The End of Detroit

by Micheline Maynard

  Unknown to the state, Honda had all but decided on Alabama from the beginning. Though it looked at expanding its operations in Ohio, it decided that it had pretty much drained the state of available workers. Plus, the UAW was constantly hovering, and there were fears that should Honda’s business there grow too large, it would be impossible to keep a personal connection with every worker, opening the door for an organizing drive. Honda gave consideration to a site in Indiana, but its real interest was in Alabama. Very quietly, it began scouting the state in January 1998, in a project it called Bingo. “It was a project to lose rather than win,” said Carroll “Lew” L. Watson, the mayor of Lincoln. The mayor, who has been in office for over 30 years, is an old-fashioned public servant who answers his own office phone at 7:40 A.M., personally handles disputes over citizens’ water bills, and knows the security guards at the International Motor Sports Hall of Fame at the Talladega Speedway by name. He found out about the search when state officials began coming up dry in their quest to find a package of land that would be suitable for the plant. They looked up near Huntsville, and had nearly settled on a piece of property in a town ironically called Spring Hill. But “every site they found, something came up,” said Watson.

  He got a call from Theodore Von Cannon, president of the Birmingham Metropolitan Development Office, asking if he could come up with 1,500 acres. Watson is a real estate appraiser as well as the Lincoln mayor. He can tell you the selling price and assessed value of everything in Lincoln, where a sprawling brick house with a four-car garage sells for $350,000, with annual taxes of $1,200. Watson knew exactly where to go for the parcel: his distant cousins, who owned a stand of farmland within a few blocks of Lincoln’s main drag. Town residents now talk about life “before Honda and after Honda,” he said. Watson personally knows what the plant has meant to the hamlet. One evening, he heard from a young woman for whom he had done an appraisal so that she could refinance her mobile home. The mother of two had been stretching to make ends meet, working a minimum-wage job. This time, she had phoned to ask Watson if he could come back to appraise the value of a tract of property that sat behind her trailer. “I’ve just gotten a job at Honda,” she said. “It’s more money than I’ve ever made in my life. I’m going to be able to buy this land.”

  The $158 million Honda package was put together without Bronner’s involvement, but he did step in at the end when it looked as if the state was going to lose its chance at landing the $1 billion Hyundai plant in 2002. Project Beach, as that plant was called, had come down to the wire, with both Alabama and Kentucky in hot pursuit. Earlier, Hyundai had eliminated Mississippi and Ohio from its consideration list. Kentucky, eager for another auto plant nearly 20 years after it had landed Toyota, had put together a package worth $125 million, while Hyundai’s bid was worth $118 million.

  But the difference in price wasn’t the only deciding factor. Hyundai was anxious to get started right away, and Alabama had a clear advantage, securing options on 1,600 acres of land that Hyundai could access immediately. Kentucky, meanwhile, had found 1,500 usable acres but was stymied in its attempt to secure a final parcel of land owned by the Howlett family. Its 111-acre parcel was appraised at $800,000, but the family was holding out for much more. In what became a nasty, public spat, the state began eminent-domain proceedings and then decided to negotiate. It reached agreement to pay $6 million for the land, but the argument had soured Hyundai on the Kentucky site. Meanwhile, the Alabama bid had a last-minute sweetener: Bronner came through with $10 million in free advertising on the television stations owned by the RSA and in its 300 community newspapers. It was an offer that Hyundai found to its liking, and Alabama had its third assembly plant. At a news conference announcing the deal, Hyundai chief executive Kim Don-Jin praised the Alabamans’ effort. “The state government of Alabama has shown a far more enthusiastic attitude toward luring Hyundai’s auto plant investments than its Kentucky counterpart,” Kim said. The package, which covered 2,000 jobs, drew little complaint in Alabama.

