MODERN ECONOMIC ORIGINS OF THE AUTOMOBILE INDUSTRY
MAJOR COUNTRIES OF PRODUCTION AND CONSUMPTION
IMPORTANCE OF THE INDUSTRY FOR MACROECONOMIC ACTIVITY AND INTERNATIONAL TRADE
CHANGES AND CHALLENGES IN THE AUTOMOBILE INDUSTRY
The turn of the twentieth century witnessed the dawning of the automobile industry. Tinkering by bicycle, motorcycle, buggy, and machinery entrepreneurs in Europe and the United States led to the first prototypes of automobiles in the late nineteenth century. French woodworking machinery makers Rene Panhard and Emile Levassor built their first car in 1890 with an engine designed in Germany by Gottlieb Daimler and Wilhelm Maybach. Armand Peugeot, a French bicycle maker, licensed the same engine and sold his first four lightweight cars in 1891. German machinist Carl Benz followed the next year with his four-wheeled car and in 1893 Charles and Frank Duryea built the first gasoline-powered car in the United States. Ransom Olds is credited as the first mass producer of gasoline-powered automobiles in the United States, making 425 “Curved Dash Olds” in 1901. The first gasoline-powered Japanese car was made in 1907 by Komanosuke Uchiyama, but it was not until 1914 that Mitsubishi mass-produced cars in Japan.
Each region in the triad—North America, Europe, and Asia—has made significant contributions to process, product, and organization throughout the twentieth century. These innovations together have shaped the competitive structure of the automotive industry that exists today. The organization of production inputs—such as labor and suppliers of components and materials—as well as the configuration of distribution channels are also important dimensions of the growth and evolution of the industry. Furthermore, various forces outside the industry shape industry structure and strategies: trade flows; regional and international movement of capital; regional and global policies on trade, environmental regulation, and intellectual property, particularly in emerging economies; and the infusion of information technology throughout the procurement, production, and distribution systems.
The automotive industry is dynamic and vast, accounting for approximately one in ten jobs in industrialized countries. Developing countries often look to their local automotive sector for economic growth opportunities, particularly because of the vast linkages that the auto industry has to other sectors of their economy.
MODERN ECONOMIC ORIGINS OF THE AUTOMOBILE INDUSTRY
The auto industry has passed through several stages: (1) craft production (1890-1908), in which dozens of small enterprises vied to establish a standard product and process; (2) mass production (1908-1973), precipitated by Henry Ford’s moving assembly lines, which became the standard operating mechanism of the industry; and (3) lean production (1973–present), which was initially developed at Toyota under the leadership of Taichi Ohno during the 1950s, and which introduced a revolutionary management process of product-development and production.
Mechanization of auto production has also been transformed over the past century, led by the need for faster and lower-cost production on the supply side of the industry. Ford’s mass-production system relied on standardized designs to enable the construction of assembly plants that were fully automated and utilized interchangeable auto parts. In its heyday, between 1908 and 1920, Ford streamlined the assembly process to the point where it took just over an hour and a half to produce one car. Setting the industry standard for production enabled Ford to take the lead in market share, but it also led to a complacent mindset that hindered innovation. In the 1920s General Motors improved on Ford’s assembly line process by introducing flexibility into the production system, enabling faster changeovers from one model to the next. However, it took half a century after Ford stopped mass producing Model T’s in 1927 for another production paradigm to emerge as the standard in the global automotive industry. Toyota’s lean production system—which had its beginnings in 1953—drove productivity to new heights by replacing the “push” system with a “pull” system. Instead of producing mass quantities of vehicles and pushing them through to dealerships to sell to customers or hold as inventories, the lean system pulled vehicles through the production process based on immediate demand, minimizing inventories at suppliers, assemblers, and dealerships. Just-in-time production also gave a larger responsibility for product design, quality, and delivery to assembly workers and suppliers than did the mass-production system. Suppliers were not vertically integrated into auto assembler operations, but rather networked to the assemblers via long-term contracts. This total system of cost-minimization and responsiveness to customer demands revolutionized auto manufacturing on a global scale, although the model has been adapted to regional conditions.
Product innovation in the automotive industry has mainly been a response to customer demands, although product positioning is a critical strategic variable for automakers. Ever since General Motors began producing different types of vehicles for different product segments, thereby ending the reign of Ford’s low-price, monochromatic Model T, the ability to vary products on several dimensions has been the main strategic variable of auto producers. U.S. automakers have mainly been responsive to customers’ desires for comfort, speed, and safety, and have developed rugged drive trains, plush suspensions and interiors, and stylish chassis and bodies. In contrast, European auto producers have focused their attentions on performance and agility features of vehicles, such as steel-belted radial tires, disc brakes, fuel injection, and turbo diesel engines. For Japanese producers, the miniaturization culture and the scarcity of fuel, materials, and space largely determine the specifications of cars.
Organizational innovations have also occurred over the past century. In concert with the introduction of mass production techniques came the vertical organization of production processes. Auto assemblers internalized the production of critical components in an effort to minimize transaction costs associated with late deliveries and products that were not produced to exact specifications. For example, the share of components purchased from outside suppliers relative to the wholesale price of an American car dropped from 55 percent in 1922 to 26 percent in 1926. During the Great Depression, this propensity to internalize production eased, with suppliers gaining independence and importance in the replacement parts market. Automakers found that a highly vertical organizational structure did not permit the flexibility in operations necessary for product innovation. In the 1930s, Ford’s vertically integrated and centrally controlled organizational structure gave way to the multidivisional organizational structure that was implemented by Alfred Sloan at General Motors Corporation (GM). Sloan’s decentralized configuration of GM fostered an independent environment for the development, production, and sales of a wide variety of vehicles. With the lean production revolution came the introduction of organizational reform referred to as the extended enterprise system : Although Japanese auto manufacturers established and diffused efficient mechanisms of supply chain management throughout the industry, Chrysler Corporation is credited with successfully implementing these innovations in the American venue.
Rivalry among assemblers in the automotive industry, once contained within national boundaries, has evolved into global competition. First movers established market dominance in the early 1900s, and their brands are still the most recognized by consumers today. The fact that auto producers choose market strategies based on what their rivals are doing indicates that this is an oligopolistic industry. What is interesting here is that market leadership remains dynamic: It is not a given that General Motors or Toyota or DaimlerChrysler will be the market leader of tomorrow.
Before industry standards for products and production were established, hundreds of automakers existed, each vying to establish a beachhead in the industry. In the United States, for example, the year 1909 saw the largest number of automakers in operation in a given year—272 companies. It is estimated that in the first twenty years of the industry’s existence, over five hundred firms entered the industry in the United States alone. The 1920s brought a wave of precipitous exits by auto manufacturers, with many firms merging into more profitable companies. In the 1930s General Motors became the market leader, with Ford slipping to second place because of a yearlong changeover in production from the Model T to the Model A. By 1937 General Motors, Ford, and Chrysler—long referred to as the Big Three—had 90 percent of total sales in the U.S. market, forming a dominant-firm oligopoly (General Motors accounted for 44.8%, Chrysler 25%, and Ford 20.5%). By the 1960s, only seven domestic auto producers remained.
In the late 1990s Japanese auto manufacturers took over more than a quarter of the U.S. market, and Big Three market share slipped below 70 percent. Today, there are only two-and-a-half U.S. automakers—General Motors, Ford, and DaimlerChrysler—collectively capturing 58.7 percent of the U.S. market. GM still has the largest share of the U.S. market (27.3%), but Toyota’s market share in the United States is just one percentage point below Chrysler’s (13%). Worldwide, market concentration has also been declining since the mid-1980s, with entrants such as Hyundai/Kia diluting the collective market share held by dominant automakers.
Market rivalry in the auto industry centers on two strategic variables: (1) product variety and quality, and (2) transactions price, which is manipulated to boost sales. The tension between shareholder concerns about short-term profitability and a company’s desire for long-term viability is palpable. Automakers must attract and maintain a solid customer base, building allegiance to brand name in an effort to maximize earnings in the long term. Maintaining high customer repurchase rates is critical to long-term profitability in the industry. Therefore, automakers attempt to attract and keep customers from the purchase of their first car in their late teens until retirement and thereafter. Product variety at all of the major automakers spans the full spectrum from small to full-sized cars, although some automakers are better known in particular market niches. For example, Mercedes, BMW, Lexus, Infiniti, and Acura capture a third of the upscale market in the United States, whereas Buick, Ford, Mercury, and Toyota are known for their family-styled traditional cars. Turnkey reliability is the hallmark of Japanese makes, whereas Ford, Chevrolet, and Toyota appeal to buyers of small or sporty vehicles. The fastest growing market segment in the United States in recent years has been sport utility vehicles (SUVs). By the early 2000s, SUVs captured 55 percent of vehicle sales.
Auto producers have used various means to develop a full line of product offerings for a broad spectrum of customers. For example, GM has historically used acquisition or shareholdings to offer a variety of brands—including Chevrolet, Oldsmobile, Pontiac, Buick, GMC, and Cadillac. In the late 1970s, GM purchased shares in Suzuki and Isuzu subcompacts and imported those vehicles, in part to satisfy Corporate Average Fuel Efficiency requirements. In recent years, Ford-Mercury-Lincoln has also diversified its portfolio by acquiring Volvo and Jaguar. Toyota, Honda, and Nissan initiated a clever marketing ploy in the 1980s aimed at selling luxury vehicles in the United States: They named their luxury brands Lexus, Acura, and Infiniti, respectively, even though these cars are built on the same platforms as their other vehicles.
Product quality has been converging over time. As recently as 1998, European and Japanese makes had fewer vehicle defects than average for cars in their first few months on the road, whereas U.S. and Korean cars had more defects than average. By 2004 vehicles from all four regions were within ten defects per hundred vehicles of the average, which had fallen from 176 to 119 defects per hundred vehicles. Interestingly, both the Japanese and the South Korean newcomers outperformed U.S. and European vehicles on this quality scale.
To attract customers to a brand, small cars are at times used as a loss leader; that is, a firm will sell their low-end vehicle at a price below invoice, while recuperating large returns on SUVs, luxury brands, and specialty cars. Another pricing strategy that is often used by automakers to clear inventories and to get the customer in the door is discounting. At particular times of the model year (which typically begins in October and ends in September of the following year) direct assembler-to-customer discounts as well as dealer-to-customer discounts are used to adjust transaction prices to ebbs and flows in demand. If the revolutionary pull system becomes pervasive in the auto industry, the need to manage inventories through end-of-model-year discounting could become obsolete. However, product positioning will continue to be an important competitive variable for automakers because demographic attributes drive the needs and desires of customers.
