The Saturn Corporation is a wholly-owned subsidiary of General Motors that
manufactures and sells small cars. From its initial planning process, conducted in 1983
by a "Committee of 99" consisting of GM and UAW representatives, Saturn was
conceived of as a full partnership between the union and the company. The decision to
create Saturn was motivated by company and union desire to build and sell a small
model in the United States that would compete well against imports and to create jobs
for UAW members. The decision to create an entirely new company at a Greenfield site
was made after management concluded that GM could not competitively manufacture a
small car in the U.S. under the existing labor contract and management policies.
Key Events
Several key events have shaped the GM-UAW labor-management experiment
taking place at Saturn: equal partnership between union and management in the design
of the organization; the emergence of co-management; the importance of performance
and image; the introduction of conflicts and controversies about Saturn’s future within
the union and GM after its original champions retired; and concerns over Saturn’s long-term viability as expressed during 1998 contract negotiations.
Joint Approach to Organizational Design: The Committee of 99
The Committee of 99 developed an organizational design that makes the UAW
an institutional "partner," participating in consensus-based decision-making from the
shop floor to the levels of senior management. This structure is overseen by a series of
“decision rings” at the department, plant or business unit, manufacturing policy, and
strategic policy levels of the organization. Through the partnership’s arrangements, the
UAW becomes an important part of strategic decisions made regarding supplier and
retailer selection, choice of technology, and product development. An initial 28-page
collective bargaining agreement outlines the basic principles governing the relationship
and the team-based system of work organization.
The partnership process is complemented by employment practices designed to
ensure that employees have the knowledge, skills, and motivation to contribute to the
performance of the enterprise. Saturn requires all employees to take a minimum of 92
hours of training each year. In 1995, 20 percent of compensation at Saturn was
contingent on the completion of this minimal amount. In addition, more than 80 percent
of the workforce is guaranteed employment security for life. Work organization at Saturn
is based on self-directed work teams of 10 to15 members, who are cross-trained and
rotate responsibility across the tasks in their unit. Teams have collective responsibility
for hiring new members and electing their own team leaders. The next level of
organization, called modules, cover an average of five to seven teams and conduct
weekly governance meetings in which teams are represented by their leaders. Teams
also have responsibility for quality assurance, job assignments, record keeping, safety
and health, material and inventory control, training, supplies, and housekeeping.
Emergence of Co-Management
As the organization took shape, local union officials and management added
another unique feature. At the department or module level, management responsibilities
became shared by two "module advisors," who are partnered. "Partnerships" at the
department level consists of union module advisors who are partnered with non-represented management module advisors. This feature of the partnership makes
Saturn the boldest experiment in co-management found in the U.S. today.
Until 1994, jointly-selected UAW crew coordinators maintained responsibility,
along with their non-represented partners, for managing crews across several
departments, which is the responsibility of superintendents in GM's more traditional
plants. However, in 1994—as a result of a negotiated agreement and in response to
considerable pressure from rank and file workers—the 14 UAW crew coordinators
became elected officials with the authority to file grievances.
Performance and Image
Saturn uses as its marketing slogan and logo the following phrase: "A Different
Kind of Company. A Different Kind of Car." Thus, it builds on its partnership with the
UAW and several other distinctive features of the company’s practices—such as its fixed
price, no-haggle, retail sales and service strategy—in positioning the company and its
products in the minds of consumers. To date, this approach has been very well-received
by the market. According to the J.D. Power Customer Satisfaction Index, within two
years of its first production run in 1990 and in every year since, Saturn achieved higher
ratings in initial vehicle quality, in satisfaction after one year of ownership, and in service
than any car in its class. Only Lexus and Infiniti, two upscale models costing three times
as much as Saturn, received higher customer satisfaction ratings.
Saturn's productivity and profitability, however, are not as high as its quality
ratings. Yet, its productivity levels still remain near the top of those at GM’s other plants.
In evaluating profitability, a question arises: Should Saturn amortize this investment
alone, or should the rest of GM’s enterprise—which was supposed to learn from this
experiment—share in their costs? Regardless, Saturn generated its first operating profit
in 1993 after mobilizing its third crew and being pressured by its GM parent to cut costs
and move up the date targeted for achieving a profit. Bonuses based on financial,
productivity, and quality goals have been paid to Saturn employees each year since
1993. The 1995 and 1996 bonuses totaled $10,000 for each member, which is the
maximum allowable under the contract. Bonuses declined in 1997 and 1998, as
Saturn’s sales declined.