  The Texas market could always be summed up in two words: pickup trucks. And for generations, pickup trucks from Detroit. This is where Toyota executives in the United States took their skeptical Japanese bosses back in the 1980s, when they were trying to make a case for Toyota to build a bigger pickup truck, alongside the little Tacoma. Bob McCurry, the executive in charge of Toyota’s sales operations, desperately wanted to see Toyota get into the market, tired of watching droves of Toyota sedan buyers defect to Big Three companies. (It was the same trend that would spur Nissan’s product development teams years later into pushing for the Titan.)

  But the pickup was a hard sell, because the Japanese market, where development and production of the pickup would take place, simply didn’t have big trucks. Moreover, Toyota officials were gun-shy over trade issues. Lee Iacocca, the Chrysler chief executive, had been incredibly vocal in his denouncement of Japanese companies’ exports to the United States. “They were sensitive about entering another market, even though it was an important market,” McCurry said. But Fujio Cho, in charge at Georgetown, took a group of visiting Japanese officials to a Dallas Cowboys football game and walked them through the parking lot. They found themselves in a sea of pickup trucks, driven to the game by affluent fans who loved their trucks. Even if they had a car in the garage, they enjoyed getting into their pickups on the weekends for their favorite pastimes, none inspiring more passion than a Cowboys game. That scene helped convince the Japanese executives that Toyota needed to get into the truck market.

  However, McCurry didn’t win his battle completely. The original Toyota pickup, the T-100, introduced in the 1990s, lacked the size and power of the big Detroit iron from Chevrolet and Ford and Dodge. The T-100 was a “political truck” deliberately dulled down in order to keep Toyota from a barrage of criticism. “It was a truck, but it was not a truck,” McCurry said. But as with the original Lexus ES 250, or the first Odyssey that Honda sold in the United States, the T-100 was a placeholder. McCurry didn’t give up on his push for a genuine big truck, and in 1998 Toyota began building its first real full-sized truck, the Tundra, in its sparkling new plant in Princeton, Indiana. Though the Tundra was smaller than the biggest Fords and the brawniest Dodge Rams, it was functional. It also got a great write-up in Consumer Reports. That recommendation was enough to win back some Toyota buyers who had previously bought trucks from Detroit companies, giving Toyota additional time to accumulate pickup expertise. In 2003, Toyota introduced an extended-cab version of the Tundra, its biggest yet, as Nissan was preparing to brave the market with the Titan. Even that Tundra was just a warm-up, because Toyota has bigger plans for the pickup truck market later this decade.

  In 2002, Toyota announced that it would build a small truck factory in Baja California, its first Mexican plant. Then, in February 2003, it announced yet another plant. This one would be in San Antonio, deep in the heart of not only Texas but truck country. If all goes well, and Toyota hits the mark with the next version of the Tundra, and the two factories come up to speed and expand in the way that Toyota plants are wont to do, Toyota could end up selling 500,000 pickup trucks a year. Where would it like to sell a lot of them? Texas. “The plant down there is driven as much by market considerations as anything,” said Dennis Cuneo of Toyota’s North American manufacturing operations. “If we’re accepted as a Texas truck, we think that will help us across the country and to really be accepted as a full-size pickup truck.”

  This time out, Toyota’s American executives aren’t going to let the pickup be developed in Japan. The bulk of the work on it will be done in the United States, at the Toyota Technical Center in Ann Arbor, Michigan, directed by a young chief engineer named Chris Nielsen. Although the engineers there had a great deal of input in the Camry, as well as the Solara coupe, the pickup will mark the first time that Toyota has ever entrusted such a critical project to its North American operations, said Cuneo. Toyota also will have key advice from Kurt Ritter, the former general manage
r at Chevrolet, who oversaw its pickups and SUVs. Ritter left in spring 2003 to join Toyota’s ad agency. The move angered GM, and Ritter subsequently opened his own consulting firm. His only client is Toyota.

