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Socialist Review, April 1994

Sabby Sagall & Dave Beecham

Kings of the road?

From Socialist Review, No. 174, April 1994.
Copyright © Socialist Review.
Copied with thanks from the Socialist Review Archive.
Marked up by Einde O’Callaghan for ETOL.

The takeover of 80 percent of the Rover Group by BMW brings into sharp relief the enormous competitive pressures in the industry. Because Rover was the last ‘British’ car firm of any size, and because car manufacture has long been a symbol of national prowess, there was bound to be a lot of rhetoric about ‘enemy’ takeovers and ‘betrayal’ of the Japanese. But behind this rhetoric is a build up of intense national and international rivalry.

The billion pound investments now required to compete; the expansion of capacity; the attack on jobs and working conditions; and the instability of the system as a whole – all have combined to threaten an all out war between the big manufacturers. The logic of capitalism now demands an even greater concentration of economic power in the hands of a few giant firms; and a further assault on those who work in the industry.

Between 1945 and the mid-1970s there was constant expansion of car production in Europe, the US and Japan. Since then, and especially since the recession of 1979, competition has sharpened in a narrowing and increasingly uncertain world market. Car firms have responded in three ways: introducing automation, transforming the existing system of production and rationalising through closures, sackings and cutbacks.

The 1979–81 recession hit particularly hard. British Leyland’s losses quadrupled from roughly £100 million to £400 million between 1979 and 1980. Employment in the British car industry has fallen from 464,000 in 1979 to 214,000 in 1993. In the US in 1980 Ford experienced its worst downturn since the 1930s. General Motors suffered losses of $1 billion in 1982. As for Chrysler, the crisis it suffered in the early 1980s caused it to go cap in hand to the US government.

In the last 15 years European and US firms have also been progressively challenged by Japanese competition.

In 1970 European firms were responsible for 10.5 percent of car imports into the US, with Japanese cars having only a 4.2 percent share, and only a 1.1 percent share of the West European market. By 1985 the European share of the US market had fallen to 5.6 percent with the Japanese share rising to 20 percent. By 1991 the Japanese car industry had over 30 percent of the US and over 10 percent of the European market.

Intensifying rivalry between the major firms has forced each to look for ways of producing better and a more varied range of cars more cheaply than their rivals. The most obvious method of achieving this is lower labour costs so all have introduced new technology, including robots, displacing large numbers of workers and intensifying productivity.

New, so-called ‘lean production’ systems have emerged, modifying traditional mass production techniques. Automation has enabled employers to reduce the workforce and broaden the role of production workers. This is sometimes called multi-skilling and it certainly involves workers taking greater responsibility for a range of different tasks. However, the main impact is a dramatic increase in the tempo of work. The speed of production has doubled: the amount of time it takes to produce a vehicle halved. Workers are increasingly exhausted and alienated. Nissan carefully selected the workers for its Sunderland factory from the most compliant. When it offered redundancy terms last year, there was no shortage of takers. The company has a workforce turnover of 15–20 percent.

Car workers are no longer confined to a single task; instead they operate in flexible production teams. In the process companies have usually tried to marginalise union organisation, or do away with it altogether. But again and again, whether at Ford or Rover, Fiat or Renault, BMW or Opel, employers in every country have relied heavily on the union machinery to force through change.

The other key development is the integration of manufacturing with suppliers. Computerised production control allows companies to operate with far lower stocks of components. The ‘just-in-time’ system can save employers huge amounts. It requires the ruthless imposition of quality and delivery systems on suppliers.

This obviously leaves the employers much more vulnerable than in the past. The slightest disruption to production or supply can have a devastating knock on effect. When workers at Ford’s Bridgend struck, production at continental plants was stopped within three days. Twenty years ago stoppage at a component supplier such as Lucas or GKN could take several weeks to have an impact.

The new systems have been introduced at a different pace in different firms and with a varying degree of success. Underlying it all has, of course, been the competitive threat from Japan.

The competitive advantage of Japanese firms originally derived from the simple but effective formula of lower wages and longer hours. But it was the heavy investment in automation and new systems of production control which panicked firms such as Ford and GM. In 1979 GM became the first Western company to make the shift to new computerised technology, a programme so far costing some $60,000 million. But the company faced huge problems in adopting lean production – because of shop floor opposition but also because the vast management bureaucracy was threatened.

