INDEX
INTRODUCTION
1
1) FORDISM: HISTORICAL DEVELOPMENTS
3
1.1) THREE FEATURES OF FORDISM IN THE 20TH CENTURY
3
1.2) A BRIEF DESCRIPTION OF FORDISM AND OF ITS HISTORY
4
1.3) THE MAIN PREREQUISITES OF THE FORDIST MODEL: ECONOMY OF SCALE.
8
1.3.1) THE VIRTUOUS CYCLE OF ECONOMY OF SCALE APPLIED TO THE T MODEL
8
1.3.2) THE LINK BETWEEN MARKET CREATION,
9
TECHNICAL CAPACITY AND ECONOMY OF SCALE
9
1.3.3) HUGE PLANTS FOR INTERNAL PRODUCTION: INDUSTRIAL GIGANTISM.
9
1.3.4) THE FORDIST FACTORY
10
1.3.5) THE FORDIST INDUSTRIAL PROCESS: INDUSTRIAL GIGANTTISM AND CONTROL
OVER PRODUCTION
11
1.3.6) CENTRALIZATION
11
1.3.7) VERTICAL INTEGRATION
12
1.3.8) FORDISM AS A POLITICAL AND SOCIAL MODEL
14
1.3.9) THE NATIONAL DIMENSION OF THE MARKET AND THE EXPANSION OF
FORDISM IN THE ’50s AND ‘60s
14
2) THE THEORETICAL STRUCTURE OF THE FORDIST MODEL
2.1) FORDISM IN ORGANIZATION THEORY
2.2) TECHNOLOGY: SEALING THE TECHNOLOGICAL NUCLEUS
2.3) THE SOCIAL STRUCTURE: THE ROLE OF WELFARE
2.4) THE WORKERS IN THE FORDIST MODEL
2.5) PROBLEMS ARISING FROM THE FORDIST MODEL
2.6) LESSONS FROM THE FORDIST MODEL
15
15
17
17
18
19
19
3) THE CRISIS OF FORDISM: A HISTORICAL OVERVIEW OF THE CRISES OF 1929 and
1970
21
3.1) KEYNES’ RECIPE TO OVERCOME THE CRISIS
22
3.2) THE WELFARE STATE
23
3.3) THE SECOND CRISES OF FORDISM AND ITS DECLINE
26
4) TOYOTISM: A NEW SYSTEM OF PRODUCTION
4.1) COST-CUTTING STRATEGY
4.2) THE JUST IN TIME PHILOSOPHY
4.3) THE “KANBAN SYSTEM”
4.4) INFORMATION TECHNOLGY
4.5) A COMPARATIVE ANALYSIS BETWEEN FORDISM AND
FORDISM
29
29
30
30
32
TOYOTISM/POST
33
5) THE CONSEQUENCES OF THE TRANSITION FROM FORDISM TO POST-FORDISM 36
6) POST-FORDISM AND THE OUTER WORLD
38
7) SOCIAL AND POLITICAL REPERCUSSIONS OF POST-FORDISM ON TRADE UNIONS
42
8) CONCLUSION
47
ANNEX 1
50
51
51
TAXATION AND GLOBALISATION
THE BMW CASE STUDY
I
ANNEX 2
INDUSTRIAL RELATIONS AT FIAT
THE “FORDIST EPOCH”
THE ECONOMIC BOOM AND UNION WEAKNESS
FIRST CHANGES
ANOTHER STAGE IN INDUSTRIAL RELATIONS
TOWARDS THE “JAPANESE MODEL”
THE PRESENT SITUATION
THE FIAT - GENERAL MOTORS AGREEMENT
SOME SUGGESTIONS FOR THE STUDY VISIT TO FIAT
53
54
54
55
55
57
58
59
60
61
SLIDES
1.
2.
3.
4.
5.
FORDISM
TAYLORISM
FEATURES OF FORDISM
TOYOTISM/POST-FORDISM
COMPARATIVE ANALYSIS FORDISM VS TOYOTISM
COURSE ACTIVITIES
ILO ANNEXES
GLOSSARY
-
FORDISM
TAYLOR, Frederick Winslow (1856-1915)
TAYLORISM
TOYOTISM
BIBLIOGRAPHY
II
INTRODUCTION
This training package focuses on the impact of the globalisation of
production, on workers and trade unions.
The package is a resource for trainers who would like to design a training
programme on labour relations, and in particular, on the structural
changes that have affected production patterns in recent years.
The guide is designed to help equip trade unions to better analyse the
structure and organisational patterns of enterprises and how they operate.
Trade union organisation is strictly related to this analytical process,
aimed at identifying the organisational patterns that unions must follow in
recruiting members in a faster changing labour environment.
In the mid 1990’s the ILO International Training Centre in Turin, Italy,
delivered a series of trade union training programmes on the broad theme
of Labour Relations and Trade Union Training for Collective Bargaining.
This pack is part of this work which has also developed a series of
publications called `Active Learning Methods in Workers' Education'.
The design and delivery of the courses involved close collaboration
between the Programme for Workers’ Activities of the ILO Turin Centre
and the Bureau of Workers’ Activities of the ILO (ACTRAV), Geneva.
Each Turin Centre Programme lasted for an average of four weeks.
Course participants were drawn from Africa, Asia and the Pacific, and the
Caribbean, and the working language of individual courses reflected
regional requirements.
Course activities are developed for trade union training at international
level; consequently some adjustments need to be made to use this
package at a national and local level. Workers' educators and trade
union trainers/tutors have to adapt the activities to their own local
circumstances and course programmes. Some activities will require
further re-drafting to suit specific regional/local requirements.
Trainers/tutors using this package should carry out an assessment of the
needs and objectives of their course participants, and adapt the materials
accordingly.
Structurally the pack is divided into the following parts:
1
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




Course content (Fordism and post-Fordism)
Case studies (BMW and Fiat)
Slides
Course Activities
ILO annexes
Glossary
Bibliography
The learning activities found in the package are intended primarily for
use with trade union officers in charge of labour relations and for trade
union officers responsible for workers' education.
Each course participant will have different experiences, local
backgrounds and objectives. Thus, the course outcomes for each course
participant will be dependent on that person's skills and needs. Broad
trade union aims and perspectives on labour relations will hopefully be
developed and shared in such a way that all participants will be able to
apply the course results to their own specific situation.
Throughout the pack, emphasis is placed on the development of the
training/educational function, and on the further production of learning
materials which will hopefully support the strategic development of trade
union training.
Most of the material originated in Turin, within the Workers' Education
Programme, whilst drawing on the skills and experiences of colleagues
from many trade union movements, who have assisted from time to time
in programme development through their teaching contributions to course
activities. In particular, this material has been produced as a result of the
delivery of courses on labour relations organised in collaboration with
Marco Revelli and Vittorio Rieser.
Enrico Cairola
Programme for Workers Activities
International Training Centre of the ILO
2
1) FORDISM: HISTORICAL DEVELOPMENTS
This is an analysis of the history of the organizational and technological
forms which characterized industrial relations for most of the 20th
century.
The basic assumption is that a deep historical change occurred at the end
of the 1960s and, even more intensively, during the 1970s and 1980s. It
was a change of paradigm, where “paradigm” means “social model”.
Today, we are experiencing the so-called “second industrial divide”, a
new industrial and technological revolution which has deeply changed the
features of the social system and of politics, especially those of trade
union relations.
Obviously, not all experts in the area of labour relations share this view:
there are contrasting theories and analyses. Some support the continuity
between what occurred at the beginning and at the end of the 20th
century. Social relations yesterday and today, seem to share common
traits, which means that little has actually changed. What needs to be
done is to correct previous social policies and adjust them to today’s
global change.
The thesis of this training paper is that this change is quite basic,
inasmuch as it mainly derives from technological change. We have
moved from mechanical technology to one based on information sharing.
There has also been organizational change, as we have moved from
centralized industrial models, to a sort of “network organization”. The
political changes of the 20th century also played a major role in this
process. By significantly modifying the role of the “nation state” and its
autonomy, the globalization process plunged the Welfare State model of
the second half of the 20th century into a deep crisis.
Another important feature of this change is related to the development of
a global financial system. Finance has become ever more important
compared to production and trade.
1.1) THREE FEATURES OF FORDISM IN THE 20TH CENTURY
The Fordist model was the economic and social system which dominated
the industrial world from the 1920s to the 1970s, whereas “post-Fordism”
refers to the social and economic model which slowly emerged during the
technological revolution of the 1970s and 1980s. It shook the world
economic system, now called an “integrated economic global system”.
In the Fordist model, workers did not have the fundamental tools they had
in the previous handicraft system of production, namely their skill, their
3
SLIDE 1
wisdom, their knowledge, their experience. Prior to Fordism, workers had
been able to control the production cycle and the technology.
One of the main reasons why Fordism became popular was that
employers decided to react against such a situation. Unions controlled the
labour force through the closed shop system: to hire new workers, one
had to go through the unions. The de-qualifying inherent in the Fordist
approach meant a change in the workers’ bargaining power: they lost
their skills and with the introduction of Fordism they lost their bargaining
power.
What is Fordism? The term was invented in the 1920s, became
fashionable in the 1930s, and remained very popular after the Second
World War. By Fordism, at least three things are meant.
Firstly we refer to a production system which was based on a given
technology. It was a way of organising the working process based on the
concept of an assembly line within a single production unit. Fordism
meant mechanical technology and an engineered factory: it was mass
production carried out on an assembly line.
Secondly, it was a system of accumulation. Fordism was an economic
model based not only on mass production but also on mass consumption.
It assumed a growing capacity for consumption by growing sectors of the
population.
Mass production made new investment possible. This in turn increased
productivity at work and thus the chance of cutting the price of goods,
thereby making the consumption of these goods more popular. Fordism
was not only a factory system; it was also a particular type of relationship
between production and consumption.
Thirdly: Fordism implies a social and political system. The political
system supported and fostered mass production and mass consumption.
Institutions and public authorities were supposed to work to make labour
available, to distribute wealth and to channel this wealth towards various
social classes that were going to consume. Moreover, Fordism enhanced
the efficiency of the labour force by providing welfare services such as
housing, health care and social protection. In other words, the Welfare
State became a major component of Fordism.
1.2) A BRIEF DESCRIPTION OF FORDISM AND OF ITS
HISTORY
Fordism in the 20th century was composed of the three above mentioned
features: a technological system, a system of accumulation and a social
model. These three components went through major changes, such as the
4
economic crisis of 1929, the two World Wars, fascism, and union
struggles which became quite common after World War II.
These conditions lasted throughout most of the 20th century and entered a
crisis during its last 25 years. How did all of this happen?
Even if we use the term “Fordism” to characterize this period, Fordism
went through many major changes during its sixty years when it was the
dominant model. There was a sort of “initial” Fordism, the American
Fordism of Henry Ford, and the emergence of the automobile industry,
which lasted up to 1929. The crisis of 1929 was proof of the contradiction
that this economic and social model had brought about. Roosevelt’s
resulting New Deal policy in the 1930s introduced very strong state
participation in the country’s economy.
Later on, there was a sort of “reformed” American Fordism, which lasted
until the Second World War. Then, between 1945 and 1960, a
“transnational” Fordism appeared: the model was adopted overseas and
became popular in Europe and in Japan. It affected the economic and
production systems of the highly industrialized countries. Finally, after
World War II, Fordism was identified with the production system of all
developed countries.
What were the characteristics of the original Fordism and the basic
features of this production system, which were later modified?
The Fordist model was actually established around 1913/14, when Henry
Ford introduced the assembly line at his Highland Park factory in Detroit.
This was apparently an elementary invention, which he had copied from
the organizational system of the Chicago slaughterhouses, where the meat
was moved along a line and processed.
Ford’s great innovation, though, was to apply this production system to a
new product: the car, which in a sense was the product of the 20th century.
He had the bright idea of transforming the production of cars from a
handicraft style to mass production.
In “The Machine that Changed the World1”, a book written by a team of
MIT experts, this invention was defined as “revolutionary”, because it
dramatically changed the world. By “machine”, they meant the assembly
line. The “industrial divide” was the turning point between the previous
industrial system and the new production system, which dominated the
20th century.
In the factories of the previous industrial production system, objects were
stationery and workers moved around. For example, in the car industry,
highly skilled workers, who were familiar with all the operations required
to build the product, would move around the car body and assemble the
1
J. P. Womack, et al; The Machine That Changed the World: The Story of Lean Production;
Paperback.
5
various components that were produced in small external workshops by
other skilled workers.
The production model at the end of the 19th century and at the beginning
of the 20th century was organised in such a way that the factory could
have been defined as an “assembly operations terminal point” where the
components produced elsewhere were assembled. This was done on a
handicraft basis, by skilled workers, not on a standardized basis. To build
a car under these conditions meant many working hours and required lot
of effort.
When the first manufacturers started building cars in the late 1800s, each
automobile was a hand built effort, tailored to the precise wishes of each
customer. These cars required hand-fitted craftsmanship and workers
were highly skilled in design and machine operations. The system of
production was decentralized and very often concentrated in an industrial
city. The owner of the factory, with a small staff, directly coordinated all
operations in direct contact with customers, workers and suppliers. Each
car was a sort of prototype and a unique product. When Henry Ford
adopted the assembly line, he caused a Copernican revolution. The most
important part of the revolution was the complete and consistent
interchangeability of identical parts and the simplicity of attaching them
together with the use of the assembly line/conveyors. Henry Ford made
the components move instead of the workers. The product passed in front
of the workers, who stayed where they were and repeatedly performed the
same operations. The car body moved along the assembly line and went
through various individual work stations where an individual worker
performed a simple operation. These were no longer highly skilled
workers; they were so-called “ordinary” workers (unskilled workers).
