Former centers of auto production like Ohio and Michigan were key to Donald Trump capturing the presidency. Voters there found Trump’s promise to bring back good auto manufacturing jobs appealing. And he has tried to keep that promise, unveiling a “Buy American, Hire American” plan, rolling back regulations and threatening tariffs on imports of steel and aluminum.
But rather than bringing back auto jobs, the industry has actually cut more of its U.S. workforce during the Trump presidency, with Ford Motor and General Motors recently announcing plant closings and layoffs. That’s because Trump’s policies ignore the reality of who makes “American” vehicles and why U.S. car companies are struggling. They aren’t lagging behind their foreign competitors in sales because material costs or labor costs are too high. They are selling fewer cars because the flawed production model they adopted to rein in labor power stifles innovation and weakens quality, sending them scurrying to cut costs in an attempt to compete.
To turn the auto industry around, the only real answer then is to empower workers, which would allow for the adoption of a more flexible and efficient production system, like the ones foreign manufacturers are using to gain market share while the American Big Three lose it.
The irony of this situation is that the Big Three actually pioneered the flexible production system in the 1910s and 1920s.
They developed this system haphazardly through trial and error. For instance, when Ford demonstrated the usefulness of geographic concentration of the entire production process at its Highland Park and River Rouge plants, GM began building and acquiring new components plants closer to their assemblers. By the 1920s, both companies used what they called “hand-to-mouth” delivery (a precursor to today’s just-in-time delivery, which supplies parts only as they are needed), flexible machinery and either long-term contracts with suppliers or simply purchasing the suppliers themselves. The result of this system of production was the most innovative period (1922 to the start of World War II) in the history of the U.S. auto industry.
Having all production operations centered in one area fueled this innovation and made it more logistically feasible to make necessary production changes, as did the lack of a stockpile of parts.
But these very features of flexible production that yielded high rates of innovation also gifted workers with incredible structural leverage over the companies. Mobilizing workers became easier because they were neighbors and parts of the same communities. And just-in-time delivery meant that if workers undertook direct action, they could target it at key chokepoints in the production process, ensuring that work stoppages produced maximum disruption. This potentially gave the actions of a smaller number of workers much larger effects.
This latent power was first felt by Henry Ford in 1913 when a sickout and rapid turnover caused the magnate to offer the unprecedented compensation package of the $5 day. For the next 15 years or so, the auto industry provided amazing wages and benefits relative to other industries employing semiskilled labor. This compensation was key to making flexible production function, as it prevented potentially costly work stoppages and made workers feel as though they shared in some of the benefits of the system, which created the buy-in necessary to successfully implement innovation.
When the Great Depression hit, however, the Big Three automakers maintained profitability by cutting wages and eliminating benefits. By 1936, GM had surpassed pre-Depression profits without sharing the recovered wealth with workers. This broke the brittle trust that had built up, and workers were no longer buying into or placated by the system. GM workers undertook sit-down strikes in Flint and surrounding areas. By targeting the key chokepoints of the system, they were able to defeat GM despite only a fraction of workers actually being members of the new United Auto Workers.
This victory signaled to nonunion member workers that it was worth joining the union, and by 1940 all of the Big Three had unionized. This alarmed management, which was concerned about what it would mean for the bottom line. Thanks to the administration of President Franklin D. Roosevelt, they secured a no-strike pledge from the union during the war. Management thought this would at least temporarily solve the problem as they believed the rash of strikes and associated unionization was a reflection of outside agitators, rather than an angry and a radicalized workforce.
But a wave of wildcat strikes (undertaken without the approval of union leadership) during the war proved to management that more drastic measures were needed to defeat worker power.
After World War II, the Big Three began to dismantle flexible production, replacing it with a decentralized production system that involved importing large stockpiles of parts first from the non-unionized Southern states, and eventually from all over the world. This removed the structural leverage that had helped workers restore higher wages and benefits and helped give them a voice in production decisions.
While this decision kept costs down at the time, it proved catastrophic once Japanese and European automakers using flexible production arrived in the 1970s.
While the foreign automakers’ flexible production systems enhanced their innovation, the U.S. companies’ dispersed production structure stood as a barrier to implementing the changes required to compete. Any changes required by an advancement in production or product threatened to render a large, expensive stockpile of parts worthless. But such stockpiles were essential given the large distances parts had to travel. These distances also separated the key players in product development and innovation, which made it slower to fine-tune new products and methodologies, costing the companies money as production was idled.
The result was that foreign automakers produced more fuel efficient, higher quality and less expensive cars.
It was this inability to compete via innovation — rather than high U.S. labor costs — that drove the Big Three to embark upon an endless cycle of cutting labor costs, particularly by outsourcing.
Today, foreign auto companies actually produce more vehicles within the United States than Ford, GM and Fiat Chrysler combined. Crucially, Honda and Toyota also produce a much greater percentage of those vehicles in the United States than the once-legendary Big Three. As a result, Trump’s policies have actually walloped the American auto manufacturers because tariffs raised the costs of their imported parts, while cutting regulation boosted the foreign producers building cars in the United States.
This illustrates how policies like Trump’s are doomed to fail because foreign firms using flexible production will also benefit, forcing U.S.-owned firms to search for even cheaper places to produce vehicles. The real solution to increasing manufacturing jobs is not sleight of hand in the form of tariffs or deregulation, but the counterintuitive policy of empowering workers in both U.S. and foreign-owned auto plants.
While empowering workers will increase costs, it will also allow for workers to feel secure enough that they can help guide the return to flexibility — eschewing the use of the leverage that so scared the Big Three in the 1940s — which will eventually yield greater innovation and competition based on quality of product rather than cheapness of labor costs. The Big Three have been loath to admit this, but it’s the only way to compete in today’s global market.