Helen J. Muller
Robert R. Rehder
Geoffrey J. Bannister
Anderson Schools of Management - The University of New Mexico - Albuquerque, NM 87131
The version of the article below was submitted to: Latin American Business Review on September 1997.
For the published version see: Latin American Business Review, Vol.1, No 2, 1998, pp. 47-67
Authors Note: We wish to thank our research assistant, Dave Black, MBA, who generously gave his expertise and time to this project. We acknowledge the Anderson Schools of Management Foundation that provided partial support for this study. Findings from an earlier phase of the research appeared in Competitive Intelligence (Jan. 1996) and the 1995/96 Strategic Management Society Proceedings. This article focuses primarily on the study’s second phase.
The automobile stamping and assembly plant in Hermosillo, Mexico is world class in productivity and quality. We analyze the process of integrating the Mexican workforce with the Japanese-designed lean production system and the U.S. Fordist management to create a unique collaborative, cross-cultural hybrid organizational model. In particular, we examine several cultural attributes of work that necessitated mutual adaptation and cooperation among the workers, and the state of labor relations, gender dynamics, and quality of work life. Finally, we pull together these factors to explore the short and long term implications of the plant as a model for developing economies.
Key words: Multinational Hybrid Auto Assembly Plant Northern Mexico
The large automobile stamping and assembly plant in Hermosillo, Mexico is a unique, world-class, advanced manufacturing system. It has heralded the development of collaborative cross-national technical expertise that is having a favorable impact, in many respects, on the Mexican and local economy. This strategic alliance, furthermore, has provided a critical laboratory for Ford Motor Company to learn about and adapt the Japanese lean production system first within Mexico and later in the United States [Kinney & Florida, 1993]. The paradox remains that while the quality of the plant’s productivity and product is world-class and competitive, labor relations, gender dynamics, and the quality of work life resembles, in some respects, those of traditional automobile assembly plants of a half century ago.
In this article, we analyze the remarkable large-scale technology transfer and cross-cultural cooperation among Ford and Mazda automotive companies and the Mexican workforce to develop a hybrid organizational model. First, we examine the process of adapting the Fordist management and the Japanese lean production system within the Mexican environment to create a flexible production system. The cultural attributes of several features of work are characterized to illustrate the complexity of this process. We then assess the state of labor relations, gender dynamics, and the quality of work life at the plant. Finally, we pull together these factors to explore the implications of the hybrid production system as a model for developing economies. The Fordist and Japanese systems have been adapted, with less success, in other locations in Mexico (Lima, 1994; Micheli, 1994).
Empirical data for this article was obtained in 1995 and 1996 from a series of field trips by the research team to the plant including on-site observation of production processes and discussions with plant employees, from site visits to several plant suppliers, and from discussions in Hermosillo with business and government officials, academic researchers, and other key people involved in various phases of the plant’s development. Library research and document collection was conducted in both Mexico and the US.
SITUATING THE PLANT IN NORTHERN MEXICO
The location of the plant in Hermosillo reflects the culmination of a long process of US automotive participation in the Mexican market and growing integration between the US and Mexico in the automobile industry. Like the rest of the automobile industry, Ford’s first investments in Mexico took place in the 1920s for assembly of car kits (completely knocked-down cars) imported from the US. The first foreign automobile plants were located in or close to Mexico City and oriented themselves towards the domestic market.
Protection of the automobile industry started in 1962 with a regulation that required at least 60 percent local content. In 1984, Mexican authorities began removing trade barriers for manufactured imports and new sets of auto decrees (1983 and 1989) removed domestic content requirements replacing them with trade balancing requirements. This made Mexico an increasingly attractive location for foreign investment oriented towards production for the international (especially US) market because authorities permitted importation of components and use of inexpensive labor for assembly and export of final products. Investments in northern Mexico under the Maquiladora program resulted.
Concurrent with this national policy shift, a change in the location of auto industry investments took place. Sites in the north became more attractive for the establishment of auto plants oriented towards greater integration with US industry. These included plants in the states of Aguascalientes (Nissan, 1985), Durango (Renault, 1982), Coahuila (GM and Chrysler, 1981), Chihuahua and Sonora (Ford, 1985).
As a result of the trend towards greater integration of the Mexican auto industry with US and international production, today, road vehicles make up the largest proportion of exports from Mexico to the US [US Department of Commerce, 1996, p. 800], and automobiles, transport equipment and auto parts make up the largest part of both imports and exports [Bank of Mexico, 1996, see Table 49]. Although Ford had only a fifth place participation in domestic sales in the Mexican market, the plant in Hermosillo placed the company at the forefront of automobile exports from Mexico. Before the plant opened in 1986, Ford did not participate in exporting automobiles from Mexico. Its Cuautitlán plant, built in 1964, served the domestic market. In its first year, the Hermosillo plant boosted Ford’s participation to 32 percent of total units exported from Mexico (163,073 units overall), and, after increasing plant capacity to 170,000 vehicles per year in 1990, the plant represented approximately 27 percent of the installed capacity for producing automobiles for export [Micheli, 1994, p. 225]. This figure illustrates the importance of the plant to Mexico’s economic strategy of North American market integration and export-oriented growth.