Fear of Japanese competition during the 1980s has been a major reason impelling European and US car firms to introduce automation. However, they have also reduced costs through ‘rationalisation’: closing down less efficient and less profitable plants or sections. Standardised production has enabled firms to cut costs through economies of scale: Ford and Mazda now produce virtually identical models, only with different names.

The combination of investment with an assault on jobs and conditions proceeded apace. Ford UK slashed the workforce from 70,000 in 1982 to 32,000. Productivity doubled, but this was still not enough to compete fully with the new Nissan and Toyota plants.

British Leyland, forerunner of Rover, led the world in low investment and poor products. With state aid pumped in by the Tories, and subsequently the alliance with Honda, the company reduced its workforce from 89,000 to 35,000. New technology accounted for 30–40 percent of this drop though the period was one of falling sales and output throughout the British motor industry. But between 1980 and 1988 the productivity of Rover workers, cars per hour of labour, rose by 250 percent. The company identified 40 percent of this as coming from new technology and the rest from ‘management’, ‘factory practice,’ ‘work systems’ – getting workers to work harder. Rover workers’ productivity rose from 5.9 cars per worker in 1978 to 17.5 in 1989. It took 12–16 hours to assemble a car body in 1978, four hours in 1982 and 2.8 hours in 1990.

But the essence of competition is that your rivals do not stand still. At Fiat the introduction of automated equipment, coupled with an assault on shop floor organisation, led to a doubling of productivity between 1980 and 1988.

What was the effect of these investments and redundancies on profitability? Initially profitability was restored, assisted, especially in the later 1980s, by the credit boom. After 1981 the pre-tax profits of the most successful companies did on the whole rise in the course of the decade, particularly towards the end of the 1980s.

In addition, as firms employ fewer workers, they can more easily hold down labour costs. This is clearly of benefit to the individual firm which strives to seize a larger share of the market from its rivals. But when every firm does it, not only in the car industry but throughout the economy, it has a disastrous effect. It means that the number of workers in employment constantly falls as a proportion of rising investment. While investments continue to grow, profitability tends to decline.

By the end of the 1980s employers were finding it hard to hold back wages as unemployment fell from the heights of the mid-1980s. With growth fuelled by the credit boom, wage rates and labour costs rose in 1987-88 in most industrial countries, especially the US and Britain. However, this expansion was fragile. Firms borrowed vast sums, causing inflation and interest rates to rise. Huge debts ate into profits.

In general, purchasing power has declined relative to the enormous investments. Workers cannot afford the goods they produce. In the late 1980s more than half the new cars produced in Britain were bought by companies. Across Europe the major car manufacturers introduced massive discounts for their employees: in one year 20,000 new cars were bought by Mercedes employees. But even this level of subsidy can no longer disguise the crisis that now besets the industry.

Last year car sales across Europe fell by an average 20–25 percent. In Britain sales rose: but it remains a far weaker market than France, Germany or Italy. There is a huge surplus of capacity as the rival firms ratchet up productivity. Japanese excess capacity is around 10 percent, and has been around 35 percent in the US since 1990. According to one estimate – by the new boss of Ford Europe, Jac Nasser – potential excess capacity in three or four years time will be about 7 million vehicles. What that means is that fully one third of the potential European output which the companies have spent billions of pounds acquiring will not be required. Plants will have to shut, the weaker companies will once again have their backs against the wall.

The crisis is global. The table illustrates how the world’s two largest manufacturers – General Motors and Ford – ran up massive losses in 1992 – incurred as the result of rationalisation and new investment to take on the Japanese. The Japanese in turn have faced mounting competition from new low cost producers elsewhere. Car production in South Korea now exceeds Britain’s.

The collapse of the European car market in the most recent recession has further dented the profits of the big German, French and Italian firms. They will certainly try to claw these back, through a process of cut throat competition led by attacks on workers.

In every country workers are told: compete or die. But the record shows this is a recipe for cutting your own throat. The only way forward is to resist the job losses, the endless speedups and the erosion of wages and conditions.

 
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