Dealers were equally enthusiastic. One from Wisconsin was dismayed the first week that his store opened, when the first sixteen cars he received had a bad batch of engine coolant. But Saturn, amazingly, replaced not only the coolant but the entire car—an expensive solution, but one that endeared Saturn to the dealer and his customers alike. Saturn stores rang a bell every time a car was sold, and every time a customer drove away in a brand-new Saturn, the dealership’s employees would gather around the driveway to wave and applaud. Saturn’s image got a further boost on June 7, 1993, when Vice President Al Gore visited the Spring Hill factory and declared that he wanted to “Saturnize” the federal government.
Saturn was flourishing because it felt so honest, so genuine, so different from Detroit’s bloated bureaucracies, and from the public’s images of white-shoed car salesmen trying to sneak in hidden charges for, say, insurance against sun damage on odd-numbered Thursdays in Alaska. Many Saturn buyers were the very upscale types, in terms of demographics and income, who had abandoned Detroit for foreign cars but yearned to “buy American” again. In June 1994 more than forty thousand Saturn owners and their families trekked to Spring Hill for the first Saturn Homecoming. It was the sort of “cult car” gathering usually attended only by owners of 385-horsepower Corvettes and other high-octane sports cars, not by ordinary folks driving around in 85-horsepower econoboxes.
But Saturn owners loved being treated to factory tours, country-music concerts, and barbecues with the workers who actually built their cars. It was a genuine public relations coup, something General Motors hadn’t had for decades. Saturn sold fewer than 75,000 cars in 1991, but by 1995 sales soared to more than 286,000. That year Saturn topped the respected J.D. Power Customer Satisfaction Survey—a distinction normally won only by high-priced luxury brands—because in the minds of most buyers, getting red-carpet treatment overcame the occasional quality glitches. Saturn’s workers were awarded thousands of dollars apiece in performance bonuses.
Despite its many birthing pains, including the baggage of Roger Smith’s image and the counterattacks from UAW right-wingers, Saturn was fulfilling its promise of showing the rest of GM that there was a different way, a better way, to do things. As far as the world could see, the issue was how quickly General Motors could spread Saturn’s innovations throughout the company. But there was a lot that the world couldn’t see about Saturn. The qualms of key people in the company and the union had abated for a while but had never entirely gone away.
The early 1990s might have been glory years for Saturn, but they weren’t for General Motors. Jack Smith, whom the GM board had installed as CEO after Bob Stempel, found that his first task was to repair the company’s battered balance sheet. Smith was a decent, self-effacing man who had started his General Motors career at the Framingham factory, the same place as Don Ephlin, though Smith was keeping the books instead of building cars. Smith wasn’t particularly passionate for or against Saturn, but he had neither the time nor the money for grand experiments.
GM was always cagey about whether Saturn actually made money. The answer depended on which accounting system was used: on a stand-alone basis, Saturn was profitable, but when Saturn was assessed for corporate-wide product development on top of the cost of its own engineering organization, the picture changed. When it came to developing new models or even making major enhancements of existing cars, GM, Smith decided, had other spending priorities.
So while Honda and Toyota were developing new versions of the Civic and Corolla with more powerful engines and other improvements, Saturn couldn’t do the same. And when Saturn asked for funding to develop an SUV, the response was that customers could buy SUVs from Chevy instead. Maybe GM’s stance made sense for a company battered by losses, but Saturn was being starved for product. It was becoming Exhibit A for GM’s inability to follow through on its initiatives.
Meanwhile the costs and limitations of workplace democracy were becoming evident. Saturn had hundreds of “sourcing teams” for machinery and components, and each one had a UAW member. Suppliers were chosen by a “point system” that awarded extra points to unionized companies. So Saturn paid a higher price for its engine pistons, among other components, than it would have paid without getting the union involved.
In these decisions Mike Bennett tried to play the good-faith middleman. But like all local UAW leaders, he had to run for reelection regularly and thus couldn’t afford to antagonize his constituents. When UAW team members insisted that Saturn build its own manual transmissions and polymer parts—with union labor—even though the components could have been purchased for less money from an outside supplier, Bennett agreed.