A deliberate industrial strategy by the state of Sonora, coordinated with national economic policy, attracted foreign investment to create jobs and generate foreign exchange. The Sonoran government offered Ford executives a series of incentives to locate in Hermosillo, including the donation of 113 hectares of land eight kilometers from the city center, topographic studies of the soil, and installation of electrical services, running water, telephone lines, and sewage lines needed for industrial production, as well as building roads, and paying for all legal costs involved in drawing up the contracts [Ramirez, 1988]. Ford also received office space and support services in the city’s industrial park free of charge for the two year period while the plant was being built. The plant public relations official explained: "We were given every reason to build in this city. The government was willing to do whatever it took to get us here." Other important factors that enticed auto executives to locate in Hermosillo included the accelerated completion of a gas pipeline (the Naco-Cananea-Hermosillo pipeline), a four lane highway from Hermosillo to the US-Mexico border at Nogales (about 200 miles), and a "credit" of US$119 million by the Mexican government to build the plant [Micheli, 1994].
Ford-Mazda chose Mexico for its plant site after careful study of global options including Taiwan, Canada and Portugal. The company, then, selected Hermosillo from a group of five northern Mexican cities that included Chihuahua, Ciudad Juarez, Matamoros, and Nuevo Laredo. Hermosillo was an ideal location because land was available at no cost, all industrial services were included, and the gas pipeline had just been completed. Moreover, the port of Guaymas, through which the Japanese machinery and assembly components could be moved rapidly and easily, was not far to the south.
The potential in the local labor force and the area’s socio-economic characteristics contributed to the site decision. In 1983, the auto partners conducted a survey of salaries and labor conditions in twelve firms in Hermosillo as part of its preliminary planning process. These firms included several industries: mining and metallurgy, electric and electronics, asbestos, and cement. The survey results, recounted by Sandoval Godoy, revealed: "...a docile and flexible labor force with little labor union participation and little bargaining power in the annual negotiations for wages and benefits" [Micheli, 1994]. For example, in firms with less than 50 workers, only 42 percent of the labor force was unionized, while in firms with more than 50 workers the proportion was lower. The survey revealed that firms in Hermosillo paid generally lower wages than in the rest of the country. In 1987, a year after plant production began, the average daily base wage in the Hermosillo plant was less than half of what it was in Ford’s Cuautitlán plant near Mexico City [Garcia, 1994].
For Hermosillo and the state of Sonora, the potential auto plant was highly attractive because it would bring supplier industries for the just-in-time production process (JIT): Carplastic (instrument panels), CISA (car seats), CIMA (carpeting), PEMSA (seatbelts), Aurolin (paints), Goodyear (tires), and Pittsburgh Paints (paints) [Godoy, 1988]. The initial investments of these suppliers was $7,910,000 Mexican pesos (old) and they employed 1011 workers. The suppliers’ presence enhanced the city’s job opportunities and tax base. The plant represented, furthermore, a boom for the state in the generation of foreign exchange and employment (both in terms of income generation and training). In 1985, the maquiladora industry in Sonora generated a little over US $100 million in annual exports; according to its management, at that time, the plant was capable of generating US $500 million in exports of which US $200 million were net imports into the plant [Godoy, 1988].
The stamping and assembly plant is a very large, modern, single-story building of approximately 1.4 million square feet with four major manufacturing centers: stamping, body, paint and final assembly. Completed in early 1986, production of several versions of the Mercury Tracer began that November. A large part of the tooling was designed and built in Japan by Mazda vendors who considered it highly advanced at that time. The Tracer was initially based on Japan’s proven Mazda designed CT18 with a Mazda 323 chassis. In 1990, to build the new model CT20, production was expanded with a large capital investment that increased the numbers of robots and other equipment that enhanced the level of automation. Micheli  argues that no other plant in Mexico has such a radical social organization of job design. A closer look at the plant’s unique hybrid organizational model gives a clearer understanding of its socio-technical components and its innovative organizational culture. Then, we analyze work related cultural attributes, gender dynamics and labor relations at the plant.
