Retrospective: The Saturn Deal
Remember twenty (20) years ago when everyone everywhere was rushing to land GM's new Saturn plant? In case you have forgotten the details, here is a reminder:
GM Picks the Winner
After a furious sweepstakes, the $3.5 billion Saturn plant goes to Tennessee
TIME Magazine
Aug. 5, 1985
Never has an industrial prize been more coveted and courted. Never has a decision by a single company been the subject of more impatience and speculation. In January, General Motors announced that it planned to build a $3.5 billion factory that will produce a new subcompact car called the Saturn. Since then, 36 states and dozens of cities have made bids to be host to a project that will provide 6,000 jobs at the plant and a shot of instant prosperity to the surrounding region. The choice of a site was originally expected to be made in April, but the suspense has dragged on maddeningly as GM considered more than 100 locations. Last week the company cleared away the last obstacle to a decision when it reached an agreement with the United Auto Workers on an innovative labor contract for the Saturn plant's employees. As a result, GM will announce this week the location of what will be, in the words of one company official, "the largest manufacturing complex that anyone has ever built anywhere at one time."
The winner is Spring Hill, Tenn., a bucolic community of 1,400 located 28 miles south of Nashville and 563 miles away from the auto industry's epicenter in Detroit. The site is not as out of the way as it sounds. It is only about 30 miles from Smyrna, where Nissan builds cars and trucks, and some 30 miles from La Vergne, where Bridgestone makes tires. The success that these two Japanese companies have had in Tennessee reportedly impressed GM, as did the state's abundant electricity, favorable tax structure and productive labor force. Despite its fame as the home of Grand Ole Opry and Jack Daniel's whisky, Tennessee has quietly become a thriving business center; 100 corporations, including Federal Express and Magic Chef, have their headquarters in the state.
GM has searched long and hard for the right location because the Saturn project is not just another auto plant. It represents the company's best and perhaps last chance to beat back the Japanese challenge. Though wholly owned by GM, the factory will be the centerpiece of an entirely new company called Saturn Corp., which will have its own executives and engineers and a separate network of dealers. GM's plan is to give its new offspring the freedom to use advanced technology and flexible labor practices to erase the $2,000-per-car cost advantage that the Japanese enjoy on small cars. Chairman Roger Smith calls Saturn the key to GM's competitiveness, survival and success as a domestic producer.
In the past, Detroit's efforts to cut costs have usually run up against poor management policies and rigid union work rules and job classifications that limit productivity. So in 1983, long before the Saturn project was unveiled, GM invited the U.A.W. to help devise a better way to build cars. A study group of 65 representatives from the union side and 34 from management began a series of brainstorming sessions that included field trips to Japan, West Germany and Sweden.
The result was a series of groundbreaking new work rules to enhance morale and productivity at Saturn. Instead of performing a single tedious task like attaching windshield wipers as cars whiz past on a long assembly line, employees would work together in self-directing teams of six to 15 people. Each team would be responsible for large sections of the car, and its members would have the latitude to reach a consensus on how to divide up and rotate job assignments. Most important, production workers would receive a salary instead of an hourly wage as they do now, and the pay would be directly tied to performance.
When a draft agreement containing these radical reforms was presented to the union's leaders in early July, they found it too much to swallow in one gulp. Peter Kelly, head of U.A.W. Local 160, in Warren, Mich., said that the plan "could lead to the demise of the U. A. W union movement as we know it." He complained that the proposal would destroy the seniority system, in which the best jobs go to workers with the longest service. Kelly pointed out that while job security would be guaranteed for 80% of Saturn's workers, the remaining 20% could still be laid off. The 25-member U.A.W. executive board rejected the plan and began negotiating with GM on revisions.
The union's leadership recognized, however, that GM needed something like the proposed contract to compete against a host of Japanese invaders. In addition to Nissan's Tennessee factory, a Honda auto plant is already operating in Marysville, Ohio. Mazda intends to build a factory in Michigan by 1987, and last week Toyota announced that it too would set up a U.S. plant within three years.