Automotive suppliers have been gaining global importance in the automotive industry, taking on the primary responsibility for product development, engineering, and manufacturing for some critical systems in the automobile. In its initial stage of development, the auto industry was comprised of auto assemblers that integrated parts production into the enterprise. Independent auto parts producers mainly supplied aftermarket parts. Throughout the twentieth century, this vertically integrated structure within assemblers has been replaced by a more network-oriented tiering structure. Here, assemblers coordinate design and production efforts with premier first-tier suppliers, while these suppliers are responsible for global coordination of the supply of their subassemblies and for the coordination of production by sub-tier parts manufacturers. Thus, first-tier suppliers have been rivaling automakers in market power and in share of value added to any given vehicle. While it seems unlikely at this time that such suppliers will evolve into complete vehicle manufacturers, the profit generated by the sale of a vehicle is shifting toward the supplier and away from the traditional assembler. Automakers, therefore, face stiff rivalry both from other automakers and from dominant suppliers. Only a select few suppliers have achieved “true global competency” in the production of automotive systems, but the industry trend is pointing in this direction. The “Intel Inside” phenomenon seen with computers—in which the supplier’s brand identity is critical for the sale of the final product—has not yet taken over the automotive industry, although “Hemi Inside” could be an emerging example.
As manufacturing momentum shifted toward auto parts suppliers, so too did the share of labor. Since the early 1960s, total employment in the U.S. auto industry has ranged between 700,000 and just over 1 million workers. Up until the mid-1980s, auto assemblers employed the majority of those workers, but from then on the employment share for automotive parts suppliers in the United States has consistently been greater than the share of workers at assembly plants. Between 1987 and 2002, the share of automotive sector employment at assembly plants declined from 44 percent to 36 percent, whereas the share of workers at automotive suppliers increased from 46 percent to 54 percent. Add to this change the influx of mostly non-unionized automotive transplants (foreign suppliers and assemblers), the outsourcing of parts and assembly to foreign nations, and the general sectoral shift away from manufacturing toward the service sector, and it is clear that the 1980s marked a turning point for labor in the U.S. auto industry.
Labor unions that represent autoworkers in the United States have had to weather a myriad of undulations in domestic business cycles since 1935, when the United Auto Workers (UAW) was founded. (Other unions that represent auto workers in the United States include the International Association of Machinists and Aerospace Workers of America, the United Steelworkers of America, and the International Brotherhood of Electrical Workers.) Recent changes in the organization of the auto industry and in the ownership of domestic firms, however, present uniquely formidable challenges to union strength. First, the implementation of lean manufacturing techniques and the drive to achieve globally competitive prices, quality, and delivery standards is likely to precipitate job cuts as suppliers strive to increase productivity. Second, only a few automotive transplants in the United States allow union status—namely, NUMMI (GM-Toyota), Diamond Star (Chrysler-Mitsubishi), and Auto Alliance (Ford-Mazda), all of which are joint ventures with U.S. companies. Yet, total transplant employment is rising: Between 1993 and 2003 employment at transplants in the United States rose from 58,840 to 93,408. The UAW continues to strive to organize labor at transplants and is targeting supplier parks near unionized assemblers in an attempt to maintain locational control. Third, outsourcing of production in a continuously globalizing industry diminishes the bargaining power of unions not just in the United States, but in Europe as well. Fourth, auto assemblers and suppliers are increasing their utilization of temporary workers. In Germany, BMW has a pool of temporary workers that can be utilized at different factories as needed, and in the United States auto assemblers are increasingly employing contract workers to reduce costs.
The globalization of the auto industry appears to challenge the status quo for labor in traditional regions of vehicle production. As employment in the industry shifts toward the supplier sector and toward emerging economies, the attempt to maintain good wages at traditional plants is paramount for autoworkers. Total hourly labor cost at GM and Ford for 2005 was estimated at $65.90, with $35.36 in wages and $30.54 in benefits, healthcare, and retirement costs. Other estimates for 2004 show earnings of production workers at assembly plants at $1,217 per week, whereas workers at parts plants earn $872 weekly, and workers in all manufacturing industries make an average of $529 per week. Autoworkers—particularly those who work in assembly plants in developed countries—certainly have a great deal at stake as the industry continues to globalize.
By contrast to labor, the power that dealerships exert on assemblers has historically been minimal. The push system of production meant that dealerships were the repositories for the inventory overruns of auto assemblers. Also, up until the 1960s, dealerships could legally be controlled by automakers. Therefore, auto dealers earn the majority of their profits from aftermarket sales of parts, accessories, supplies, and service, all of which are a small portion of their business. With the movement toward a pull system of production, dealerships could play a more important role in the automotive industry. However, the countervailing threat to dealerships is Internet-based sales, an innovation that stands to mitigate the market power of dealerships vis-à-vis auto assemblers.
MAJOR COUNTRIES OF PRODUCTION AND CONSUMPTION
The Worldwide Big Three automakers are General Motors, Toyota Motor Corporation, and Ford Motor Company. In 2004 these companies had worldwide market shares of 13 percent, 11 percent, and 10 percent, respectively, and production shares that closely mirrored these numbers. Interestingly, the geocenter of automotive production is the Asia-Pacific region, with over 23 million units produced in 2004. Japan was the dominant producer, with China a distant second at half of Japan’s output that year. Western Europe and North America ranked a distant second and third in worldwide production, respectively, producing between 16 and 17 million vehicles in 2004. Germany is the dominant producer in western Europe, while the United States produces the lion’s share of vehicles in North America.
The biggest consumers of vehicles are North Americans, with Asian Pacific and western European customers a close second and third. Although per-capita ownership of vehicles in China is very small (1.5 vehicles per 100 households compared to 50 vehicles per 100 households in Japan in 2001), the number of vehicles sold in China in 2004 fell only a few hundred thousand short of vehicle sales in Japan. In addition, the growth rate of sales in Japan between 2003 and 2004 was a sparse 0.1 percent, whereas China experienced a 17.2 percent growth in vehicle sales during that period. The other countries with over a million in vehicle sales per year that also had double-digit growth in vehicle sales in 2004 were Russia (24 percent), India (18.2%), Brazil (17%), Mexico (11.8%), and Spain (10.2%). Market opportunities in these countries are highly dependent on macroeconomic performance and policies. Hence, automakers pursue a portfolio approach to production and marketing, given the fragility of economic growth in these regions.
Since the 1960s, auto analysts have looked to a few regions for sources of new productive capacity: Eastern Europe, Latin America, India, and China. By 1980, however, the eastern European motor industry had stagnated and during the 1980s severe economic and political turmoil caused halting growth in the Latin American automotive sectors. In the 1990s liberalization of trade and investment policies gradually emerged in India and China. Today, China has captured attention as the location for new automotive productive capacity. Beginning with Volkswagen’s investment in 1985, all of the major automakers have established productive capacity in China through joint-venture relationships with local automakers.
In the mid 1970s passenger car production was practically nonexistent in China. Thirty years later, sales and profit rates had soared, although capacity utilization is low (between 50% and 60%) and inventories are high relative to their Japanese, European, and U.S. competitors. If China continues on its pathway from centrally planned economy to modest marketization, and continues to become more fully integrated into the global economy, then its domestic automotive industry will most likely steadily expand.
IMPORTANCE OF THE INDUSTRY FOR MACROECONOMIC ACTIVITY AND INTERNATIONAL TRADE
The automotive industry is an important sector of the overall economy, particularly in industrialized countries. For example, the automobile is second only to a house in purchase value for the average American household. The average manufacturing job in the automotive sector pays 60 percent more than the average U.S. job. It is estimated that the industry generates 10.4 jobs for every worker directly employed in automotive manufacturing and support services (excluding auto dealers) in the United States. Employment spillovers are seen in manufacturing and nonmanufacturing industries, including retail trade and services. In 2000 motor vehicles and equipment (assemblers and suppliers) expenditures on research and development (R&D) outpaced R&D spending in many of the thirty-nine largest industry groups, including pharmaceuticals and medicines, semiconductors and other electronic components, communications equipment, and computers and peripheral equipment.
Motor vehicles are also a major component of international trade and foreign direct investment between countries. In 2000 the share of automotive products in world trade was 9.4 percent, unchanged from its share a decade earlier. Western Europe, North America, and Asia in declining order are the global leaders in exports and imports. While western Europe and Asia are net exporters of vehicles, North American imports far outpace exports. In North America, exports have remained relatively flat since the 1980s, whereas imports have ratcheted up. North America, eastern Europe, the Middle East, and Africa are all net importers of automotive products. Intraregional trade figures show that intra–western European trade was the largest in value at almost US$200 billion that year, intra–North American trade was second at US$87.7 billion, and intra-Asian trade was the lowest at US$19.6 billion. Interestingly, intra–North American trade declined by 10 percent compared to 1990. The fastest growing region-to-region trade was North America’s trade with its European and Latin American partners.
From time to time barriers have been erected around the globe to protect local automotive sectors. For example, over the past twenty years, countries in North America and Europe have erected tariff and non-tariff barriers specifically applied to trade in automobiles. Between 1981 and 1988, the United States and Japan “voluntarily” agreed on a fixed number of vehicle units that Japan would export to the United States. The European Union and Japan also entered a voluntary export agreement (VER) between 1990 and 1999, as Japanese imports to Europe began to surge. In both cases, the VERs were partly responsible for an increase in transplant production, as Japanese auto producers jumped over the trade barriers to erect manufacturing plants in the United States and Europe. Although the transplants have become a critical component of the local manufacturing landscape, the jobs and exports that they generate are weighted against their dampening effect on wages and the costs that some local governments incur to attract foreign firms to their region.
In developing countries, trade and investment restrictions in the automotive sector take the form of local content rules, tariffs, and quotas. The impetus behind these protectionist measures is to give local producers a chance to develop before they face competition from world-class auto producers that are more productive and therefore have lower unit costs. In recent decades, regional trade pacts have been implemented that liberalize many of these local content, investment, and trade restrictions. The North American Free Trade Agreement (NAFTA), which was implemented in 1994, is one significant example. When the United States and Canada included Mexico in their free trade pact on trade in automobiles and parts, Mexico reduced tariffs for its northern partners and lifted restrictions on local investment for all foreign companies, allowing domestic status for transplant operations.
One of the critical determinants of the location of assembly plants and their related suppliers is production cost. Production costs and market opportunities are the primary reasons why jobs are shifting away from the traditional geographic centers of vehicle production. At the same time, implementation of the lean production paradigm is shifting the operational center of vehicle production toward first-tier suppliers with global capabilities. Variable costs of production—costs that depend on the number of vehicles produced—include expenditures on materials and labor. In the automotive industry, material costs range between 22 and 50 percent, whereas labor costs range from 10 to 20 percent. Because these costs vary by region and product produced, auto assemblers and suppliers are actively engaged in assessments and adjustment processes that lead to changes in the configuration and operations of their plants. Yet, the evolution of North American, European, Asian, and South American trading blocs has significant implications for the geographic configuration of production and trade flows. While it remains an important factor, comparative advantage is not the sole determinant of trade patterns in the automotive industry.
CHANGES AND CHALLENGES IN THE AUTOMOBILE INDUSTRY
Auto industry analysts anticipate major organizational and geographical changes in the global auto industry in response to innovations in auto-manufacturing techniques, reconfigurations in the loci of demand for vehicles, and growing environmental concerns. A new model of labor utilization will develop as suppliers and automakers adjust to flexible manufacturing practices and the globalization of their operations.