On top of that, as the procurement process was wrapping up, some UAW team members didn’t want to return to the assembly line to build cars again. Such dilemmas didn’t exist at the Japanese car factories in America. The Japanese worked hard to engage their hourly workers, encourage their suggestions, and foster consensus decision-making, but they made no pretense of workplace democracy. Management retained the right to run the place, period.
Saturn might well have managed its way through such awkward issues. But just as GM’s commitment to Saturn was cooling, the UAW’s suspicions were hardening into antagonism. In the early 1990s a new and forceful figure was gaining power in Solidarity House, the union’s international headquarters on the east side of Detroit. He was Stephen P. Yokich, the child of two UAW activists who had hauled their son to his first picket line in 1937 when he was just twenty-two months old.
The anti-Ephlin in virtually every respect, Yokich was muscular and fit, thanks to regular workouts at a public gym near his home in Detroit’s blue-collar suburbs. Unlike the cerebral and soft-spoken Ephlin, Yokich had a violent temper that could erupt without warning. He once shocked two visiting journalists by launching into a tirade against Detroit’s Catholic cardinal, who had disciplined a priest who was friendly with Yokich. “The cardinal’s a fucking prick!” Yokich screamed, his face turning bright red and veins popping out of his neck. “Just a fucking prick!”
Yokich was a proverbial union firebrand who had made his mark by leading a long, bitter 1979 strike against International Harvester, and then moved further up the UAW hierarchy. It wasn’t hard to understand why a man of his nature would be suspicious of Saturn. To Yokich, the union had given up far too much in the Saturn contract for what it received in return. UAW orthodoxy put a premium on seniority rights, which the Saturn contract threatened. Tying workers’ pay to corporate results would leave union members too vulnerable to bad decisions by management, in Yokich’s view, and GM obviously had made plenty of those. Likewise, he believed that substituting a 401(k) profit-sharing plan for a fixed pension was a blow against the security of UAW retirees.
The major problem with the Saturn contract, in Yokich’s eyes, was that it might eventually apply to the rest of General Motors—which, of course, was Saturn’s original goal. “Saturnizing” might have been okay for the federal government, if that’s what Al Gore wanted, but it was the last thing Steve Yokich wanted for GM. So step by step, with a canny knack for UAW politics that Don Ephlin always had lacked, Yokich began his campaign to undo Saturn.
In 1993 he dispatched one of his relatives, a staffer at union headquarters, as a representative to UAW Local 1853 at Saturn. Bennett rightly regarded the man as a spy. Saturn’s management had the factory on flexible schedules that might leave union members working the day shift one week but the night shift the next. It was an efficient system that allowed three-shift days when necessary, but it was anathema to Saturn workers who had transferred with high seniority from other GM plants. They wanted traditional fixed-shift scheduling, in which seniority determined the choice of shifts.
Mike Bennett supported management on the flexible-shift schedules, but in 1994 Yokich forced a vote on the issue. Saturn workers backed Bennett in two plant elections, one in November and the other in early December 1994. But Yokich insisted on a third election later that month,
and this time his political power within the union prevailed, and flexible shifts were defeated. It was a sign of Steve Yokich’s ascendancy, and there was more to come. In mid-1995 Yokich would be elected president of the United Auto Workers. It was great for union traditionalists, but bad for Saturn—and for the new labor model that Saturn hoped to create.
The following year, after lobbying from Yokich, General Motors announced that a new Saturn midsize sedan would be built at a GM factory in Delaware instead of at Spring Hill. It was a sea change for Saturn, which had built its image on being distinct from General Motors—“a different kind of company,” where labor and management worked in harmony amid the down-home values of Spring Hill. The Delaware factory, in contrast, had the regular UAW contract, with all its work rules and job classifications. But in a hard-nosed way, the Delaware decision suited both the company and the union. GM was able to utilize spare manufacturing capacity and avoid closing the Delaware plant, while Yokich and his UAW allies were able to rein in the heresies at Saturn.
