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The Best Gift Arrived


See also:
Outsourcing -- Part One
Outsourcing -- Part Two
Outsourcing -- Part Three
Outsourcing Information Technology Systems and Services
Are We Indispensable?

          Looking back on 1996 and 1997, perhaps the best gift to the smaller business was not postmarked "Washington, DC," but "Detroit, MI." US auto makers negotiated a tough new three-year labor pact with the United Auto Workers (UAW).1 With the UAW representing 420,000 production, skilled trades, engineers and salaried workers at General Motors, Ford and Chrysler (the "Big Three"), the stakes for both sides in these negotiations were enormous; in fact, their survival was at stake.

          The UAW had lost half of its membership over the past 15 years, and it was determined to stem this inexorable erosion. Labor unions may have lost some of their mid-century clout, but they are still a powerful factor in certain industries -- viz., automotive. Jobs guarantees were a paramount objective for the UAW. On the other hand, the Big Three -- especially General Motors (GM) -- were equally determined to gain some new tools to strengthen their competitiveness in an increasingly combative global automotive market. Enhancing competitiveness through an essential reduction in headcounts appeared to put the UAW and the Big Three on a collision course. Outsourcing was the gut word during these muscular negotiations which included a 20-day strike between the Canadian Auto Workers and GM.

          However, the final agreement was described enthusiastically by Frank Joyce, Director of the UAW’s Public Relations and Publications Department: "This is a visionary contract in the way it combines and addresses the interlocking needs of present, past and future workers with those of the Big Three. It’s a win-win for both of us."

          The contract signed December 9 by the UAW and GM is exceedingly complex comprising 1,700 pages; this was the most significant of the Big Three contracts. This contract limits GM from outsourcing more that five percent of the company’s current 210,000 UAW-represented positions -- i.e., only 10,500 jobs. However, each of the Big Three contracts also permits the elimination of jobs due to changes in technology, increases in productivity, declines in market share, and even, in certain cases, the closing and disposal of a non-competitive plant or the discontinuance of a product line.

          Union-management negotiations are always intricate political contests with dramatic posturing and shouting for the benefit of specific constituencies. But politics is ultimately "the art of doable." While GM failed to achieve its announced outsourcing objectives, it realized some substantial gains. Automotive industry authorities estimate that GM (alone) may be able to actually eliminate between 20,000 and 30,000 positions during the three-year life of this new contract.

          What does this mean for smaller businesses and entrepreneurs? Of course, this does mean there will now be increased outsourcing opportunities for some selected smaller businesses serving the automotive industry. However, more significantly, this means outsourcing will become more broadly accepted in all industries. Since their common survival is indeed symbiotic, both the Big Three and the UAW implicitly acknowledge their survival is now dependent upon increased outsourcing. This trend may sometimes appear to be moving slowly and may occasionally appear to be stymied, but the arduous 1996 labor negotiations in the automotive industry confirm that both labor and management understand and accept the unstoppable trend towards evermore imaginative and enlarging outsourcing alliances.

          The Big Three auto makers are often the bellwether for all major industrial corporations. And the Big Three were willing to go-to-the-mat to win greater concessions on their rights to increased outsourcing. It is clear this trend will not now be stopped or reversed. Outsourcing is more firmly entrenched than ever before in American industry.

          What does this mean for smaller businesses and entrepreneurs? This means that the perceptive and innovative smaller business and entrepreneur will be finding more-and-more outsourcing opportunities. This means that outsourcing will not be quite as hard a sell as it has often been in the past. More-and-more major corporations are now searching aggressively to buy outsourcing relationships; the education of our prospective customers may not be quite as laborious. Of course, this is a long-term ground swell, not a six-month revolution. But the current three-year labor contracts in the automotive industry make it clear that the trend toward enhanced and more diverse outsourcing is indeed irreversible. Even the UAW tacitly accepts this imperative. Enlarging outsourcing opportunities for smaller businesses and entrepreneurs can now be constrained only by our own failure of vision or imagination.


1 United Automobile, Aerospace and Agricultural Implement Workers of America.

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Thomas A. Faulhaber, Editor

Telephone: 617.232.6596 -- FAX: 617.232.6674

Brookline, Massachusetts 02446.2822    USA

Outsourcing Placard

Revised: January 29, 1998 TAF

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