Mass production not only made cars affordable for a large number of
consumers (and workers) , but the simplicity and interchangeability of the
parts allowed for much enhanced reliability and easy maintenance in
comparison with craft production cars.
These apparently simple ideas brought in by Ford to improve production
implied two more major innovations.
Firstly, the adoption of the “American system2”, a technique which
enabled the production of identical components. This innovation was the
result of the application of very advanced technology in the steel mills.
To make this new system work, the components had to be identical, and
workers were not supposed to screen and correct individual components.
The “American system” dated back to the American Secession War,
when there was a need to produce weapons (rifle and gun components) on
2
D. Hounshell; From the American System to mass Production, 1800-1932; Baltimore; 1984.
6
SLIDE 2
a mass basis. During that time, the system was also improved to make it
possible to manufacture identical components.
The second innovation was the adoption of a scientific means of
measuring operation times. This was invented by Frederick Taylor.
Taylorism was the scientific organization of work, the identification of a
series of techniques to break down the work process into simple
operations. The time needed to carry out each individual operation was
measured by the “One Best Way3” system, which established the best
way to do a given operation. This released individual workers from the
task of controlling their own operations. Previously, the workers
themselves had to know how long a given operation would take. The
factory owners did not have this information; the time needed time was
managed individually by the workers themselves.
Taylor thought that workers would slow down the operation times on
purpose. Workers feared that if they worked more quickly, some of them
would lose their jobs, or be paid less. Taylor invented a scientific system
to reveal the information held by workers and to establish a scientific
“One Best Way” system through repeated time measurement. This
method was absolutely necessary for an assembly line to work. If the
individual timing of each operation was not fixed, it might have been
difficult to organize mass production and to distribute the various
operations along the assembly line.
From then on, thanks also to the adoption of the assembly line, the time
necessary to manufacture vehicles was visibly reduced and the product
became standardized with a consequent increase in production and
productivity.
In a nutshell, in the old factories products were tailor-made by specialised
workers and usually hand-made with simple technologies. With
standardized production it was no longer possible to produce tailor-made
vehicles: the vehicles were identical to one another. One of Henry Ford’s
favourite sayings was, “Anyone is free to choose the colour of the car
they want, as long as it’s black.”
Cars came off the assembly line in huge quantities. They were
standardized and manufactured by workers with very low professional
skills (unskilled workers). In a typical Fordist factory, anyone can learn
the basics of their job in a very short time. In the past, on the other hand,
a worker needed long years of apprenticeship to learn the basics of his or
her job.
3
R. Kanigel; The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency (Sloan
Technology Series), Hardcover.
7
1.3) THE MAIN PREREQUISITES OF THE FORDIST MODEL:
ECONOMY OF SCALE.
SLIDE 3
A deeper analysis of Fordism would reveal five of its main features. The
first is the “virtuous cycle of economies of scale”. The secret of Henry
Ford’s success and of the success of the Fordist system as a whole, laid in
the fact that by increasing production volume, it was possible to cut the
cost and the price of goods. When the price was lower, more customers
were able to buy the product.
Cost-related advantages were obtained only by increasing the quantity
and volume of the goods that were manufactured (development of
“economy of scale”). The higher the number of product units that left the
factory, the lower the unit cost that the manufacturer had to bear. The
reason why economy of scale offered this important advantage depended
on cutting fixed costs. Fixed costs were the investments in terms of plant,
equipment, machinery and wages that employers had to make. All these
costs had to be met regardless of the quantity produced. The number of
vehicles produced did not influence fixed costs (land, premises, buildings,
machinery, plant, and workers). If 1,000 vehicles were produced, these
costs had to be spread over 1,000 product units, whereas if 10,000
vehicles were produced, these costs were spread over a higher number of
units.
Depending on the number of products manufactured, fixed costs either
decreased or increased. In the Fordist model, if production increased, the
cost of each vehicle automatically decreased.
1.3.1) THE VIRTUOUS CYCLE OF ECONOMY OF SCALE
APPLIED TO THE T MODEL
Production data for the Model T shows that the very first exemplars came
off the assembly line at a higher cost.
The first model of car meant for a mass market and produced by the Ford
plants was designed in 1908 and started to be produced by a semi-manual
system in 1909. Then, starting in 1913, the same Model T was produced
by the assembly line system.
In 1909, the Ford plants produced 13,814 vehicles, sold at $950 each. At
the time, it was still quite a high price for the USA: a regular worker
would have to work many years to afford such a car.
The following year, 20,000 vehicles were produced: each of them was
sold at $780. The increase in production went along with the drop in
price.
8
In 1911, even before the assembly line system began, production rose to
53,000 units; the price was $700. In 1916, more than 500,000 vehicles
were produced, five times as many as in 1911, and the price went down to
$360: little more than one third of the original price. In the first half of the
1920s, average annual production exceeded 2 million vehicles and the
price was $250, about a quarter of the original price for the very same
vehicle.
The inverse proportion between quantity and price was evident: the more
cars produced, the lower their price was.
1.3.2) THE LINK BETWEEN MARKET CREATION,
TECHNICAL CAPACITY AND ECONOMY OF SCALE
In the Fordist model, manufacturers were able to govern the market
because of their technical ability. They were able to increase production
and find new customers and new market shares. In other words, Fordism
was able to create and expand its own market.
This was possible only because the markets concerned were new markets.
In these markets, the vast majority of people needed that specific product
and did not have it. At that time, the car was a brand new product.
When Henry Ford launched his production system, there were slightly
fewer than 150,000 cars in the United States, for a population of 85
million people. This meant that Americans were potentially waiting for
their first car. The only restraint was that they could not afford the cost of
the vehicle. Simply cutting the price made it possible for manufacturers to
increase sales. Cutting the vehicles’ price was possible because of the
increase in production volume, thanks to the virtuous circle outlined
above.
This is the first specific characteristic of Fordism: the virtuous circle of
economies of scale in virgin markets that were able to absorb industrial
production with no limits and no restraints.
1.3.3) HUGE PLANTS FOR
INDUSTRIAL GIGANTISM.
INTERNAL
PRODUCTION:
The second major feature of Fordism was industrial gigantism. The
Fordist factory was a huge plant. The symbol of Fordist industrial
architecture was Albert Kahn, the architect who designed all the Ford
Motor Company’s factories, from the one in Picket Street in Detroit to the
Highland Park plant and the River Rouge plant.
9
A glance at Fordist architecture suggested the amazing growth in the size
of industrial buildings as time went by. As the Fordist philosophy
developed, a parallel growth in the size of industrial buildings took place.
The main example of this type of architecture in Italy (Turin) was the
Lingotto factory, which dated back to the Fordist period. The Lingotto
plant reproduced the structure of the Fordist plant in Highland Park, the
biggest plant ever built in the United States, the one in which the first
assembly line was built.
The River Rouge plant, set up on the banks of the River Rouge in Detroit,
was ten times bigger. River Rouge was built between 1917 and 1924 to
host the assembly line for the Model T Ford, and became famous as the
biggest factory in the world. It was 11 miles long; at its production peak,
there were 105,000 people working inside it. All the operations necessary
to produce all car components were integrated within its walls.
1.3.4) THE FORDIST FACTORY
The major difference between the previous industrial system (19th
Century) and the Fordist system was that, beforehand, a major part of
production took place outside the factory and components were
assembled inside, whereas in the Fordist system of production, all the
operations necessary for the manufacturing were carried out within the
plant and were subject to the very same hierarchical structure.
As an example the River Rouge plant contained the various assembly
areas, as well as the foundry or blast furnaces. The raw material arrived
and went to the furnace. There was even a department that manufactured
leather for the seats and doors and there was also a powerful power plant.
The Fordist factory was absolutely autonomous from the energy point of
view. The energy necessary to run the factory was produced inside the
factory itself and the plant was completely self-sufficient.
The plant had a central backbone running from line to line, crossed by
rails: this configuration permitted the constant distribution of
manufactured goods from one department to the next. It was a kind of
giant assembly line all along which, and on which, the various
components produced within the factory itself were transported and
conveyed.
On day one, the raw material would reach one end of the factory by rail
or by river; on day three, at the other end, the finished product would
come out. Everything was produced and taken care of within the plant.
10
1.3.5) THE FORDIST INDUSTRIAL PROCESS: INDUSTRIAL
GIGANTTISM AND CONTROL OVER PRODUCTION
The process described derived from the need that Henry Ford felt to keep
strict control over each step in the production cycle, so that nothing
beyond his control could possibly happen. The Fordist employer did not
just set up a factory for the production of goods: he purchased sources of
raw materials too. The Ford Motor Company acquired rubber plantations
in order to exert direct control over the production of rubber. It also
purchased forests and oil wells.
Why was Henry Ford so obsessed with controlling each step in
production? It all comes down to the basics of the philosophy of the
Fordist model: in order to ensure regular production flows and to avoid
possible delays or setbacks, it was of the utmost importance to have
control over each production component.
In the previous industrial system, delays in uphill production or
components not matching others were routine: they did not cause
problems. But in the highly integrated production cycle conceived by
Ford, everything had to work perfectly: any single piece that did not
comply with the standard could paralyse the whole production cycle. In
such a situation, it was essential to ensure that all production steps and
cycles underwent the same control processes. Control was exerted by the
engineers responsible for the departments; they, in turn, were controlled
by one person, the person in charge of the whole factory.
At that time, of course, communication was slightly complicated: even
the telephone was not widespread. Due control over each production step
therefore depended very much on the whole of production being
concentrated in a single space. For this reason, operations were removed
from outside and made internal.
1.3.6) CENTRALIZATION
The third characteristic of Fordist philosophy was centralization. This
meant highly organized production plants based on strictly vertical
hierarchical structures.
The hierarchy itself was of paramount importance. According to the
model, no deviation was even conceivable. Any behaviour that did not
comply with the rules was considered unacceptable. This was particularly
true for workers: any worker behaviour that did not adhere to formal
behaviour patterns was not accepted. Accordingly, any personal,
subjective or creative behaviour on the part of the worker was deemed
unsuitable. What is nowadays seen as an advantage, at that time was
11
considered an obstacle. The best operator in a system like that was a
worker who carried out his or her work mindlessly, blindly, repeatedly.
Any creative difference might have stopped the regular flow of
production.
1.3.7) VERTICAL INTEGRATION
The fourth characteristic of Fordism, which is related to centralisation,
was the trend of enlarging the organizational borders of the production
system. This process was called vertical integration. For example, if a car
factory depends on another company for the supply of car radiators, the
owner may be afraid that the supply company will not be able to supply
the necessary amount of components or will cheat by changing the price
without warning, thereby disrupting the cost system of the car
manufacturer. The car manufacturer may try to reduce the negative
consequences of the behaviour of the supply company by merging the
two companies or by acquiring the supply company.
In other words, system A is afraid of being negatively influenced by
system B. To overcome this risk, system A engulfs system B. This has
occurred several times, for instance when the oil companies started to
purchase oil tankers. They did not trust the freight system organized by
navigation companies, so they bought tankers. They did not trust the oil
producing countries, so they bought some of the oil wells and acquired a
distribution system. They got organized and established sales points.
These are all examples of vertical integration. This was the obsession
Henry Ford had with direct control over all possible operations. It was a
sort of mania to extend the company’s borders so that the organizational
system could absorb anything which could be absorbed, in order to avoid
any possible problem for the organization.
This process of vertical integration could also be defined, technically
speaking, as the dominance of the “make” over the “buy” approach. I
make what I need rather than buying it from outside or outsourcing it.
Each organization sector or division, when it needs components for its
product, will have to make up its mind whether to make these
components internally or buy them on the market: to be autonomous or to
depend on different suppliers. The “make” system is an autarchic system;
the “buy” system has to trust market suppliers.
In the first case, the “make” system, there is direct intervention by the socalled “visible hand”: through a hierarchical approach, the system is
governed centrally. In the second case, the “buy” system, there is a very
small core, the company, and then there is the “invisible hand” of the
market that regulates all the other resources.
12
The Fordist system took the “make” approach to its logical conclusion.
Anything which can be made inside will be made inside, so as to build a
closed system. Even to the detriment of the financial system of the
company: costs may increase considerably because of this approach, and
the more complex the system gets, the heavier the cost will be for the
company itself. As a consequence, the organization costs grow
constantly, as its borders become wider and wider.
The closed system affected the social structure, the relationships between
the people working within the company, and the relationships among the
various production functions. The whole structure had to be divided into
two: the ruling structure and the behavioural structure. The ruling
structure consists of all those functions that are rigid, formal, based on
standards and regulations, so that little room is left for personal initiative.
It was by definition impersonal. It reduced the differences between
individuals to nil: everybody had the functions described in the relevant
manual. In contrast, the behavioural structure was based on personal
initiative: every single person works in her/his own manner. So, on the
one hand, there are rules; on the other hand, there are practical actions.
