February 2017Policy

No thanks To Trump, auto industry's savage restructuring is a long-term project

The most pressing site of analysis is the automobile industry, where Trump can claim to have successfully influenced investment decisions before taking office. In order to prevent defections from anti-Trump alliances, and to forge new partnerships with working women and men, we must show that Trump's tweets are merely epiphenomenal moments in a constantly restructuring automobile industry and he deserves no credit for investment by the auto industry.

Our task is to counter Trump's appeal to workers on the basis of creating jobs, and begin the work of forming an analysis of the hegemonic fraction of the bourgeois when capitalists directly control the capitalist state. As we'll see, Trump's actual relevance is his providing a potential pretext for continued brutal anti-worker reorganization of auto production by capital.

"Offshoring"

During his campaign for president, Trump frequently criticized Ford for producing in Mexico many of the automobiles it sold in the United States. The first clear instance of Trump taking credit for Ford's investment decisions was in November, when Ford announced that it would not shift production of the Lincoln MKC line to a plant in Mexico. Trump tweeted, "I worked hard with Bill Ford to keep the Lincoln plant in Kentucky. I owed it to the great State of Kentucky for their confidence in me!" Trump implied that jobs would be lost at the Kentucky plant and so in preventing the MKC from being built in Mexico he saved Kentuckian jobs. Yet Ford had intended to move production of the MKC and increase production of the Ford Explorer at the Kentucky plant, such that the capacity for MKCs would be dedicated to Explorers. The same number of vehicles would be made, and there would not necessarily be layoffs from the change. Trump can take credit for reducing the number of MKCs assembled, not saving jobs. Media outlets did not fail to point this out.

Yet media outlets did fail to point this out when in January of this year Ford initiated a similar reversal, but it was seen as a victory for Trump. Ford had planned to open a new plant in Mexico to assemble the Focus but canceled those plans and decided to make the Focus in an existing plant in Mexico. Like the case of the MKC, Ford looked at their capacity and decided they had enough to meet demand so they scrapped plans to increase supply. Yet this time the media credited Trump with the reversal. In the Business section of the New York Times, in an article entitled "Even Before he Takes Office, Trump Knocks Automakers on Their Heels," Vlasic and Boudette write,

In a stunning reversal, Ford Motor, the nation's second-largest automaker, said on Tuesday that it would scrap plans to build a small-car assembly plant in Mexico that Mr. Trump has repeatedly criticized. Just a few hours earlier, Mr. Trump threatened to impose tariffs on cars made in Mexico by General Motors, the nation's largest automaker. His message forced the company to defend itself. Both developments indicate how Mr. Trump is having an enormous impact on how American car companies run their operations, even before he takes office. They also illustrate that one of Mr. Trump's particular points of criticism, manufacturing in Mexico, has become particularly sensitive.

Ford Motors' decision not to increase its capacity to produce the Focus was made into a political victory for Trump. The media portrayed Trump as massively influential because an auto assembler changed course on what was probably a poor investment in plant and equipment.

Trump's perceived victory against Ford created an atmosphere where his critiques of General Motors, Fiat Chrysler, Toyota, Mercedes and BMW, led to headlines from Bloomberg reading "GM Plans $1 Billion in Investment in Nod to Trump," "Donald Trump's Tweets Shake Auto Industry" in the Detroit Free Press, and "Fiat Chrysler to Add U.S. Jobs as Trump Puts Spotlight On Industry" from Reuters. Many articles mentioned that the investments were already planned and were announced merely to score political points with the Trump regime, but the barrage of headlines hardly made this clear. Those who skimmed the headlines would be reasonable in thinking Trump had caused the auto assemblers to invest in the United States. Those who read the articles would be led to think that the investments were not caused by Trump, but still, were investments that the auto assemblers were reluctant to make with labor in, and imports from, Mexico so cheap. The truth is more complex. And Marxist.

Dodging labor activism

In an incredible survey of the history of global automobile manufacturing using the World Labor Group database (Forces of Labor: Workers' Movements and Globalization since 1870), Beverly Silver finds that capital pursues a "spatial-fix" for the labor unrest allowed by workers -- control of delivery lines in mass production -- relocating production to other regions without militant labor. The highest points of labor unrest for a nation's automobile industry occur while they are the "world leader," and precede automobile capital's relocation to a new region. When that region comes to be the world leader, it sees its own highest point of labor unrest. Automobile capital relocates again when it is unable to tame labor there, and so on again. America was the world leader from 1910 to 1950s, Western Europe led in the 1950s and 60s, Brazil and South Africa in the late 60s and early 70s, and South Korea beginning in 1973 and lasting until the Asian Crisis.