Conflicts and Controversies
Despite its successes, Saturn is a controversial topic within both the UAW
International Union and GM. Several years after Saturn was created, its original
champions within both the UAW and GM retired. Their successors were not as
committed to Saturn’s principles and partnership structure. Meanwhile, over the course
of the 1990s, GM and the UAW experienced an intermittent set of strikes, largely over
questions about outsourcing. These conflicts peaked during a seven-week strike in the
summer of 1998, which shut down nearly all of GM’s production operations. At the end
of this strike, both GM and UAW leaders pledged to find a better way of dealing with
these issues—yet what, exactly, this promise means remains uncertain. GM continues
to feel intense pressure to outsource more of its component production to outside
vendors. In fact, it announced shortly after the end of the strike its intention to group
component operations into a separate division (Delphi), as well as to continue exploring
options for divesting component operations that are not competitive with outside
alternatives.
UAW leadership and the leaders of the Saturn local have been experiencing
considerable internal conflict over the past decade on a host of issues ranging from the
adequacy of representation on traditional issues to shift schedules, overtime and shift
premiums, and other administrative matters. Political factions have also arisen within
the local (similar to the dynamics at other UAW local unions). For example, each
election of union officers since 1992 has been hotly contested.
GM management has also been ambivalent about Saturn. On the one hand, the
corporation relishes the positive image that Saturn has achieved and urges other
divisions to learn from Saturn's experiences. On the other hand, while some technical
and marketing innovations have been adopted, there is little evidence that significant
learning from or diffusion of Saturn’s organizational principles has occurred within GM.
Moreover, in 1996 GM decided to accede to the International UAW’s preference to build
the second generation Saturn model in GM’s Wilmington, Delaware plant—not in Spring
Hill, as requested by the local union and management. The labor agreement negotiated
at Wilmington calls for some use of teams and employee involvement, but does not
include the full partnership model found in Spring Hill; it remains a part of the national
UAW-GM contract.
In 1998, GM announced that Saturn’s engineering, design, and parts sourcing
decisions would be integrated into the GM small car division as part of its overall re-centralization of these functions.
Finally, Saturn has somewhat of a schizophrenic identity. On the one hand, it
receives many accolades for innovative organizational design and employee relations,
as well as for favorable customer satisfaction performance. On the other hand, many of
the provisions of the partnership are of questionable legality under American labor and
employment laws; the co-management and shared governance structures have been
criticized by some business leaders as rescinding important managerial prerogatives;
and some union leaders are critical of the many long-standing work rules that the union
abandoned in return for this type role in the governance and management process.
1998 Negotiations
Concerns over these developments came to a head in Spring Hill in 1998. In
April of that year, the union—in response to rank and file concerns over the long-term
viability of Saturn—held a referendum over whether to continue the partnership as
specified under the local agreement or to return to the national contract. Sixty-eight
percent of the membership voted in favor of continuing the partnership as specified in
the Saturn agreement. Then, in the summer of 1998, the union took a strike
authorization vote and issued a 30-day strike letter in an effort to resolve an ongoing
dispute over both the formula for the risk-reward plan and the broader issue of the future
product stream planned for Spring Hill. These negotiations produced an agreement that
included the following provisions: GM would build a Saturn Sport Utility Vehicle at
Spring Hill; the union would be included in the sourcing decisions affecting Saturn
products; moreover, four factors (cost, quality, brand image, and job security) would be
considered in making sourcing decisions; and a compromise resolution to the parties’
different interpretations of the risk-reward formula would be enacted.
These negotiations served to force a decision on Saturn’s future, which had been
either delayed or allowed to drift for several years. GM was forced to decide how Saturn
would fit into its larger centralization effort, as well as its common engineering,
purchasing, and platform strategies and structural realignment. It also had to choose
which—if any—future products would be produced at Spring Hill. The result was that
GM stated its continuing commitment to the Saturn Partnership and reinforced this
commitment by agreeing to build the Sport Utility Vehicle in Spring Hill, as well as to give
the union a voice in sourcing decisions. Yet, despite these major compromises and
commitments, GM continues to follow its recentralization and outsourcing strategies.
GM’s strategy remains rather ambivalent—trying to accommodate the principles of the
Saturn partnership while simultaneously integrating Saturn into the corporation.