The Fordist model was aiming to reduce unforeseen events to a
minimum, by expanding the regulatory structure as much as possible, and
by trying to reduce the behavioural component to a minimum. Workers
had to do nothing less, but also nothing more, than what they were told to
by the rules. People had to forego their own personality, their own
creativity, because what mattered was that they behaved in accordance
with strict rules. Anything unforeseen or unexpected, even though it
might have enhanced the value of the production mechanism, and even
though the people may have taken to this creative approach in order to
improve the production mechanism, was seen as potentially hazardous,
dangerous and damaging.
In a closed system, the regulatory structure dominated the behavioural
structure, and behaviour was highly formalized. Behaviour was simply a
matter of what the rules and regulations told people to do. It was a highly
formal structure. The goals, in a structure that was so highly sensitive to
any variation, had to be set in advance, prior to the work. They could not
be changed or adjusted along the way. Such a structure worked on basis
of far-sighted multi-annual planning cycles. Managers had to know today
what would be the output in six months or in one or two years’ time. The
factory had to be able to equip itself to comply with this plan well in
advance. It was a question of rational planning. The system could not
adjust its strategy: it could only work at the same rhythm for a long time.
Projection over time was a basic prerequisite for lowering fixed costs: an
increase in fixed costs could be counterbalanced by an increase in pieces
13
produced. Production had to be planned well in advance so as to cut down
fixed costs, and this in itself made the Fordist organisation rigid.
1.3.8) FORDISM AS A POLITICAL AND SOCIAL MODEL
The fifth feature of Fordism was the political and institutional aspect, not
only in terms of technology or accumulation, but as a political and social
model of the middle of the last century, that later evolved into the welfare
state.
The technological nucleus of Fordism, conceived to isolate the production
process from the surrounding environment, has already been analysed in
previous sections. Factories were surrounded by high walls; they had
gates controlled by guards who were sometimes armed. These areas were
totally separated from the surrounding social context: anyone working in
a Fordist plant had to show an identification document. These
mechanisms isolated the production space from social relationships, from
daily life. The working environment was dominated by very strong
technological rules and by specific regulation. This internal process was
also reflected in the external environment regulated by social and political
rules. In other words Fordism, as a production model, implied the
existence of a special social order or state policy for creating the external
social conditions favourable for its development.
1.3.9) THE NATIONAL DIMENSION OF THE MARKET AND
THE EXPANSION OF FORDISM IN THE ’50 AND ‘60
The Fordist model was born and grew strong when the car market was
mostly a domestic market. Each country, provided it was large enough,
had its own car manufacturer, or even more than one if the market was
very big (Ford, GM and Chrysler in the USA; Volkswagen in Germany;
Fiat and Lancia in Italy; Peugeot and Renault in France).
Because they were sold within national boundaries, the products were
conceived and designed to meet national tastes. There was very strong
protectionism against the circulation of goods: it was difficult to export to
other countries. The markets were national and very flexible, able to
absorb the entire output of a country’s factories. In other words, the first
Fordist car production took place with virgin domestic markets that
matched the political borders of the state as its target. Going beyond these
borders was a complex operation, possible only by transferring the whole
production cycle of Fordism to another country as was done later after the
Second World War, by multinational companies.
14
2) THE THEORETICAL STRUCTURE OF THE
FORDIST MODEL
2.1) FORDISM IN ORGANIZATION THEORY
If we approach Fordism through organizational theory, some particular
features of this model stand out. They were common to many different
countries and to all the situations in which this model became popular.
One popular model of organizational theory is the Leavitt model4. Leavitt
was a sociologist who proposed a model for all organizational systems,
even the most complex ones, such as factories and business.
According to Leavitt, these models have four main components, namely:
1) technology
2) the social structure
3) the system of goals or objectives
4) the participants / workers
Leavitt’s model can be applied to any organization such as a company, a
political party, or a union; at any time.
Complex organisations have their own technology, on the basis of which
they operate. Technology means not only machines, equipment and
technical products. It means anything used by the organization to achieve
the results for which it was set up; hence it may also mean knowledge or
staff.
Each organization has its own technology and its own social structure. In
other words, a set of ties and links amongst its members, a network of
relationships, which may be translated into rules or behaviour.
Every organization has its own short and long term objectives and goals:
it seeks to achieve them with pre-established plans and with strategic
planning strategies.
It also has participants: its workers, management and employers. This is
true for any organization, whatever the place and time. What do change
as time goes on, and as the historical context changes, are the
4
H. J. Leavitt; Applied Organisational Change in Industry. Structural, Technological and Humanistic
approach; in Handbook of Organisations, edited by J. G. March Rand McNally; Chicago 1965.
H. J., et al.; The Organizational World; Harcourt Brace Jovanovich; Inc. 1973.
15
characteristics of these individual elements which make up the
organization, as well as their inter-relationship.
The Leavitt theory can be applied to Fordism: to better identify the four
main components of the model: technology, the social structure, the
system of goals or objectives and the participants.
The technology of the Fordist model was longlink technology. This
meant that the various functions and operations that the organization
carried out in order to attain its results were placed in sequence. It was a
linear sequence, in which the output of the first work station became the
input of the second work station. What was produced in each work station
became the input of the following one. This was a typical longlink
technology, with a very high efficiency level and high work productivity.
As an example the global outcome of a group of workers using longlink
technologies was much greater than separate operations carried out by
individual workers. In other words, the overall result was much higher
than the individual result, so it was more efficient and productive.
There are two major limits to this approach:
1) it needs a very regular resource input pattern; that is, it cannot
withstand any variation in the flow of resources;
2) it requires an external environment which is ready to receive the
product flow without any problem.
Such technology was extremely sensitive to any variation: it was not at all
flexible. Technology of this kind was only useful for manufacturing a
highly standardized product with no variation, either in the product or in
the product flow.
This feature of Fordist technology affected the whole operation of the
factory working as a closed system. This model was based on the closed
system strategy. It worked better the more it was able to eliminate
unforeseen occurrences which derived from the external environment, so
it had to seal itself within its own environment as far as possible.
The organization of the Fordist system was based on the attempt to
eliminate external factors (e.g. fluctuations in the supply of raw materials,
a market being unable to absorb all that was manufactured, a sudden,
unforeseen change in workers’ behaviour such as a strike, or a machine
that broke down). Anything which threatened to break or interrupt the
regular rhythm of the production flow was perceived as a risk, as
something to be removed. For this reason, it was a closed system strategy
and the objective was to seal the technological nucleus against external
influences (the environment was kept outside).
16
2.2) TECHNOLOGY:
NUCLEUS
SEALING
THE
TECHNOLOGICAL
The simplest system of sealing the technological nucleus consisted of
surrounding the technological core with stockage areas. For the flows to
be regular all the time, one possible solution was to build warehouses
near the assembly line.
It worked exactly like a hydraulic system: if there is a river which is dry
in summer and overflows in winter, a hydraulic machine must be used to
build a water catchment, so the water which reaches the dam can be
controlled. The flow is stabilized and is returned as a normal flow. The
same applied to the Fordist factory. If there was a market which behaved
irregularly, a warehouse was built to give the flow the required regularity.
This was the simple system by which the Fordist factory attempted to
control irregularities deriving from the external environment.
Another way was to set up regular maintenance processes. To avoid
sudden breakdowns of the machines, ad hoc maintenance programmes
with regular checks were established.
All that, obviously, implied an increase in costs for the company, because
building warehouses inside the factories or establishing maintenance
programmes entailed high costs.
The first consequence of this vulnerable aspect of the Fordist approach
was a notable increase in organizational costs due to the attempt to
eliminate unforeseen events, which raised internal administration costs.
Two new categories of workers were introduced: warehouse operators
and maintenance workers. They were not connected to the production line
directly, but their work was essential if the central production line had to
work smoothly.
These precautions were often not enough: in spite of warehouses,
production shops and maintenance programmes, the external environment
penetrated into the organization. How did the Fordist model react? It went
beyond technical innovation to produce new means of coping with the
external environment.
2.3) THE SOCIAL STRUCTURE: THE ROLE OF WELFARE
Welfare reflects the Fordist model outside the factory. Just as within the
factory, management was asked to ensure smooth and regular flows,
outside the factory, the government was required to regulate social
17
relations with a regulatory mechanism. The “Regulation School”5
established that the Fordist approach could not improve if social relations
developed in an uncontrolled or autonomous way. They needed to be
regulated with the provision of welfare and social programs. The great
intuition of J. M. Keynes6 was to assign to the State the basic task of
redistributing wealth. Wealth had to be redistributed to reach social
groups that needed it to become consumers. The redistribution role of the
government included the provision of social services to the workers, such
as health care, education, housing and pension schemes. Social relations,
too, had to be regulated and controlled by the government in order to
avoid conflicts.
In the external environment, a sort of negotiating policy was established.
Through the negotiation process, what was irregular was made regular. At
the same time, representatives of other external organizations were coopted by the Fordist factory through a contracting policy and through a
co-opting policy.
2.4) THE WORKERS IN THE FORDIST MODEL
The Fordist company was based on a stable number of workers, regularly
employed for a long period by the company. There was no question of
sub-contracting; there were no independent actors in the working
environment. Everyone had to be a direct employee.
The workers in such a highly regulated environment were usually
unskilled: they did not have to think; they simply had to perform very
simple actions accurately. The Fordist company initially thought that it
could exert full control over its workforce, primarily through the twin
pillars of high wages and draconian regulations. The “five-dollar day”
became a fad. In the 1920s, that was more than twice the usual wage in
American factories. High wages were an incentive that would promote
discipline. There were shifts of controllers going around checking
everybody’s behaviour. There were many penalties and punishments,
even financial ones, for anyone who did not behave the way they were
expected to.
5
R. Boyer; La Théorie de la régulation : Une analyse critique .; La Découverte, Collection Agalma,
Paris 1986.
R. Boyer, J.P. Durand ; L’après Fordism ; Syros ; Paris 1995.
A. Lipietz ; Mirages and Miracles. Crises of Global Fordism; Verso; London 1987.
A. Lipietz; Towards a New Economic Order. Post-Fordism, Ecology and Democracy; Oxford
University Press; 1992.
M. Aglietta; Régulation et Crise du Capitalism; Calman/Levy ; Paris 1976.
6
J. M. Keynes; The General Theory of Employment, Interest and Money; 1936.
18
In the 1920s and 1930s, collective agreements were introduced. The
collective agreement did not work only to the advantage of the workers,
because collective agreements ensured stability to such a vulnerable
organizational structure.
The collective agreement stabilized the behaviour of the workforce. The
workers knew for certain that as long as their contract lasted, they would
receive a certain wage. The workers knew everything about their duties
and their rights, such as how many hours they had to work. The collective
agreement itself was helpful, because it ensured production could be
planned in advance. It was not very different from the contracting
technique used to stabilize the supply of raw materials or semi-finished
products.
2.5) PROBLEMS ARISING FROM THE FORDIST MODEL
For a long time, the markets were able to absorb industrial production;
production flows were smooth and regular and the labour force accepted
the working conditions imposed by Fordism. There were also large
agricultural areas where the agricultural workers were eager to leave their
fields and work in factories in the industrial areas.
There was no reason why the model had to change: it worked in spite of
its rigidity. The problem emerged when the internal and external
conditions changed, when markets became saturated and the labour force
stopped accepting the discipline imposed by the Fordist environment.
In a rigid system, the regularity of the production flow was hit by any
unforeseen event such as a wildcat strike. And if the workers worked
more slowly than expected, they jeopardized the functioning of the
overall organization.
With longlink technology, the workers were supposed to be very closely
synchronized with each other and to work at the same speed. When the
work organization became so worker-dependent, the power of each team
of workers became enormous. In the following chapters it will become
clear why in the post-Fordist model this power was removed from the
workers by outsourcing and by introducing flexibility in the working
process. This meant job cuts, introduction of new technologies and the
fragmentation of production cycles / workers’ power.
2.6) LESSONS FROM THE FORDIST MODEL
There are important lessons to be learned from both the weaknesses and
the advantages of this structure.
19
It all somehow revolves around the same issue: the reduction of
unforeseen events to a minimum. The Fordist system was afraid of
possible collapse unless it could control unforeseen events, be they
internal or external. The main limit of the Fordist model lies in it being so
rigid. This lack of flexibility was the root cause of the failure of the
system.
First of all, the market was no longer virgin. It had begun to get saturated.
Rigid behaviour also appeared in the labour force. At the end of the
1960s, in the industrialised world, there was a real mass revolt and
uprising against the characteristics of Fordism and Taylorism, against the
alienation of the worker. As a consequence of the above, a technological
revolution took place, one that made the mechanical technology of the
assembly line obsolete.
All these facts together were the roots of the crisis of the Fordist model.
Its costs became too high; its lack of flexibility became intolerable. These
giants (the Fordist companies) were no longer able to stay afloat in an
ocean that had turned stormy. The Fordist model started to reveal certain
weaknesses and problems related to the management /control of its own
workforce, to market growth and expansion and to increased world
competition.
In the late 1960s, Fordism went into a crisis that would lead to its
downfall and its replacement by industrial models generally defined
“post-Fordism” or “Toyotism”. The Toyotist model breaks with the
Fordist model and upstages its major characteristics. Centralization of the
production process is replaced by outsourcing, looking for external
suppliers or sub-supplying systems. This is followed by the establishment
of decentralized global networks of production.
