How Is Detroit Responding to Japanese and Swedish Organization and Management Systems?

By Rehder, Robert; Finston, Howard | Industrial Management, January/February 1991 | Go to article overview

How Is Detroit Responding to Japanese and Swedish Organization and Management Systems?


Rehder, Robert, Finston, Howard, Industrial Management


The Japanese are rewriting the book on the American automobile industry, and the reading is disquieting. Since the turn of the century, Detroit has dominated the global automobile industry. In 1960, Detroit's Big Three manufactured over half of the world's automobiles. Today, the Big Three are struggling to hold onto their dwindling share of the U.S. market, which has declined to 65 percent and is still falling. A recent editorial in The Economist says the unthinkable: "A truth has become nearly self-evident: Detroit's Big Three are staring death in the face."

The Japanese automobile plants in the United States (transplants) are creating high levels of unemployment and dislocation. Current estimates are that over 20,000 U.S. auto workers have lost their jobs in the last three years alone, without counting the losses in the automotive parts plants. During this same period, approximately 11,000 new jobs have been generated by the new Japanese transplants. The ratio of jobs lost to jobs gained has hardly been favorable, and the displacement has only begun. A more optimistic forecast of Japanese transplants is presented by Robert Lawrence, a senior fellow at the Brookings Institute, in a study funded by the Automobile Importers of America. According to Lawrence, Japanese transplants may displace 64,600 jobs in GM, Ford and Chrysler by 1992; however, they will create a net 100,000 new jobs. It is also apparent the U.S. automobile crisis is now moving from an economic problem to a social and political national issue as evidenced by congressional protectionist threats, coupled with growing U.S. mistrust of the Japanese. The unprecedented response to Moore's low budget film about GM's CEO, Roger and Me is a clear indication that the U.S. public is deeply feeling the social costs of automobile plants closing and job losses. In addition, the movie highlights the anachronistic corporate aristocracy in the U.S. It is increasingly apparent to the U.S. public that the centralized, aristocratic corporation with its ever growing disparity between executive and employee compensation, perks, and power, is increasingly seen as inconsistent with U.S. democratic culture and values. Illustrative of this problem is the latest GM increase in executive pension benefits which result in Roger Smith's pension doubling from $700,000 to $1.25 million per year. These fattened executive benefits come at a time when thousands of GM workers are being laid off as GM's market share slid 11 percent last year alone. The traditional corporation, with its win/lose corporate culture, results in a dramatic trust gap between top management and their workers as evidenced by recent polls.

The Japanese have established ten automobile transplants in North America as well as hundreds of parts plants. Despite a world awash in automobile plant overcapacity, the Japanese transplants continue to expand, improve the quality of their product while employing U.S. workers, and sharpen their marketing operations in the United States. Indeed, the Japanese system has been viewed as the new model for Detroit to follow and, in many respects, is revolutionizing the U.S. automobile industry. Indeed, some Big Three critics suggest the Japanese should run the Big Three's factories. The distinguishing characteristics of this Japanese management model have been discussed at length in an earlier article. Among the more important of these are the team concept, quest for perfection (in both quality and quantity), mutual trust, stable livelihood, win/win relationships between labor and management, and just-in-time inventories.

After some five years of witnessing the Japanese system firsthand, U.S. academics, managers and workers alike better understand the many benefits and accomplishments of the Japanese approach. At the same time, they also are becoming increasingly aware of its true human costs. Many U.S. transplant employees are asking what the point is of duty, loyalty, quality, teamwork, and productivity if the end result is loss of individual freedom, compromised industrial due process, and diminished quality of work life? …

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