GM could hand Holden to the workers and cut its losses.
By Gary Scarrabelottti
Few, if any, are those who know how to save the Australian car industry. But, if there is a solution, part of it has to be that the employees take charge.
More importantly, car industry workers need to take personal responsibility — as opposed to a collectivized disconnect from responsibility — for shop floor efficiency and productivity and for the cost to the business of their wages, conditions, and staffing levels.
Securing part-ownership of, say, GM Holden should not be a major financial problem.
If it cannot extract further subsidies from the Federal Government – or “rent” as GMH’s CEO, Mike Devereux, truthfully calls it – GM is prepared to walk away from its Australian operations. The cost of closing down its facilities and paying out the workers will represent the true, negative value to GM of its Australian operations.
Instead of spending these many millions to close down the operation, GM could hand the company to the employees in return for, maybe, a 5 ‑10 per cent discount on entitlements owing.
Shares in the new company could be issued to an employee share trust – within which shares would be allocated to individual employee accounts – and the trust would become the owner of the company. GM could exit the business without any of the administrative hassel of having to close down the enterprise and at a modest discount on its entitlement obligations.
Converting the company into a worker-owned enterprise would not of itself assure its survival. But becoming an owner of a failing business would sure as blazes focus the minds of the workers – they would now be the ones making decisions vital to their future wellbeing.
When I say “making the decisions”, I am not referring to the employees voting their shares and electing the Board. They would, in all likelihood, do that; but creating a worker-controlled version of a traditional top-down corporation is unlikely to save the workers jobs or the business. Worker-control in this archaic sense is not central to my proposal.
The heart of worker ownership, and the engine of productivity in successful employee-owned companies, is a system of shop-floor committees through which the workers take delegated executive control over the sections of the business in which they work.
Employee ownership is much more about how the workers design, operate and manage their workplaces than about having workers’ delegates on the board of management.
In order to empower the employees to take control of their workplaces, the business has to share with its worker-owners all the company’s “numbers” and train the new owners to understand what they mean, then to let the employees loose to apply their knowledge at the shop floor level.
Creating a worker-controlled version of a traditional top-down corporation is unlikely to save the workers jobs or the business.
In these circumstances, the question confronting each and every worker-owner becomes this:
“What must I do, on my own patch, to ensure that I can save my own job and that of my workmates around me?”
In this kind of radically re-designed business structure, the role of the management is not to command the workforce but to act as “enablers” or “service providers” whose role is to supply administrative, accounting, and financial support for the employee decision-makers at the “pointy end” of the business.
Obviously, for such a project to work, federal and state governments would need to provide, or at least guarantee, working capital for the new venture. But the upside for the governments involved would be that they would win kudos for themselves by laying down as a condition for further support to the car industry that the existing troubled manufacturers be converted to worker-owned businesses in which radically new shop floor management principles would apply.
Naturally enough, no government is going to give vehicle building workers a free-ride to worker ownership. Canberra, above all, would expect that the employees have some skin in the game; in return for continued federal support for vehicle manufacturing, the employees would need to chip in their entitlements.
Finally, the trade unions would have to make a decision about the roles they might play. With one of their classic reactionary knee jerks, they could insist on killing any proposal that does not allow the workers to bank their entitlements. Alternatively, the unions could decide to support the new venture, and to offer workforce leadership or — and perhaps preferably – they should get out of the way, especially if they think that they, rather than the worker-owners, should set the new direction of the company.
Is the scenario I’ve sketched here plausible?
Springfield of hope
Well, if you look at the American experience, the answer has to be a resounding yes.
The greatest success story of them all is the Springfield ReManufacturing Corporation (SRC) of Springfield, Missouri.
When a small group of workers bought a failing heavy-vehicle engine remanufacturing business from International Harvester in 1983, the chances of survival were slim. But, by using the radical corporate redesign model of the kind essayed here, and by empowering the workers, Springfield ReManufacturing became one of the great success stories in US manufacturing.
More than that, SRC has made a successful business out of communicating to other companies and workers how SRC did it: it’s called Open Book Management and SRC promotes it, profitably, through a subsidiary, “The Great Game of Business”.
The hurdles to doing such things in Australia are not insubstantial. There is lack of vision at the level of corporate management; there is a deep skepticism on the part of governments; there is trade union fear of not being needed by worker-owners; and there is the blinkered proletarianism of heavily unionized workforces.
Sadly, I must also add that our federal tax and corporations laws do not help the creation of employee-owned companies. The Abbott government needs to legislate away these obstacles: obstacles that the Howard, Rudd and Gillard governments understood well enough but chose to do nothing about.
The key point to grasp, however, is this: obstacles and pitfalls notwithstanding, the ordinary men and women on the manufacturing lines are the ones who can actually save and reshape the business. What they need from governments, unions, and financiers is the moral support and practical assistance to do it.
There is no denying that the decision the workers would have to make under the worker-ownership scenario would be a tough one. They would have to choose either grabbing their entitlements with both hands as they head for unemployment or sinking their entitlements into the business and taking charge of their destinies.
Yes, it’s risky. But the rewards are great, potentially, above all in self-respect department.
If governments and trade unions allow it, vehicle manufacturing workers are not on the road to oblivion, they are at a cross road.
Down one path, they can join the embittered and disillusioned members of the non-working class; down the other, they can emulate the impressive people I met a few years ago at SRC: grimy-handed, blue-overalled, quietly spoken local heroes – the people who saved their company and their jobs, grew the business, created new jobs, opened career paths for their children and brought honour to themselves and their city.
Governments, business leaders, union bosses, workers: what’s it going to be?*Gary Scarrabelotti was Group Secretary of the Employee Ownership Group, a network of corporate advocates for employee ownership. He is a director of Equityplan, expert advisors on employee share plans and their implementation.