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How can American manufacturing be reinvented to thrive in an era of globalization?


The Death and Rebirth of Spring Hill

What the unexpected revival of a Tennessee car factory teaches about American manufacturing.

General Motors employee Tom McCallum puts part kits together for sub head assembly.

Tom McCallum works in August at GM's Spring Hill plant in Spring Hill, Tenn.

Photo by Sarah B. Gilliam for General Motors.

When Kim Riddle took the 700-mile trip from Athens, Ala., to her new home in Lordstown, Ohio, last year, it was the first time she had left either her home or her 18-year-old son. Riddle had certainly gone on road trips out of state, but she had never moved and never been on an airplane or a subway before transplanting to Ohio. (She has since traveled on the former but expressed no desire to try the latter.) “When you’re from the South, you don’t want to leave,” Riddle says in the thick drawl of the Tennessee-Alabama border.

Riddle had worked in the famed Saturn factory in Spring Hill, Tenn., for 19 years before General Motors shut down the company and all but idled the plant after its 2009 bankruptcy and government bailout. She had contributed virtually everywhere on the Saturn assembly line, helping to make transmissions, putting on tires and wheels and seat belts and weather strips, attaching sun roofs, assembling chassis and doors, and checking parts. “I’ve done a little bit of it all,” she says.

After being laid off from Spring Hill along with about 2,000 other workers, Riddle was unable to find work for nearly 18 months. Then the UAW and GM got her a job in GM’s Lordstown plant. Having undergone its own cutbacks during GM’s bankruptcy in 2009, the plant was ramping up production of the Chevy Cruze.

Although Riddle was grateful to have any job at all, moving to Lordstown with other former employees of the Spring Hill plant was an intensely painful experience. “Every time we stopped, all of us would just be crying,” Riddle says of her two closest fellow transplants, with whom she would meet for dinner every weekend. “Never going anywhere, you just don’t know what you’re going to get into.”

Now after a year in Lordstown spent wondering if she would ever be able to return to her son, her home, and her childhood farm, Riddle has moved back to Tennessee and back to a job at Spring Hill.

A landmark new contract between the United Auto Workers and GM has already returned more than 1,200 workers to a plant that had for all practical purposes shut down in 2009, with more new jobs anticipated in 2013.

Many of those Spring Hill jobs were expected to go to Mexico but were able to remain in the United States thanks to a deal that included an agreement by the UAW for a second-tier wage scale for new employees. “It’s a historic kind of victory for the UAW to persuade General Motors to keep jobs in America that reverses decades of movement in the other direction,” journalist William J. Holstein, author of Why GM Matters: Inside the Race to Transform an American Icon, told me. “For General Motors and the UAW to agree on something like this, that’s a seminal development.”

As of the end of August, the Spring Hill plant was back up to 1,825 workers from a low of 600 in 2009, with most of these workers building the Equinox, Chevy’s second-best-selling car. GM’s August sales were up 10 percent year-over-year, and sales of the Equinox were up an even more robust 22 percent.

Riddle was one of approximately 330 UAW members to return to Spring Hill in June and July after transferring to Midwestern plants. Hundreds more are still working in factories in Ohio and Michigan on three-year-long commitments after having taken larger relocation packages in exchange for longer transfers.

When Saturn failed, Spring Hill nearly died too. “We went through the same tragic business cycle that a lot of the [places] did,” says Mike Herron, the shop chairman for UAW Local 1853 in Spring Hill. “We had truly an economic tsunami here that was unbelievable.”

As the New York Times reported last year, the county unemployment rate climbed to 17 percent at one point, and the local high school lost 85 students in the 2011 graduating class. “It started to get kind of depressing, because that plant is the biggest thing here in Spring Hill,” says Vivian Vannor, who like Riddle took a transfer to Lordstown just weeks before her unemployment benefits were to run out in 2011. “Businesses were closing. You didn’t see as many people in the shopping centers.”

Vannor also started at Saturn in 1990 and also spent a year away from her family in Lordstown. She would visit her husband and 16-year-old daughter back in Tennessee once every two or three months, with her husband traveling to Ohio every three or four weeks. When she returned home for Thanksgiving last year, Vannor cooked the entire meal—including the turkey—in Ohio, froze it, packed it in a suitcase, flew back home with it, and reheated it in Tennessee.

“That was probably the worst year of my entire life, being away from my family and my home,” she said.

But Vannor and Riddle are back now, and so is Spring Hill. The news of the plant reopening led to a mini real estate boom in Spring Hill at the start of 2012. Year-over-year home sales in the county nearly doubled in the first two months of the year. “It's all good news here now,” Spring Hill Mayor Michael Dinwiddie told the Tennessean in March. “We're seeing more construction around town and more plans for residential developments submitted to our planning commission. It's a lot more positive around here than it was two years ago.”

The revival of Spring Hill speaks to the broader recovery for GM and the U.S. auto industry. Big questions still remain about whether American auto manufacturing can thrive in a competitive global market, but three years ago it would have been practically impossible to imagine that the industry could accomplish what it has already accomplished.

