The End of Detroit (37 page)

POLITICS

In the past, Detroit companies have never hesitated to turn to the political arena when they needed help to compete. Here they have a weapon that the imports cannot wield. What role could the United Auto Workers play, either in a protectionist political debate or in helping the Big Three companies return to prosperity? No matter how powerful the UAW has always been in Democratic politics, it has little say these days in the nation’s capital, dominated as it is by the Republicans. “Obviously, we do not have a lot of friends in Washington to help us,” said Ron Gettelfinger, the UAW’s president. Some would say that the UAW hasn’t been much of a friend to the Big Three, either. But to blame the union alone for what’s happened to the Detroit companies is just plain wrong. Detroit’s problems haven’t been caused only by the fact that its workers are unionized and those at the transplants are not. There are two signatures on every union contract—one from the UAW, the other from the auto companies.

The work rules, wages and benefits at the Detroit companies weren’t imposed on them—they were agreed to. Nobody twisted Detroit’s arm—although the UAW has never hesitated to get its point across through strikes and work slowdowns. The UAW has stood up for its members over the years, and it has won some generous benefits that white-collar workers in many professions can only dream about: fully paid health care, legal advice, child care, pensions, vacation time, education benefits and job security. Clearly, it has been a positive force in their eyes, no matter how the Detroit executives complain about legacy costs. They have only themselves to blame, for in every instance an auto company agreed to go along.

What will it take to change that? It will require vision and courage, not just from one side of the table but from both. Until that happens, nothing will change in the master contracts or in the way of thinking that permeates Detroit. No matter the outcome of the latest labor negotiations in Detroit, set to wrap up in the fall of 2003, nothing is going to be different unless there’s a collective acknowledgment at the companies and in the UAW that the landscape has changed and that things need to be done differently. There are numerous examples—in Ohio, Kentucky, Tennessee, Alabama and elsewhere—that unions aren’t necessary for American workers to build some of the finest cars and trucks in the world. That wasn’t a reality 20 years ago, but it is now. The newest auto plants in this country prove that Americans can produce quality vehicles. They just aren’t unionized. That’s something both the Detroit companies and the UAW have to concede, as much as it hurts to.

It doesn’t do any good for Gettelfinger to get up in front of the Economic Club of Detroit, as he did in March 2003, and try to make a case for why America needs more unions. That’s not the issue in the auto industry, where union jobs are still disappearing and nonunion jobs are proliferating. The UAW needs to help the Big Three be as competitive as the import companies are without the UAW. And likewise, the Detroit companies have to help the UAW tell its members that the contracts they’ve worked under during the past 20 years are not saving their jobs. It’s an incredibly difficult cultural, political and financial task, and it can’t be done with old ways of thinking. It may take a revolution like the one that created the UAW in the first place in the 1930s, and it may take the same kind of revolution in thinking that convinced the Big Three to accept the union back then.

There is a precedent for all of this. From 1979 to 1982, the UAW agreed to a series of concessions, including wage cuts, pay freezes, the elimination of cost-of-living allowances and other steps meant to save Chrysler and help GM and Ford get back on their feet. There are two reasons why this happened: One is that the UAW had to give in or Chrysler would die. It was a pragmatic situation that Lee Iacocca played to his advantage. The other reason is the work by a number of creative executives and union leaders who arrived on the scene just when they were most needed. At the UAW, it was the president, Douglas Fraser, the vice president in charge of Ford, Donald Ephlin, and the Canadian union leader, Bob White, all of whom knew that the futures of their workers were in doubt unless things changed.

At Ford, the revolution was brought about by Peter Pestillo, the labor relations vice president who had come to Detroit with a strategic plan to change the atmosphere and find new ways for labor and management to work together. Fraser and White are long retired, Ephlin is dead and Pestillo is winding up his career as chief executive of Visteon, the auto parts supplier that was once part of Ford. But the 1982 agreement between Ford and the UAW, which GM later accepted, was a landmark in that it traded concessions in return for the union getting a look at the company’s books and, ultimately, a say in certain affairs in its manufacturing plants. The agreement proved that the UAW and the Big Three could face reality and move forward. Eventually, the union won back all their pay, and relations between the union and the companies turned rocky again, culminating in the devastating strike at GM in 1998 that shut down the company for seven weeks and cost it billions of dollars in lost sales.