The U.A.W. executive board approved the Saturn contract last week with only a few revisions. One change was a new requirement that anyone Saturn hired who was a union member and a current or former GM employee would be guaranteed lifetime job security. U.A.W. President Owen Beiber praised the pact. Said he: "For the first time in history, our union will have a great deal of input upon how the plant is operated."
GM's announcement of the winning site will be the climax of a contest that bore a passing similarity to the 1849 gold rush. More than 20 Governors made pilgrimages to Detroit to woo GM, offering all sorts of land deals, tax breaks and worker-training grants. Minnesota's Rudy Perpich said his package of inducements was worth $1.3 billion to the company. To remind GM's executives of its lures, Missouri erected a billboard in downtown Detroit that read GIVE US A RING. Another sign said CHICAGO WANTS YOU. Celebrities were enlisted as well. Boxer Ray ("Boom Boom") Mancini touted Youngstown, Ohio, and Golfing Great Arnold Palmer praised Westmoreland County, Penn.
But company officials were not as interested in deals and flattery as they were in a specific list of requirements that the site must meet. Among other things, the plant had to be near a railroad, water transportation and at least two interstate highways. Every day the factory would need 4 million gal. of fresh water, half a million pounds of steam and 80 megawatts of power.
Within the past few weeks, GM reportedly narrowed the choice down to three sites that met most of its needs: Spring Hill; Shelbyville, Ky., a town of 5,500 about 30 miles east of Louisville; and Schoolcraft, Mich. (pop. 1,350), which is twelve miles south of Kalamazoo. One of Kentucky's drawbacks appeared to be the relatively poor quality of its educational system. Partly in response to GM's concerns, the state's legislature met in special session two weeks ago to pass a $306 million education-aid bill. Michigan's main attraction was a large pool of skilled workers already experienced in automaking. GM was hesitant, however, to put a plant with revolutionary work rules so close to the company's conventional factories. The Saturn workers and employees at older plants near by might resent being treated differently.
By last week, Spring Hill had emerged as GM's choice. Tennessee's pitch had been low-key but effective. Three months ago, when Smith was in Memphis to give a speech, Tennessee Governor Lamar Alexander and former Senator Howard Baker cornered him. The three men met for an hour at the stately Peabody Hotel, once a favorite gathering place for Southern plantation owners. Alexander and Baker explained that Tennessee's constitution prohibits it from giving financial incentives to companies. They also emphasized that the state has a pro-business government, no income tax on wages and salaries, and a hardworking labor force. Another selling point was that Nissan and Bridgestone have achieved unusually high productivity and quality in Tennessee. One Nissan study showed that trucks built at Smyrna had 11% fewer defects after being on the road for three months than models assembled in Japan.
Spring Hill is a scenic town set amid rippling cornfields and rolling meadows. Last week its citizens were almost as excited about GM's imminent arrival as they were over an important Little League game in which Andersen's Hardware blasted Jack Warren's Stables by a 30-14 score. At the Poplar Inn on Main Street, where townspeople and truckers can always enjoy pork tenderloin, biscuits and the latest gossip, diners were abuzz about how Maclin Davis, a Nashville lawyer, had accumulated options to buy 4,000 acres around Haynes Haven farm. A few residents had mixed emotions. "I will hate to see the farmlands torn up," said Ronald Woody, assistant principal of Spring Hill High School, but he was happy that the GM plant would force the county to build a new high school. The current one was completed in 1937 by the New Deal's Works Progress Administration.
It was a discouraging week for the losers in the Saturn sweepstakes. Said New Jersey Governor Thomas Kean: "We're obviously disappointed. We knew we were a long shot, but we also knew we were in the competition." But Douglas Ross, Michigan's secretary of commerce, was more upbeat. "We win, no matter where the Saturn plant goes," he said. "If Saturn learns how to build cars competitive with the Japanese, that means the American auto industry centered in Michigan will survive and flourish."
General Motors certainly hopes that will be true. The company is betting its reputation and resources that the Saturn project will be the factory of the future. If GM succeeds, American industry will have proved that it has not lost its vision and verve. --By Charles P. Alexander. Reported by Barbara Dolan/Detroit and Joseph J. Kane/Spring Hill
posted by Don Iannone, D.Div., Ph.D. at
Saturday, May 28, 2005
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