UC Berkeley

The Fremont California-based NUMMI plant was long considered a model of high-skill, high-productivity manufacturing, as the facility produced some of the highest quality vehicles in the world for almost three decades until its closure in 2010. I argue that NUMMI's success was due to its collective bargaining agreement because it leveraged workers' fullest effort and skill because it ensured them job security, a living wage, and protected them from capricious management. The presence of a union and a collective bargaining agreement mandated that workers avoid disputes with management and collaborate with managers on streamlining production in exchange for compensation and related guarantees and ensured smooth, consistent and high quality work.

Some interpreted NUMMI's closure in 2010 as a referendum on union-supported wages, health care benefits and pensions at General Motors. My research shows that General Motors' failure was due primarily to financial problems, poor managerial decisions, rises in health care costs, undesirable product lineups and overinvestment in trucks and SUV's. General Motors also played a conspicuous role in the financial meltdown through its subsidiaries. General Motors Acceptance Corporation (GMAC) financed hundreds of billions of dollars in mortgage-based assets of suspect credit quality that helped create this multi-trillion dollar mortgage-backed asset market that collapsed in the global meltdown of the financial sector in 2008.

I argue that NUMMI and case studies from other automotive plants show that, despite a recession and global competition, lowering the wages of American workers and slashing their benefits undermines key sources of American competitive strength and represents the incorrect policy posture for the American economy.