20
3) THE CRISIS OF FORDISM: A HISTORICAL
OVERVIEW OF THE CRISES OF 1929 AND 1970
The Wall Street crash and the subsequent crisis of 1929 revolutionized
the capitalist world of the time. It gave rise to deep social, economic and
political transformations, including the temporary downfall of Fordism
with its first crises. One might even say that the economic crises during
1929 were a direct consequence, a product, of Fordism. In fact, it was the
result of two different consequences of Fordism.
One was the increase in industrial productivity, the potentially huge
increase in industrial production which Fordism made possible. Fordism
did increase the individual productivity of the single worker enormously,
as well as the collective productivity of the whole industrial system.
The other was the fragmentation and the defeat of the old workers’ and
trade union organisations.
Historically Fordism, particularly during its first phase, had destroyed the
resistance of 19th century trade unionism. It had destroyed the bargaining
power of the old trade unions able to organise the skilled/professional
workers and control the labour market and the workplace (closed shop
system). Fordism destroyed the importance of professional competence
and made it possible for companies to recruit masses of workers with no
skills or qualifications whatsoever. Sometimes these workers had just fled
the countryside in search of different types of work. Some of them were
recruited from the new immigrants arriving from Europe.
Between 1900 and 1920, trade unionism underwent a deep crisis,
especially in the USA. At the same time, Fordist production was on the
rise, and the crisis was replicated in countries where Fordism gradually
became established.
The crisis of 1929 was the epicentre of the earthquake. The defeat of the
trade unions led to a decrease of wages and to an increase in productivity,
and this gave rise to an important imbalance in the distribution of wealth.
Workers started to produce more, without any corresponding increment in
their salaries. The vast majority of American workers saw their wages
and their purchasing power dramatically slashed. This unequal and
uneven distribution of wealth was the basis for the crisis. Wealth was
concentrated in small groups of the population (the upper middle class).
Rather than using their own wealth to buy consumer goods or increase
investments, these small groups invested their money in the stock
exchange, increasing the value of the stocks.
21
In the second half of the 1920s, there was a rapid growth of stock values
in the USA due to this uneven distribution of wealth. The vast majority of
workers produced more, but without earning more. Their purchasing
power was insufficient to meet their expectations, to allow them to buy
the goods that had invaded the market. The market was saturated.
In the USA, the vast majority of the population still had not fulfilled their
needs and was not able to buy durable goods, such as cars or household
appliances.
Surplus wealth was concentrated in the hands of the upper classes and
was not evenly distributed among the mass of potential consumers. This
was the root of the crisis which began on Wall Street’s “Black Monday”
in October 1929. A high percentage of the national wealth was suddenly
destroyed. The purchasing power of the richest part of the population
dropped, prices fell, investments by companies were suddenly halved and
capital investment was dramatically reduced. As a consequence, quite a
high percentage of workers was suddenly made unemployed. With their
purchasing power reduced to zero, workers were no longer able to buy
anything. A vicious circle had replaced the virtuous circle, generating a
wider and deeper crisis.
Quite a long time passed by before people realized the reasons for this
catastrophe, and it took a long time for them to find solutions and
introduce major political changes.
President Hoover’s administration, which had been marked mainly by
liberalism, came to an end. That administration had rejected state
intervention in the economy. It thought that the economy would be able
to find a way out of the crisis with its own strength. It believed that the
role played by the state was a neutral one and that the fall in prices would
automatically give rise to an increase in demand. This did not happen:
prices kept dropping; unemployment kept rising; demand went down.
3.1) KEYNES’ RECIPE TO OVERCOME THE CRISIS
After Hoover, Roosevelt was elected. This is what finally made the New
Deal possible. The policies of the New Deal were based on a totally
different theory. The new administration started from the presumption
that the economy could not find the right balance by itself: markets left to
themselves would not reach an equilibrium. They believed that the state
had to intervene. In particular, they knew that the role played by the state
could have created a more even distribution of wealth at national level.
Behind Roosevelt’s New Deal lay the ideas of a great economist who had
managed to influence political decisions: J. M. Keynes. He was not a
socialist but a liberal, though not a free-marketeer. He did not believe that
22
the market alone could achieve the best balance. He believed that the
state had to act. In particular, he was firmly convinced that under special
circumstances, such as the ones created by the crisis of 1929, whereby
you have a dramatic fall in demand and investment, the state has to act,
even at the risk of a budget deficit, even if the state has to abandon the
dogma of breaking even. He believed state intervention was necessary to
help the economy rise again, to boost demand when the economic
mechanisms of the market failed to do so. If necessary, he believed, there
had to be a transfer of money, of capital, from the wealthy classes down
to the mass of workers and consumers. The state could use the tax lever
to take money from the wealthy and transfer part of this wealth to the
poor: people who had needs and who could help boost demand and hence
revive investment. Industry could start working again, increasing
production and hiring more people at higher wages, which, in turn, would
increase the demand for consumer goods and investments. These policies
helped transform the vicious circle of the crash of ’29 into a virtuous
circle that revitalized and improved the economy.
This was the solution that helped Fordism emerge from its crisis. It was
what made Fordism survive the negative consequences that Fordism itself
had produced. It had raised productivity and production and cut the
workers’ income. To some extent, through external action by the state,
this imbalance could be corrected. Thanks to public expenditure, thanks
to subsidies to the unemployed, demand could rise back to the level
typical of full production and full employment.
The state took the central role in economic regulation. Out of this
development came the modern welfare state: a synthesis of Taylorism and
Fordism in the organization of labour, Fordism in the wage regime, and
Keynesianism in the macroeconomic regulation of society.
It was a new type of state based on the supply of welfare that invested in
social relations and in the process of accumulation. For this reason, the
New Deal produced a form of government that supported production, the
market and social cohesion.
3.2) THE WELFARE STATE
The origin of the modern Welfare State is related to Roosevelt’s New
Deal. The Welfare State is a model of the nation-state that assumes
responsibility for the mechanisms of the economic system and
redistributes wealth by creating a new social pact. The basis of the
welfare state is an agreement between the two major players in the labour
market: capital and labour, employers and workers.
23
The core of this agreement is the following: workers do not question the
control that employers exert over their work, whereas employers provide
income, safety and security. workers are given the chance to consume
more, to achieve a better standard of living, to lead a normal life once
they retire, because the state will take care of them with welfare
provisions.
These were Keynes’ policies: they aimed at reviving the economy
through a more even distribution of wealth. This model of the state is an
alternative to the free market model, as well as to the socialist model, in
which the state is based on the idea of nationalization of production.
It is somewhere between liberalism and socialism, a model based on state
intervention.
The features of mass production and this model of the nation-state, which
were tested in the USA in the 1930s, became popular throughout Europe
and the rest of the world after 1945 and influenced the social structure of
all highly developed countries
This kind of model works in an economic system organized around a
national system in which the political borders of the state coincide with
its economic borders. Countries have their own sovereignty and can
choose the policies they prefer, including welfare policies. Welfare is
produced through the tax system, and this wealth is redistributed by
public expenditure and by the government’s social policies. Both these
elements need a stable economic model where the movement of capital is
confined to within national territory. Fordist factories are deeply rooted in
their national territory; capital circulates inside its borders and the borders
should be the same for both goods and capital. This is the meaning of the
economic sovereignty principle observed by nation states. So, in the case
of the Welfare State, the economy and politics coincide.
Trade unions play a very important role in this model, because they are
one of the parties in the basic bargaining system. As we have observed,
the social pact has two parties: trade unions and employers organisations,
with the government acting as mediator. The government is the guarantor
of the clauses of the pact. Freedom of association and the right to
collective bargaining are the pillars of this social model. Democracies are
not only political democracies, but also social democracies. In other
words, it is a system in which the political rights of all citizens, starting
with the right to vote and freedom of speech, are accompanied by social
rights, such as the right to work, the right to organise and to strike, the
right to health cover, and the right to housing.
Labour rights and labour itself were, and still are a fundamental part of
the various guarantees provided by the state. The most advanced
24
constitutions embody these principles and labour rights as mandatory
principles never to be questioned by the other party.
Without this mechanism, the Fordist system would have collapsed in the
1930s, because it would have been strangled from the very beginning. It
would have been destroyed by the contradiction between high
productivity and the low purchasing power of the working class.
The role of trade unions was fundamental in this period. With Fordism
Unions organised workers by sector (metal workers’ union, textile
workers’ union, chemical workers’ unions, etc). They were mass unions
and they were organized around the major industrial sectors in different
countries. They were no longer distinguished between members and nonmembers. In the past, unions were movements which would negotiate
only on behalf of their members. Now they were mass movements, and
labour contracts and the bargaining processes that they promoted had a
universal coverage that encompassed those who were not members of the
union.
Fordism has clearly not always enabled countries to become
economically independent, and somehow working conditions have not
improved. Sometimes the positive relationship between higher
productivity and higher wages has not been replicated, e.g. in Asian
countries. In some of these countries, there has been a sort of Fordism
without any labour rights granted to workers. It seems that in some
countries there has been more darkness than light. Sometimes Fordism
went hand in hand with neo-colonialism. Investments were made in
factories; at the same time, raw materials and finished products were
exported. Sometimes countries were simply used as a platform for parts
of the production cycle: raw materials went in and finished products came
out.
It would be interesting to draw a map showing the various types of
Fordism that existed around the world (refer to course activity in annexe).
This model lasted until the 1970s, and was then gradually phased out. The
Welfare State suffered a crisis because the tax burden reached limits that
could no longer have been tolerated. Moreover, enterprises started to
consider the social pact as an obstacle to their growth: the entente with
the working class was perceived as a clear-cut loss. Then the
globalization process appeared and the nation state saw the weakening of
public expenditure and fiscal policies which had made the model work.
25
3.3) THE SECOND CRISES OF FORDISM AND ITS DECLINE
Having analysed the Fordist model and its subsequent transformations,
we will try to pinpoint its crisis and describe the model that has replaced
Fordism globally.
Ford created a powerful system of production, a system able to grow and
expand rapidly. At its root there was a very specific market situation
where markets were potentially endless and able to absorb all kinds of
supply. The typical context within which Fordism developed was a
market where potential demand always exceeded supply. This constant
growth in the market lasted for many decades, together with the
manufacturers’ ability to generate what the market needed. The motto of
Fordism was: “Everything we produce has already been sold.”
The constant growth extended to the rest of the industrialized world from
the 1940s onwards, when data show that the world economy grew at
close to 5% per year, with peaks in highly industrialized countries.
The average was 6% a year from 1950 to 1959, 5.1% a year from 1960 to
1967, and 5.6% a year from 1968 to 1973. Those were outstanding rates,
unthinkable today where the world’s growth rate is about 2% - less than
half the rate that the economy kept up during those thirty glorious years.
The average growth of the world car market was close to 10% a year
from 1950 to 1970 because the automobile sector was driving the
development of the Fordist system of production.
With such exceptional growth, the overall product doubled every seven or
eight years, and the absorption capacity of the various domestic markets
was greater than the work productivity at that time, which nonetheless
grew between 3% and 4% a year. Despite all this, market demand
outstripped supply.
The countries that adopted mass production late experienced incredible
growth rates: Japan, excluded from the world economy until after the
Second World War, had a growth rate of between 6.3 % and 20.8% a
year, whereas the Italian growth rate fluctuated between 5.9% and 6.2% a
year (mid 50’s and late 60’s).
Every sign seemed to indicate that such growth would last forever.
Indeed, the production philosophy of Fordism was based on the idea of
endless growth, a typical 20th century belief, according to which growth
had no limits, above all for the market, because the market could always
expand if it was constantly overflowing with products.
Another belief of Fordism was that there were no environmental restraints
or limits to growth and that the planet would always provide raw
26
materials, and it would always be possible to dispose of the various waste
products (gases and other emissions).
All of a sudden, the outstanding rate of development suffered a dramatic
slow-down. In the early 1970s the first oil shock came, with a sudden
increase in the price of oil and of raw materials, as a consequence of
political and military events (mainly the war in the Middle East). The
world growth rate went down to 3.5%; the highly industrialized
countries’ rate plummeted to 2.7% between 1973 and 1979.
Between 1981 and 1990, the growth rate was 3.3%. At the beginning of
the 1990s, it stood at 1.1%.
This slowing down affected the whole economy, but it is even more
apparent if we take a single product, the symbol of Fordism: the car. Not
because Fordism was created ad hoc for cars, but because the car has
always been the driving force among durable goods. The automobile
sector was a sector in which the whole world economy could develop: the
building of roads and other infrastructure has changed the physical
structure of urban areas. During the 30 years after the Second World War,
the automobile market sector underwent world-wide growth similar to
American growth before 1929 and the Wall Street crash. Its production
grew very rapidly; sales of cars increased by around 10% a year. Every
10 years the number of cars sold doubled: 4.7 million cars in 1949; 22
million cars in 1959; 181 million cars in 1969 and 260 million cars in
1979. Everyone expected growth to continue at that pace, so that at the
end of the 1970s there would be about 400 million cars. As it turned out,
in that period there were only 307 million cars in the world.
There was a major decrease, which people thought was a normal
consequence of the oil shock. They believed that it was a temporary
event, bound to finish, and that the economic growth rate would start to
increase again. The percentage fell to 2-2,5%; in 1989 only 424 million
cars were sold, as against 700 million if the pace had kept up. At the
beginning of the 1990s, the automobile sector’s growth rate was close to
zero.