As of 2007, overcapacity in the global automotive industry is estimated at 20 million units, which is approximately one-third of global annual production or the productive capacity of the western European automakers. With minimum efficient scale of production at an assembly plant estimated at 200,000 vehicles, dozens of assembly plants are likely to close as automakers strive to improve their profitability. Capacity unitization of about 75 percent is the tipping point below which automakers are in jeopardy of experiencing financial losses.
Overcapacity, therefore, has triggered mergers, acquisitions, and network alliances. Auto companies are consolidating and simplifying control and development functions, and attempting to minimize new investment initiatives, the number of unique parts in their vehicles, the number of design and production tools used, the number of components made in-house, and the number of direct supplier relationships. Assemblers are also utilizing modularization to simplify final assembly processes, and they are experimenting with various organizational designs as part of the restructuring process. Automakers and parts suppliers are utilizing vertical and horizontal strategic alliances with the expectation that they will facilitate the development of new products and the spread of automotive productive capacity to new geographic regions. These ventures, however, will also create new competitors, particularly in emerging economies.
However, consolidation has not proven to be a panacea for optimizing productive capacity in the industry. Mergers have typically occurred between companies that have complementary product lines and therefore the opportunities for retiring some plants are diminished. Effective rationalization brings job losses. Yet mergers between companies from different countries (such as Germany’s Daimler-Benz and Chrysler in the United States) have not typically brought capacity reduction, because political forces strive to maintain domestic jobs.
Analysts anticipate that production will shift away from traditional regions in North America, Europe, and East Asia to Brazil, China, India, and countries in Southeast Asia. Trade liberalization will facilitate this geographical shift in production, as well as increased commonilization —the sharing of principal components and platforms—although consumer tastes will militate against the full introduction of a homogeneous “world car” from each automaker. Commonilization—coupled with the differentiation of products based on regional tastes—is already practiced by Ford and Honda, and other automakers are also adopting this practice. There is no clear evidence, however, that automakers are converging on one comprehensive paradigm of production.
Economic growth in East and South Asia is also expected to influence the locational decisions of auto producers. For example, economic and political developments in China during the past decade have had considerable influences on global sourcing and production decisions of German, American, and Japanese automakers. Growing disposable income among middle-and upper-income citizens, burgeoning industrial development in coastal regions, and the periodic liberalization of personal finance markets are driving demand for passenger cars and commercial vehicles in China. Given these trends and the size of the market, automakers anticipate good returns from their productive capacity in the Far East. Yet, exuberance over the potentially hot auto market in China is tamed from time to time by the prospect that the underpinnings of that market rests importantly on government fiat.
The automobile industry will also need to continue to address a range of environmental concerns related to carbon dioxide levels and other health risks. While estimates vary widely as to the impact that vehicle emissions have on the global environment, automakers have made emissions and safety adjustments to their automobiles over time. In the United States, rules and guidelines that originated in the 1970s—such as the Corporate Average Fuel Efficiency Standards (CAFE) and federal safety regulations—have brought about significant emission reductions. Thirty years since CAFE standards were put in place, new cars in the United States emit approximately 1 percent of the smog-producing compounds emitted by new cars in the 1970s. This progress is not solely the result of government regulations, however. The Alliance of Automobile Manufacturers—a trade association of nine automakers from the United States, Germany, and Japan—has identified clean energy technologies as a means to further economic growth in the industry. It is important to note, however, that increased use of vehicles and persistent use of vehicles with old technology mitigate some of these important strides.
Automakers around the globe are also engaged in developing new technologies and products, such as electronic fuel cells, navigational systems that manage congestion problems, and “telematics” (telecommunications capabilities). Information technology networks will be fully integrated into the R&D, procurement, manufacturing, and distribution functions of the enterprise structure. The Internet and Web-based communications are expected to drive the next transformation in the automobile industry. The next frontier in distribution channels is fully to implement a build-to-order system. While dealerships might not become obsolete, the efficiency of the pull system will reduce their inventories and associated costs. Implementing a system similar to the Dell Direct model could mean significant cost reductions in the distribution and purchasing functions of firms in the industry.
SEE ALSO Ford Motor Company; General Motors
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Kaye Husbands Fealing
UAW (International Union, United Automobile, Aerospace and Agricultural Implement Workers of America)
UAW (International Union, United Automobile, Aerospace
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Web site: http://www.uaw.org
Private Company—Labor Union
Employees: 200 (est.)
Operating Revenues: $325 million (2003)
NAIC: 813930 Labor Unions and Similar Labor Organizations
The UAW (International Union, United Automobile, Aerospace and Agricultural Implement Workers of America) remains one of the most influential labor union in the United States, although its power has waned since its peak in the 1970s. The union now has about 700,000 active members belonging to more than 950 local unions, as well as over 500,000 retired members. The Detroit, Michigan-based organization negotiates contracts for its members and also offers them education and training programs. Over the course of its history, the UAW has won a number of contract concessions now taken for granted, such as employer-paid health insurance and cost-of-living allowances. In more recent years, however, as economic conditions have changed, the UAW has devoted much of it energy fighting a rearguard action to hold onto the gains achieved in previous decades, while learning how to adapt to life in a global economy. Long allied with the Democratic party, the UAW has always been a politically active organization, not just relating to economic issues but social issues as well, such as civil rights legislation, the Fair Housing act, Medicare and Medicaid legislation, the Occupational Safety and Health Act, and the Family and Medical Leave Act.
Rise of the Auto Industry in the Early 1900s
When the automobile industry began to establish itself in the early years of the 20th century, it relied mostly on craftsmen: cabinetmakers, upholsterers, molders, foundrymen, and others skilled in the metal and woodworking trades. Even as late as 1910, three out of every four autoworkers were skilled. However, as demand for cars increased, automakers were hard pressed to find skilled workers, resulting in escalating wages. In response, the manufacturers turned to labor-saving machinery that could be operated by semi-skilled or unskilled workers, who would accept lower wages than skilled employees. It was because of its location on the Great Lakes and accessibility by rail and road that Detroit became a magnet for automakers and workers alike. The city's skilled workers had long been members of strong craft unions, but automakers fought hard to make Detroit an open shop city, where unions had a difficult time taking root and collective bargaining was rare. Automation in car manufacturing reached a new level in 1913 when the Ford Motor Company introduced the continuously moving assembly line. As a result, an increasing number of autoworkers simply tended machines and could be trained to do their job within a week, sometimes in mere hours. By the mid-1920s, 85 percent of autoworkers were unskilled and easily replaced. Younger workers, many earning probationary rates, were preferred, since the assembly line could be speeded up as needed and what was now valued was strength and stamina not skill. Led by Henry Ford, automakers paid their workers more than other manufacturers, but this was mitigated by seasonal layoffs, so that during the 1920s autoworkers earned only slightly higher incomes than manual workers. Moreover, many were victimized by unscrupulous foremen, who had the power to hire and fire, resulting in a building resentment among workers that was to fuel militancy during the 1930s.
AFL Forms Autoworkers Union in the Mid-1930s
There were occasional attempts to form unions in the auto industry but they failed, solidifying Detroit's reputation as the "graveyard of organizers." The American Federation of Labor (AFL) tried twice during the 1920s to unionize autoworkers along craft lines rather than as a industrial union. The auto industry thrived in the late 1920s, but after the 1929 stock crash ushered in the Great Depression of the 1930s, demand for new cars plummeted leading to mass layoffs and creating fertile ground for labor unrest. A number of strikes broke out in Detroit in 1933, achieving little, but in June of that year the new Roosevelt administration passed the National Recovery Act, which included a provision that guaranteed workers the right to organize and bargain collectively, leading to increased efforts to organize autoworkers. The AFL continued to take a craft union approach to the auto industry, although unskilled production workers clearly had no trade. The AFL began signing up workers but it was not until August 1935 that it formed the United Automobile Workers union under its auspices. The organization was poorly led and ineffective, but that would change with the rising influence of one of its members, Walter Phillip Reuther, who would build and lead the UAW for decades and rise to the highest ranks in the labor movement.
Reuther was born in Wheeling, West Virginia, in 1906, the son of a German-born brewery-wagon driver who was a staunch trade unionist and Socialist. A high school dropout, Reuther, along with his brothers Roy and Victor, moved to Detroit in 1927, took a job at the Ford plant and became a supervising die maker. During the early 1930s, he became more of an activist, joining the Auto Workers Union, formed years earlier by the AFL and taken over by Communists in 1925 as part of their effort to organize Detroit. Reuther was laid off at Ford—in his mind, at least, because of his union activities—then in 1933 traveled to the Soviet Union, where he and Victor worked in the Gorki auto works, which needed workers experienced with the Ford equipment it had acquired. Reuther returned to the United States at a pivotal time in the labor movement: in 1935 Congress passed the Wagner Act which stated that if a majority of employees at a company voted to be represented by a union, then it became the bargaining agent for all. Although it would be another two years before the United States Supreme Court confirmed the Wagner Acts' constitutionality, labor organizers were given a shot in the arm. Later in 1935, Reuther attended the AFL convention in Atlantic City, where the organization remained conflicted over the industrial union issue. Reuther returned to New York, and despite having no job he procured a union card and in early 1936 became a member of small UAW Local 86, soon becoming its president. In April, he was a delegate at the UAW convention, where not only would the organization elect its first president, it would essentially declare its independence from the AFL. Reuther quickly established himself in the union and was elected to the general executive board.
As the president of the amalgamated Local 174, covering all of Detroit's west side, Reuther, aided by his brothers, began launching strikes against parts factories and assembly plants. Although he was not a major factor in the 1937 sit-down strike at Flint, Michigan, resulting in General Motors recognizing the UAW, his brothers were involved, and the Reuther name benefited from the victory and solidified his reputation. Of more importance to the building of his image was the "Battle of the Overpass" that took place on May 26, 1937. In front of the Ford River Rouge plant, Reuther and other UAW organizers, who had permits to distribute leaflets, were surrounded and severely beaten by a group of 40 Ford hirelings. A Detroit News photographer won a Pulitzer Prize for the pictures he took of the encounter, and the image of the bloodied Reuther only served to elevate his status. Although the UAW failed to organize Ford on this attempt, with the help of the surrounding controversy it succeeded in swelling its membership ranks to about 300,000 by the end of 1937.
However, even as the UAW was taking on the auto industry, it had to contend with internal conflict over who was going to control the union. In 1938, an uneasy coalition fell apart, resulting in a split, with UAW president Homer Martin a year later taking a splinter group into the AFL, leaving the rest of the union under the auspices of the Congress of Industrial Organizations (CIO). R.J. Thomas was installed as president, and he quickly appointed Reuther director of the General Motors Department, essentially a paper organization at the time.
Reuther took on GM at a weak point, concentrating on its tool and die makers, building on the successful strikes of more militant shops to build a walkout against all of GM's tool and die makers. Unable to retool for 1940 models, the company had no choice but to recognize the UAW as the bargaining agent for GM's tool and die makers, the first in a series of dominoes that were to fall. Next, GM production workers were brought into the fold, leading to other industry victories, with Ford finally capitulating in 1941. It was also during this period that the UAW began organizing aircraft workers, competing against the AFL's machinist union. Later, in the 1950s, the Farm Equipment Workers union would be brought into the fold, resulting in the present-day combination and the union's official name: The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America.