THE HYBRID ORGANIZATIONAL MODEL
Following World War II, Mr. Toyoda traveled to the Michigan-based Ford River Rouge automobile plant and spent several months studying the Fordist manufacturing system. Upon his return to Japan, he announced that his engineers and managers could improve upon it and they began to develop the Japanese lean production system. Ironically, some thirty five years later, Ford managers and engineers were to study and learn about the lean production system from Japanese Mazda workers at the plant in Hermosillo. Mazda’s automobile manufacturing system was adapted originally from Toyota’s lean system which defined precision fit and consistency.
At the same time as Ford was learning about the Japanese system from Mazda, General Motors was learning about lean production from Toyota Motors at its NUMMI joint venture assembly plant in Freemont, California [Rehder, Hendry, & Smith, 1985]. The GM-Toyota NUMMI plant has received a great deal of study and publicity while the plant in Hermosillo has attracted less attention. Nevertheless, the latter is no less of a world-class stamping and assembly plant that is impressively competitive. Womack, Jones and Roos  report that such assembly plants in developing countries, like Brazil, Korea, Mexico, and Taiwan, show an extraordinary range of performance and, in a study sample, the Hermosillo plant had the best assembly plant quality with its quality better than the best Japanese plants and the best North American transplants. The plant, furthermore, is the eighth most productive subcompact plant in North America (Automotive News, 1997). Such success clearly demonstrates that world-class quality and productivity can be achieved in Mexico.
Significant government resource incentives and the combination of a predominantly lean system advanced technology and management and a carefully selected, highly trained, and previously non-unionized work force created this unique model. Field visits to the plant by the study team revealed a wholly Mexican management and workforce by the mid 1990s. Moreover, the transfer of production technology from Mazda-Japan to Ford-Mexico is continuing with Japanese workers providing on-site technical assistance as the production process gears up for new model cars. The hybrid legacies of the Japanese lean system and the traditional Fordist system are unmistakably evident. Haigh  notes the importance of trust in promoting a cooperative environment where neither country’s players dominated the relationship. Effectively integrating Japanese, Mexican, and US socio-technical inputs into a world class automobile assembly plant is a significant achievement.
The creation of the plant’s innovative organizational culture has been a highly complex process because of the disparate influences of a) Japanese managers and technicians and their lean system, incorporating both just-in-time (JIT) and total quality management (TQM), b) US managers and their traditional Fordist legacy, and c) a relatively young Mexican workforce inexperienced in automobile assembly. Cultural innovation is more difficult to achieve than cultural maintenance because managers need to figure out how to develop and inculcate distinctive sets of ideologies and cultural forms that will fit their circumstances and membership [Trice & Beyer, 1993]. The mutual adaptation process of US and Japanese managers and their production ideologies occurred simultaneously with socialization (and skill-building) of the Mexican workforce and its emerging management team to the multinational alliance.
One way in which the multinational alliance created the innovative organizational culture was to use cultural mediators who helped the various parties learn and adapt. For example, a Cuban national who worked for Ford-Detroit helped to inculcate "foreign" business attitudes in the Mexican workers. In an interview in Hermosillo in 1996, Mr. Fernandez, who is now retired, said that he was working on a US assembly line when he was asked to go to Hermosillo, but before working with Ford in the US, he had spent many years in Mexico. Mr. Fernandez recalled: "My job was to help American and Japanese managers communicate and understand one another; I had to learn the JIT system first, then I had to try to teach this system to others who would really be using it." He helped in the hiring and training of much of the initial Mexican workforce by holding workshops to teach workers about JIT and work teams. Mr. Fernandez was a co-facilitator, furthermore, of cross-cultural management teams that established guidelines for the plant. He explained the point of view of Mexican workers to the Americans and Japanese as well as educated the Mexican workers about US and Japanese work habits. "I really felt like more of a cultural liaison because I really was trying to explain the small cultural habits of each group to the other," he said. His multi-linguistic abilities and cross-cultural understanding helped the transition take place with few major problems. Mr. Fernandez felt that his job was one of the more important ones at the plant in the mid 1980s.
The FMH principles and philosophy reveal the strong Japanese influence in creating the lean production system. There is a striking similarity of the plant’s stated philosophy, principals, and operational factors, given to the authors, with those of Japanese transplants worldwide emphasizing socio-technical attributes that comprise the core of the lean system.
This philosophy and its practices has been transferred to the plant’s suppliers in Hermosillo and has affected the lives of individual FMH workers. For example, Carplastic, a supplier that makes the dashboards for the cars, has a similar mission statement emphasizing quality, valuing employees, and mutual respect. The Carplastic manager told our research team that aligning with FMH and its philosophy became so profitable that Ford bought a stake in the company. The plant manager emphasized: "We try to teach our employees to think for themselves, to ask the questions that need to be asked, and to take actions that will make Carplastic an even better company."