The picture is even starker in one highly industrialized country, where the
curve looks like a hill. At the bottom, 2 million cars were manufactured
in the USA in the mid twenties; then the curve goes up until the 1960s,
when 10 million cars were manufactured; it levels off around the mid1970s and then drops. In 1991, for instance, little more than 5 million cars
were produced in the USA.
One cannot trace the causes of this situation back to something transitory.
There were structural causes for this phenomenon, and the reason was
that in the rich markets, where per capita national income was high
enough to allow people to buy cars, markets had reached a saturation
point and they were “mature”.
27
The figures confirm this. Statistics show that from the 1970s onwards, in
the USA the density has been nearly 1 car every 2 inhabitants, which
means roughly that every adult has at least one car. On average, every
American family has three cars. In Europe you have also a similar
situation.
The second reason for the crises of Fordism in the early ‘70s was related
to the increasing resistance of workers and to their power to put an
incredible amount of pressure on employers and within production itself.
The struggles and the strikes that spread in the ‘70s were organized by
masses of workers concentrated in Fordist plants (especially of the auto
industry and other mass consumption industries).
This massive concentration of workers and the rigidity of this system of
production, organized around assembly lines, were at the base of a cycle
of struggles at the beginning of the 1970s. Fordist assembly lines became
the hub of numerous acts of resistance, strikes and even sabotage where
production could have been easily stopped by workers. These cycles of
struggles succeeded in eroding the rate of accumulation in the
industrialized countries. At the end of the 1970s the crisis reached a point
where it became inevitable for the employers to completely reorganize
the management of the labour force in order to diminish and better
control their power.
In order to defeat the resistance of the workers and to support the cycle of
accumulation there was a need to bring changes in management and in
the political set up of Fordism. Social pacts that had regulated the system
were gradually substituted with neo-liberal models and policies that
shook the foundations of the welfare state.
The major means for achieving this end was a change in paradigm of
production and the introduction of a new system of production, this time
imported from Japan.
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4) TOYOTISM: A NEW SYSTEM OF
PRODUCTION
The markets now follow a replacement model. The replacement market is
by nature a slow growth market. Car manufacturers understood this very
late. They realized that it was not a transitory phenomenon but a longterm structural feature of the market in the wealthy countries, those where
per capita income was about $10,000 a year (this level of income makes a
market a mass consumption market).
SLIDE 4
The first person who realized this was a Japanese engineer, Taiichi Ohno,
vice-president of the Toyota Motor Company, one of the most important
car manufacturing companies in Japan. He could be compared to Henry
Ford because he caused a true breakthrough in the philosophy of
production of the world industry. As a radical innovator he challenged the
Fordist scenario, which had been considered the best possible way to
build a car and was blindly accepted everywhere.
In a book entitled “The Toyota Spirit”, Ohno explicitly says that the point
of departure for this new philosophy was the idea that car manufacturers
would have to learn how to reduce costs in order to be competitive in a
slow growth market.
This was the central point for him. He had realized that manufacturers
had to learn how to be competitive in a zero growth market environment.
The virtuous circle mentioned so often (decreasing costs and increasing
numbers of cars produced) was about to disappear. In other words, since
the number of cars produced remained the same, only costs had to be
reduced.
4.1) COST-CUTTING STRATEGY
This meant ruling out the Fordist mechanism for cutting costs, which was
based on economies of scale and mass production. So the dilemma was
how to be competitive, and sell limited numbers of goods and services at
a lower price?
The first point of his strategy was to contain fixed costs. Within a closed /
Fordist factory, organizational costs grow constantly. Ohno argues that
fixed costs have to be reduced in order to be competitive in a period of
slow growth: it was not sufficient to spread them across a larger number
of units and products. The typical techniques of Toyotism all hinge on
this objective. Fixed costs were reduced by cutting the number of workers
who did not work on the product directly, but who worked to help the
29
production system function (e.g. car testers, maintenance workers,
warehouse workers, logistics workers). These workers were made
redundant.
4.2) THE JUST IN TIME PHILOSOPHY
Toyotism’s first major innovation was the “just in time” philosophy,
which has now become a common principle of industrial production.
What does “just in time” mean for a factory? Ohno argues that a factory
has to work with no stocks of components, no warehouses, no dead times.
“Just in time” means that the various components run on the assembly
line at the very time they are needed and in the amount required. It is a
lean flow: the departments that manufacture bumpers, for instance, have
to produce them at the very time when the department which has to
assemble them needs them: not one day or one week before, but at the
very time they are needed. The components have to run on the assembly
line when required by the assembler.
The factory has to work in perfect synchronization, and in the Ohno
system, everything devised by Fordism to ensure stable flows warehouses and this “lung system” (as it was called), established in order
to overcome unforeseen events - is considered a useless cost which has to
be cut. All the workers at these stations were considered unproductive
and made redundant.
The Fordist assembly line used to be surrounded by stock areas that
separated the technological nucleus of the factory from a turbulent
external environment. These areas disappear because they generate costs
which the company cannot afford any more and are replaced by a
communication system.
4.3) THE “KANBAN SYSTEM”
The new communication system, called Kanban, replaces the old logistic
tools of the Fordist factory. Kanban is a rather simple tool: a tag that the
assembly team sticks to the car where the various components are
assembled, and on this tag is noted the number of components to be used
for the next operation.
As an example let’s suppose that the factory assembly line is called
number 1: here the final product is assembled. There is a car body, and
the various components are bonnets, lights and doors. These components
are manufactured on secondary assembly lines that convey, for instance,
doors and lights. In the Fordist model, at the end of each secondary
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conveyor belt there would be a storage area (intermediate stores, as they
were called) where components would be heaped up and then sent, when
necessary, to the major assembly line.
When these areas are removed, what remains is the communication
between those who work at the main assembly line and those who work
at the conveyor belts. This is the meaning of Kanban. When they receive
the first lot of components, the workers at a given station stick a tag
specifying the number of components they will need in the following
stage. In so doing, they inform the workers of that sector of the number
and type of doors they will need in following hours.
What is important at this point is the fact that the tag is equivalent to a
manufacturing order. During the Fordist phase, these amounts were not
decided by the assembly line workers, but rather by the top management
in the nearby offices; or by the engineers who worked in the Time and
Methods department, for instance.
It is obvious that there is a sort of revolution here. Part of the subjective,
personal type of operation, which had been removed from the production
line and sent to the top management, comes back to the assembly line in
the shape of a communication line. This simple intuition is embodied in
the tag, which is a delivery or manufacturing order.
The communication flow of the company is totally different. In the
Fordist model, communication was top down. Orders would come from
the top management and go down the assembly lines, passing through the
various stations in the production process to the final stage, when the
product would leave the factory. The decision-making point was the top
management, who decided how much had to be produced, which models
had to be produced and so on. The Kanban approach, which seems to be
just a minor detail, is a true revolution. Information goes from the bottom
up, from the end to the beginning, from the periphery to the centre. In
other words, the production process goes not down but up. This happens
at all levels.
It is the final point, the dealer, who informs the factory of the number of
cars he will need next week or next month, and it is the final stage
operators who inform the previous station of the number of components
they will need. This really revolutionizes the philosophy of production.
Innovation occurred in a Fordist factory on a philosophy of centralization.
The organizational breakthrough that Ohno introduced revolutionized the
Fordist model and changed the basic pillars of labour relation, opening
the way to a further stage related to the process of globalising production
patterns.
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4.4) INFORMATION TECHNOLGY
Even in the technological field, things changed radically with
development and introduction of information technologies applied to the
production processes as well as to products.
A real revolution took place: the mechanical approach that produced the
assembly line gave way to a new technological model computer based.
At the beginning innovations were rather limited to begin with:
innovations in information technology and networks development seemed
quite simple, almost negligible. In fact, these changes contained the seed
of more drastic changes.
In some sections of the manufacturing cycle, workers were replaced by
computerized machines and robots. These machines were able to modify
their operations in accordance with environmental/market changes. They
were able to change the sequence of their operations according to the type
of product which slides on to the conveyor belt. These technologies
known as “manufacturing robots” are equipped with sensors that can
detect the components and decide whether, as an example, a car (which is
moving on the assembly line) is a three-door or five-door car, whether it
is for the domestic market or for the foreign market, what its engine
power is, what its capacity is. The robot is able to choose and carry out
different operations according to the model on different conveyor belts.
In the past each model which was manufactured needed a special
assembly line, and when the model changed, a new assembly line had to
be built. Today, thanks to electronics and to information technology, the
machine has become flexible enough to adjust to a new model quickly
and smoothly. This process is called “flexibility”: the longlink technology
of the assembly line has become flexible and production cycles can also
be organised in different physical locations with the support of computer
networks.
This new flexible approach able to adjust itself to the external market
environment was made possible by the introduction and application of
information technology and networks development in the production
process. It is easy to imagine the extent to which fixed costs were reduced
thanks to this new flexibility.
Microelectronics, the information technology revolution and the use of
the computer associated with networks have made it possible for the
technological nucleus to cope with unexpected events with a high degree
of flexibility.
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4.5) A COMPARATIVE ANALYSIS BETWEEN FORDISM AND
TOYOTISM/POST FORDISM
SLIDE 5
If we compare Fordism with Toyotism we will see how the apparently
negligible and very marginal changes introduced by Ohno deeply affected
the whole production system.
The market and planning
In the Fordist period markets were virgin and able to absorb any product.
It was a market with no obstacles to either output or input. The inflow of
raw materials was assured as well as the rapid absorption of final goods
and services. Production targets were stable as well as the objectives and
goals of enterprises: once defined, they stayed that way once and for all.
Central planning decided today how much to produce in one year’s time,
in two years’ time, etc. Production had to be planned well in advance for
making the system work. The Fordist companies were like huge
pachyderms: once they decided on a direction, that was the direction
followed, there was no question.
Toyotism’s main goal was to reduce costs and to make the whole
production process more agile. The environment is a turbulent one: the
uncertainties coming from outside are so many and so varied that they
can no longer be kept under control as in the Fordist environment.
After the ‘70s, when post-Fordism begun, markets became more rigid and
in some cases started to be saturated. On the output side, signs of rigidity
emerged. This rigidity had a backlash that influenced all the steps in the
system, first of all its goals. Once markets are overflowing and saturated
with products, the targets become uncertain, fragmented, less predictable.
In consequence, companies must equip themselves to meet fluctuating
demand that might either suddenly increase or suddenly shrink. For
selling products customers’ expectations have to be met. Customers’
preferences and needs must be quickly understood and rapidly introduced
in the production process. Planning in advance was not possible any more
and manufacturers had to adjust models and production methods very
quickly. This change affected the targets, the goals and the objectives of
the company. In other words enterprises became hostages of markets.
The social structure in the factory
In Fordist factories targets were pre-determined and planned in advance.
The direct consequence of this managerial structure was the creation of
fixed rules/regulations. Workers had to comply with the established
33
formalities and merely carry out their work on the basis of procedures
that had been decided by the top and mid management structures.
Post-Fordism is based on the “just in time” philosophy and the “lean
production7” approach.
In this context workers must be able to adapt, to change production
objectives very quickly. Workers must not simply carry out a job to meet
pre-determined goals or targets following formal procedures. The factory
can become flexible and responsive to markets only with the
“active/flexible” participation of the workers.
Ohno calls this mechanism “autonomation”. It means not just automation
of processes, but also autonomy of workers. The workers must be able to
decide independently, to adjust or change something in the production
process, in order to make production and product as flexible as possible.
The Ohno’s philosophy calls on workers to be more active, not just to
move their bodies, but also to put their souls and intelligence at stake for
the benefit of the company.
Workers are no longer asked just to screw a bolt or weld two components
together. Workers have to pay active attention, be psychologically
responsive to the working environment and able to identify faults or
defects of production and, if they find any, they must take the decision to
stop the production flow and revise quickly their tasks and consequently
their skills.
Workers are asked to become controllers who monitor production. This
means that, in addition to their practical duties, they must also control,
monitor, test and inspect their production. They must contribute to the
improvement of the final product and of the overall production.
The attitude of top management versus workers changes also: they now
have realised that no-one knows how to improve things better than the
worker, that the worker knows how to make the whole process as
effective and efficient as possible. This aspect has an implication with
management practices related to active workers’ participation and
“quality circles” team exercises.
If Fordism considered the “intelligence” of the worker as an obstacle,
Toyotism considers the “intelligence and know how” of workers as a
strategic resource for its survival. The workers are expected to adopt
irregular behaviour if this favours production. In the Fordist factory, the
idea that a worker could interrupt the production flow by pressing a
button and stopping the assembly line was unthinkable.
The post-Fordist factory is a factory that can adapt daily to ever-changing
market needs: this is why workers are asked to take an active part in the
7
J. P. Womack, et al; Lean Thinking: Banish Waste and Create Wealth in Your Corporation, Revised
and Updated; Hardcover; 2003.
34
work they perform. The worker is no longer a “machine” that has to
perform the same operation over and over again. The worker is now
“alive”, with his/her own personality and capacity, and puts all this at the
disposal of the factory, to the advantage of the company, so that the
company can survive in the market and become more competitive.
35
5) THE CONSEQUENCES OF THE TRANSITION
FROM FORDISM TO POST-FORDISM
One could say that in the post-Fordist era all the defects, drawbacks and
unpleasant consequences of the system have been removed in favour of
greater flexibility and greater participation (or opportunity to participate)
by the workers.