At the same time that he was becoming the automakers chief antagonist, Reuther was solidifying his power in the UAW. Finally, in 1946, he defeated Thomas in a tight election, then over the course of the next year gained control of the other national offices. He purged the organization of all opposition and entrenched himself in power, no doubt making enemies along the way. In April 1948, he survived an assassination attempt, suffering a shotgun wound that crippled his right arm. The crime was never solved.
The UAW's commitment to improve the lives of working men and women extends beyond our borders to encompass people around the globe.
Despite his sympathy with socialism, Reuther quit the Socialist Party in 1939, then in the 1940s became a leading member of the anti-Communist Left, purging Communists from the ranks of the UAW as well as the CIO. He supported Roosevelt's New Deal legislation, but it was not until Harry Truman's victory in 1948 that he finally embraced the Democratic party as labor's only viable champion in government. He and the UAW became a force in Democratic politics, leading to the union's pivotal role in electing John F. Kennedy to the presidency in 1960s and influencing civil rights and welfare legislation during Lyndon Johnson's "Great Society" initiative.
Post-World War II Victories
Pre-eminent among his abilities as a labor leader was Reuther's keen aptitude for collective bargaining. He developed the concept of "Pattern Bargaining," targeting one of the "Big Three" automakers for a strike and relying on the zeal of its competitors to take advantage of the situation to drive the company to the bargaining table. Once a deal was struck, it established a pattern and the other automakers fell in line. As a result, the UAW won a string of significant victories, resulting in higher wages and improved benefits. In 1948, a settlement with GM established the concept of an annual wage increase tied to a cost-of-living adjustment. A deal with Chrysler in 1950 brought with it employer-funded pensions, and in that same year medical insurance was granted by GM.
In addition to his role at the UAW, Reuther became president of the CIO in 1952 and was instrumental in finding common ground with the AFL, leading to the 1955 merger that resulted in the AFL-CIO. But the more progressive Reuther and conservative AFL-CIO president George Meany would eventually fall out during the 1960s. Reuther became disenchanted with the war in Vietnam, while Meany maintained loyal to the administration. Moreover, Reuther believed the labor movement was failing to stay current and not connecting with new reform moments, such as peace, minority rights, and the environment. The rupture between the two men culminated in 1968 when the UAW left the AFL-CIO, but no other unions followed its lead. The UAW would not return to the AFL-CIO until 1981.
Reuther and his wife were killed in a plane crash in 1970. He left his successor, Leonard Woodcock, in charge of one of America's strongest labor unions (along with the United Steel-workers of America). Woodcock remained loyal to Reuther's vision during the seven years he headed the UAW, and during his tenure the union reached its high water mark in a number of ways. Its last national strike, against Ford, took place in 1976, and membership peaked in 1979 around 1.5 million. Woodcock was replaced in 1977 by Douglas A. Fraser, considered the last of the 1930s firebrands that established the UAW. In addition to his challenges as a union leader, Fraser had to contend with issues beyond the control of the automakers. Earlier in the decade, the OPEC oil cartel rocked the United States economy with price increases. A second round of increases was launched in 1978, leading to a greater demand on the part of auto buyers for Japanese imports and a significant drop-off in the sale of U.S.-made cars. The UAW joined forces with the Big Three to fend off the Japanese threat and offered wage concessions to improve competitiveness. Fraser even took a set on Chrysler's board of directors, ostensibly to serve as a watchdog, but when Chrysler cut employment by 57,000, closing ten plants, the UAW was complicit in the decisions, and the locals had no choice but to capitulate. The UAW was not alone in experiencing a decline in power. The steel industry and its workers were devastated by cheap steel imported or produced by the new domestic mini-mills. Arguably, the recession of 1981 to 1982 brought a close to the golden era of the U.S. labor movement. After President Ronald Reagan hired replacement air traffic controllers, all unions became hard pressed to keep the gains they had made during the previous decades, let alone attempt to secure better terms from employers.
- The United Automobile Workers (UAW) is formed by American Federation of Labor.
- General Motors recognizes the UAW.
- Walter Reuther is named president of the union.
- The UAW wins pension and medical insurance benefits.
- The UAW leaves the AFL-CIO.
- Reuther dies in an airplane accident.
- Membership peaks around 1.5 million.
- Canadian autoworkers secede from the UAW.
- Stephen P. Yokich is named president.
- Membership increases for first time in ten years.
- Ronald A. Gettelfinger is named president.
Fraser, who retired, was replaced as the UAW's president in 1983 by Owen F. Bieber, more an administrator than a visionary. He maintained that because the Big Three were rebounding, the union would no longer agree to givebacks. He was also committed to organizing the Japanese auto plants cropping up in the Southeast, but these efforts ended in failure. In addition, under his watch the Canadian section of the union, angry over concessions made to the Big Three, seceded from the UAW in 1985. As a result of the split, automakers would now be able to threaten the union with moving jobs to Canada, where labor costs were cheaper. Many U.S. members were also displeased with their leadership's non-adversarial approach, resulting in the rise of a dissident faction under the New Directions banner. Nevertheless, Bieber retained his post until his retirement in 1995. He was replaced by a more truculent president, Stephen P. Yokich, a third generation UAW member, who first "walked" a picket line at the age of 22 months in a stroller pushed by his mother, a GM worker. In 1989, he was put in charge of relations with GM and was successful in launching strikes against parts-making and car assembly plants that resulted in GM meeting the union's demands. At the same time, he proved to automakers that behind the scenes he was willing to cooperate to help employers become more efficient and thus more competitive. One of his greatest challenges was in the auto-parts sector, where the union had experienced its greatest loss of membership in recent years. During the late 1970s, close to 70 percent of auto parts workers were UAW members, but that number had fallen to less than 25 percent. The independent auto-parts makers paid well below UAW scale, putting Big Three operations at a competitive disadvantage. In order to maintain wages and benefits with the Big Three, Yokich had to organize the suppliers, lest the Big Three simply opt to outsource the supply of auto parts. Under Yokich, the UAW also looked to restore some of its clout in the labor movement by merging with the International Association of Machinists and the United Steelworkers. The idea was floated in 1995 but in 1999 the Machinists dropped out and the merger with the Steelworkers, scheduled to occur in 2000, petered out as well.
Yokich enjoyed some success launching sudden local strikes, but again it was on ground determined by the automakers, as the union fought to hang onto earlier gains and stem the erosion of its membership. Although it enjoyed a bump in membership in 1999, the first increase in a decade, the ranks continued to thin. Moreover, younger members were less active in the union. Unlike previous generations that were determined to hold onto a good-paying job for life, new blue collar workers shared a similar attitude of many white collar workers, who periodically changed jobs to advance their careers. The new generation of autoworkers all but assumed that high-paying jobs would eventually go overseas and took steps, or at least expected, to eventually move into a new career.
Following Yokich's retirement in 2002, Ronald A. Gettelfinger was elected the UAW's president. Not only did he have to contend with outsourcing and technological efficiencies that eliminated jobs, but he was also confronted with the UAW's continued inability to organize foreign-operated auto plants. Gettelfinger soon proved, however, that he was a worthy adversary for automakers. Like Reuther before him, he zeroed in on a weakness, in this case automaker's increasing dependence on just-in-time ordering of parts. He launched sudden two-day strikes against factories that made interior parts for some of General Motors and Chrysler's most popular vehicles. The workers lost little in the way of income, while the automakers were forced to shut down production on bestselling SUVs Chevy Trailblazer and Jeep Liberty. The automakers then applied pressure on their suppliers to come to terms with the UAW. The master plan was to reunionize the parts sector. At the same time, Gettelfinger proved willing to adapt to changing times and eschew traditional bargaining techniques. In 2003, rather than singling out one of the Big Three in an attempt at pattern bargaining, he worked out an agreement with all three automakers simultaneously. This move was indicative that both management and labor were feeling competitive pressures. From the union's point of view, a quick and peaceful settlement might give it a better chance at finally organizing the U.S. operations of foreign auto makers.
The effort to revitalize the UAW was complicated by the George W. Bush administration, and the Republican-majority National Labor Relations Board was far from sympathetic to its cause, especially after the UAW backed Senator John Kerry during the 2004 presidential election. The union's difficult situation was highlighted in 2004 by the adoption of cost-cutting measures, which included the cutting of its work force at headquarters and in regional offices by 15 percent, to be achieved by attrition. Although still a force not to be taken lightly in the U.S. auto industry, the UAW faced a challenging future succeeding in a global economy. For years the union had talked about operating transnationally, and now more than ever it appeared that the UAW would have to find a way to take its place on the world stage or face the prospect of receding into irrelevance.
Ball, Jeffrey, Lee Hawkins, Jr., and Sholnn Freeman, "Big Three, UAW Show Rare Unity," Wall Street Journal, September 8, 2003, p. A2.
Barnard, John, Walter Reuther and the Rise of the Auto Workers, Boston: Little, Brown and Company, 1983, 236 p.
Bluestone, Irving, "Working-Class Hero—Walter Reuther," Time, December 7, 1998, p. 157.
Bradsher, Keith, "U.A.W. Is Just Trying to Hold Its Ground with Detroit," New York Times, September 13, 1996, p. D1.
Burkins, Glenn, "Picket Line's Next Generation Shows UAW Weakness, Problems," Wall Street Journal, June 26, 1998, p. B1.
Davis, Bob, Neal Templin, and Brandon Mitchener, Wall Street Journal, March 25, 1996, p. A11.
Lichtenstein, Nelson, The Most Dangerous Man in Detroit: Walter Reuther and the Fate of American Labor, New York: BasicBooks, 1995, 575 p.
Lowell, Jon, "Hard Times for the UAW," Ward's Auto World, September 1985, p. 67.
Muller, Joann, "Has the UAW Found a Better Road?," BusinessWeek, July 15, 2002, p. 108.
AUTOMOBILE INDUSTRY became the world's largest form of manufacturing by the middle of the twentieth century, making more money and employing more people than any other industry. In the United States, the automobile industry changed how business was conducted and how Americans lived; automobiles were more popular in America than anywhere else in the world.
Origins of the Industry
It was in America that the first three important steps toward automobile manufacture were taken, two of them by Oliver Evans of Philadelphia. During the last two decades of the 1700s, he created an automated flourmill. It took in unprocessed grain and used conveyor belts and screws to transport the grain from step to step, through chaffing, grinding, and packaging, without human intervention. The mill was powered by a steam engine. Evans had not quite invented the assembly line Henry Ford would later use to change how the world manufactured almost everything, but the basic ideas were present: stations for each step in the flour-making process and machines doing the physically strenuous work.
Evans's other significant contribution was the world's first amphibious, fully functioning automobile. In 1805, he completed work on a machine that could be stored on land, driven to the shoreline, and then paddled through the water. It was a dredge for keeping waterways clear. With its steam engine chugging away, Evans' automobile made a great deal of noise as it was driven down to the docks on four large wheels. Once in the water with the paddle wheel attached, the machine could paddle about for several hours. It was the first clear demonstration that a mechanically powered transport could function for hours at a time without falling apart and do practical work.