For such a revolution to take place in the auto industry again would require the companies and the UAW to sit down together and find new ways of doing business. People who are familiar with his style say that Gettelfinger realizes the threat that the imports pose. But he can’t step forward alone—and especially not without the support of his union members. That would be political suicide, because those workers have a say in whether Gettelfinger will get reelected. He’s got to get help from CEOs and other leaders at the auto companies, who would also have to pledge to overhaul the way they do business.

That might be too much to expect from Detroit companies, permeated as they are with the culture of bigness. But as Chrysler is trying to change its focus from domestic to import, as GM is trying to become the strongest American player, on a par with the best imports, as Ford searches for an identity, there is hope that eventually some kind of change can come about. In the meantime, there will be hundreds more automotive jobs created in this country by 2010. They just won’t be at Detroit’s Big Three.

Jim Olson of Toyota doesn’t completely discount the possibility of minor actions, on the part of the union or the Detroit companies, to stymie the imports’ growth. One such showdown has been over fuel-economy regulations. In 2002, the UAW tried to convince members of Congress to impose standards that would have required auto companies to improve their fuel economy according to a set percentage. That would have hurt import companies more, because the fuel economy of their vehicles is generally higher than that of Big Three automobiles. The effort was defeated, however. Said Olson, “We’re always wary. They can get us in little ways, with sharp elbows and heels to disadvantage us, but they aren’t able to drop a big thing on us.”

Besides, he noted, every major automotive company building vehicles in the United States except Honda is a member of the Alliance of Automobile Manufacturers. Representatives of the group meet twice a month to talk about issues in Washington and elsewhere, which has removed some of the Detroit companies’ incentive for attacking their foreign counterparts. “It’s difficult to do that with someone that you meet with every two weeks. You can’t hide it anymore,” Olson said.

THE PEOPLE

One of the places where Detroit has come to expect change is at the top. In times of crisis, the Detroit auto companies replace CEOs almost as frequently as sports teams do coaches (which, in the case of the Detroit Lions, owned by the Ford family, has become an annual occurrence). It’s become a favorite pastime among company insiders, the media and the Wall Street community to lay odds on whose star is rising and whose is falling. And almost no attention is paid to the import companies’ own leadership developments. But a very important one is taking place at Toyota.

Yoshi Inaba, the president of Toyota’s U.S. sales operation, is considered a candidate to become the next chief executive, succeeding Fujio Cho, who turns 65 in 2003. Inaba is a relaxed, smiling executive who speaks perfect English and is a keen student of the auto industry. He has directed Toyota’s operations in the United States during its most aggressive and successful period, seeing its sales top 1.75 million a year, owing in part to its expansion into the truck market and its ever-growing collection of factories in the United States, Canada and Mexico. Were he to replace Cho, it would mark the second time in recent years that a Toyota executive had taken the top job after holding a key position in the United States—and it would be only fitting, now that the United States is Toyota’s leading market.

Understandably, Inaba doesn’t think it’s appropriate to discuss succession issues where his own future is concerned. But he’s one of the few people at the company who will discuss the future of another Toyota executive—Akio Toyoda, 46, the latest member of the company’s founding family to play a role at the automaker, and a man who many feel will become its eventual CEO. “Whoever is next [as chief executive] is bridging to Akio Toyoda,” Inaba said. Roughly the same age as Bill Ford, Jr., Toyoda could be as important to his family’s company as Ford has been to his. And indeed, the pair of automotive scions could be in place at the same time, since Ford plans to be at his family’s company the rest of his career.