Despite Detroit’s overall prosperity as the new millennium neared, the hope that Saturn would spawn an era of company-union cooperation at General Motors was fading. Any illusion otherwise would meet with harsh reality in 1998, some 550 miles north of Spring Hill, in the UAW citadel of Flint.
On the night of June 4, 1998, General Motors moved some dies—giant cookie cutters used to stamp car body parts out of steel sheets—out of a metal-processing factory in Flint. Equipment moves were common, but this one was ordered because the company’s manufacturing executives were fed up. Workers at the Flint facility were filling their daily production quotas (which had been negotiated between management and the union local) after working just four or five hours, then taking the rest of the day off. But they were getting paid for a full eight hours. If GM needed to schedule extra work, it had to pay them overtime.
It was the sort of utter craziness that had come to seem normal because it had gone on for years. And it was among the reasons GM’s labor costs for each car were $700 higher than those of Japanese manufacturers. Determined to take a stand, GM warned the union leaders in Flint that the system had to change. When it didn’t, they decided to move some of the work to other factories.
The move was a direct public challenge to the UAW and Yokich, and workers at the plant walked out the next day. Six days later, on June 11, workers at another Flint factory walked out in sympathy. Only 9,200 workers were on strike, but their impact was enormous. The two factories produced components that were critical to most of the GM assembly plants in the United States and Canada. Within a week or so those plants were shut down, idling their 175,000 workers as well as tens of thousands more workers at plants owned by other companies that produced parts for GM.
The strike’s impact caused the entire industrial production of the United States to drop nearly 1 percent for the month, the sharpest monthly decrease in five years. It was like Sarajevo 1914: neither side had believed things might escalate so quickly, nor that the result would be so destructive. In Spring Hill, even Saturn workers voted to authorize a possible strike—something that would have been unthinkable just a few years before.
In late June, with the strike three weeks old, the UAW’s leadership adjourned to Las Vegas for the union’s triennial convention. A GM executive taunted them, in voice-mail messages to employees, for cavorting in Vegas instead of engaging in negotiations. “I mean it’s nuts,” Yokich told reporters in Las Vegas. “It’s like a madman’s in control of the company.” The irony of Steve Yokich calling a GM executive a madman was rich. The union’s real concern, though, was that the company seemed to have some legal leverage.
The GM-UAW contract forbade strikes during the life of the agreement, except on issues involving production standards, subcontracting, and safety. The number of grievances on those issues in the Flint factories had surged magically from just six to 259 shortly before the strike. Most of them were blatantly bogus. What followed showed how dysfunctional the GM-UAW relationship had become.
GM’s lawyers suggested suing the union. But the company’s timorous labor relations staff retorted that the move would be unduly antagonistic. It was as if GM’s labor staffers were suffering from an industrial version of Stockholm syndrome, the strange tendency of hostages to sympathize with their captors. In mid-July, with its losses topping $1 billion, GM finally mustered the gumption to sue the UAW, citing the sudden increase in grievances as evidence that the strike violated the contract.
It was the first time GM had sued the union since the Sit-down Strike, in the same city, sixty-two years earlier. Yokich phoned GM executives and screamed, “You can’t do this!” He was antagonized all right, just as GM’s labor staff had predicted, but what more could he do? GM was already almost entirely shut down.
By late July fear was mounting inside Solidarity House that the union might actually lose the case—with potentially devastating consequences. If the court deemed the strike illegal and ordered the UAW to reimburse GM for its losses, the union would be bankrupted.
Then suddenly, just a day before the judge was ready to rule, GM’s senior executives lost their nerve. They convinced themselves that even winning the lawsuit would be a no-win proposition, because they would have to live with embittered workers who might, conceivably, resort to sabotage after returning to their jobs. The reality was that the UAW was the devil GM knew. On July 28, after fifty-four days and $2.2 billion losses, the company and the union settled, and GM’s costliest strike in twenty-eight years came to an end.