The other important American in the history of the automobile from Evans's day was Eli Whitney of Connecticut. He developed the concept of interchangeable parts and showed that the concept could be put to practical use: in 1798, he was contracted by the United States government to produce 10,000 muskets that would be identical to each other.
In the 1830s, Charles Goodyear discovered that sulphur mixed with boiling natural rubber created a material that was not prone to melting under friction; this breakthrough would lead to the tires that automobiles would use. In 1832, Walter Hancock of Britain made a steam carriage for personal use. His ideas would quickly evolve into busses that ran regular routes in England, but the English government would outlaw most uses of mechanical power for transportation, dropping England out of the competition for producing practical automobiles.
In 1860, in France, Étienne Lenoir invented a rival to the steam engine, the first practical internal combustion engine. Its advantage over the steam engine was its compactness: it was smaller and lighter. The German engineer Nikolaus Otto refined the internal combustion engine, making it more powerful and more efficient. In 1876, he introduced his four-stroke-cycle compression engine. A compression engine mixes air and fuel, draws the mixture into a chamber, a piston compresses it, and then it is ignited by a spark.
Otto's engine would become the foundation for most internal combustion engines. Almost immediately, it was put to use in automobiles. In some, it generated electricity rather than powering a drive shaft; the electric cars needed no gearshifts and gained or lost power smoothly when in use. These electric cars would be competitive with automobiles with direct drives into the 1920s. Another German, Wilhelm Maybach, invented the carburetor that, by squirting a spray of fuel into air to form the mixture the piston would compress, made possible the use of gasoline in Otto's engine.
In 1879, New Yorker George Baldwin Selden applied for a patent for what he called a "road locomotive." It was the frame of a buckboard with a compression engine underneath the front seat, above the front axel. Selden quickly discovered that the technology of the time needed to catch up to him; the tools for manufacturing his machine were not in general use, so he delayed the patent process until he had financial backing and a market for his device. He and his backers claimed the patent rights to every motor vehicle that used a compression engine, and they made millions of dollars from the manufacturers of cars until they pushed Henry Ford too hard; he took them to court and won in January 1911, breaking their monopoly.
In 1894, the French firm Panhard and Levassor produced an automobile with a V-engine, a water-cooling system, a gearshift transmission, springs under the passengers to cushion the ride, and brakes fitted to wheel hubs. This state-of-the-art automobile was crafted piece by piece, rather than with interchangeable parts, but it is the first automobile to pull together most of the major ingredients of the modern automobile. In 1899, a visionary American, Ransom E. Olds, made the necessary leap of thought to the idea of using interchangeable parts for the purpose of producing automobiles for the masses and soon out produced every other automobile manufacturer in the world; in 1901, he produced the Oldsmobile. Elsewhere in 1899, Henry Ford helped form the Detroit Automobile company. Ford had an idea for a simple-to-maintain automobile that would appeal to farmers. His first effort was taken over by his financial backers, becoming Cadillac. In 1903, Buick Motor Company was founded in Flint, Michigan, while Ford formed the Ford Motor Company in Detroit, Michigan.
Henry Ford and Mass Production
Henry Ford did not invent the automobile, but he did coin the phrase "mass production," and he found a way to excel beyond Olds' efforts by creating a process whereby goods could be made so fast, and in such great quantities, that they could be sold for a tiny profit and still earn millions for their manufacturer. In 1903, he produced his first Model A (there was another in 1927). He tried new designs, working up the alphabet until he reached T in 1908. In 1908, he tried reorganizing his factory; it took twelve-and-a-half hours to produce one car, and he realized that he had just about reached the limit for speeds using old, craftsman techniques of fitting parts to automobiles. His ambition was to sell a car to every American home, and he needed to speed up the process of production. Two of his innovations began the mass-production revolution.
One had to do with small parts. At the time, automobile manufacturers used wood for many of their parts because steel was so soft it would warp when heated during the manufacturing process. It took workers many hours to hammer such parts back into shape and to file them until they fit each other. Ford took advantage of a new kind of steel that was hardened during production and therefore would not warp during the manufacturing of an automobile or while the automobile was in use. Ford combined this development with manufacturing-to-gauge: that is, he assigned an exact set of specifications for every part, and all the parts were to be made exactly to those specifications so they did not need to be hammered or filed to fit a particular car; the idea was that if the parts of cars were all mixed together, workers would be able to build the cars while randomly selecting their pieces. Ford was obsessed with manufacturing-to-gauge, and brought his zeal to the work floor of his factory.
With parts made of hardened steel that were universally interchangeable, he was able to effect his other great innovation. He had chassis of his automobiles hitched to ropes and towed the length of his factory. Workers would walk alongside the chassis to piles of parts; each pile was a station where the chassis would stop and the workers would add the parts. In 1908, this dropped the production time for a single automobile to under six hours, and his company became the world's largest annual producer of cars.
The Model T became popular. At a little over 900 dollars, it was within the financial reach of middle-class Americans. Even so, Ford wanted the car to be within reach of anyone earning a living wage; this meant faster production and lower overhead. In 1913, he introduced the assembly line, as it would be known even into the twenty-first century. Instead of having workers move to piles of parts, he had the parts moved to them; each station had a worker or a small team of workers who performed one function over and over throughout their long work day. The time to produce one Model T dropped to one-and-a-half hours. In 1914, the price for one Model T dropped to 490 dollars and Ford produced forty-five percent of America's automobiles.
Ford's business practices were considered insane by most manufacturers: in 1915, he shook the manufacturing
world. He promised customers that if he sold 300,000 Model Ts during the year he would send each purchaser a rebate; when sales exceeded 300,000 he rebated fifty dollars per car. More disturbing to other companies was his doubling the minimum wage of his workers from $2.50 a day to $5.00 a day. It became possible for a Ford worker who stayed on the job for several years to own his own home and automobile and to build a sizeable savings. Ford would go on to advocate shorter working hours and fewer work days, because, he said, mass production enabled a company to meet all of its market demands with shorter work times; in the 1930s, he advocated a thirty-hour work week. In 1917, he bought out his stockholders for $105,250,000, and then he could experiment even more.
He did what he did partly out of idealism and partly because of his memories of being young and poor. Further, he wanted to build worker loyalty; he wanted his workers to have jobs for life with his company. In addition, he wanted to build brand loyalty; he wanted his customers to remember that Ford gave them a fair deal. Not all of his efforts worked. His implementation of the assembly line changed how workers viewed their jobs. No longer craftsmen who would learn how everything in the factory worked, Ford's workers learned only about the function of their specific work stations; status came not from skill but from seniority, and status was not rewarded with increasing responsibilities for the manufacturing process but by moving to the work stations that required the least amount of physical effort. Workers became more like interchangeable parts of the manufacturing process. When Dodge began production in 1915, the lesson became clear: assembly-line workers could easily move to another factory and stand at workstations doing what they had done before. There was another dark side to Ford's achievements: while long-term workers benefited from their loyalty to Ford, on average, a worker lasted three months on the assembly line. The tedium was over-whelming; assembly lines were dangerous and losing limbs was a risk workers took; what came to be known as repetitive motion injuries could cripple workers. Automobile manufacturers managed to cover up many of these problems well into the 1920s, but they were a constant tax on production.
By 1920, the automobile industry was shaking down to a small number of competitors. A recession in 1921 caught small manufacturers without enough cash on hand to operate their factories. During the 1920s, the big two manufacturers were Ford and General Motors (GM), with a young Chrysler Motor Corporation, established in 1925, gaining ground. In 1920, the luxury car maker Dusenberg introduced four-wheel brakes and a straight-eight engine. In 1924, Hudson introduced an enclosed sedan as a standard release, costing the same as its open car, $895.00. Further, ethylene glycol antifreeze was invented. These two innovations meant that manufacturers could produce all-weather cars that could withstand cold and shelter their drivers.
In 1925, the last strong challenge to the internal combustion engine ended when the versatile Stanley Steamer ceased being manufactured. Journalists had been predicting the "saturation" of the automobile market for over a decade, claiming automobile sales had to decline once everyone who wanted a car had a car; they had long been wrong. In 1925, Alfred P. Sloan, Jr., who ran GM, suggested that the time was coming when the saturation of the market would have to be dealt with, and he suggested what would later be called "planned obsolescence" as the solution. Change the style every year to make older styles seem out of date. By 1927, GM's Chevrolet division was outselling Ford. Meanwhile, Chrysler bought out Dodge and in 1928, launched Plymouth and De Soto.
It was in 1928 that automakers began to make planned obsolescence a reality, but in the early 1930s, the industry was hit hard by the Great Depression. From 1931 to 1932, nine thousand auto dealerships went out of business, although neither Ford nor GM lost even one. Because of its virtues of being inexpensive and durable, the Ford Model A, introduced in 1927, helped Ford re-take its lead in sales in a much diminished market. In 1933, Chrysler introduced aerodynamic designing, but its futuristic offering did not fit public tastes in hard times.
Unionization hit the industry in the 1930s. Ford was outraged, viewing his workers as ungrateful, but his reaction was mild compared to the violence GM used to discourage unionization of its plants. Even so, the major automakers eventually signed collective bargaining agreements with the United Auto Workers. In 1942, the automotive industry almost came to a stop because the United States had entered World War II. The government ordered the automobile companies to produce war supplies, and this they did. The Ford Motor Company had been taken over by Henry Ford II, grandson of the founder, and he was beginning to reshape the company in 1941. During the war, Ford applied its mass production principles to manufacturing heavy bombers. By the end of the war, it was producing a B-24 bomber every sixty-three minutes. To GM fell the manufacturing of tanks. The GM management rethought their manufacturing process, introducing teams of workers who ran their work stations and a new whole chassis welding process that encouraged workers to be their own quality managers.
In 1945, Henry Kaiser founded Kaiser-Frazer Corporation and began manufacturing innovative automobiles. In 1954, Nash and Hudson merged to form American Motors. The big three in automobile production were GM, first, Chrysler, second, and Ford, third. At the time, about seventeen percent of American-made automobiles were sold in foreign countries. Ford was especially well positioned for sales in Europe with factories in England and elsewhere on the continent. The "Big Three" did not seem to care about what was happening in Japan during the 1950s.
The Japanese were listening to American management consultant W. Edwards Deming, who told them they should produce high-quality, durable products, and stand behind their quality with warranties in order to sell their wares internationally. Not all Japanese manufacturers believed Deming, but some invested everything they had into Deming's ideas. One such company was Toyota, who developed the "Toyota Production System." They encouraged worker suggestions for improving products as well as procedures and they created teams of workers who were responsible for the quality of their workstations' performances, which they called kaizen. During the 1950s and 1960s, planned obsolescence governed the American auto industry; the fiasco in 1957 of the Ford Easel came about in part because it was not at all innovative in performance or design.