  Meanwhile, the San Antonio plant, like all things at Toyota, will fulfill more than just one role. With 65 percent of the area’s population of Hispanic descent, the plant will serve as an opportunity for Toyota to attract young Spanish-speaking managers that it can train and deploy to its operations in Mexico, Central America and South America. It will also give Toyota direct experience working with Hispanic employees, who it hopes can give it even more understanding of the Hispanic market. With the nation’s population shifting dramatically, and with Hispanics now becoming the single biggest nonwhite ethnic group, Toyota wants to be able to stretch beyond its traditional customers, Cuneo said. It believes that San Antonio, in addition to its sales experiences in California, where the market is 40 percent Hispanic, will be a key force in helping it to understand what these important buyers want.

  In Alabama, just before the exit for the Mercedes plant, there is a big billboard. Like the three-pointed star atop the visitors’ center, the sign is illuminated at night and is impossible to miss. “Sixty-five years of progress. Standing together as one,” declares the sign, which carries the seal of the UAW. It is a visible reminder that the union hasn’t given up its efforts to organize these factories. And by rights, the Mercedes plant ought to be the one that it is able to unionize the most easily. As part of the merger that created DaimlerChrysler in 1998, the UAW gained a seat on the company’s supervisory board. Chrysler workers in the United States and Canada are unionized, and it seemed logical that Mercedes would be next. Moreover, Mercedes’s plants in Germany are all unionized, so the company has plenty of experience in that regard.

  Yet the UAW hasn’t succeeded, either here or at any of the independent factories owned by import auto companies in the United States. The UAW has been defeated in elections at both Honda and Nissan—four times at Nissan alone—and has never called a vote at Toyota, though it has had an organizing office there for years. Bob King, the UAW’s thoughtful vice president in charge of organizing, said after the latest defeat at Nissan in 2001 that the company had engaged in a campaign of “fear and intimidation.” And indeed, Nissan made a concerted effort to defeat the UAW. Even Carlos Ghosn stepped in with an appeal to workers on videotape. But what keeps the UAW out of these plants isn’t the tactics by the companies. It is the fact that workers aren’t convinced that a union would make things any better for them.

  The absence of the UAW is the primary difference between Detroit-owned factories and the new plants built in the United States by foreign companies during the past 20 years. By and large, the aging brick facilities that the Big Three companies made do with as recently as the 1990s have been shut down and replaced with newer facilities. Even the factories built in the 1970s and 1980s, when Detroit companies went on a plant-building spree, have been thoroughly renovated. To a casual visitor, walking the floor of a Detroit factory seems just the same as visiting Honda’s plant in Marysville, Ohio, the Nissan factory in Smyrna, or Toyota in Georgetown. The plants all use robots to assemble their car bodies, and they boast highly automated facilities to paint them. On the assembly line, workstations are organized and labeled according to the tasks that are performed there. The ability to stop the line by pulling on an overhead cord, called an andon, which was once exclusive to Japanese companies, has been instituted in the Detroit-owned plants. Just as they do at the Detroit companies, workers go through training classes and meet in groups to discuss ideas to improve their daily tasks. In a sharp contrast to the past, when the path to a powerful job lay through finance or marketing, the Big Three companies all have men in key positions who were trained in manufacturing, such as Gary Cowger and James Padilla, who head North American operations at GM and Ford, respectively.

  But the presence of the UAW is what keeps Detroit companies from achieving the efficiency of the transplant factories in “Detroit South” and elsewhere. This obstacle is best defined by a thick book that contains the UAW’s master agreement with each company. In it lie definitions of job classifications and staffing requirements across the plants, as well as the holidays, vacation pay, pensions and other benefits that the UAW workers receive. In addition to the master agreement, there are individual contracts for every assembly plant. All these pages add up to additional cost and complexity that the transplants simply don’t have. They also cut into the speed with which information gained on the factory floor can be transmitted to people upward in the organization. It’s hard to quantify with any certainty just how many additional jobs this means. But Russ Scaffede, the former manager of Toyota’s engine plant in Georgetown, estimated that it was a significant number. Scaffede, who worked at GM before joining Toyota, said that because of the GM contract with the UAW, he would have to have three workers on a GM assembly line to every one at Toyota. Along with more jobs, the UAW contract creates another obstacle: a barrier between the workers and managers. Committeemen are still a part of UAW-represented plants, handling concerns and filing grievances with the company. Often, hundreds of such complaints are open at any time between workers and management. There’s little motivation to solve the complaints as they arise, because they can be a bargaining chip between the union and the company at contract time. The national UAW agreement does not allow company-wide walkouts except when the contract expires, but workers can stage local, or “guerrilla,” strikes over certain local disputes, such as when leaders feel their health and safety is in jeopardy.