FMH workers reported to our research team that they have received offers from other Mexican companies who know that FMH employees are highly productive and well rounded. One worker said: "I can go to almost any company in town and get a good job because they know I can work hard and on my own." Sergio Sandoval also commented to our study team on the social transfers from FMH: "Many Ford employees eventually go to work for other companies as managers or trainers. These employees have learned how to cut costs, manage themselves, and work effectively in groups, which is a huge asset to a growing company in Mexico that has no experience with this type of management system." In the following section, we explore cultural differences among workers that made adaptation and close cooperation among them essential.
CULTURAL FACTORS AND WORK
A study of Mexican, U.S. and third country nationals managing joint ventures and other cross-national corporate alliances identified significant ways in which cultural differences affect the resultant hybrid organizations [Stephens & Greer, 1995]. The study supports our field data which found that Mexicans, whose traditional managerial style is predominantly authoritarian and paternalistic, adapted over time to the dominant managerial values and systems of the multinational corporation in which they worked. In order to work effectively in the lean production process, Mexican workers had to adapt to, at least, two work-related cultural factors: power distance and its inherent issues of control and authority, and time orientation. Power distance, according to Hofstede, measures the extent to which less powerful members of an organization accept the unequal distribution of power [Adler, 1997]. In Mexico, power distance is greater than in Japan and the US with the US having the least distance. As Kras  puts it:
Mexican workers have great respect for authority. Their upbringing has inculcated in them an acceptance of absolute authority on the part of parents and, at times, elders. As a result, young executives never question or even comment on decisions of their superiors, even if they totally disagree (p. 45).
Power distance is manifested in the extent to which employees accept that their boss has more power than they do. The Japanese team based lean system inherently has low levels of power distance and is nonhierarchical in design. In a team situation, workers have to take control of operations and they are responsible for following through and resolving problems to achieve high qualtiy products. Kras  argues that Mexicans, traditionally, do their jobs and then wait to see the results; they are unaccustomed to checking on their work, in part, because subordinates are inclined to feel that supervisors do not trust them if quality checks on performance are introduced. Such traditional issues of control and power are intertwined with the factor of time. Time, traditionally, is not a precise concept in Mexico. There is a different approach to time in business because other priorities in life prevail and conditions often conspire to prevent the realization of stated plans [Nolan, 1994, p. 239].
Japanese orientation toward time is more to the future and they believe in evaluating plans in terms of future benefit; future-oriented people justify innovation and change in terms of future economic payoffs [Adler, 1997]. Reconciling two such different views of time was an integral part of creating the lean production system. The Japanese had to show both the Americans and Mexicans the future benefits of working within this highly precise JIT system. On the job training with regard to time is reinforced by requiring workers to arrive at work on time. Company buses (peseros) travel throughout Hermosillo each day picking up and dropping off technicians. In the colonia where our research assistant lived while on assignment, male plant workers, clad in blue uniforms with the Ford insignia, waited early in the morning for the peseros. In the initial phase of the plant’s operation, reliance on city buses severely hurt plant operations because they would run late if they ran at all. Uniforms, furthermore, serve to strengthen company identity and convey to outsiders the workers’ loyalty and commitment. Most of the FMH suppliers now require employees to wear shirts similar to Ford’s with their own company logo, thus identifying themselves with FMH and the top quality products that they produce.
Unlike traditional Fordist organizations, Japanese lean system hybrids, such as FMH, concentrate their philosophy and principles on human moral values and collective behavior: trustworthiness, personal integrity, responsibility, initiative, personal development, loyalty, and honesty. Collective values and behaviors such as shared goals, mutual respect, interdependence and cooperation, group recognition, open communication, and perceived egalitarianism are key to building the organizational culture of the lean system. Such values and behaviors of lean system hybrids represent a significant departure from those of the traditional Fordist system which are more individualistic, hierarchical and centralized. The collectivist-oriented values of hybrids, in many respects, are more similar to the orientation of Mexican workers than to individualistically-oriented Anglo-American (US) workers who compete with one another. In reality, these expressed lean system values, however, are more often symbolic ideals that are seldom fully achieved, especially in hybrid transplants like FMH, where strong control by managers and supervisors are not uncommon.
The FMH adopted Mazda’s total quality management program by involving its component suppliers and workers at each stage of the production and assembly process. The adoption of the lean system mission, goals, and guiding principles combined with lean management and engineering system technology were operationalized through extensive top to bottom employee training programs in Hermosillo, in Mazda’s Hiroshima plant, and in Ford’s plants in Valencia, Spain, and Ghent, Belgium, and Detroit. This is a significant difference from the minimalist technical training of the traditional Fordist system and demonstrates, furthermore, the developing global technology transfer within the auto industry.