Japan never fit into the circuit of capital's spatial-fixes. An upsurge in labor unrest at the end of the World War II, just prior to the take-off of the Japanese auto industry, pushed the development of automobile production there away from Fordist-style mass production. As Silver puts it, "discarding their early attempts at vertical integration, Japanese automobile producers established a multi-layered subcontracting system that simultaneously allowed them to guarantee employment to (and establish cooperative relations with) a core labor force, while obtaining low-cost inputs and flexibility from the lower rungs of the supply network." The lower rung was first inhabited by the wives of the core workers, who were disciplined away from labor militancy. This patriarchal order could not prevent rises in wages in the 1980s, causing Japanese automobile capital to attain their bottom-tier labor in poorer East and Southeast Asian states. The discipline of the lower-tier worker was, however, now not guaranteed.

During this period of spreading Japanese automobile capital, foreign autos sold so well in the United States that Reagan imposed import restrictions on foreign vehicles at the urging of US assemblers. But, as Nicole Aschoff notes in Socialist Register: 2012, "the resulting 'voluntary' export restrictions catalyzed a wave of investment by Japanese assemblers and suppliers into the US during the 1980s." First settling into the Midwest due to existing supply networks, by the late 80s, "foreign supplier investment in the US increased significantly, allowing foreign assemblers to migrate investment southward to take advantage of lower-cost labour."

In response to the competition on their home turf, in the 1980s US assemblers shuttered export plants along the coast and opened sites in the interior so as to be tapped into domestic transportation demand, coming to focus on small trucks and sport utility vehicles. The US assemblers produced cheaper, small autos in Mexico and low-wage regions, but the locations for their factories building the most profitable lines, trucks and SUVs that could be sold for more than autos but without much higher input costs, were in the US. "Rather than a uni-directional movement of production from traditional manufacturing regions to low-wage sites in the US South and Mexico, the investment pattern in the North American auto industry during the past three decades has been characterized by a reorganization of production, resulting in an 'auto alley' stretching from the Great Lakes to the Gulf of Mexico," Aschoff observes, looking at the data collected in the Automotive Investment Database.

Not only did the US assemblers follow the influence of Japanese auto assemblers by restructuring their investments in plant and equipment, they implemented the version of the Japanese labor model that Japanese auto assemblers used in their American plants -- one harsher than the homegrown model. Where the Japanese model is "lean and dual," the American implementation is "lean and mean."

Rather than gain the cooperation of the core workers with guaranteed employment, lean production in the United States sought the cooperation of workers by making their employment anything but guaranteed, and work so stressful that workers had no energy for militancy. As Kim Moody observed in In Solidarity, "termed --management-by-stress" by critics Parker and Slaughter, this characterization captured the way in which these new production norms reduced inputs while increasing output. This import from Japan combined team-working, continuous improvement, speedups, just-in-time delivery, multitasking, extensive outsourcing, "reengineering," and Total Quality Management (TQM) to produce a constant tightening of the production system. The result was an incredible increase in productivity, rising 47.4 percent from 1980 through 1988, Moody notes.

Yet by the late 1990s lean-and-mean production was reaching its limits in eliciting active worker cooperation to continuing productivity gains. But the emphasis was not in expanding job security for the core; rather, it was on, "the establishment of a large 'buffer' made up of insecure workers in the lower-tiers of the subcontracting system and of 'part-time' and 'temporary' workers in the upper-tier firms," Silver points out. The most prominent example was GM's in-house parts maker, Delphi, which was consolidated and spun off as a separate entity in 1999. It forced a series of wages and benefits concessions from its workers, first in 2003 when it complained that the high wages costs it inherited from GM would bankrupt it, and after those concessions did not prevent it from filing for bankruptcy, more worker concessions were demanded during its 2005 bankruptcy proceedings.

Restructuring through "spin-offs" of parts makers allowed US auto firms to cut their costs by trimming their work forces, and then in demanding that parts makers lower their prices for parts, have the cuts passed onto workers in the auto-parts industry. Dianne Feeley noted in Against the Current that, "Following Chrysler's lead a decade earlier, GM spun off American Axle in 1994 and Delphi in 1999 with Ford spinning off Visteon in 2000 [...] Suppliers are increasingly responsible for research and development. They now register more than three times as many patents as automakers. At the same time these corporations have been forced to reduce their prices 3% annually. Profitability has been halved. […] Although there are 1500 in all -- with Delphi and Visteon among the largest -- all are continually squeezed by the Big Three, and a couple have already exited the industry. It is in this context that suppliers are 'forced' to cut the wages and benefits of their workforce." It is this method of restructuring that is emblematic of the auto-industry, not sending assembly plants abroad.

