One of the key campaign issues during this past election was Mr. Trump’s demand that high-paying jobs be brought back home to America. To this end he suggested canceling certain trade agreements, such as the Trans-Pacific Partnership, and renegotiating others, such as NAFTA. As I’ve pointed out here before, a decade ago many voices were cheering on the beat-down of unionized automotive labor; today those same individuals are demanding that these high-paying jobs return and be expanded.
The problem facing all elected officials is that, if certain legislation or political actions cause one group to win, there will certainly be another party considered the loser. But in the case of bringing back automotive jobs to the U.S., there may in fact be no winners at all. Or at best, we’ll get temporary gains at a very high cost, either human or financial.
The point is that we’ve done this all before. We made relatively impressive gains in the number of automobile factories built. Honda was the first; it built its Marysville, Ohio, plant to build the famed Gold Wing motorcycle at the end of the Carter administration, then immediately enlarged it to produce automobiles. Today Mercedes, BMW, Kia, Hyundai, VW, Subaru, Nissan, Honda, Toyota and the Detroit Big Three all operate automobile factories within the U.S. For the record, both Toyota and Honda have almost as many factories as Chrysler.
Yet, while automobile factories here have enjoyed reasonable growth over the past 37 years, the rise of auto parts suppliers and their plants may be even more impressive. This is solely because the entire industry has adopted Toyota’s Ohno (just in time) system inside their plants. No longer do factories order and stockpile large numbers of parts at each factory. No, “lean” production demands just the opposite — although it’s a high-wire balancing act, making sure the rights parts are at the correct factory just as they are about to be needed for assembly. As the head of Honda once famously said, if just one part is missing you can’t build the car.
But even if we brought back more manufacturing to America, the odds are it wouldn’t change the pricing of either the parts or the cars. So we are creating — scratch that, have already created — a system that most assuredly is not much different from the sweatshop employment scenario of the Gilded Age.
Peter Woldman at Bloomberg published that very story on March 23, discussing the low pay and unsafe conditions at many of the parts plants in the Southern states. He started off with the story of Regina Elsea, a 20-year-old who dropped out of college because she wanted to move in with her boyfriend, who had wrangled a top-flight job as a stocker at the local Wal-Mart. Her mother warned her that the pace and pressures of those jobs were unbearable, but Elsea followed her step-father and sister into a job at the Ajin USA factory in Cusseta, Ala.
It was a temporary job, which is not uncommon for these transplanted companies. Everyone gets a chance, and those who are the best end up with the promise of permanent employment. Elsea started at the temp hourly wage of $8.75 per hour, hoping to make it full time and get a wage increase to $10.50. Now she was there making dashboard frames 12 hours every day, seven days a week. But Alabama follows federal regulations for overtime pay, which meant had Elsea worked there an entire year without break or time off, she would have potentially earned $48,218 with overtime. Again, that’s if she could have continued the pace of 12-hour days, seven days a week. But that was not to be.
A robot jammed at her work location; if not fixed quickly, it would thwart management’s demand that her group make 420 dashboard frames per shift. After time went by and the plant’s maintenance crew failed to arrive to fix the problem, Elsea attempted to do it herself. But the robot came back to life and crushed her against one of the dashboard frames, and she passed away the next day. Ajin sent a single artificial flower to her funeral.
The other issue that comes up is how many people in that industry are working a 12-hour shift each and every day of the week — sometimes more. Cordney Crutcher, who operated a metal press for Matsu Alabama in Huntsville, successfully finished his 12-hour shift and simply wanted to go home. But a supervisor told him he had to take over for another worker, who had fallen behind on his quota for the day. Crutcher lost his finger on a press that had been acting up all day, which was why the other worker had fallen behind. But just as troubling is how someone works a 12-hour day and yet fears punishment if he doesn’t want to stay longer and cover for another worker.
Crutcher, apparently considered one of the better workers at Matsu Alabama, earned $12 an hour. After that incident he took off for the GM factory in Spring Hill, Tenn., and $18.21 per hour.
Ray Trott, the former head of production at WKW-Erbsloeh and a retired Marine aircraft maintenance chief, laid part of the blame for these issues on upper management, claiming they just didn’t understand the American worker. In the case of his former employer, on seeing 28,000 parts made in one day the German managers immediately raised the output demand to 29,000. Apparently they assumed that no many how many parts were being built, people must be slacking on the job. But the biggest stick was raised against Trott; he said that every day, all day long, Germany would be reminding him that if the right number of parts didn’t leave the plant that day, their fines from the automakers would be $80,000.
There it is: The downside to the original Toyota Ohno ‘just in time’ system for manufacturing. If the right number of the right parts from every supplier doesn’t hit the assembly plants at the exact right time, then huge penalties are due from the parts suppliers for delaying production. So for decades what truly sounded incredible at business conferences, where corporate gurus preached the brilliance of lean manufacturing, turns out to carry a huge human cost. Then again, when one group wins another always loses.
There’s one other issue with these transplanted auto parts factories, whether they are here in the States or not: They are constantly reminded during negotiations for future part volumes and pricing that they must beat ‘the China price’ to win the business. Hence the reason so many of these kids take the temporary jobs paying $8.75 an hour. Then again, when you build your factory in a state where in 2016 the median income was just $42,917, ten thousand below the national average, one understands you will have no end of people willing to work under these conditions for this pay. Even $8.75-an-hour jobs are sometimes hard to find in some parts of America.
Therefore, the facts will remain what they are. We want to believe that bringing these jobs back to our country would benefit us in some great way. And let’s be fair; if one lives in a county with few if any prospects for a better life, having an automobile plant come to your neighborhood may be a great thing. But in many cases, if not most, these will not be great-paying jobs; realistically, they probably haven’t been for the past 30 years. Because even if the jobs came back to America, which odds are most won’t, everything today has to be priced to beat the world price for auto parts — which, for the foreseeable future, is China’s.
Still, this scenario looks so much like our past. Most forget that in 1873 the world fell into what is today known as The Long Depression; originally it was called The Great Depression, until the 1930 edition moved the names around. One of the key issues that damaged Europe’s economy so much in that period was the young upstart industrial manufacturing giant, whose wages were so incredibly low it was costing European workers, even skilled laborers, dearly. In 1873 that young upstart country altering the world’s wage-price system was us.
We continue to hear that as productivity goes up, wages will soon follow. Apparently, that’s not true anymore. At least, not for those who make things for a living.
© 2017 Ed Wallace
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, conferred by the Anderson School of Business at UCLA. He reviews new cars every Friday morning at 7:20 on Fox Four’s “Good Day” and hosts the top-rated talk show, “Wheels,” 8:00 to 1:00 Saturdays on 570 KLIF AM. E-mail: firstname.lastname@example.org