These positive aspects also have a negative side, namely unemployment,
since this model (which is based on flexibility to cope with more rigid
markets and saturated markets) does not follow the market requirements
by increasing the employment rate, but rather by decreasing it. One of the
major features of lean production and of the new organizational model is
its breaking of the relationship between industrial growth and
employment growth. As we mentioned before, in the Fordist model,
employment grew hand in hand with industrial production, and as mass
production increased (and the Fordist factory therefore produced a greater
number of products) the number of employed people also increased,
maybe not in the same proportion, but nonetheless the number of
employed people kept on growing.
Fordism was a system based on full employment. The no-limit growth
principle which inspired the Fordist factory was also based on the
employment principle, so that everybody would work in big or small and
medium-sized factories. This was the basic assumption and when this
relationship between industrial growth and employment growth came to
an end during the Fordist era, Toyotism appeared, based on the idea that
enterprises grow in the global market by getting thinner and thinner. The
motto of the post-Fordist production model is to grow, to become more
competitive by cutting the number of people employed and to be flexible
and lean to be successful. In other words, the lower the break-even point
(that is to say, the level of production above which you lose and below
which you start to gain) the better the company will be able to adjust to
the global market.
In the Fordist model, the strength of a company was also measured by the
number of people employed: a company or a business was considered
stronger, the more people it employed. In the post-Fordist model, the
opposite is true: a company is considered more efficient the greater the
number of workers it eliminates. In the stock-market, shareholders reward
companies that get thinner and penalize those that are still “fat” in
employment.
In order to make this concept clear, there are statistics which refer to
Germany between the 1950s and 1990s. The data show the number of
36
jobs either destroyed or created by new investments. This is quite a
reliable indicator of how technical innovation and investments operate,
since investments prove the growth of a company.
Here are the data: between 1955 and 1960, 100 billion marks invested in
the industrial sector to improve productivity could create at least 2
million jobs. Between 1960 and 1965 (corresponding to the highest peak
of the Fordist cycle) the same amount invested could create 40 thousand
jobs. Between 1965 and 1970, when the new phase began, 100 thousand
jobs were destroyed, and in the following decade, when information
technology became popular and the first organizational innovation took
place, 100 billion marks ended up destroying half million jobs8.
This demonstrates that under the new circumstances, the reorganizational processes (the so-called “re-engineering processes”) of the
technical and organizational structures of these companies discontinued
the relationship between growth and employment. Concerning the
methodology, the aggregation data and the official statistics often show
that the production rate, in particular in the United States and Japan
during the 1980s and 1990s, was lower than in the 1960s and the early
1970s. This means that the production rate is measured on the basis of the
production volume of these countries and it ignores the production rate of
the individual worker. It should not be forgotten that it is the development
of information technology that has actually increased the production rate
per workers/hour and this is the true innovation, in particular in new
sectors such as electronics and computers.
In these sectors, the increased production rate per worker is huge, but not
related to the sales volume of the company as in the 1960s, hence it does
not mean more products sold, but rather more jobs eliminated. In other
words, individual production is high, but the total product volume does
not increase. This means that workers are losing their jobs.
Jobs which are regulated by collective bargaining agreements (typical of
the Fordist factory) are slowly declining. The number of seasonal
workers, part-time workers, atypical workers, has increased as well as the
role and influence of the informal economy.
8
G. Aznar; Travailler moins pour travailler tous. 20 propositions. ; Syros ; Paris 1993.
37
6) POST-FORDISM AND THE OUTER WORLD
We have seen the extent to which relationships within the Fordist factory
have changed and how deep changes occurred within the post-Fordist
model.
In a post-Fordist context, communication by computer becomes possible,
and linking computers through a network makes it possible to organize
production systems whose components are not necessarily all located in a
single site: they might actually be located very far from each other. This
marks a major turnabout, a vertical rupture with the logic of Fordism
based on centralisation. Today we have telematics and network
communications, satellite communication and computers that make the
development of global production systems possible.
Moreover, there have been major changes in the transport system. Over
the past few decades, the cost of transport has shrunk radically thanks to
container systems and air cargo, so that goods and materials can be
transported from one place to another, even over great distances, very
quickly.
The notion of “lean production” has been further developed in the search
to cut fixed costs, so that companies started to outsource activities that
they used to do internally. They outsource anything which is not
considered part of the core production system; which determines the socalled “mission” of a company. Outsourcing and downsizing processes
take place continuously in multinational enterprises (MNEs): this leads to
a reduction in the number of workers and to the sending out of parts of
the production process to sub-contractors. Organizational costs are then
borne by these outside companies.
We should not forget that Ford produced one of the most impressive
examples of industrial gigantism, i.e. the River Rouge plant. In 1978, the
Ford Motor Company had 256,614 employees in the USA. This number
fell in the next five years, during the crisis that the automobile market
went through in America, and when Japanese competition arrived.
The number of workers dropped to 155,000, so more than 100,000
employees were laid off, which is 39.2% of the original number of
employees. At end of the 1990s, the Ford Group produced 1.5 million
cars for the US market with just over 155,000 workers, a number that is
only slightly greater than the number employed by just one plant, the
River Rouge plant, at the height of Fordism. These 155,000 workers are
no longer located in a single plan,t but distributed over at least twelve
average-sized plants with just over 10,000 workers per factory.
Of course, all these plants are integrated, so that production volumes are
balanced and distributed among them. Although they may be located far
38
from one another, they are very well synchronized and co-ordinated,
thanks to a network of computers. Each plant relies on a tangled web of
sub-contractors; they have not just outsourced a series of production
processes, they have entrusted a number of subcontractors with the
production of components and the supply of services.
Ford sub-contractors in the USA had reached an impressive number by
the mid-1990s, about 4,500. Among them were some very small
companies with few workers, whereas others had a few thousand
workers. All were located like concentric circles around a core, and along
chains of different lengths. That explains why some factories were built
in the immediate surroundings of the parent company, in the same region
or even in the same city. Some of these factories are located in the so
called “Sun Belt” between Mexico and the United States, or even in Latin
America, or in other continents such as Asia, where the labour force can
be exploited at a very low cost and where workers are denied the right to
form unions and negotiate collectively.
Over a decade, Ford was able to outsource more than 50% of its
production processes. In the mid of the 90’s, almost 54% of the
components of any given Ford vehicle is produced by external
manufacturers, not by Ford itself. The heart of this system is no longer
the assembly line or the “highline” as it was called in the River Rouge
plant, but a computer network providing constant links via satellite.
Toyota had more than 50,000 subcontractors in the late 90’s, meaning
that more than 50,000 small and medium enterprises worked as
subcontractors for Toyota, all of them organized in a very hierarchical
way. Some of them simply had to co-ordinate further circles of
subcontractors, but they were all linked to the parent company by
different types of supply contract.
A system of micro-enterprises or small and medium enterprise (SME)
linked via a network to the parent company contribute to the manufacture
of the final product. In a way, it means going back to the pre-Fordist
model, a model in which the factory was a place where components were
assembled after being produced by a large number of micro-enterprises.
Today, we have in a slight way gone back to that time. Of course, thanks
to technology, a factory can do all the work without having to locate all
production processes in one place. This has produced a dual system:
average-sized companies assemble the components; long chains of
subcontractors provide the supplies. This is the prevailing model in the
car manufacturing industry where a medium or large plant for the final
assembly is still needed. However, there are other industrial sectors in
which this fragmentation, this sharing out, has been taken to extremes, for
39
example the textile industry, the electronics industry, the clothing
industry or furniture manufacturing.
In these cases, outsourcing has been even more radical, as with IKEA, the
famous global corporation that produces furniture. This company has
only kept in-house strategic functions such as marketing, product design
and finance; everything else has been outsourced, especially to
developing countries. Although IKEA is a Swedish company, its’
products and materials are assembled and manufactured primarily in
south-east Asia. It has outsourced all its manufacturing activities and
simply kept the non-tangible strategic activities in-house.
Nike is another example. It is a major brand whose strategies are kept
inside the “mother” company, whereas everything else (such as material
and physical production) has been totally outsourced. There are other
companies that are located on a network with the structure typical of an
industrial cluster: within one region there are small enterprises,
sometimes micro-enterprises operating in Economic Special Zones
(EPZs), sometimes family-run, all co-operating to produce a single
product.
This is the logic of industrial districts or clusters. These very small
businesses compete successfully at a global level because in addition of
lower wages and limited workers’ rights, they share the costs of research,
development and design among a large number of very small production
units. Then we have other companies that specialize in co-ordinating a
series of small enterprises, often family-run ones. In Taiwan, for example,
some companies co-ordinate an endless number of Chinese producers and
manufacturers. They send the products to a single company that coordinates the products and sends them abroad or to another company that
supplies such products.
At first glance, the situation as such is very different from the past:
production has left the company walls, has spread throughout the world
and - due to globalization - production itself is now carried out in circles
or chains that go beyond national borders. It has turned massively into
cross-border or transnational production.
The majority of subcontractors or small companies are linked to
transnational corporations that have delocalised their production because
they prefer to outsource it in order to maximize their profit.
Today, we can imagine a company with its legal headquarters in a
country such as Singapore (where the legal framework promotes the
setting up of new companies). This company would be able to find or
fetch the same amount of capital in a global financial market such as
Hong Kong or Wall Street, and might hire engineering for its own
products in India where there are outstanding engineers who are paid an
40
eighth, or a tenth of what their American equivalents earn. The product
would then be designed in Malaysia and maybe physically assembled or
produced in some region in China (EPZ’s) where the wages are onethirtieth or one-fortieth of the wages for the equivalent tasks in the USA,
Japan or Europe. The destination markets for these products would then
be Japan, Europe or the USA. The global shoe industry, for instance,
works on this basis.
These are not isolated examples. They are becoming the rule, made
possible by the new flexibility of post-Fordist organization and
technology. Obviously, all this implies huge problems for the trade union
and for globalising workers’ rights.
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7) SOCIAL AND POLITICAL REPERCUSSIONS
OF POST-FORDISM ON TRADE UNIONS
These changes in production have rendered the whole economic system
smoother and much more flexible. The factor that unifies all these
transformations is the mobility of capital flows which follows from the
organizational transformations.
Markets have become mature and the rate of growth has fallen, but these
difficulties have been used to achieve a higher degree of mobility and
flexibility. Nowadays, capital flows are free to move around the world.
These capital flows entail variations in employment models to a much
greater extent than twenty years ago. What are the immediate
repercussions of these innovations on labour relations?
The labour market is fragmented. Previously, the economic system was
based on a centralized type of labour relations: jobs were associated with
long-term contracts. Rules and regulations were established as the result
of collective agreements signed between employers and unions. This was
one of the main features of Fordism: a large amount of workers were
unionized and their working conditions regulated by collective
sectoral/enterprise agreements. This worked in favour of the development
of a social system where workers had stable, regulated, unionized jobs.
This model underwent a crisis, not only because of the big increase in the
unemployment rate. Unemployment is not just a local or temporary
problem: it becomes pathological as a result of the new system in place.
In a Post-Fordist model the secondary effect of low growth is
unemployment. The amount of unemployed people, part-time and
temporary workers increase. This happens under fairly good economic
conditions: it is not a reaction to a crisis and, on the contrary, it is a
phenomenon which arises in an apparently wealthy economy.
Full-time workers become less numerous because they are replaced with
new types of workers, such as part-time and fixed-term workers, seasonal
workers who just fill gaps on a temporary basis. Atypical workers have
slowly become the rule under the new economic conditions. There are
self-employed workers (e.g. craftsmen who do not get a salary, but who
just manufacture a component); there are home workers, who are linked
to the external production cycle remotely even if this cycle has a very
high technological content.
The whole process has been described as the fragmentation of the work
diamond. The diamond was a single block until 30 years ago. Nowadays,
the diamond has broken into many different pieces. Some of them are
42
modern in nature, such as the so-called “knowledge workers”, whose
skills are very specialised. They control the new technologies; they know
how to work with internet/networks and are acquainted with the new
communication languages; they are highly professional global consultants
for multinational companies. They are based in very large towns, because
they deliver services to the most important and largest multinational
companies.
On the other hand, there are workers who belong to the pre-Fordist era,
such as home workers, like those of 19th century, who work thanks to
communication technology; or part-time workers who have no job
security. There are the so-called “working poor” who companies hire
from agencies as they require them, on a part-time or fixed-term basis.
These workers have mainly lost their bargaining power: they have no way
to negotiate agreements or devise common lines of action. In a Fordist
factory, this ability existed, because workers shared the same destiny and
were a compact mass, easy to organize. In contrast, workers employed in
post-Fordist factories, which have small, scattered and fragmented
production units, are extremely far from each other, and can communicate
only through new technology systems, so that it is much harder to
organize them.
Workers differ in terms of skills and capacity. Often they speak different
languages; they rely on different cultures. It is extremely difficult to have
a collective bargaining process for this type of worker, just as it is
difficult to set up a representative organization for all of them.
There are people who work in pre-capitalistic conditions, with personal
subordination, with no labour rights, with no negotiating power, not even
on an individual basis, as happens with services rendered to another
person or in sub-contracting. Sometimes companies are set up in private
houses, in hidden places, because clandestine workers have to keep
themselves hidden.
