This whole issue of downsizing, it's gotten a very negative connotation out there, and it shouldn't at all...The alternative to downsizing is going out of business. Chrysler's a perfect example of that. We had to go through that downsizing period in '89, '90, or we wouldn't have survived...It's an unbelievable hardship on employees, but it's a necessary thing to do to be able to ultimately grow and change and be more competitive.
I think reengineering or restructuring or downsizing or rightsizing or whatever you want to call it, it's basically firing, has gone way too far. Employees, as I talk to them across the country, feel that they are not respected, they are not valued. They feel the company is simply no longer loyal to them. Why should they be loyal to the company, they ask me. Why should I go the extra mile?
No owner, no manager makes a decision to move a plant easily. It's a very difficult decision to make. All the pain of the human factors is involved. There's a terrific amount of capital investment. There's risk associated with starting up a new plant. There's interruption of customer service. So those decisions are not taken easily. But the reason for doing that, more often than not, is because a competitor has changed the rules of engagement, because a business is losing market share, and because there's a long term survivability issue involved.
We all want to stay employed and the realities of the world, say if you make bad product, you don't stay employed. Remember 1982. Forty percent of the people left the employment of Harley-Davidson, because we weren't doing the right thing. Now we have to be careful about being complacent. Because we are so successful, some people think it's guaranteed.
There's been a lot of re-engineering which really involves a radical rethink of basic processes in both white collar and blue collar functions...And in many cases, they are long overdue. They are removing the bloat. But they are putting a large class of American workers through an economic angst that they have not had to go through in the past...The new economics of the 1990's is putting significant pressure on workers through the twin forces of layoffs and real wage stagnation...The new economics is all about corporate survival through boosting productivity in an effort to recapture our competitive prowess. The good news is we've done it. America is back on top of the global competitive sweepstakes...the bad news is really how we've gone about doing it.
Many more companies ought to understand that given an adequate level of capital investment, that even very high-priced labor can be a bargain... They are not doing it for a number of reasons. First, the very fact that they have the option of taking the low road, of going out and operating with unskilled labor and low investment in "greenfield" locations away from the cities and away from the influence of trade unions is a very, very hard temptation to resist. The second reason is that companies are very interested in making sure their scarce capital resources are spent in the best way possible, so they are constantly looking for which activities are peripheral to their businesses -- ones they can simply stop doing.
FRONTLINE / WGBH Educational Foundation