Meanwhile, the world and Americans were changing fast. By the end of the 1960s, people who had never been in a coalmine were dying of black lung disease in polluted cities such as New York and Los Angeles. In the early 1970s, the United States Congress mandated cleaner burning automobile engines and set standards for automobile safety. The Japanese were ready with cars that met the standards; the Americans were not. Then in 1973, the Organization of Petroleum Exporting Countries (OPEC) cut back steeply on exports, gasoline prices rose steeply, and Americans had to wait in long lines at gas stations because of gasoline shortages. Since the 1920s, automobile manufacturers knew that Americans preferred big cars over small ones. A forty-miles-per-gallon automobile, the Crassly Hotshot, had been produced in the 1940s but had disappeared because of poor sales. In the 1970s, Americans wanted small, gas efficient cars. The Japanese had them.
In 1977, more American automobiles were recalled because of faulty parts or construction than were actually built during the year. In 1979, Chrysler almost went bankrupt, and only earnest pleas for help from charismatic company president Lee Iacocca won the federal loan guarantees the company needed in order to continue operations.
Meeting the Japanese Challenge
In 1980, America's automakers lost 1.8 billion dollars. In 1980, Japanese automobiles outsold American automobiles worldwide for the first time. Yet, in that year, American automobile companies invested seventy billion dollars to reconstruct their plants. They were putting computers into their cars to manage fuel, the shifting of gears, and other aspects of cars, to make driving them more efficient and with less wear and tear. The Texaco Controlled-Combustion System, invented in the 1940s, allowed automobiles to burn almost any fuel efficiently, and engines that ran on methanol, coal dust, and natural gas were created.
Meanwhile, Japanese manufacturers ran into problems. The most important one was their dependence on foreign imports of raw materials. Another problem was the saturation level: they were running out of markets for their small cars, and without high volume sales, it was hard to earn profits making them. Thus, Japanese manufacturers began to shift toward making more expensive large automobiles with luxury features; they could make a higher profit per car for the large ones than for the smaller ones. Further, the Japanese yen had been strong against the American dollar for many years, helping make Japanese cars cheaper than American ones. By 1985, the yen had dropped against the dollar, adding two thousand dollars to the price of a Japanese automobile in America.
In 1987, Chrysler bought out American Motors and showed its renewed financial strength by paying back its loans early. GM showed that there was still life in the idea of worker participation in quality management by beginning, in June 1982 (but publicly announced in 1983), a new car division for the Saturn, the first of which was manufactured 15 September 1984. The car depended on its reputation for high quality to succeed in the American market. In Japan, automobile manufacturers depended heavily on robots to man their workstations, whereas American companies did not. What seemed to make economic sense in the 1980s, proved a money pit for the Japanese. They discovered that while they saved money from laying off workers who were replaced by robots, they were spending extra money on the people who maintained the robots and programmed the robots' computers. Plus, kaizen was disappearing as the workers who could have made constructive suggestions were laid off. The result was that by 1995, American automobile makers regained their dominant position in the marketplace.
"The Arsenals of Progress." The Economist (US) 330, no. 7853 (5 March 1994): M5–7.
De Camp, L. Sprague, and Catherine C. De Camp. The Story of Science in America. New York: Charles Scribner's Sons, 1967.
Grove, Noel. "Swing Low, Sweet Chariot!: The Automobile and the American Way." National Geographic (June 1983): 2–35.
Hapgood, Fred. "Keeping It Simple." Inc. 18, no. 4 (19 March 1996): 66–70.
Ingrassia, Paul J., and Joseph B. White. Comeback: The Fall and Rise of the American Automobile Industry. New York: Simon & Schuster, 1994.
Kerson, Roger. "Ending the Bends." Technology Review 89 (April 1986): 6.
Showalter, Williamm Joseph. "The Automobile Industry: An American Art That Has Revolutionized Methods of Manufacturing and Transformed Transportation." National Geographic 44, no. 4 (October 1923): 337–414.
Sloan, Alfred P., Jr. My Years with General Motors. New York: Doubleday, 1972.
Smith, Philip Hillyer. Wheels within Wheels: A Short History of American Motor Car Manufacturing. New York: Funk & Wagnalls, 1968. By someone who actually lived the history.
"Toyota's New Bombshell." World Press Review 42, no. 6 (June 1995): 33.
Womack, James P., Daniel T. Jones, and Daniel Roos. The Machine That Changed the World: How Japan's Secret Weapon in the Global Auto Wars Will Revolutionize Western Industry. New York: Maxwell Macmillan International, 1990.
See alsoAir Pollution ; Assembly Line ; Ford Motor Company ; General Motors ; Mass Production ; Steam Power and Engines ; United Automobile Workers of America ; andvol. 9:Ford Men Beat and Rout Lewis .
Few industries have had a larger impact on the U.S. economy as the automobile industry. The development of the motor vehicle brought significant changes in twentieth century U.S. culture and society. The auto industry provided progressively easier and faster travelling and shipping and it spurred the development of elaborate highway systems linking cities and states. It also stimulated the creation of suburbs around major cities. The average person could now afford to travel easily from city to city and to commute to work from an outlying area. Owning an automobile became an indicator of financial success; some type of vehicle was within the reach of all but the poorest citizens. Autos were also one of the first products available for purchase on a payment plan, a financial arrangement that became a marketing mainstay of the U.S. economy. In the cities buses allowed large numbers of people to move easily from place to place at a low price. It also became commonplace to bus children to schools. The automobile also sparked the development of other industries such as petroleum and steel, as well as other support businesses such as gas stations, repair shops, and automobile dealerships. Emergency systems also depended on automobiles for getting people to hospitals and for putting out fires.
Not all of these improvements, however, met with success. For example, tractors and harvesters eventually became so sophisticated and expensive (including improvements that made the work less onerous, like air conditioning and tape players) that it ran many farmers out of business. In general, farm implement technology based on internal combustion reduced the overall cost of harvesting crops such as corn or wheat by using machinery that did the work of several farmers in a fraction of the time. This, however, drove farm families off of their small farms and into the city.
The development of the automobile in the late nineteenth century had its foundations in the invention of the steam engine a century earlier. By the middle of the nineteenth century certain types of farm equipment had utilized the steam engine as a source of propulsion. Inventor Sylvester H. Roper developed and tested several steam carriages, which were shown in the East and the Midwest. In addition to the steam engine, other inventors tested electric and gasoline powered engines. Frank and Charles Duryea tested a gasoline-powered wagon in 1893. The development of these vehicles grew out of the carriage industries. Many bicycle companies also became involved in this process of improving automotive technology by providing parts such as ball bearings, wheels, and tires.
By the early part of the twentieth century, the gasoline internal combustion engine became the favorite choice for providing power to carriages, especially after the 1912 Cadillac combined the engine with the ease of an electric self starter. While electric and steam-powered motor vehicles remained popular for a while longer in the East, the Midwest became the home for many of the producers of gasoline powered autos. Ranson E. Olds (1864–1950) of Lansing, Michigan, switched from steam engines to the gasoline engine by the late 1890s, building the first in 1896. Production of his cars was limited until 1899, when Olds Motor Works was formed, a company that eventually became known as General Motors' Oldsmobile Division. Olds expanded production and in 1904 about 5000 were assembled, an impressive feat for the time. Many Olds employees, machinists and parts suppliers eventually left to form their own companies, such as Maxwell, the Reo Company, Hudson, Cadillac, and Dodge.
By 1903 the Ford Motor Company emerged as a rival to Olds by creating a sturdy but low-priced car which became very popular. The Model T, sold from 1908 through 1927, became one of the most famous cars of all time. With Ford's utilization of the moving assembly line, (c 1913–1914,) automobile yearly production soared to numbers in the millions by the 1920s.
World War I (1914–1918) caused a shortage in the materials used to produce automobiles, but production resumed in full as soon as the war ended. However, the bottom fell out of the automobile market as the country entered a depression era (1920–1923). Many independent or smaller automobile companies went out of business. Larger companies struggled as well. Maxwell and Chalmers became part of a new company named Chrysler Corporation in 1925. In 1928 the Dodge Company also became a part of Chrysler. By the late 1920s most smaller companies had either disappeared or had been absorbed into one of the three major companies: Ford, General Motors, and Chrysler, known as The Big Three. General Motors, a leader of the industry during this time, developed some very successful managerial and marketing strategies, such as improvements in offering consumers installment credit, producing models in various price ranges that encouraged car owners to trade in for a more expensive model, and changing car designs yearly. Ford fell behind by holding on to the Model T until it had been long outdated; the company continued to struggle until the 1950s. Chrysler remained a strong second place to General Motors throughout the 1930s.
In the later 1930s automobile workers—both skilled and unskilled workers—turned to unions to protect their jobs. By the early 1940s the industry was fully unionized, but not without several violent confrontations. From 1937 to 1941 a bitter war of sorts was waged between the Ford Motor Company and the United Auto Workers. Several acts of violence occurred, fostering the animosity between auto workers and the large corporations.
During World War II (1939–1945) automotive factories were put to use producing vehicles, airplanes, airplane engines, and other related items for use in the war. At the end of the war consumer production was again booming as buyers replaced their aging autos. The Big Three continued to dominate automobile production throughout the mid-twentieth century. During the 1960s and 1970s laws were passed to improve safety, including the requirement of seat belts and a reduction in allowable automobile emissions. Fuel efficiency soon became an important issue because of the jump in gasoline prices in the mid-1970s. The automotive industry tried to break its habit of producing big cars and turned to the design and manufacture of smaller "economy" cars.
By the late 1950s foreign automobile manufacturers began to export cars such as Volkswagens, Hondas, Toyotas, and Datsuns. These cars became popular because of their efficient fuel consumption, contemporary design, and quality of construction. They soon became a threat to U.S. manufacturers. By 1980 Japan had become the primary producer of automobiles for the entire world. U.S. auto makers rose to the challenge, revamping, restructuring, modernizing, "downsizing" and even giving concessions to the auto companies in the effort to protect jobs. The restructuring of the U.S. auto industry meant more machines and fewer workers, a prescription, which led to layoffs. Moreover, U.S. automobile companies bought into the foreign competition and thus became morally implicated in the erosion of the U.S. "middle class" standard of living.
The final decade of the twentieth century found the major automobile companies striving to please a demanding American consumer while asking for concessions from its unions and trying to compete with the foreign competition. New innovations included: the development and successful marketing of the sport utility vehicle (a lighter version of the truck that could be used both on and off the road), air conditioner coolant that would not pollute, and plans by General Motors to produce an electric car. At the end of the 1990s it remained to be seen whether these innovations would revitalize the U.S. automotive industry.
See also: Assembly Line, Walter Chrysler, Chrysler Corporation, Henry Ford, Ford Motor Company, General Motors, Model T, Alfred Sloan, United Auto Workers
Compton's Encyclopedia and Fact Index, Ani-Az. Chicago: Compton's Learning Co., 1985, s.v. "Automobile Industry."
Encyclopedia of American Business History and Biography. New York: Bruccoli Clark Layman, 1990, s.v. "The Automotive Industry, 1896–1920."
Encyclopedia of American Business History and Biography. New York: Bruccoli Clark Layman, 1989, s.v. "The Automotive Industry, 1920–1980."
Foner, Eric, and John A. Garraty, eds. The Reader's Companion to American History. Boston: Houghton Mifflin Co., 1991, s.v. "Automobiles."