An additional repercussion of post-Fordism on workers concerns the
dispute settlement relationship, which was so strong in the Fordist
factory. The Fordist factory was a dualistic stage for two players: capital
and labour. There was an obvious conflict of interest between the two,
and this conflict often led to labour disputes that were settled by a
collective agreements. In the Fordist model, however, conflict is not a
pathological phenomenon but rather a physiological phenomenon. In the
post-Fordist company, this is no longer true; everybody has to struggle to
make the company more flexible to survive.
The relationship between companies has been defined as global
competition in which companies all compete against each other.
Protectionism has finished: there is no national market anymore and the
niches within which individual companies moved and were protected
43
have disappeared. Borders have collapsed, and in some key sectors (cars,
electronics, information technology, clothing and textiles) competition
has become global. It exists wherever a market exists. Under these global
competition conditions, in which workers are asked to contribute their
mental, personal and physical resources, we are no longer confronted
with a dualistic model but with a one-player model.
Workers and employers are “in the same boat”: they have to co-operate;
they have to work together to make the company survive. A passive
attitude on the part of workers is perceived as an infringement of
company rules, a betrayal. Workers are not considered loyal if they
behave passively, because doing so puts the survival of the company in
danger.
The Toyota model needs the participation of the workers, though only
partially. It not only requires participation in a specific segment of the
production cycle, it also demands complete dedication to the company’s
philosophy and goals. It is no longer a company in which the two subjects
(capital and labour) have opposite interests: it has become a single work
community. The term “labour community” is often used in modern
management texts, and it is obvious that a community cannot be split into
two parts. It is a single, unique structure, whose ends are shared by all,
and in which no individual interest shall prevail. A flexible and mobile
structure, like that of the post-Fordist company, is also a structure which
leaves little room for different opinions or conflicts.
In post-Fordism, conflict goes back to its pathological roots: it is again
seen as a pathological feature of labour relations. Collective agreements
lose their importance: for the employers they are seen as neither useful
nor necessary, whereas it was extremely important during the Fordist
period, as industrial relations were organized around collective
bargaining.
In the post-Fordist model, collective bargaining is seen as an obstacle to
the freedom of movement of the enterprise and of capital. In a situation in
which long-term planning is replaced by immediate planning, a sectoral
or enterprise agreement is perceived as something which limits the
company’s freedom and agility in the global market.
Workers risk losing all the regulatory advantages they gained during the
Fordist period. From the political and social standpoint, this coincides
with the deregulation process, which dismantles the system of rules,
guarantees and social protection which had marked the previous period,
and which had built a sort of safety net for the workers.
Post-Fordism has weakened trade union structures almost everywhere.
Statistics show that in the USA, the UK, France and Japan, the unions
have lost a lot of power and members. In the USA, more than 20 million
members have left the unions in the 80’s and early 90’s. The number of
44
members of British unions halved during the 1980s and in the early
1990s, and the number of young workers who joined a union was
extremely low compared to the previous generation. These are workers
who do flexible jobs, shift jobs and atypical jobs in the new economy,
where there is no collective bargaining system in place.
The number of workers covered by collective agreements in France has
been halved in the last twenty years. In Italy, there has been a sharp fall in
the number of members; in Germany, the co-participation and codetermination system has partly saved the unions9.
The new category of atypical workers does not have a representation
system: they are not covered by collective bargaining or by a welfare
system. There have been many attempts to devise a legal protection
system for these workers, but with unsatisfactory results so far.
Last, but not least, another additional repercussion of post-Fordism on
workers concerns the crisis of the welfare state and the provision of social
protection to workers.
As we have seen, the Welfare State was a social system that suited the
development of Fordism. It, too, went into a major crisis, for many
different reasons. The first reason is related to the fiscal crises of the
nation-state, as a result of the process of globalization of the world
economy and, in particular, of finance (see the case study of BMW in
annex).
Wealth is distributed in an extremely uneven way, and most of mankind
has an average income which is far below the $ 10,000 a year necessary
to become a potential buyer of industrial products.
The world has around 800 million people above this threshold, who can
buy industrial products. It is a very limited portion of humanity, and as
long as this portion is so limited, it is going to be hard to overcome
market difficulties. Although the globalization process is an attempt to
extend market borders, it is much more an effort to build a sort of global
space in which capital can flow freely.
Capital seeks a huge economic space where it can circulate freely and
look for investment areas where the various types of production can be
based. In the global space, financial capital flows extremely quickly,
where the major work processes are reorganized and re-engineered.
This is the meaning of the term “globalization”. It emerges that the
development of globalization is not so much related to the distribution of
goods, but rather to the flows of financial capital, investment and work
processes.
9
World Labour Report 1997-98, Industrial relations, democracy and social stability, ILO Publication
Geneva, 1997.
45
All this has produced an integrated economic space which is far larger
than the political arena (which coincides with national borders). This is a
consequence of the disappearance of the fifth typical characteristic of the
Fordist model; the political and social regulatory system. Fordism was
mainly linked to a domestic environment, whereas with post-Fordism,
economic space has become much wider than the political one. Nationstates have partly lost control of the two necessary levers for exerting
their governance, such as taxation (the fiscal lever) and public
expenditure. It means that states are less and less able to control the
wealth that flows through them.
46
8) CONCLUSION
The main barrier to economic development producing good results from a
social stance, is still the uneven distribution of resources at global level,
i.e. the gap in terms of income and access to resources between developed
countries and developing countries. The world unified by globalization is
a world that is terribly divided by poverty.
It is a world characterized by a pole, an area, a magnet that attracts more
than 80% of global wealth. Little more than 20% of the population has
80% of global wealth in its own hands, whereas 80% of the population
has to share the remaining 20% of global wealth. This is the real tragedy
that overshadows the development of new industrial models. Moreover, it
gives rise to a perverse mechanism. More regular development depends
on more evenly distributed wealth, a kind of global Keynesianism, a
global New Deal; a New Deal, however, that does not come after an
economic catastrophe: we do not want another global 1929. It has to
come before the crisis, even though it is doubtful whether there will be a
global political authority able to govern the process. In 1929, just one
state implemented Keynesian policies. Today, we would need a world
state to govern the redistribution of wealth and the development of
policies based on the social dimension of globalisation opposed to neoliberal economic and social policies.
This is the first requirement for an agenda of global governance.
The current economic and productive systems, the way the labour market
is structured today and contemporary consumption patterns indicate the
need to re-discuss the economic paradigm that has driven industrial
development in the 20th century. There is an urgent need to address the
key issue of environmental sustainability of the contemporary pattern of
production.
Economic models have to be rethought in a perspective that puts people,
communities and the environment at its core, not merely economic
growth and industrial productivity, as it was in the past cycle of
development.
Sustainable development as a global policy was defined in the 1992 UN
summit at Rio. In the Declaration on Environment and Development, it
was stated that sustainable development "meets the needs of the present
without compromising the ability of future generations to meet their own
needs." Sustainable development provides a framework under which
communities develop by addressing economic, environmental, and social
issues. They use resources efficiently by creating well-organized
47
infrastructures, by protecting and enhancing the quality of life, and by
creating new businesses to strengthen their local economies.
Sustainability, as defined by the UN, is the second notion that should
drive economic and social development.
An agenda for global governanace must also seriously address the issue
of globalizing workers rights.
The International Labour Organization is a United Nations specialized
agency aiming at promoting social justice and universally recognized
human and labour rights (international labour standards). It is the only
worldwide organization founded on a tripartite structure involving equal
representation of governments, employers and workers. International
labour standards are the most important means that the Organization has
to attain its objectives.
Global governance on labour derives from the strength of the
International Labour Organization in promoting the effective and
widespread application of international labour standards.
If there are no global rules regulating labour and organizing the rights of
workers, then the globalization process is bound to condemn the vast
majority of the world’s population to a gloomy future.
Workers in developing countries often have no rights. The “sine qua non”
condition for globalization is the creation at the global level of a political
will for the effective implementation of the ILO’s fundamental workers’
rights.
This can be done at the global level by putting the ILO at the core of the
process of global governance, where the social dimension of globalisation
has to be integrated with the trade, economic and financial policies.
Other private initiatives could also be launched for enhancing workers’
rights within MNE’s. For instance, the promotion of global labour
relations based on the development of framework agreements between
Global Union Federations (GUFs) and MNEs is very promising and could
provide a good basis for the effective global promotion of workers’
rights.
The fragmentation and destruction of labour communities, that are the
immediate effect of globalization has, of course, hit the nation state and
its ability to stimulate social cohesion with appropriate social-welfare
policies.
The reconnection of labour communities has to start from people,
workers’ organisations, institutions that are clever enough and ready to
act with the creation of local networks that are able to defend and
safeguard the rights of workers living in the local community. The effects
48
of globalization might be governed if this process of network
development starts from the bottom and aims at reintroducing the
principle of solidarity at all levels, for the protection of local communities
and workers from the destructive effects of globalization.
49
ANNEX 1
50
TAXATION AND GLOBALISATION
THE BMW CASE STUDY10
This example shows how the situation is becoming more and more
complicated for nation states to put a fiscal policy in place.
At the end of the 1980s, the German car manufacturer BMW paid 545
million DM a year in taxes. In the mid-1990s, it only paid 31 million DM
to the German tax authorities and at the end of the 1990s, BMW was a net
creditor vis à vis the German government (32 million DM).
This happened without any fall in the profits that BMW was making.
During an interview, the financial director of BMW said that
multinational companies located in many different countries throughout
the world, put in their accounting books losses and gains, depending on
the country and on the strictest or loosest taxation system.
It really becomes very difficult for every state to determine and to tax
company profits. Since companies are not located in just one country, the
state cannot control the incoming or outgoing cash flows. Companies can
move their losses and profits wherever it is most convenient to them, and
do so with absolute freedom. At the same time, each and every
manufacturer working in a globalized context can sell its goods in a
market other than the market where the goods are produced. As a result,
the basic logic is that of export-driven production. This means that the
Singapore model has become quite widespread. This model refers to a
specific geographic area, fairly small in terms of surface and population,
where a large number of productive activities are concentrated. Goods are
not produced for the local market but for the global market. It is a logic
that has been adopted by the vast majority of today’s corporations. Many
companies produce local products that are meant for a global market.
These companies are not interested in any Keynesian policy: they are not
interested in the purchasing power of the people who live where they
produce. What matters is the average income of the population their
products are meant for, who live far away from the physical production
site. For example, if you produce in Thailand but want to sell your
products in Germany, you are not interested in the purchasing power of
the Thai population; you are interested in the purchasing power of the
German population.
BMW considers any type of taxation on its own resources as a loss, a
negative sum game. The Fordist model, on a national basis, considered
the redistribution of wealth as a game with an inevitably positive
10
H. P. Martin, H. Schumann; Die Globalisierungsfalle. Der Angriff auf Demokratie und Wohlstand.;
Rowohlt; Reinbek bei Hambourg 1996.
51
outcome, whereby both players gained something. An increase in demand
that would benefit the producer, and an increase in purchasing power and
in wages, that would benefit the workers. That, though, referred to a
single geographical space, whereas when the space where production is
located becomes fragmented, then any taxation becomes detrimental both
to the entrepreneurs and, in the mind of the entrepreneurs, even to the
workers. Over-taxation discourages investment in a country, and in a
global, competitive environment, the players compete to attract
investment. If taxation is too high in a certain country, capital flees that
country and investors shun it. This works to the detriment of everybody.
Globalization has given rise to this situation; as a result, Keynesian
policies and the logic of the Welfare State are ignored.
The role of states is no longer to distribute the wealth evenly and
safeguard the citizens and workers via social contributions. The state
must simply ensure that the nation itself is competitive, so as to attract as
many resources and investments and as much capital as possible. This
does often happen, but to the detriment of social security and
environmental protection.
52
ANNEX 2
53
INDUSTRIAL RELATIONS AT FIAT
THE “FORDIST EPOCH”
The history of FIAT actually started in 1899, but it was during the second
part of the 20th century that FIAT became a major example of the rise of
the Fordist and Taylorist system of production and, later on, a mirror of
its decline. It should never be forgotten that a factory, as well as being a
system of technological production run by human beings, is a social
system, a system composed of the people working in it and by the
relations they have with each other. Industrial relations are a major part of
the wider human relations that exist in the factory as a social system. The
productive system and the social system interact and strongly influence
each other. The introduction of new technology always affects social
relations among workers within the factory (and also outside, as a
repercussion) but human relations - and especially industrial relations also lie behind the crucial decisions that shape the production modalities
of a factory.
Let’s remind ourselves of two important definitions from the labour
relations dictionary:
 Taylorism: a technical system of organizing work based on a very
high division of labour in order to simplify and standardize operations
and reduce most of the worker’s tasks to very small repetitive steps to be
performed at a very high speed. In this production system, workers do not
necessarily have to be skilled, since they can learn their job quickly. The
logic behind Taylorism is that once a high division of labour is achieved,
productivity rises dramatically.
 Fordism: a system of mass standardized production based on cost
reduction (through a high division of labour) and relatively high wages so
that the product becomes affordable even for the workers themselves,
who become the buyers of their own product.
The combination of these two modalities of production has characterized
not only FIAT’s history but also that of other major car factories.