FMH management points out that the combination of extensive pre-employment screening and selection, intensive and lengthy classroom training, and continuous on-the-job training in cooperative work teams are important factors in the successful development of its hybrid lean system. Workers are cross-trained to carry out multiple tasks. Each team or equipo de trabajo, consisting of from 9-12 people, allows for quick transfer of information. Researcher Sergio Sandoval said in Hermosillo in 1996: "The teams allow for small centers of power to combat problems that arise without all of the bureaucracy." Such teams demonstrate, furthermore, the important role of group decision-making in the continuous improvement process, a feature that differs from the Fordist system. The use of Mazda-Japan’s veteran managers and assembly line workers from the sister plant in Hiroshima as trainers in Hermosillo was essential for the success of the technology transfer process to Ford-Mazda. In the following sections, we examine several aspects of labor relations and gender dynamics at the plant.
The number of employees at the plant increased from 1100, initially, to 2300 in 1990 when it geared up for the new CT20 model. The plant is organized by the National Union of Ford Motor Company Workers which is part of the Mexican Worker’s Congress (CTM), the official labor movement in Mexico. The collective bargaining agreements between FMH and CTM demonstrate management’s need to secure a high degree of workplace flexibility. Reducing and restricting union influence on the shop floor was a prerequisite to the development and operation of the hybrid lean system. Our findings agree with Carrillo : "The union was left with practically no power to interfere in production because work teams had wide powers to resolve day-to-day conflicts and interpret plant regulations" [p. 92]. In this way, FMH was able to secure a contract that advantaged its JIT and lean system, whereas at Ford’s Cautitlán plant, a tougher union has made it more difficult to implement the flexible production model [Carrillo, 1995]. The ostensibly compliant nature of the CTM Hermosillo-affiliate has given FMH managers a great deal of leeway in managing shop floor technicians and in reducing the union’s role in the grievance resolution process. On the other hand, the union at FMH has focused bargaining primarily on wages and benefits where substantial inequities exist in comparison to other Ford Mexican assembly plants [Garcia, 1994].
Strikes and other job actions over wages, benefits and working conditions occurred in 1987 and again in 1988 when work stoppages and sabotage resulted in the firing of 34 workers including three top dissonant union officers and other newly elected leaders at the plant. Hermosillo’s local managers have supported higher wages to reduce turnover, improve morale, and reduce strikes and other job actions [Shaiken, 1994]. FMH, however, has followed the multinational corporate policy of paying prevailing wages in the area where their plant is located. As a result, the average technician’s salary, in early 1995, was about 1,200 New Pesos per month. Benefits to workers are about 100% of salary, as is common in most Mexican plants, thus final compensation was equivalent to US$320 a month at the prevailing exchange rate of 7.5 New Pesos to the dollar. Housing is also available to employees who have at least five years of employment. The company subsidizes the purchase of a small home by offering a lower interest rate than is available in the city. Such housing, offered as well by other companies in Mexico, was recently the cause of a protest in which community activists criticized General Motors for offering housing subsidies while holding down wages in Mexico [Blumenstein & Solis, 1997].
Why have FMH senior managers resisted wage increases at the Hermosillo plant in the face of employee discontent and turnover? We believe that the reason lies partially in the substantial savings in technician and white-collar wages compared to such costs in the US. These savings can be as high as US $800 per unit [Shaiken, 1991, p. 131]. When leveraged by the large output of units each year, such savings can have a significant impact on the bottom line. In addition, an abundant supply of workers in the Hermosillo area makes it easy for management to obtain new workers when others leave. The high turnover is thus a result of Ford-Mazda’s strategy of basing part of the plant’s competitive advantage on the low wages that prevail in the Hermosillo market. The cost of this strategy is the added payments the automaker must make to train the new workers it hires.
There are three broad job classifications of employees at the plant: directors or managers, administrative support including professionals and clerical employees, and technicians or assembly plant production workers. Women hold positions only in the middle job category as clerical workers and as professionals. A plant spokesperson explained that men, without exception, are hired in the technical positions because of the double shift (one shift is evening-night) rotation every three months and heavy work. What factors created such occupational sex segregation? The 1917 Mexican constitution prohibits discrimination on the basis of race, religion, or sex. Mexican labor law has changed to permit women to work in the same jobs as men and to repeal the nighttime prohibition against working women. In most countries, however, the implementation of such legal mandates to equalize employment opportunities between men and women lags far behind their adoption [Izraeli & Adler, 1994]. The plant’s practices on technician-hiring illustrates that legislated anti-discrimination employment provisions carry little weight in manufacturing plants where traditional gender role stereotypes may prevail. Mexican tradition views women as physically weaker and more vulnerable than men [Garcia & Oliveira, 1994]. Stereotypes are being increasingly challenged, however, as more women workers are hired in assembly plants especially on the US-Mexico border [Tiano, 1994] and as women become managers.