It has been nearly 10 years since a Toyoda family member ran the company, and in that time both Cho and Okuda raised Toyota’s profile on a global level, bringing it beyond its Japanese roots. In view of his background, Toyoda is most likely to stay with that path. Named to the company’s board in June 2000 as its youngest member, Toyoda’s journey has been unusual compared with that of other family members, but in a sense completely appropriate for a future CEO given the direction Toyota is taking. He attended prestigious Keio University, outside Tokyo, but earned an MBA degree at Babson College in Boston (the alma mater of Edsel Ford II). Toyoda joined Toyota in 1984 as a regular trainee, and then served as vice president at NUMMI. In 1998, Toyoda founded
Gazoo.com
, a cybermall that became one of Japan’s trendiest Web sites; it sold CDs, DVDs, used books and PCs and included a link to Toyota’s financing Web site. Toyoda’s latest assignment has been with the automaker’s Chinese operations, which will be critically important both to feed the developing Chinese market and as a potential source of production. Toyoda, who sports glasses and close-cropped hair, has said that he doesn’t feel qualified to talk about his future. “I try not to think about my heritage. But I’d be lying if I said nobody around me is conscious of it,” he told
Business Week
in 2001. Sounding impossibly modest, he went on, “I’m just happy doing whatever I can for the company as sort of a jack-of-all-trades.”

If he ascends to the CEO’s job, Toyoda would take charge of a company that has gone well beyond its Japanese roots. Inaba has said he feels that Toyoda would embrace Toyota’s emerging global philosophy. “Toyota is now a giant company striving for change,” Inaba points out. “Whoever comes next should go along those lines.” In the same way that he expects Toyoda to take charge, Inaba also would like to see an American in the job he holds. That would be a step forward for a Japanese company in the United States: Neither Toyota, Honda nor Nissan has Americans completely in charge here. But Inaba thinks the time is coming, if Toyota is truly to be considered an American player. “I wish I could tell you that we were much more Americanized. There are still a lot of hurdles to face to truly call us an Americanized company. But this culture within Toyota can be perfectly carried forward through an American CEO,” he said.

Toyota has no shortage of candidates for that job among its American managers and, significantly, no shortage of talented Americans throughout its operations, much to Detroit’s chagrin. It’s a sign of imports’ enduring success that these companies continue to lure the best and the brightest from Detroit to join their operations. Among those hired by Toyota in 2002 was a manufacturing executive named Jamie Bonini, who had been with Chrysler for 15 years. Bonini, 40, was by all accounts a rising star in the American automobile industry. A graduate of Princeton University with a master’s in mechanical engineering from the University of California at Berkeley, he was profiled on the front page of the
Wall Street Journal
in 1997 for his work helping to streamline the auto company’s Windsor, Ontario, minivan plant. He played a key role in developing the Chrysler Operating System, based on the Toyota Production System. As a reward, Chrysler sent him to Brazil, where he was the codirector of a prestigious engine production venture the company launched with BMW.

Bonini loved Chrysler and had no intention of leaving, especially as the company pushed forward under Dieter Zetsche. But in 2002, he joined Toyota, taking an assistant manager’s job inside the engine and transmission factory in the Georgetown, Kentucky, complex. The position would be seen as a demotion in the hotly competitive world of Detroit, where executives spend as much time managing their careers as they do managing their operations. But for Bonini, it was a start in a company that he hopes will be “a good long-term fit,” he said. “I came to Toyota knowing it was going to take several years in my early time in the company to really understand the philosophy and lead with that philosophy,” Bonini said.

He made his decision to leave Chrysler after months of discussions with Sam Heltman, the executive in charge of human resources at Toyota Manufacturing North America. As interested as Toyota was in Bonini’s skills, Heltman said he wanted to make sure that Bonini would embrace Toyota’s culture and that he’d be happy inside the company, starting out in a job beneath his abilities but that would give him a chance to learn how Toyota worked. Bonini, for his part, said he was impressed by the thorough interview process, which involved his family, too. “I really love manufacturing. I love working on the shop floor. I thought I was a really good fit with what Toyota was trying to do.”