The worker concessions UAW made to Delphi were forced on assembly workers by the Big Three in the 2007 contract negotiations. "Again the UAW went along, agreeing to tiered wages and a separate health and pension plan for new 'non-core' workers such as materials movers, general stores managers, and finished vehicle drivers. Wages for non-core work were modeled after the second-tier wages negotiated at Delphi," Aschoff observed. Something of the lean-and-dual model was still on track, though the weight carried by the non-core workers was becoming enormous.

The financial crisis provided the chance for the US auto-assemblers to return to lean-and-mean production, and had the backing of the state to do so. To receive their bailouts, GM and Chrysler were required by the state to achieve labor cost parity with the un-unionized foreign firms Toyota, Nissan and Honda. Workers -- total compensation packages and the work rules they are guided by were required to be competitive with the lean-and-mean foreign firms. As Aschoff put it, "while Detroit has been working toward this outcome for years, it's worth emphasizing that the US government played a direct role in the restructuring and forced concessions. Its demand for work rules and wages to match non-union firms effectively negates the rights of workers to collectively bargain to better their wages and working conditions."

Said Herman Rosenfeld for Monthly Review in 2009, "Whatever the ultimate outcome for GM and Chrysler, the industry would be modeled on the lean and mean transplants: competitive, profit-making machines with weak or no unions. [...] It is using the threat of bankruptcy to force workers to accept further job loss, reductions in wages, benefits, pension rights, work intensification, and deteriorating working conditions. [...] In appearing to be equally harsh with both bondholders and the UAW, the administration maintains a faacade of fairness -- even though workers will end up paying with their basic livelihoods and pensions."

Staying put, going lean

Trump has rallied his supporters by claiming that the US auto assemblers want to move production to Mexico, but he will fight them to keep jobs here. The preceding shows that the US auto industry has for the past three and a half decades utilized lean production methods that rely on a set of core workers in the US. That model has switched from lean-and-mean to lean-and-dual as necessary, but there is no indication that US assemblers are moving away from reliance on core workers in the US. For the moment, the state's preparedness to intervene and prevent the contradictions of lean-and-mean to force a shift to lean-and-dual, makes likely that US auto companies will maintain their current pattern of accumulation. A new round of rapid restructuring, backed by the state, is possible.

Aschoff's analysis of the automotive crisis is invaluable. She writes:

"the crisis forced the industry to regroup after the boom of the 1990s fizzled and easy credit conditions disappeared. [...] The 'new' US auto manufacturers are essentially slimmer versions of the old ones. Using the financial assistance and authority of the US state, they've simply eliminated some unprofitable lines and cut their costs faster than they would have otherwise, allowing a rapid turnaround to profitability. [...] Recasting the recent crisis in a historical context shows that it is part of a continual process of ‘creative destruction -- in the auto industry over the past three decades, with firms opening plants, closing plants, buying companies and then spinning them off later. Rather than an overall pattern of decline, or an abrupt shift after the crisis, the dynamics of the industry are better understood as a continual process of reorganization."

The continual process of reorganization, it must be emphasized, includes the state legitimating cuts to workers' wages and benefits in times of crisis. This must be borne in mind when we consider the political theater playing out between Trump and the auto-industry. The return to profitability by the US assemblers seems to be reaching the end of its cycle. 2016 saw a record year of new car sales, 17.55 million, up from the previous high of 17.47 in 2015. But in order to beat 2015 sales auto companies used sales incentives that analysts caution are not sustainable without deep cuts into profits. As Vlasic put it for the New York Times Business section, "Demand, however, has leveled off, and companies are falling back on old habits to move excess inventories. Analysts reported that sales incentives were about 25 percent higher in the fourth quarter of 2016 than in the same period a year earlier, even though overall sales were flat." With sales of small cars down, workers at small-auto assembly plants are being laid-off.

Brutal restructuring borne on the backs of workers is forthcoming, possibly within the next four years. Trump's demands that assemblers build their autos in the United States could give US automakers the political cover to argue that US workers will have to bear the costs of restructuring. Any gains towards lean-and-dual production, should they arise, will be reversed and lean-and-mean production will be forcefully re-instated with the backing of the state.

The Democratic Socialists of America, and the revolutionary Left overall, must make this clear to Trump supporters: Trump did not force the auto assemblers to keep jobs in the United States. Trump set the groundwork for the state's support of the next violent restructuring of the auto-industry. The massive opposition currents to President Trump are heartening, but unstable alliances pose their own difficulties, making more parlous the revolutionary Left's obligation to articulate and understand the complex social relations of the current division of labor. With this role comes the responsibility of keeping unsteady alliances sound by viewing the "wins" of the Trump administration in the context of Marxist analysis of the capitalist mode of production.

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