The ramifications, however, were just beginning. While the company got some concessions on work rules, the dies that had launched the war were returned to the Flint metal-stamping plant in broad daylight—cheered by UAW members in a public victory parade. GM replaced its veteran chief of labor relations with another executive who had marching orders to get along with the UAW, no matter what. The company began requiring managers to fill out an internal “score sheet,” assessing the potential for planned productivity improvements in any factory to trigger another strike.
Newsweek, BusinessWeek, and Barron’s assessed the developments and concluded, correctly, that General Motors had caved. Instead of either standing up to the union or spreading the Saturn model, wrote Barron’s, General Motors had taken the ineffectual middle ground of “building lean and agile’ plants too quickly to keep the union quiet and too slowly to make big annual gains in productivity.” In the Flint strike, yet again, GM lacked the will to finish what it had begun.
A week after the settlement General Motors announced it would spin off its components operations, including the Flint facilities that had been ground zero in the strike, to its shareholders. They would become a new, independent company called Delphi Corporation. GM’s board of directors finally had become fed up with paying inflated prices for parts from “captive” components plants whose workers had the ability, and the will, to shut the whole company down. Spinning off Delphi would give GM flexibility to buy components from other, independent suppliers. The company’s show of resolve went only so far, however. GM agreed to the union’s demand to guarantee the pensions of Delphi workers, in case Delphi couldn’t pay them. It was a critical concession, because subsequent events would prove that GM hadn’t really washed its hands of Delphi after all.
In early December Jack Smith and Rick Wagoner (who by now was the president of GM and Smith’s heir apparent) held a peace parley with Yokich over dinner at the Whitney, a restaurant housed in the elegantly restored mansion of a Michigan lumber baron just north of downtown Detroit. It was part of the company’s new charm offensive. Steve Yokich, however, was still on the warpath.
In the fall of 1998 a young GM executive named Mark Hogan took four senior staffers from the UAW’s headquarters on a fact-finding mission to Brazil. The personable Hogan had served as president of GM Brazil before being recalled to headquarters by Wagoner to lead U.S. small-car operations. His marching orders from Wagoner were clear: Do whatever it
takes to make the company’s small cars profitable.
So Hogan traveled back to Brazil with the UAW staffers to look at Project Blue Macaw, which Hogan himself had launched shortly before returning to the United States. Blue Macaw achieved significant efficiencies by shifting much of the responsibility for building a car to components companies, which usually had more flexibility and lower labor costs than the automakers themselves.
The suppliers would deliver preassembled modules, as opposed to individual components, to the assembly plant, where the final work would be done at a fraction of the previous cost. Hogan wanted to adapt Blue Macaw to the United States under a new code name, Project Yellowstone, but with essentially the same concepts. The potential savings were huge: some $2,000 off the cost of building each car.
Yellowstone would be GM’s third bite at the apple of small-car profitability and a new labor-management relationship. The first had been the Nummi joint venture with Toyota, which remained an isolated outpost of the GM empire, regarded in Detroit as too Toyota and not enough GM. The second was Saturn, which neither GM nor the UAW seemed willing or able to embrace. Hogan, however, figured that Yellowstone would succeed if he lined up backing from key people in the company and the union. He was energized to try a concept that was working—despite some initial glitches—in Brazil.
The trip with the union staffers went well, so when Hogan returned to the United States he paid a visit to the chairman of UAW Local 652 in Lansing, Michigan, Art Baker. Baker had run Local 652 for nearly twenty years, a rare achievement, and was an avid hunter whose trophy room had enough antlers to outfit an entire herd of deer.
Baker’s top priority, possibly excluding hunting, was to secure future jobs for his local union, so when Hogan talked about building a new assembly plant near Lansing, he listened eagerly. Hogan acknowledged that the plant would need fewer workers—far fewer—than existing GM factories. But he also said GM would guarantee the jobs of all existing employees in Lansing and would manage the reductions over time through attrition and retirements instead of layoffs.
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