Hillstrom, Kevin, ed. Encyclopedia of American Industries, Volume 1: Manufacturing Industries. New York: Gale Research, Inc.
Johnston, James D. Driving America: Your Car, Your Government, Your Choice. Washington, D.C.: AEI Press, 1997.
Scharchburg, Richard P. Carriages Without Horses: J. Frank Duryea and the Birth of the American Automobile Industry. Warrendale, PA: Society of Automotive Engineers, 1993.
St. Clair, David James. The Motorization of American Cities. New York: Praeger, 1986.
Wolf, Winfried. Car Mania: A Critical History of Transport. Chicago, IL: Pluto Press, 1996.
Motor vehicles first arrived in Buenos Aires in 1889, and in 1916 Ford Motor Company established assembly operations in Argentina. While Ford's move marked the beginning of automobile production in Latin America, several North American automakers already maintained distribution networks in major countries there. Throughout the first half of the twentieth century, U.S. firms, eager to supplement slowing domestic growth, dominated the Latin American auto trade. Most began by distributing U.S.-built vehicles; some, such as Chrysler and Kaiser, proceeded to authorize licensing agreements, enabling local manufacturers to assemble their vehicles, while others, including General Motors, established subsidiary operations to assemble vehicles. In either case, early assembly operations were small-scale, designed to build vehicles from complete knockdown kits (CKDs) imported from the United States. The CKDs included virtually all the sheet metal and subassemblies required to produce a vehicle. Following Ford's lead, General Motors built an assembly plant in Brazil in 1925, and before long most of Detroit's major automakers had established assembly operations in the Mexico City area. Auto production stagnated during the Great Depression and World War II, however, and locally built vehicles remained a small portion of vehicles sold in Latin America. Vehicle shortages during the war prompted Latin American governments to end their dependence on imported vehicles, and resultant policies effected a resurgence in the industry. Thereafter, auto manufacturing expanded. In 1992 Brazil and Mexico produced 1.1 million vehicles each, as opposed to 9.7 million units in the United States. The prevalence of automobiles in Latin America still lags behind other industrialized nations, however. In the United States, for example, there was one vehicle for every 1.6 people in 1990; in Mexico, that ratio dropped to one for every 8.9, while in Brazil there was only one vehicle for every 12 people. Brazil and Mexico emerged as dominant producer nations, while Argentina, Chile, Peru, Colombia, and Venezuela played much smaller roles.
After 1945, governments in Brazil, Mexico, Argentina, and Chile supported the development of the automotive industry in order to end dependence on imported vehicles and to increase employment. They encouraged foreign investment, granted tax incentives to heavy industry, and levied high tariffs on imported finished vehicles while maintaining duty-free status for CKDs. Some imposed outright bans on imported vehicles. The incentives, coupled with a car-starved market, resulted in an influx of European manufacturers and renewed growth. During the 1950s, Córdoba, Argentina, became an important automotive center and was home to Fiat and Kaiser assembly plants. Argentina's inducements also attracted General Motors and Rambler. Córdoba became known for its militant labor force, which commanded higher wages; since labor costs in Brazil were lower, Volkswagen constructed its plant in São Paulo, and both General Motors and Ford chose Brazil for future expansion. In Mexico, no fewer than eleven auto firms were represented. By the late 1950s, more than twenty major European, North American, and Japanese manufacturers assembled imported components—far too many entrants to achieve efficiency in such a small market.
Governments realized that the goal of substituting domestic for foreign vehicles needed refinement: manufacturers were unable to achieve the economies of scale necessary to control costs and produce quality products at affordable prices. Since all major producers were foreign-owned and managed, the importation of the components of their vehicles created a drain on foreign exchange. Brazil took the first step by initiating content restrictions, which stipulated that an increasing portion of a vehicle's content must be locally produced. Argentina followed suit in 1958, and in 1960 Mexico not only enacted local-content laws but also rationalized the number of its auto manufacturers. Content laws challenged automakers in two ways: first, they became increasingly responsible for building a complex vehicle, not just a kit; second, they were now subject to the vagaries of local-parts supply, inflation, and infrastructure problems.
Prices of domestically produced vehicles were substantially higher than in Europe or North America owing to production inefficiencies, higher material and financing costs, and taxes. Latin America's markets languished. The large and rapidly growing market sought by the manufacturers remained limited by low incomes. During the 1970s governments and manufacturers began to look beyond domestic markets. They sought to capitalize on the region's low labor costs and believed increased export volume would both lower prices for the domestic market and alleviate trade imbalances. Despite major worldwide economic recessions in the 1970s and the 1980s and spiraling inflation, which eroded cost advantages, the Latin American automobile industry, particularly that of Mexico, reached new production records. While trade barriers and lackluster economies throughout the world have softened demand for new vehicles, the Latin American automobile industry is as vital as ever.
South America's Mercosur Trade Agreement and the North American Free Trade Agreement (NAFTA) have stimulated exports by further eliminating trade barriers between producing nations. Major international carmakers moved to Mexico's side of the border with the United States after the passage of NAFTA. In 2006, Mexico produced two million cars, a record number. Argentina's auto industry has had a difficult time adjusting to international competition and in the early twenty-first century has been restructuring. In Brazil, Renault, Honda, and Toyota set up factories in the 1990s, creating stiff competition there for the traditional industry leaders General Motors, Ford, and Volkswagen. This led to an extremely competitive market and Brazil became a major exporter to Europe and the rest of South America. As of 2007 Brazil still maintains tariffs that protect local auto production. This protection has become a contentious issue during the Doha Round of World Trade Organization (WTO) discussions and future agreements will probably require that Brazil at least lower duties on foreign auto imports.
See alsoMercosur; North American Free Trade Agreement.
Deebe Ferris, Ward's Automotive Yearbook (1962–1993).
Motor Vehicle Manufacturers Association of the U.S., Inc., Automobile Facts and Figures (1967–1992).
Jack N. Behrman, The Role of International Companies in Latin American Integration (1972).
Rhys Owen Jenkins, Dependent Industrialization in Latin America: The Automotive Industry in Argentina, Chile, and Mexico (1977), and Transnational Corporations and the Latin American Automobile Industry (1987).
Ian Roxborough, Unions and Politics in Mexico: The Case of the Automobile Industry (1984), pp. 45-46.
Richard S. Newfarmer, ed., Profits, Progress, and Poverty (1985), pp. 205-207, 225.
Bernhard Fischer et al., Capital-Intensive Industries in Newly Industrializing Countries: The Case of the Brazilian Automobile and Steel Industries (1988).
Arteaga García, Arnulfo. Integración productiva y relaciones laborales en la industria automotriz en México. Mexico City: Universidad Autónoma Metropolitana, Unidad Iztapalapa, Plaza y Valdés, 2003.
Brambilla, Irene. A Customs Union with Multinational Firms: The Automobile Market in Argentina and Brazil. Cambridge, MA: National Bureau of Economic Research, 2005.
Tuman, John Peter. Reshaping the North American Automobile Industry: Restructuring, Corporatism, and Union Democracy in Mexico. London and New York: Continuum, 2003.
Janet M. Plzak
United Automobile Workers of America
UNITED AUTOMOBILE WORKERS OF AMERICA
UNITED AUTOMOBILE WORKERS OF AMERICA (UAW) was the largest and most politically important
trade union during the heyday of the twentieth-century labor movement. Although the UAW held its first convention in 1935, its real founding took place the next year, when it became one of the key unions within the new Committee for Industrial Organization. After a dramatic, six-week sit-down strike at General Motors during the winter of 1937, the UAW won union recognition from that company, then the nation's largest corporation. Chrysler and numerous supplier plants followed within a few months, after which it took four difficult years to organize workers at the Ford Motor Company, an intransigent union foe. By 1943, the UAW had organized more than a million workers in the auto, aircraft, and agricultural equipment industries.
The UAW was a uniquely democratic and militant union for three reasons. First, under conditions of mass production, supervisors and unionists fought bitterly and continuously over the pace of production, the distribution of work, and the extent to which seniority would govern job security. Second, the UAW enrolled hundreds of thousands of Poles, Hungarians, Slavs, Italians, African Americans, and white Appalachian migrants for whom unionism represented a doorway to an engaged sense of American citizenship. Finally, the founders and officers of the UAW were a notably factional and ideological cohort, among which socialists, communists, Catholic corporatists, and Roosevelt liberals fought for power and office.
Homer Martin, who served as union president from 1936 until 1939, was a former Protestant minister whose maladroit leadership nearly wrecked the union during the sharp recession of 1938. He was followed by R. J. Thomas, who tried to straddle the rivalry that made the former socialist Walter Reuther and his "right wing" faction the bitter enemies of Secretary Treasurer George Addes and Vice President Richard Frankensteen and their communist supporters. Reuther won the union presidency in 1946, and his anticommunist caucus, which nevertheless embodied the radicalism of many shop militants and progressive unionists, took full control of the UAW the next year. Reuther served as president until 1970, when he died in an airplane crash.
During its first quarter century, the UAW established the template that defined much of modern U.S. unionism. In bargaining with the big three auto corporations, the union raised and equalized wages between plants, regions, and occupations. It established a grievance arbitration system that limited the foreman's right to hire, fire, and discipline, and it won for its members a wide array of health and pension "fringe benefits" when it became clear that the unions and their liberal allies could not expand the U.S. welfare state. The real income of automobile workers more than doubled between 1947 and 1973.
But the UAW was thwarted in many of its larger ambitions. During World War II, the union sought a role in administering the production effort and sharing power with corporate management. Immediately after the war, Reuther led a 113-day strike against General Motors not only to raise wages but also to pressure both that corporation and the administration of President Harry Truman to limit any subsequent rise in the price of cars, thus enhancing the purchasing power of all workers.
The defeat of the UAW on both of these issues paved the way for a midcentury accord with most of the big auto firms. The union abandoned most efforts to challenge management pricing or production prerogatives, in return for which the corporations guaranteed autoworkers a slow but steady increase in their real pay. But this industry–UAW accord was not peaceful. Individual UAW locals struck repeatedly to humanize working conditions and to defend unionists victimized by management. At the company wide level, both sides probed for advantage. Thus, long strikes occurred at Chrysler in 1950 and 1957, at Ford in 1955 and 1967, and at General Motors in 1964 and 1970.
Politically, the UAW was a liberal presence in national Democratic politics and in those states, such as Michigan, Missouri, Ohio, Illinois, New York, Iowa, California, and Indiana, where it had a large membership. Until 1948, many in the UAW leadership supported forming a labor-based third party, but after Truman's unexpected victory, the UAW sought a liberal "realignment" of the Democrats. The union pushed for aggressive Keynesian fiscal policies to lower unemployment, fought for an expanded welfare state, and favored détente with the Soviets. The UAW funded numerous civil rights activities in the 1960s, despite or perhaps because its role in Detroit municipal politics and in numerous auto and aircraft factories was an equivocal one on racial issues. The UAW did not break with President Lyndon Johnson over Vietnam. But it withdrew from the AFL-CIO from 1968 to 1981, because of what Reuther considered the conservative posture and stolid anticommunism of that union federation and of George Meany, its longtime president. In 1972 the UAW vigorously supported the presidential candidacy of George McGovern.