The lack of women in management at the plant is somewhat puzzling because Mexican women are slowly making advances into such ranks. Women now make up 20 percent of all administrative and managerial workers in Mexico whereas twenty years ago they made up 7 percent [International Labor Office, 1994]. Despite such gains, few women are in senior level managerial ranks and these are often in female-dominated job categories such as personnel [De Avelar & Zabludovsky, 1996]. Traditional gender role ideology that values women’s place in the home still guides much of business practice in Mexico [Nolan, 1994] as it does in Japan. There is some indication, however, that such beliefs are beginning to change as women slowly move into professional positions [Kras, 1995].
At an automobile assembly plant, where work is regarded stereotypically as men’s work, it could be that there are no women managers because traditional ideology is prevalent. Senior ranking managers in other parts of Mexico have commented to one of the authors that it is very difficult for Mexican women to manage male workers because of the common perception that women’s roles are in the home and that work for pay is seen as an extension of the home. Managerial work is typically viewed as appropriately men’s work in most of the world, and as previously implied, a paternalistic ethos is the norm in most Mexican organizations. However, Mexican women senior managers may represent a new wave of Mexican managers who practice nontraditional management, transcend discriminatory obstacles, and are involved, to a large extent, in unconventional, dual career marriages [Muller & Rowell, 1997]. The FMH may be overlooking an emerging and important human resource.
In professional positions, Mexican women occupy 40 percent of such jobs nationally. Their presence reflects higher educational levels achieved by women in recent times, changing norms regarding gender and work, and recent economic pressures. Although women occupy about 10 percent of the administrative support category at FMH, only a few are in professional categories. Most jobs are located in clerical-related positions, the largest category of Mexican women workers nationally. One can conclude that women occupy few positions at this plant where they may earn more than minimum wage.
Such inequity in employment is a contributory factor towards the lower average wage for Mexican women in comparison to Mexican men, a situation similar to the United States. Both in Mexico and in the U.S., women earn 75 percent of men’s wages in nonagricultural jobs [United Nations Development Program, 1995, p. 36]. In Mexico, however, this percentage recently declined because of the economic crisis. For example, in 1992 women’s industrial wages plummeted from 80 percent of men’s wages to only 57 percent, and women’s total income declined from 71 percent of men’s in 1984 to 66 percent in 1992 [United Nations Development Program, 1995, p. 40]. Because the economy declined further in 1994 and 1995, we expect that women’s total income declined more, and during economic crisis, we assume that women will have less priority for higher paying jobs than men. Thus any attempts by management or others to counteract the stereotype that automobile assembly line work is men’s work will be hard to carry out. Nationally, this stereotype is reinforced by the fact that in maquila industries, men are more prevalent in the auto-supply sector which is seen as characteristically male work, although, overall, two-thirds of assembly workers are women [Teagarden, Butler, & Von Glinow, 1992]. In the following section, we explore several issues related to the quality of work life.
QUALITY OF WORK LIFE
The term "quality of work life" varies in meaning among practitioners and academic scholars. It is most often associated with the opportunity for individuals or teams to influence their workplace [Steers & Porter, 1983, p. 548], and some companies believe that developing specific quality of work life programs can enhance worker productivity [Carrell, Jennings, Heavrin, 1997]. In the traditional Fordist system, workers were treated like single purpose machine tools and it was implied that individuals need to leave their brains at the door. In the Japanese lean system and the FMH, there is more team influence on work, but with some significant limitations and added stressors and group controls as we discuss below.
Work teams at FMH, as at other lean assembly plants, are important structures for training and kaizen(continuous quality improvement) activities. They are the primary means, furthermore, for cultural and technical socialization. Work teams foster group goals, norms, and loyalty, and they serve as a means of imposing peer pressure. For example, teams discipline their members for absenteeism, and teams or their supervisors have to make up time for an absent or late member. Moreover, lean production teams and their supervisors are responsible for many of the traditional management responsibilities of the Fordist system such as quality inspections, training, scheduling, and sometimes maintenance, and they typically integrate skilled and production jobs.
The responsibilities described above combined with peer and management controls and the discipline and machine-pacing of a large volume, high-tech assembly line result in repetitive and stressful jobs. Lean system managers believe that intense levels of pressure are essential to high quality productivity. While this may be true, considerable human costs are reflected in the plant’s hiring of only young male technicians in the production areas and a disruptively high turnover. One technician remarked to the authors that they "will have trained most of Mexico’s young male work force in time." Between January and August of 1990, 228 workers left the plant, and 65 percent quit during their first year [Shaiken, 1994]. This is a considerable deterrent to team cohesion and performance.