“When GM went into bankruptcy in 2009, there were many informed analysts that said, ‘We don’t really need GM, and in any case it’s fundamentally noncompetitive to keep it on life support,’ ” says Harley Shaiken, a professor at University of California, Berkeley. “Detroit has recovered more rapidly and far more successfully than many, myself included, would have projected.”

When the Obama administration bailed out the U.S. auto industry in 2009 with $80 billion worth of TARP funds, GM had been posting massive losses for eight consecutive quarters. The company lost $15.5 billion in a single horrible quarter in 2008 and posted $4.3 billion in losses after undergoing bankruptcy in 2009. But the company returned to profitability two years ago and has remained there ever since. The company earned $4.7 billion in 2010 and a record profit of $7.6 billion last year. GM sold 9 million vehicles in 2011, more than any other company in the world.

The United States hasn’t broken even on its GM investment. Taxpayers are still owed $25 billion, but their GM shares are worth only about $12 billion. Still, economists are almost uniform in their appraisals that had the car industry went under it would have been a cataclysm for the already flailing economy.

“Without financial help from the federal government, all three domestic vehicle producers and many of their suppliers might have had to liquidate many operations, with devastating effects on the broader economy, and especially on the Midwest,” economists Mark Zandi, of Moody’s Analytics, and Alan Blinder, of Princeton University, have written.

“To see the domestic industry collapse would have been somewhere between highly damaging and catastrophic,” Shaiken told me. “The notion that there were other alternatives absent the rescue is 100 percent illusory.”

The auto manufacturing job market has still not fully recovered from the devastation of 2008 and 2009, but the most recent jobs report showed that the industry has added 231,600 jobs in the past three years. With GM specifically, the new jobs are the result of a new compact between the car company and the UAW to try to create new American jobs. 

“The bitter and combative relationship that they had for decades has gone through a real transition,” said Holstein. “If you the long sweep of history, the UAW now realizes that if GM doesn’t survive and thrive, they don’t either.”

The UAW and GM’s first labor deal since the bankruptcy—the one that promised to bring jobs back to Spring Hill—reflects this transition. The UAW accepted savings in the pension plan and a second-tier wage structure for new employees. As part of the four-year agreement, labor costs at GM would grow just 1 percent annually. This allowed GM’s CEO Daniel F. Akerson to declare it a “win-win” for the company and the union when the contract was announced. In exchange for concessions, the UAW got an entry-level wage increase, bonuses, and increased profit-sharing. Most significantly, it received a guarantee for 6,400 new jobs at GM plants.

“The bargain that led to it was painful for the union but absolutely far-sighted, in that the wages are significantly lower, the benefits are smaller, but the jobs are here,” said Shaiken. “The notion that the UAW had is that you could have the best contract in the world, but if you don’t have the jobs, it doesn’t mean much.”

It was the union that made the hardest push for Spring Hill to be the plant where the jobs returned, Shaiken added.

“We’re bringing work out of Mexico, which is totally unheard of,” said union leader Mike Herron, who was the man Vannor and Riddle both credited with supporting them during their year in Lordstown and helping to return their jobs to Spring Hill. “This was one of these situations where the UAW said, ‘We’re going to go ahead and actually recreate the way that we do business and recreate the way that we go after the contract. … We’re going to focus on getting jobs.’ ”

Unsurprisingly, Herron and Vannor both also stressed the role of one of the UAW’s greatest political allies, President Barack Obama, in orchestrating the bailout that kept GM afloat. “We had politicians out there saying let Detroit go bankrupt,” Herron said in a not-so-subtle jab against Mitt Romney. “[The president] saved a million jobs in the process that he’ll never get credit for because nobody knows what would have happened to the house that didn’t burn down.”

While Obama and President George W. Bush certainly deserve credit for ensuring that GM was provided with the bridge loans it needed to stay afloat, Holstein said a lot of the credit for the new alliance between the union and GM belongs to former GM CEO Rick Wagoner. Although he was one of the biggest scapegoats for GM’s collapse, having been forced out of his job by the White House as part of the bailout deal, it was Wagoner who paved the way for a new relationship between the company and the union.

“He was the one that persuaded the union to accept the two-tier wage system. He’s the one that persuaded the union to take responsibility for medical costs,” Holstein said. “Over the sweep of five years, the relationship between GM and the UAW has been completely transformed.”

As a result of this détente between union and management, manufacturing jobs are more affordable for companies than they have been in years.

“The fact of that matter is that the Chinese now are getting expensive,” Holstein says. “The energy costs are greater, and more manufacturers are saying that we need to have faster response times to what the market is doing.”

Plus, the economic recession created a market of consumers who were holding off on purchasing a new vehicle until the economy improved. As of last year, the average car age in this country was up to 10.8 years—a record. Last month started to see some of that pent-up demand released, with national car sales reaching their highest rate in four years as of September. Though its pickup truck sales were disappointingly down last month, GM’s total sales grew by 1.5 percent to 210,245 vehicles—still the highest number in the country by far. And with the new accord between labor and management, it’s at least possible that resurgent sales could ultimately lead to even more manufacturing jobs.

“For the first time in at least 20 years there are at least glimmers on the horizon that American manufacturing is world-class competitive, and we can actually grow our manufacturing base again,” Holstein says.

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