  And such areas might be logical places where the UAW could center a case for representation at some of the older transplant factories. Georgetown, Marysville and Smyrna are showing their age, and the novelty of working for Japanese companies has evaporated 20 years on. The pace of the assembly line is relentless, and the pressure to always become more efficient adds a factor of stress. Yet, despite an atmosphere that is at least conducive to an organizing drive, the UAW hasn't been able to convince workers in these plants to join its ranks. Given that failure, the UAW stands even less of a chance at the brand-new factories in Detroit, where workers are eager to have these high-paying, prestigious automotive jobs.

  Over the years, Mercedes employees have gotten used to being stopped in the grocery store, the bank or in a shopping mall by people who spot the company logo on their clothing, a giveaway of where they work. It’s common to spot workers in Detroit-owned plants wearing UAW shirts, pledging their loyalty to their brethren above the company. But throughout the Mercedes plant, managers and hourly workers alike dress in an array of chambray shirts, sweaters, sweats and golf shirts embroidered with the three-point star. The attire, called “team wear,” results in a casual, upscale atmosphere that is more like the members’ grill at a country club than an auto plant. It also eliminates any visible distinction between boss and employee, since everyone is dressing alike. That is a subtle way to get across the message that Mercedes is one big family and that outsiders needn’t intrude.

  A more direct way is through the plant’s team representatives, who serve as problem solvers for disputes between the workers and management. These employees serve as de facto committeemen, except for the fact that they are attached to Mercedes’s human resources department. Arthur Williams, team representative for the plant’s body and paint department, said he believed workers and management are “all one team” but that differences sometimes need to be ironed out. “Our team members come to work wanting to be successful,” said Williams, who is also an ordained minister. He has been trained in nearly every aspect of building a Mercedes—“I can do everything but paint the car,” he says with a smile—and he said the best solutions to Mercedes’s problems come from the workers themselves. “There’s never any blame laid. If there’s a problem, you go back in and try to find a way to fix it. Nobody is looking at someone to point the finger at. If there’s a flaw, you want to be part of the sol
ution,” Williams said. Bill Taylor, the plant’s president and chief executive, said that relying on workers for input, rather than imposing ideas on them, has been a key part of Mercedes’s operating principle. “Technology is exactly the same in the industry. You can buy technology. But deployment of the people and giving them the challenge has unleashed this organization,” Taylor said.

  That philosophy, expressed by executives at many of the transplant auto factories, has been a key to keeping the UAW out, said Gary Chaison, professor of industrial relations at Clark University in Worcester, Massachusetts. “What the plants are emphasizing, very importantly, is first-line communication,” he said. “The transplants have said to themselves, ‘Employers create unions. Unions can only organize in an atmosphere where we allow it.’” Chaison said the UAW’s two major selling points—better economic conditions and a voice for workers—simply are ineffective in the case of the auto plants. Toyota, Honda, Nissan and the others have been very diligent in pegging their wage and benefit plans to those of the Big Three. The transplant companies pay salary rates of about $25 an hour, which is within range of those earned by a typical worker at GM, Ford or Chrysler. (The exception is temporary workers, hired for the summer or for specific projects. At Honda, they earn half the hourly rate.) Generous even by northern standards, the income is enormous for workers in low-wage southern states. “They’re comparing themselves with Wal-Mart, and they’re comparing themselves with what their fathers earned, and with clerical jobs in those towns,” Chaison said. “The workers understand what’s going on. Among the southern workers, the realization is ‘You can build the car, or you can fix it’ and they’d much rather build it.”