The negotiations involved considerable use of traditional bargaining tactics by the
union, including severe criticism of the commitment and competence of Saturn’s senior
management. A strike vote was held, the pace of production slowed, union leaders went
around Saturn management to pressure GM executives, and the union used the
leverage created by bad publicity. These strategies, in turn, irritated Saturn
management officials and fostered bad feelings.
Summary and Implications
Saturn represents not only the most comprehensive labor-management
partnership model found in the U.S. but also an organization that embodies many of the
principles of what is meant by a “stakeholder” corporation:
1. Saturn was designed to achieve both GM’s shareholders’ goal of making a
small car profitably and the workforce and union’s goal of building small cars
in the U.S. with U.S. workers and UAW members; this fact implies that the
success of the firm should be measured against these multiple objectives.
2. Workers and union representatives were to be full and legitimate partners in
the governance and management processes of the firm, and
3. Workers share the risks and rewards of the firm’s performance with
shareholders.
Thus, more than any other U.S. case, Saturn illustrates a type of organizational
partnership and employment system that can be created when a union with a vision of
its own participates in the design, governance, and management of the enterprise.
Workers have a strong voice on both traditional labor-management and broader
managerial or strategic issues. Principles of teamwork, continuous improvement,
quality, safety, ergonomics, and customer satisfaction are given high priorities. Conflicts
occur both within and across traditional labor and management boundaries, but are
managed and resolved differently than through the reliance on traditional contract
negotiations or grievance arbitration processes.
Whether Saturn’s limited profitability to date implies that this organizational model
inevitably redistributes some of the financial rewards across the different stakeholders at
the expense of shareholders is still an open question—one that is likely to be the subject
of considerable debate in the future. Thus, despite the positive publicity that the UAW-Saturn partnership has received and its success on the quality and marketing fronts, the
ambivalent support from both parents (UAW International and GM), leave the future of
Saturn somewhat uncertain.
At the same time, GM and the UAW both realize that the traditional approaches
they have taken to their relationship in general have not addressed the underlying
competitiveness and job security challenges they face. Both parties are examining
future options. Whether any of the principles, practices, and lessons from a decade of
Saturn experience will be brought to bear on this larger relationship remains to be seen.
Over the past several years—and particularly over the past year—the parties
have been caught in a downward, reinforcing spiral. The union was frustrated with a
lack of leadership and decision-making power within Saturn management and the lack of
support from UAW national leaders. Its renewed militancy has left some managers
feeling they have been betrayed. At the workplace, the partnership was put on hold.
Workers, in turn, became demoralized, as they saw sales and production fall; as the
relationship deteriorated, they began falling into traditional patterns. Therefore,
performance declined, adding further to costs and the frustration of management.
GM agreed to a settlement that is inconsistent with its larger strategy of
centralizing design, purchasing, and outsourcing components. It gave the union a role in
purchasing/sourcing decisions, using the criteria of cost, quality, brand equity (image),
and job security. They did so in this instance because the UAW threatened a strike that
would have imposed big economic and public relations costs on the company—and
might have signaled the death of the partnership principles. How the new arrangement
will be implemented and made to work in the context of GM’s broader centralization and
outsourcing decisions remains to be seen.
Saturn represents the most far-reaching example of a labor management
partnership model, one that embodies more of the features of a stakeholder model of the
corporation than any other example discussed here. As such, it suggests both some
strengths and limitations.
On the one hand, it shows that multiple objectives of firms and employees can be
achieved and balanced if both labor and employer representatives share a commitment
to building and sustaining a partnership—that is, a legacy of mutual commitment
fostered by the first generation of leaders who built Saturn. Second, it demonstrates that
this type of employment relationship and the commitment to quality and customer
service resonates positively with consumers and has a positive market value.
But the case also illustrates the significant resistance that exists to sharing power
fully and redefining the basic mission, goals, and governance structures of the American
corporation—and, therefore, the difficulty Saturn has experienced in sustaining support
from leaders both within its parent labor and corporate organizations. It also suggests
that significant changes in labor and employment laws, as well as perhaps in corporate
law, would be needed to allow this full type of stakeholder firm to emerge and survive in
the United States.
A further limitation of the Saturn model is the fact that “non-represented”
managers and professionals were not formally included in the governance process.
How to treat these employees remains an open question.