Case Introduction

Resurgence
Increased Investment in Capital Base Low rate of inflation

Demographic influences
Aging of baby boomers Decline in costs

 Managerial trends affecting HR policies

Differences in environment of automobile industry

NAFTAs effect on automobile industry HR issues for managers

Difference from 1970 Technology Organizational Structure Worker Values Managerial trends Demographic trends Trend in utilization of HR

Readings:
Meeting the Challenge US industry faces 21st Century. Professor Charles H Fine, US Dept. of Commerce office of Technology Policy Human Resource and the Auto Industry. Practices in Automotive Suppliers. Ten Years After
Implementation of Lean Manufacturing Principles in

Automobile industry.

Core understandings

Flash Back
1920 Ford reduces its cost to two-third by implementing

Production line conveyer belt..became the market leader The competitors followed the same strategy. GM motors etc. 1930- GM motors were the market leaders as they kept their COMPETITVE EDGE of offering high range of Models to the customers. Ford had to face 7 months shutter down to reorganize itself. Next revolution came in 1960s which was not in US but in JAPAN. The new concept of Lean Manufacturing and Function based teams was implemented This is where our story begins 1970

Hence by 1970
Big 3 (Ford, GM and Chrysler) had tough competition

with Japan-owned and other companies (Toyota, Nissan and Honda)

Improved productivity Reduced capacity

Global competition

Later. High labor cost , less sales and old concept of internal combustion (Perry, 2007) has given them good reasons to bankrupt. Pressure Groups resisted for work-teams

Demographics and Labor Relation Management

United Auto Workers (UAW) - the lifetime agreement. Wage rate in Big-3 is 35% more than other automobile

industry in US. (Perry,2007) UAW growing old. Job loss on the basis of Inverse seniority from UAW 50% retired by 2005 from Big 3 There has got to be
reduction in labor-management conflicts by Labor-Mgmt.

Cooperation Collective bargaining relationship Reduction in unionization for ceasing work Trust has got to be developed

1980s and 1990s

Trends in Management
In 1980 and 1990 the emergence of non-union transplant

assembly plants. Toyota ,Honda and Nissan has total non-union transplant assembly plants. Fords joint venture with Mazda in US has implemented TQM practices with less use of teams. Use of Teams, Job rotation and suggestion systems adopted by Big-3 at far less pace than Japanese

Management Trends in US Auto Industry

Modest increase in contingent compensation, reduction

in status difference and training for innovation. Japanese are at high pace. Overall, the United States has experienced a significant expansion in employee participation and associated workplace innovations over the past 20 years UAW-1980 to 1990 Saturn (1980) was also a great success with 28-page MOU

 An integrated approach is required for automation and HR

practices In 1990s Japanese had more integration than US-owned plants. From 1989 to 1994 US adapted the Lean Production Practices but did not integrated much. GM closed the doors of its two factories in 1982 but opened up in 1984 with a joint-ownership with Toyota. Having lean management. NUMMI (1984 to 2010)
Reduced absenteeism by 90% Doubled productivity Contingency compensation increased creativity

Standing at the edge of 20th century

Reorganization and restructuring can be a great help to

reduce the union impact Reengineering- effect on Big3 as others already have low cost and lack of union strong arming Unions have got to accept Work-teams Self-directed management teams Management should be facilitator rather than a controller Global Focus

US Auto-industry now.
More emphasis on tools and techniques rather than the system

itself. Lack consistency They look for a recipe cook book Whole system has got to be based on Lean Principals Present logic before implementing change Managers need to present exemplary technical skills Become a learning organization Needs to focus on:

How people work How people connect How production line is constructed How to move forward

Innovation, technology and systems management

The Key is Cross Functional Product Development Teams

HR-Issues
Globalization
Unemployment Organization culture

Employee empowerment
Compensation Diversity

Future Changes:
In automobile Sector:
Shorter Developmental cycle Diversity , Team Work (virtual Teams), Outsourcing More focus on TQM, Reengineering and Integrated Manufacturing

Global Competition

In Managerial Practices:
Lean and flat organizations (need for job assignments and opportunities) More skills and education requirements Conceptual understanding of technological environment De-emphasis on traditional managerial roles and more autonomy and

decision making power to employees

Contd:
In Employees Skills

They should be: multi skilled Flexible porous Adaptive Creative technological know-how mature enough to handle situations