Until the late 1970s, UAW membership fluctuated between 1.2 and 1.5 million, but the back-to-back recessions of the late 1970s and the early 1980s combined with automation, the deunionization of the auto parts sector, and the closing of many older factories slashed UAW size to about 750,000. When Chrysler verged on bankruptcy in 1980 and 1981, the union agreed to a series of contract concessions that for the first time in forty years broke wage parity among the major auto firms. The UAW eventually reestablished the industry wage pattern and won employment guarantees for many of its remaining members, but the concession bargaining of the early 1980s spread rapidly across industrial America with devastating results for millions of workers.
After the mid-1980s, the UAW no longer played the "vanguard" role within the labor movement once hailed by Reuther. Until 1983 it was led by Leonard Woodcock and Douglas Fraser, both union pioneers and labor spokesmen of national stature. The UAW voice was more muted during the subsequent presidencies of Owen Beiber and Steven Yokich. The union cooperated with the auto industry to dilute government-mandated fuel efficiency standards and to stanch Japanese imports. But when foreign firms built assembly and parts plants in the United States, the union could not organize the workers. For more than a decade the UAW accommodated management efforts to deploy team production and employee involvement schemes, which often eroded work standards and eviscerated union consciousness. By the early twenty-first century the UAW was the nation's fifth largest union.
Boyle, Kevin. The UAW and the Heyday of American Liberalism,1945–1968. Ithaca, N.Y.: Cornell University Press, 1995.
Halpern, Martin. UAW Politics in the Cold War Era. Albany: State University of New York Press, 1988.
Jefferys, Steve. Management and Managed: Fifty Years of Crisis at Chrysler. New York: Cambridge University Press, 1986.
Lichtenstein, Nelson. The Most Dangerous Man in Detroit: Walter Reuther and the Fate of American Labor. New York: Basic Books, 1995.
Moody, Kim. Workers in a Lean World: Unions in the International Economy. London: Verso, 1997.
See alsoAmerican Federation of Labor–Congress of Industrial Organizations ; Automobile Industry ; Labor ; Sitdown Strikes ; Strikes andvol. 9:Ford Men Beat and Rout Lewis .
When industrialist Henry Ford (1863–1947) introduced his now-famous Model T automobile in 1908, he changed the lives of millions of Americans.
Ford did not invent the automobile; the Model T was not Ford's first car. His contribution to the automotive industry was designing a car that was so simple and affordable that the average American could own one. The Model T was that car. In 1908, more than ten thousand of them sold for $825 (the equivalent of about $19,000 in 2007 using the Consumer Price Index), each in the first year of production. Because of innovative production techniques that eventually included the moving assembly line, the price dropped to $575 (about $12,000 in 2007) within four years, and sales skyrocketed. By 1914, Ford owned 48 percent of the automobile market. His new car-manufacturing plant was turning out one Model T every ninety-three minutes. By 1927—years after the perfection of the assembly line—Ford was producing one car every twenty-four seconds. The price dropped to $300 (about $3,500 in 2007).
Ford made more than cars. He made it possible for Americans to live in the country and work in the city. For those who did not like city life, he allowed for the development of an entirely different lifestyle: the suburbs.
His innovations created jobs and allowed for mobility on a scale never before known. Suddenly, distances between loved ones did not seem so great, and families could visit relatives or take summer vacations. Tourism became a major American industry. Weekend jaunts to the country became a popular pastime, whereas before, the farthest one could hope to travel in one trip was fifteen miles or so. Horses pulling wagons or carriages could not be expected to go farther than that.
It can be argued that the introduction of Ford's economical Model T had the greatest effect on the lives of women. Where once their lives centered around the home, if for no other reason than that they had no
means of transportation at their disposal, they now could travel conveniently. Rural women could visit their neighbors miles away without having to leave an entire afternoon open for the walk or horse ride. They could shop at their local merchants or venture farther to stores where selection and price were more consumer friendly. The car made women more visible in towns and society in general, giving them an independence and power they had never had.
Thanks to affordable cars, more people could attend colleges and universities, and hospitals were now more accessible. More cars meant the development and maintenance of new roads and highways that connected one region to the next. By the 1950s, interstate highways were built, connecting one end of the country to the other.
America was not the only producer of automobiles, but World War II (1939–45) bombs had destroyed factories in Japan. Recovery was
The world of industry was forever changed in 1913, the year Henry Ford invented the assembly line. As is often the case with inventions, one might wonder why it took so long for anyone to come up with the idea of the assembly line. It is a logical way to build something.
Henry Ford was born July 30, 1863, in Michigan. Although he was born into a farming family, he showed an early interest in all things mechanical. He left home at the age of sixteen to work as an apprentice (student assistant) for a machinist in Detroit. In 1888, he married and supported his family by running a sawmill.
Ford took a job with the Edison Illuminating Company in Detroit in 1891. He began as an engineer and was promoted to chief engineer just two years later. During this time, he began spending his free hours experimenting with internal combustion engines. In 1896, he invented the Quadricycle. This vehicle had four large bicyclelike wheels, was steered with a system like that in a boat, and had two forward speeds.
Pleased with his progress, Ford established the Ford Motor Company in 1903. He was the company's vice president and chief engineer. Ford introduced the Model T car five years later. Only two or three cars were made each day at the Ford plant. Small groups of men would work on each car using components purchased from outside manufacturers. It was not an efficient way to build vehicles.
The Model T changed the way America lived. Ford's cars were selling faster than he could build them, so he moved his factory to a bigger plant in the Detroit suburb of Highland Park in 1910.
Ford was the first industrialist to manufacture interchangeable and standardized parts. He eventually made many models of automobiles, but many of the parts in each model were the same as those in other models. By making one part to fit all cars, Ford was able to lower the cost of his autos, thus making them more affordable for more consumers.
In keeping with that efficient spirit, Ford invented the assembly line. Workers stood in one place while a moving belt carried each car along. Every worker was responsible for incorporating one part onto the automobile. Parts were delivered to each worker by a carefully timed conveyor belt so that assembly was smooth and efficient. Again, this invention allowed Ford to lower the cost of his cars because it now took less time to assemble each one. Soon, he was the largest car manufacturer in the world.
slow, but Japan produced 1,070 passenger cars in 1949. Throughout the Korean War (1950–53), Japan served as a supply depot for United Nations troops—just as the major U.S. automakers had done during World War II. They manufactured trucks for them, and in addition, produced 1,594 cars in 1950. In 1955, automobile production increased to 20,220, still not enough to pose a threat to America.
Japanese automobile companies realized that most Asians could not afford vehicles, and if they wanted to stay in business, they would need to export. In 1957, Toyota sold 288 cars in the United States. The following year was better, with sales at 821. Nissan also chose to export and sold 1,131 cars and 179 trucks in 1959; another 1,294 cars and 346 trucks sold the following year. In the mid-1960s, Nissan and Toyota bought some of the smaller Japanese manufacturers, and Mitsubishi partnered with Isuzu.
Japanese autos were not the only exports to the United States; German cars, led by Volkswagen, outsold Japanese vehicles throughout the 1960s and into the 1970s. In fact, Volkswagen opened the first foreign-owned U.S. auto manufacturing plant in 1978 (and closed in 1987 due to increasing Japanese presence). Regardless of where the cars were made, all the exports were compact. America, meanwhile, continued to produce larger cars. This proved to be its downfall. When gas prices skyrocketed in 1973, Americans demanded more fuel-efficient cars. In 1975, 695,000 Japanese cars were sold in the United States, and sales only increased for the remainder of the decade. In 1980, Japan manufactured 7 million automobiles compared to 6.4 million produced by the United States. Nearly 2 million of those cars were exported, and for the first time, Japanese car production exceeded that of America and became the number one manufacturer in the entire world.
In the last decade of the twentieth century, automobile companies turned to innovation in hopes of revitalizing the market. Automakers developed the sport utility vehicle (SUV), a lighter type of truck that could be driven on and off the road. As the end of the first decade of the twenty-first century approached, high gas prices forced automakers to reduce SUV and truck production in favor of smaller, less gas-guzzling cars.
In 2006, Toyota continued to be the industry leader in manufacturing, followed by General Motors (once the largest U.S. corporation), Ford, Volkswagen, and Honda.
United Auto Workers
UNITED AUTO WORKERS
The United Auto Workers (UAW) was created in 1936 to protect the rights of workers in America's largest industry, automobile manufacturing. Unionizing auto workers was a formidable task. Management was staunchly anti-union, harassing workers suspected of union activity and even employing spies to report on employee activities. Workers were subjected to capricious firings and bullying from foremen, and could not appeal management decisions. Because the American Federation of Labor (AFL) was not concerned with the needs of unskilled workers, a group of radical labor leaders emerged to advocate for their rights. John L. Lewis (1880–1969) of the United Mine Workers, David Dubinsky (1892–1982) of the International Ladies' Garment Workers, and Sidney Hillman (1887–1946) of the Amalgamated Clothing Workers formed the Committee of Industrial Organization (CIO), a committee within the AFL. The CIO worked on organizing unskilled labor into huge industry-wide unions. The UAW, with Homer Martin as its first president, became the auto workers' union.
Workers, intimidated by management's hostility, were reluctant at first to join the UAW. They needed proof that the union could succeed against the biggest and most powerful industry in the country. To confront these industry giants, organizers adopted a new tactic. They staged sit-down strikes at several plants, forcing companies to stop production. This strategy was so damaging to business that the auto companies were finally forced to accept the union as labor's legitimate bargaining agent.
The recognition of the UAW was a landmark in the struggle for labor rights. It signaled the emergence of a new generation of labor leaders who were ready to push hard for the rights of unskilled labor. And workers responded enthusiastically. UAW membership rose from 98,000 in early 1937 to 400,000 by mid-year. During the 1930s and 1940s, the UAW fought for and obtained significant improvements for its members, especially under the leadership of Walter Reuther (1907–1970), who served as UAW president from 1946 to 1970. The union successfully bargained for such measures as cost-of-living adjustments, wage increases, and pensions. In 1955, auto workers won a guaranteed annual wage. At the same time, however, the UAW grew increasingly bureaucratized in the years after World War II (1939–1945). Abandoning its more democratic roots, the UAW became a fiercely authoritarian and anti-Communist organization. Power was concentrated within the central administration, the autonomy of local chapters destroyed, and accusations or patronage abounded. Though the UAW continued to win concrete labor benefits, it imposed contracts on membership without their input and stifled internal debate. By the 1960s, workers grew increasingly alienated from the union, which had not brought a national strike against General Motors since 1945–1946. When disgruntled workers finally staged wildcat strikes in 1970, UAW officials broke up picket lines to force strikers back to work.
By the 1990s the UAW had modified many of its positions. Though power was still centrally concentrated, the UAW at the end of the twentieth century was one of the most democratic unions in the United States. Unlike many unions, such as the Teamsters, the UAW has been relatively free of corruption charges and maintains a good reputation for its efforts.
See also: Automobile Industry, Labor Movement, Labor Unionism, Sit-Down Strikes