japanese- made autos. And in the area of cost, the $1,500-per-car cost advantage for the Japanese originally identified in the January 1981 report to the president from outgoing Secretary of Transportation Neil Goldschmidt may now be as great as $2,000 per car.
What is critically important about these facts is that they are related. The quality and cost problems of the U.S. auto industry both stem from the same source: the relationship between management and labor. Both problems reflect the obsolete perceptions and institutions that currently define the relationship between management and labor in America. It is that relationship that must be redefined if the U.S. auto industry is to compete.
In Japan, virtually all of the quality advantage and more than half of the cost advantage result from their relationship between management and labor. Importantly, only one- third of the cost advantage reflects a difference in wages between Japanese and U.S. auto workers. Most of it comes from the way the work is managed, from management and labor productivity, from less restrictive work rules and less rigid job descriptions, and from the quality of workmanship up and down the organization. These are the areas where the U.S. relationship must change if our auto industry is to compete: not only through a new negotiation over pay, but even more important, through a new negotiation over how basic functions are managed, over work rules, roles and responsibilities.
These changes will be difficult to accomplish--at least as difficult as the wage issue, perhaps even more so. Many of the attitudes management and labor in this country have toward each other date back to Henry Ford's assembly line and the early precepts of scientific management. The progress that has been made to overcome these deeply ingrained attitudes has occurred during better times; in a period of deep industry depression it may prove a more difficult undertaking.
But what makes a bad situation even worse is the deep rift between the Reagan administration and organized labor. The UAW today faces a twin dilemma: the threat of economic insecurity from the management of the Big Three and the threat of political insecurity from the Reagan administration. It is conceivable that management and labor could handle the economic negotiation and arrive at a workable arrangement. But the threat of political insecurity adds a critical destabilizing influence.
The erosion of the UAW's influence with government makes it virtually impossible for organized labor to see to it that its members' needs are met during this period of wrenching transition. And it makes it more unlikely that the UAW would agree to any kind of fundamental redefinition of its relationship with management--or that the membership would agree to a new arrangement if it were negotiated.
>There are two relatively painless ways the Reagan administration can contribute to settling things down. First, a change in public attitude would go a long way toward reassuring union members, if not leadership. After all, roughly 40 percent of the UAW membership voted for President Reagan. A genuine show of concern for this constituency is not only appropriate--it's good politics. Second, the administration could assist the transition already under way by supporting existing state, local and even private sector-financed worker retraining programs. These steps would send the right signals to labor and management: there must be changes here at home if the auto industry is to compete in the world.>
These steps could help persuade UAW membership that management and government are not simply ganging up to force them to accept less. They could help dispel the current atmosphere of insecurity and distrust fostered by the Reagan administration's political relationship with the UAW--an atmosphere that can only prevent real change from taking place. Sadly, while the UAW may, in the end, be pushed to make concessions, they are likely to work only at the margins: the basic issue of an obsolete industrial relationship may never be dealt with. The result will be the continued dismantling of the U.S. auto industry by foreign competition.
So, for 1982, if I were chairman of a U.S. auto company, my request to Reagan would be for peace between government and labor, a real truce that would allow fundamental negotiations to go on between management and labor without the menacing shadow of a government perceived as hostile to labor. A new era of cooperation in the U.S. industrial relationship may prove to be the Reagan administration's best economic policy--and the best politics, as well.