During the 1920s and 1930s, the conditions at FIAT were suitable for
those models. FIAT had just built two huge plants: Lingotto (now
converted into an exhibition hall, concert hall and conference centre) and
Mirafiori.
54
Even though the first Italian assembly lines came into operation at
Mirafiori before the Second World War, the car market was not ready to
absorb mass production at that time. Conditions suitable for the full
application of Fordism and Taylorism at FIAT only appeared at the end
of the 1950s. FIAT then started to produce small cars at very low prices.
The most famous, the “FIAT 500”, cost the equivalent of about six
months’ salary of a typical FIAT assembly line worker.
Nowadays, the cheapest FIAT costs at least one year’s salary of a typical
FIAT worker because production costs have increased.
THE ECONOMIC BOOM AND UNION WEAKNESS
At the end of the 1950s and during the 1960s, FIAT production
experienced a real boom which coincided with the full implementation of
the Fordist/Taylorist model of production. This production boom was
simultaneously spreading to other countries in Europe, to the USA and
Japan. However, the Italian model of mass production had specific
features, above all in the field of industrial relations.
The development of FIAT as a Fordist factory coincided with tough
repressive action against unions. For this reason, FIAT fired more than
3,000 workers during those years of huge growth in employment, with
the explicit purpose of eradicating independent unionism or forcing it
mainstream into company unionism.
This had important consequences for FIAT’s competitiveness. The first
was that the weakness of independent unions allowed the firm’s
management to gain full control over working conditions. FIAT workers
in Italy thus had to work harder and faster than workers in similar plants
abroad, despite very similar technology being used. On top of that, their
salaries were lower than their foreign colleagues’, since their bargaining
power was low. This gave the company a strong comparative advantage.
In Germany, for instance, Fordism and Taylorism developed widely, too,
but under strong union control within the factories. This protected
workers from an excessive workload, secured basic health and safety
measures at work, and involved workers in important decision-making
processes concerning company management.
FIRST CHANGES
The situation at FIAT could not last long and its internal contradictions
soon became evident. At the beginning of the 1960s, three major
contradictions emerged. Firstly, working conditions (especially the very
55
high intensity of work) were becoming unbearable: in the end, the
workers were going to react. Secondly, concrete co-ordinated measures
were needed to deal with the huge migration to Turin at that time: people
arriving from the south of the country had no housing facilities and a
desperately low standard of living (including overcrowded
accommodation and bed-sharing among shift workers). Thirdly,
economic growth and the consequent growth in employment strengthened
unions in most Italian workplaces where the FIAT strategy towards
unions had not been adopted, so that union strength outside FIAT was
restored. Furthermore, FIAT workers themselves started to perceive the
change: during the 1950s they had had very stable jobs and high salaries
in comparison with other workers in Italy, whereas by the end of the
decade their wages were lower than those of workers in Italy whose
unions had been free and active in demanding better conditions.
These contradictions led to a first general strike in 1962. It lasted many
days and was directly connected to the collective bargaining that was
going on at that time for a national collective agreement for metal
workers.
One result was the defeat of the traditional FIAT policy based on
company unions. These attempted to sign a separate agreement with the
company, with the result that workers’ protests grew tougher and more
violent. This forced FIAT to recognize certain basic union rights, such as
bargaining on wages, working hours and working conditions. Still, FIAT
unions could not act directly on working conditions as they lacked
internal organization (except for the few so-called “Commissioni
Interne”). FIAT could therefore insist on its objectives of increasing work
intensity and speed, and concentrating production in the Turin area. This
was clear when the new plant at Rivalta was built. In the meantime,
Mirafiori had been turned into a giant plant: by the end of the 1960s,
60,000 workers were concentrated in it, with another 15,000 at Rivalta.
This high concentration of workers was a problem in itself, both for the
organization of production and for industrial conflicts, since a widespread
strike would have threatened or stopped the whole cycle of production at
the plant. Internal migration from the south continued during the 1960s,
thereby maintaining the conditions that had led to the big strike in 1962.
One of the immediate consequences was a series of strikes from 1968
onwards, the most important outcome of which was the final
establishment of a structured union organization within the plant, a
feature that had been missing for a long time from independent FIAT
unions and that lay behind their weakness.
After 1968, workers’ representatives were regularly elected, and
permanently supervised working conditions (e.g. the speed of the line) in
order to demand improvements and the acceptance of workers’ demands.
56
The presence of a stable, structured union organization, as well as the
presence of full-time workers’ delegates, enabled union networking to
take place. The FIAT union finally seized a certain degree of control over
working conditions, including internal mobility and careers. However, the
very authoritarian form of Taylorism FIAT had chosen to apply could not
adapt to this new context and was totally incompatible with a high level
of union power.
ANOTHER STAGE IN INDUSTRIAL RELATIONS
The FIAT system of production could not have survived such a deep
change in its industrial relations. Nor indeed were the workers themselves
ready for such drastic change. FIAT’s management made some attempts
to find a solution: new ways of organizing work were tried; the degree of
Taylorism was reduced by regrouping tasks; job rotation and enlargement
were introduced in order to diminish workers’ alienation and make them
more skilled. This measure met with the full approval of the union.
Unfortunately, only a minority of the FIAT management was in favour.
The majority wished to defeat the union once more and get back to the
previous situation. At the same time, the spread of new technology was
again changing ways of production: automation, for instance, was
introduced in some segments of FIAT’s assembly lines during the second
half of the 1970s.
The era of union strength lasted until the end of the 1970s, by which time
FIAT production was suffering from the failure to reconcile workers’
increased power with the traditional Fordist/Talylorist schemas and the
final disappearance of the conditions for the old methods to succeed.
FIAT could no longer sustain its huge workforce and in 1980 announced
23,000 redundancies. The unions called a big strike. It lasted 35 days, but
in the end they were defeated and FIAT’s management regained full
control of the factory. Paradoxically, the 1980s, the years immediately
following the union’s defeat, coincided with the revival of
Fordism/Taylorism and, at the same time, with its final decline. FIAT’s
management reasserted its full control over workers’ conditions by reintroducing all the intermediate hierarchical positions to ensure complete
supervision of production. At the same time, FIAT invested in automation
and extended its use to the plants located in the south, which were
technologically more advanced than the older ones based in Turin. In
fact, FIAT’s management sought to use automation to obtain the same
quantity of production, with better quality, using less labour. However, a
deeper cut in the labour force working on the assembly lines and on
machine maintenance would have had a lot of negative repercussions on
the production process. For instance, an automated line without the
57
skilled personnel trained to recognize and deal quickly with automated
machine problems would certainly have generated a lot of breakdowns
and production defects, with a consequent increase in company costs (the
exact opposite effect to that which the management was aiming at). After
a series of failed attempts, they realized that it was not possible to match
the old kind of work organization with the new automation technology.
TOWARDS THE “JAPANESE MODEL”
The old Fordist/Taylorist system was declared definitively obsolete and
the management started to study the new Japanese models, Toyotism
above all. At the beginning of the 1990s, a new system of production was
introduced, the so-called “Integrated Factory” system. Among the
innovative elements of this system was a full recognition of the crucial
role workers played at all levels in the firm: the only possible answer to
the market requirement for flexible production and the new levels of
technology required increasingly active workers’ participation in the
production process. It was the end of the old Taylorist ideal of the
factory, with workers repeating small, easy tasks rhythmically, just
following instructions without any decision-making, commitment or
creative involvement. From that moment on, even the typical assembly
line worker was required to play an active role, for instance by signalling
any need for machine maintenance or by checking component quality.
The importance of teamwork was rediscovered and stressed, and
paradoxically matched the most automated segments of production. The
so-called “Technological Team” consisted basically of production
workers, maintenance workers and technicians: whenever a problem
came up, they met and co-operated to find the most suitable solution
through an experience-sharing process. Still, the management imposed
time deadlines geared to production, so that it was actually impossible to
put teamwork into practice, since it takes time even though it solves
problems better. The new system, therefore, spread in a patchy way
within the factory, concentrating where more automation-intensive forms
of production required it, whereas a more traditional approach was kept
for the less technological lines. Moreover, the new features of the car
market put heavy time pressure on production (e.g. “Just in Time”) and
hence worsened working conditions: the average scheduled time for
every single operation was reduced by about 20 per cent. Of course, time
pressure did not help production quality.
58
THE PRESENT SITUATION





To sum up, the new model is somewhat innovative, but still relies on
basic contradictory features. Industrial relations after the unions’ defeat in
1980 continued quite regularly, but the truth is that at present unions at
FIAT are still relatively weak and their membership is small. On top of
that, FIAT has always had a strong tendency to centralize the collective
bargaining process at the top level of the company, so that it is very
difficult for unions to establish a common negotiation platform for so
many types of workers. In fact, FIAT not only produces cars but is also a
leader in electronics, software production, trade services, etc.
The “Integrated Factory” is not the most recent development in
production systems at FIAT. A further change currently taking place is
directly connected with the globalization process. There is a constant
shifting of production to Asia, Latin America and other parts of the world
where labour is cheap.
Some FIAT managers see this further change as an evolution from the
“Integrated Factory” to the so-called “Modular Factory”, that is to say a
factory where most of the main steps of production (such as engineering,
design and marketing) are commissioned to outside factories to reduce
costs, while only the final assembly and the sale of the products are kept
at headquarters.
In addition, FIAT workers no longer have the long-term contract that was
typical during the years of the economic boom, and a wide range of
employment relationships has emerged.
Even if the workers you will see are working on the same tasks, they are
likely to have very different status.
They might be:
workers with a training contract (from 12 to 24 months) who usually
become long-term workers after the contract finishes (unless disciplinary,
political or health problems crop up);
temporary workers (from 6 to 12 months);
externally hired workers (recruited by specialist agencies that hire
workers on a temporary basis).
workers belonging to other FIAT divisions
workers grouped in co-operatives (earning lower salaries and with
different rights, maybe not covered by the same national agreement and
therefore with other workers’ representatives who do not necessarily
share their workplace).
This fragmentation of the union representation of workers is a big
challenge for unions, and not only at FIAT. It is also a big issue for FIAT
itself, because when a product depends on so many different outside
companies and different kinds of workers, a lot of attention and resources
59
have to go to logistics, so that optimum co-ordination and quality control
become more and more difficult.
THE FIAT - GENERAL MOTORS AGREEMENT
FIAT and General Motors set up a joint venture in the Engine Production
Division and in core supplies for car production (about 70% of FIAT and
GM cars are processed outside either company) in order to take
advantage of economies of scale and positive outside factors.
The top problem for FIAT deriving from this agreement was the tough
competition that was arising between FIAT and Opel (part of the GM
group), who work in the same market segment, namely medium-sized and
small models. This lead to redundancies, above all in the Turin area. At
the time the agreement was signed, there was actually another contact in
the pipeline with Mercedes/Daimler-Chrysler. This option was rejected
by FIAT, who feared a re-alignment imposed by Mercedes on FIAT’s
management (under this agreement, Mercedes would have played a more
powerful role than General Motors does). FIAT particularly feared the
extension of the “German model” in industrial relations. From the unions’
point of view, an agreement with Mercedes/Daimler-Chrysler would have
been preferable, as it would not have led to competition within the group,
since Mercedes/Daimler-Chrysler covers an upper-medium/high segment
of the car market. The major jobs problem rose in the Engine Production
Division, as there had already been some redundancies in the sector
before the agreement, and production quotas had to be re-allocated
between FIAT and the other companies in the group.
General Motors Corp and Fiat announced in February 2005 that they have
executed an agreement to terminate the Master Agreement between the
companies and realign their industrial relationships. GM will acquire
certain strategic assets from Fiat to assure the future availability of a full
range of diesel engines for vehicles produced by GM’s global operations.
Under terms of the agreement, GM will pay Fiat 1.55 billion (Euro) to
terminate the Master Agreement (including the put option) and to
acquire an interest in key strategic diesel engine assets, and other
important rights with respect to diesel engine technology and
know-how. GM will return its 10 percent equity to Fiat Auto Holdings to
Fiat S.P.A.
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SOME SUGGESTIONS FOR THE STUDY VISIT TO FIAT
 What to look at:

Even if Taylorism has formally finished, much of FIAT’s production
is still organized on a Taylorist basis (small tasks that have to be repeated
along the assembly line within a certain time) and the Car Division you’re
going to visit is one example.

The “Just-in-time” mode of production should reduce stock areas to
the minimum as they represent an unfruitful immobilization of capital;
but in the concrete application of the model, stock areas are in fact there.
Sometimes, the workers themselves supply them in order to meet any
difficulties caused by shortages or bad quality of pieces.

 What to ask for:

FIAT always refuses to negotiate at firm level; they prefer to negotiate
at national level only. Are there any negotiations going on at the moment,
at what level and why?

Health and safety is an interesting issue at FIAT. Conditions have
improved impressively in recent decades, thanks to a remarkable
evolution in production technology: chemicals are being replaced with
water-based liquids and automation keeps workers away from the most
dangerous operations. Nevertheless, time pressure in production causes a
high risk of injury. This risk is directly connected with overtime, as
attention levels drop whenever you work more than your scheduled
hours. On top of that, the workers who are most exposed to danger are the
short-term ones or those on a training contract, since they are not
experienced enough to evaluate risks properly. Questions should be raised
ask about health and safety measures at FIAT to protect workers from
traditional risks at work and about the new kinds of risk they are exposed
to.
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