Long before The New Economy was touted as the replacement for North America's “old-fashioned” manufacturing base, there was the Service Economy.
In the mid-1980s, it was an idea just as popular and trendy as the New Economy was in the late 1990s — and just as dumb.
The premise was that manufacturing — and the good-paying jobs that go along with it — was no longer important and was better off being shipped to China, Mexico and other low-cost locales.
Robots in workerless “lights out” factories would perform the higher-skilled manufacturing jobs that remained.
American auto workers were viewed as incompetent malingerers, and the contributions they made in terms of taxes paid and products consumed were considered inconsequential. They needed to be replaced with automation or low-cost foreign labor and re-trained to do something “important” such as fixing computers, selling junk bonds or flipping burgers somewhere.
Incredible as it may sound now, people believed this crap.
Ironically, Toyota, Honda and Nissan exposed the stupidity of this philosophy. They built sleek new factories in the U.S. that were equal or better in productivity and quality than those in Japan. They achieved this by relying on lean-manufacturing techniques, not by replacing workers with robots. And their local manufacturing base not only protected them from tariffs but also currency shifts, which can prove devastating to a multinational corporation's bottom line.
Following their example, U.S. auto companies made huge improvements in their own productivity and went on to enjoy their most profitable years ever in the mid-1980s and again through the latter half of the 1990s. And they did it with the United Auto Workers union.
Now, once again the U.S. manufacturing base — at least the part owned by Detroit's Big Three and its suppliers — appears threatened by horrific cost pressures and skyrocketing health care and pension costs. The pressure to close U.S. plants and shift capacity to China and other areas is mounting. General Motors Corp.'s medical costs, for instance, amount to about $1,200 per car. In comparison, its manufacturing disadvantage with the best Japanese producers is only a couple hundred bucks.
This year's contract talks between Detroit's Big Three and the UAW will no doubt require gut-wrenching compromise on both sides. But with a presidential election looming in 2004, and in a climate where all Americans are worried about rising health care costs and job security, this year's negotiations shouldn't digress into an angry skirmish in the Rustbelt that nobody outside the Midwest cares about.
The talks have the potential to be a launching pad for innovative new ideas for cutting health care costs and improving productivity that could benefit all of America, and bolster the U.S. manufacturing base. For instance, an effective joint effort between auto makers and the UAW to convince workers to quit smoking and start living healthier could save billions alone.
After years of ugliness, the last contract talks in 1999 ushered in a new era of civility. Let's elevate them further this time around. Make this Detroit's finest hour.