The lean system is dependent on the team-based workforce that requires careful pre-employment screening, and expensive, intensive and ongoing training. In addition to such costs, the loss of experienced workers has a substantial impact on the system’s quality and productivity. Although quality and productivity figures were not available to us, it seems safe to say that the impact of high turnover on team morale is significant. The stressful nature of the assembly line production work remains a significant factor especially for workers with little previous factory experience. Meanwhile, costly and continual intensive training and development of technicians and managers is essential to the plant’s successful global competition.
The lean production system, like the Fordist system before it, is a socio-technical system operating within a larger industrialized global economy which has a well defined, highly competitive growth and profit imperative. Some social critics see these highly competitive global organizations as inherently amoral [Mander, 1992], or as displacing issues of community well-being and citizen democracy [Korten, 1995].While these may be dissonant points of view, it is common knowledge that human and social interests are often of secondary importance to achieving competitive corporate growth and profit.
It is true that FMH is providing jobs in a depressed economy where employment is difficult to find even though its jobs are highly stressful and the wages relatively low. The recent economic crisis in Mexico has not substantively affected the plant operations, according to plant spokespersons, because its production is export-related. Moreover, the macroeconomic gains made by the plant for Sonora and Mexico over the past decade far outweigh the initial incentives given to the company. We have examined the achievements that Ford, Mazda, and the Mexican managers and employees have made in successfully transferring and adapting the lean system, and to its local Mexican suppliers. Moreover, the plant’s important role as a learning laboratory for other Ford plants worldwide cannot be overlooked. In the concluding section, we draw together our analysis of the FMH to assess its implications as a model for developing economies.
IMPLICATIONS FOR DEVELOPMENT
In the preceding sections we referred to investments involved at the FMH as benefiting the local and national economies and we noted some problematic aspects of work life. Our assessment leads to the question: is the FMH a good or even adequate model for developing economies? The evaluation of the costs and benefits of investments such as the FMH is not a simple process and it rarely results in a definitive answer. In this final section, we point out some of the factors involved without attempting to come to a definitive analysis. We draw some tentative conclusions, however, about the desirability of these types of investments as transition strategies for development.
A simple accounting begins with an evaluation of the benefits and costs of the plant in the short run. By short-run we refer to benefits and costs with respect to immediate priorities that the city of Hermosillo, the state of Sonora, or Mexico might consider. On the positive side we suggest several benefits: 1) Net exports which bring foreign exchange into the country and the region and contribute to macroeconomic stability; 2) cross-national technology transfer to suppliers and other manufacturers that introduces efficient and high quality production processes that demonstrate what can be done to compete in the international economy; 3) Employment income, training, housing, and other such benefits that the plant provides to its employees as well as acquired skills that enable workers to be mobile for other employment options; 4) Economic activity that the plant generates due to its demand for services and just-in-time inputs in the local economy; 5) Revenue that the plant provides at the state and federal level from taxes.
Mitigating against these benefits are a number of less tangible but no less important costs:
1) Stereotypical gender role work models that stratify the labor force excluding women from certain jobs and better wages. 2) Insertion of a less-skilled labor force into an international economic system that relies on low wages to maintain competitiveness. 3) Work that is stressful physically and mentally and often lacking in meaning. 4) Perpetuation of a system of labor relations that tends to diminish union influence and to disenfranchise workers.
While these costs are important, they may diminish in significance when compared to the quality of work life that could have existed for workers if the plant had not been built and if the resulting industrialization of the region had not taken place. Whether such quality of work life comparison is with subsistence agricultural work or with less technologically advanced industrial work (as in the local cement plant or quarries), it can be argued that the FMH presents a relatively better quality of work life for its workers than previously available opportunities. This does not imply, however, that the quality of work life in the plant is good or desirable in the long-run.
A more complex issue is whether the investment of FMH contributes to the long-term development of the region and Mexico in terms of increasing people’s incomes and a better quality of work life for both women and men. From the long-term point of view, there is an inherent paradox in basing economic development and rising incomes on a strategy of international competition which depends on low-wage assembly labor (and, therefore, low incomes). In the case of FMH, this paradox is heightened by the fact that its parallel strategy for international competition includes the implementation of systems (such as the lean production system) imported from labor-scarce economies that are designed to make more efficient use of labor (even though labor is relatively abundant in developing economies). In the case of the lean system and its hybrids, using labor more efficiently includes some degree of dehumanizing work that may, in the long-term, not improve the quality of work life.
