Like many other lean-oriented bloggers I’ve held back from making much of a comment on the recent deal between GM and the UAW. I think Chrysler, with the luxury of being privately-owned and a rather remarkable new leadership team, stands far more of a chance of taking on the likes of Toyota. Not a guarantee by any means, but a better chance than the rest of the Detroit Three. As Mark mentioned, the GM deal is not really a lean issue. Or is it?
The GM-UAW deal is rather unique in that it commits GM to certain operational decisions that may or may not be in the best interests of the company… and thereby the union (unfortunately both parties often forget that relationship). From an article in this weekend’s Wall Street Journal,
Under the deal, GM has made multibillion-dollar commitments to keep building specific cars, trucks, engines and numerous plants across the U.S. Among the investments listed in the UAW contract documents: a plan to put a new battery-operated car in a Detroit plant, build a roadster in Kentucky factory and revamp the company’s big pick-up trucks to keep plants in Wisconsin, Michigan and Indiana humming after 2012.
That will be interesting. What happens if demand for pickups continues to decline, fuel cells upstage battery-operated cars, or some other technology disruption occurs? I’m presuming there is contractual language governing such situations, but cementing product mix and production deployment strategies into a labor contract is rather unique.
On the other hand, perhaps in an roundabout way this will induce some new lean behaviors. GM will need to find a way to be competitive from U.S. plants instead of mindlessly shipping production to Mexico or elsewhere. They will have to get serious about reducing costs while working within the constraints of the labor contract.
There is another aspect of the contract that may create employee, and UAW, commitment to GM’s success.
Under the proposed pact, the UAW will find itself more concerned than ever with GM’s stock price. Some $4.37 billion of the retiree healthcare fund will come in the form of a convertible note tied to GM’s stock price.
Of course stock price is not always tied directly to actual company success, let alone depth of lean commitment. It is a shareholder perception of the future value path of a company. Still, one of the best ways to increase company value is by creating top and bottom line success, and the UAW membership will be focused more than ever on those attributes.
Again, not directly a lean issue, but perhaps a stimulus toward lean behaviors. If the workers become focused on improving the bottom line by using the lean training they’ve no doubt been given, even half-heartedly, and if the company becomes focused on making U.S.-based factories globally competitive by using Toyota’s tried and true methods, then perhaps success can occur.
Time will tell whether this agreement creates a deeper lean commitment, or whether the rather unique operational constraints tie GM’s hands when then they need to make decisions in response to unexpected external market forces.