Effect of Managerial Trends on HR

Diversity
cultural awareness training open communication ease of discussing differences (and respect them)

For all this more flexible and broadened policies, open mindedness, less standardized operating methods and more skills for dealing with resistance will be needed

Work Team

Fair performance and compensation policies Team based rewards Training for successful team building Control on leg pulling and team politics

Contd
TQM
Training Emphasis on team based evaluation Improved communication

Control downsizing

Intenerated Manufacturing and Re-Engineering

Careful selection of employees who possess high technical and problem

solving techniques Greater emphasis on more comprehensive training, more selectivity in hiring, greater developemental use of performance apraisal & greater emphasis on external pay equity Higher need to hire and maintain high-quality workforce

Contd
Management of Professionals:
HR should try different schemes to make professionals loyal to the

organization Developmental and career plans (HR need to focus on alternatives that will satisfy both organizations and professionals)

Mergers And Acquisitions:

HR should work closely with other departments (especially with Finance

dep't to foresee such an activity) Planning for merger/takeover should be done before it actually takes place HR pays the price ultimately

From (1994-2010)

North American Free Trade Agreement (NAFTA):

Signed by 3 countries Canda, U.S & Mexico
Came into force on Jan 1, 1994 Aim is to reduce trade barriers among these countries by

eliminating the tarrif on goods produced and trade

Expectation From This Agreement

NAFTA was expected to enhance the competitivness of U.S companies throughout the world Stated by George W. Bush: The agreement would help establish a level playing field reactive economic growth and create new jobs Mexican President Carlos Salinas de Gortan also hoped that accord would result in sustained economic growth with increase employment and improve wages

North American Free Trade Agreement

Imported goods are now taxed free so all three countries

can get banefit on the basis of comparative advantage Export efficient producing good Import goods in which other produce more efficiently So net benefit of this trade is very positive But have negative impact on employment and income

NAFTAs Hidden Cost

Trade expand but jobs not grown at the same pace
Gain in productivity, but wages tended to stagnate Benefit only for business communities, but did not pay

attention to protect worker rights & wages from the adverse effect of economic globalization

Hidden cost.....
U.S face trade deficit

In 2009: Total export under NAFTA = $397B Total import =$438 B So trade deficit with NAFTA was $41 B in 2009 In 2010: Total export= $412 B Total import= $506 B Trade deficit= $95 B

Hidden cost.....
Imapct of trade deficit: Actual and potentail job loses Rise in income inequality Suppressed real wages for production worker Weakened collective bargaining power Reduce fringe benefit

NAFTAs efect on U.S automobile industry

Goal: NAFTA wsa enacted with the end goal of giving major industrial nation (U.S, Canada, Mexico) the ability to competitively compete with the rest of the world Conduct business in such a way that each of these nation would mutually benefit Espacially this was envisioned fot the automobile industry of U.S NAFTA being used as catalyst, allow U.S to export automobiles to Canda & Mexico Increasing the market for American automobiles Giving struggling industry a chance to revive and grow

 Traditionally US enjoyed the dominance in automobile

industry 3 big manufacturers are Ford, General motors & Chrysler After World War 2 the dominance began to slide with the rise of Japan and other European nations After Sept 11, 2001, changed all the scenario of global trade Soaring tranportation cost, insurance cost put an excessive burden on U.S automobile industry

Problems
NAFTA intended to create EEO,but actually it craeate set of problems
From U.S point of view, lowering import restriction allowed Mexico &

Canada to enter in American markets and sell viechles at lower price and capture huge market share This increased competition and lower revenues make U.S automobile m,anufacturer to end up their manufacturinf facilities domestically....result in job losses
The increse demand for labour in Canda & Mexico, encourage people to

shif big cities where ther better paid, so this inturn led to inflate the price of production for U.S automobile manufacturer because of increase in labor cost, this making even harder for US to try to compete

In a nut-shell
NAFTA when 1st unveiled, held a great deal of promises;

however, in the final analysis the result were quite the opposite Free trade is never totally free-someone always pays In this case US automobile industry and workforce has been forced to foot the bill

conclusion
Shortage of skilled labor.
Integrating corporate culture. Mergers &acquisitions.

Implementing information sharing strategies to help

improve performance. Industry needs more research and analysis to go green.