For these reasons, the Hermosillo plant and investments like it can be seen as a transitional stage in the process of moving towards a high-income economy. What is missing from this transitional strategy? We argue that the aim of a development strategy is to put itself out of business by raising worker productivity, wages and incomes sufficiently so that competition will not have to be based on low-wages but rather on compensating worker productivity. In the parlance of development economists this means moving beyond factor (labor) efficiency and concentrating on factor (labor) quality and specialization (Porter & Ghemawat, 1995). To increase incomes and living standards, it is thus necessary to upgrade labor and liberate it from having to be used as solely mere input in the production process. The critical ingredient here is not on-the-job training, but, rather, basic ongoing education and employment opportunities for men and women alike.
If a key ingredient of competitive success is imagination, as is postulated by strategic management theorists, this critical factor presents particular challenges for developed and developing countries alike. Since the private returns on education at the primary and secondary levels are small, but the social returns high, there is an important role for the government in transforming the education system and in Mexico in particular. Unlike other successful emerging economies such as Korea and Taiwan, which spend about 6 percent of GNP on education, Mexico spends only 2-3 percent (Lustig, 1992, p. 81). Thus there is considerable scope for improvement.
In conclusion, the FMH and investments like it can address the transitional problems of development, which include (among other things) a need for foreign exchange, transfer of technology, and creation of employment and income. As we have illustrated, however, such investment entails a cost in terms of quality of work life. This cost would most likely exist even in the absence of investment. On the other hand, Ford-Mazda and other similar corporate strategies ignore the more fundamental and long-term issues of development such as the need for extensive investment in basic and advanced education. Is this longer term issue within the purview of multinational corporations? One can argue that it needs to be.
The fundamental issues that we have raised are by no means particular to developing countries but they are also becoming (or perhaps have been for a long time) important in industrialized countries as well. If countries with more resources have not found solutions to these problems can we expect emerging economies to do so? Finally, and as important as the economic and social factors enumerated above, is the demonstration of FMH as a model of cross-cultural adaptation and cooperation that has resulted in a globally competitive organizational and management system that has gained international recognition.
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Table 1. Ford-Mazda Hermosillo guiding principles and philosophy
People are the key factor in our organization and our image in society.
To have installations, equipment and technology that permit us to respond to the continuous changes in the world market.
To have flexible manufacturing and organizational systems that support achievement of the Plant objective.
The quality of our product is proven by attaining customer satisfaction which also reflects our dedication and effort.
Optimum utilization of material and human resources, with a mindset of continuous improvement and elimination of waste.
Policies and practices should reflect our belief that:
· People are trustworthy in their personal integrity and in the performance of their work
· People will behave responsibly when they have a clear understanding of what they have to do and are provided timely feedback on their performance
· People will contribute to their full potential when they have the right environment to express themselves and a vehicle to be heard
· People will grow and develop their skills and abilities when there are opportunities for doing so, and when they understand the business sufficiently to be able to actively influence what they need to learn
· People will cooperate with each other and work together where there are well-defined, shared goals, and where there is mutual respect and understanding of one another’s responsibilities
· People will act in a safe and healthy manner because their well-being must not be compromised in the performance of their work
· People will act with initiative and creativity in all of the factors that influence the achievement of the Plant object. Mutual respect is fundamental in human relations.
Key Characteristics of Fordist, Lean Production and Hermosillo Hybrid System
Ford - USA - Traditional Fordist Production System
· Highly hierarchical & centralized management system
· High levels of technology & automation
· Individual specialized, narrow skilled, job descriptions
· Limited job security and training
· Adversarial win-lose labor relations system
· Limited top down communication system
· Management-established acceptable levels of quality & productivity
· Highly controlled & narrowly defined work environment
· Comparatively high wage levels and moderate fringe benefits
Ford/Mazda - Mexico - Hybrid Production System
· Moderate hierarchical management system
· Seeks stable employment with some advancement
· Careful pre-employment screening & continuous training with veteran trainers from U.S., Japan, & Mexico
· Moderate utilization of multi-skilled self-managed teams
· Seeks non-adversarial labor relations with limited success
· Seeks open multidirectional communication with moderate success
· Just-in-time production system improving
· Quality & productivity standards set by management with some worker input
· A cross-cultural social technical system model
· Building on strong Mexican & Japanese collectivistic culture
· Moderate use of highly automated technology
· Low wages and moderate fringe benefits
Mazda - Japan - Lean Socio-Technical System
· Moderate hierarchical, management system
· Constant improvement in quality & productivity
· Highly automated assembly technology
· Stable employment with extensive pre-employment screening
· Develops full human potential through ongoing extensive training
· High utilization of multi-skilled self-managing teams
· Non-adversarial labor relations system
· Seeks harmony, trust, & win-win problem- solving with high levels of success
· Just-in-time production system highly successful
· Open multidirectional communication system
· High wage levels and fringe benefits
Key Components of the Ford-Mazda Hybrid Plant in Hermosillo
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