Does America Still Work?

Interview with Robert J. Eaton: Part II

Q: We spoke to one of your newly rehired workers. He is ecstatic about having a job again, having the benefits, having the wages. Can the Bill Donnells of the world breathe easy the way American workers once were relaxed and could depend on their jobs in the 1950's and '60s or has the world changed for good?

Eaton: Oh, I think they can as long as we continue to work together and become ever more competitive with high quality products. The marketplace votes every day out there, and it's the entire company from the management down to the people working on the factory floor that ultimately determines competitiveness. So if we work together and all work hard, I think there isn't any question we've got a tremendously bright future.

Q: What advice do you give the workers? The business philosophers out there and the consultants say be prepared to work for five or six companies now over your life. Be prepared to retrain all the time. Don't relax. You can't relax anymore.

Eaton: I don't think you can -- I think that's good. You cannot relax. You've got to think about what you're doing. Every single day there is somebody that is going to buy that product or that service, and you've got to make sure that you can continually deliver that product or service better than anyone else out there -- deliver your piece of that, regardless of how small or how big. From a value standpoint, from a quality standpoint, from a functional standpoint, you just have to keep focused on those things, doing the very best job you can, whether it's me or it's somebody on the line. That's what we have to do every day when we get up.

Q: To clarify one issue -- Are some kinds of products given to the kind of sophisticated managerial methods and the new high tech equipment that can make for high paying jobs? Do we have to abandon some kinds of lower skill operations to low-wage countries or low-wage sections of this country?

Eaton: Oh, I think that there's no question about the fact that there are some things that are largely manual labor that you simply cannot ever compete with. No doubt about that. But I do think the major things, whether it's engines, transmissions, body assembly, or design, those are the things that determine what I call the brand character of the vehicle that you're producing. And those are things that we want to always do in-house and have total and complete control of.

Q: Is it possible Chrysler will be doing more of the simple operations that you've outsourced over the years?

Eaton: We work with the Union and with our designers every time we develop a product. Where we have the technology in-house to be able to do it and if we determine we can do it competitively, we bring it in-house. We have done that. We just talked about the engines from Japan, the vehicles that we're currently buying from Mitsubishi. But there's no question we want to be able to be competitive. We want the lowest price possible. If we can do that in-house, we'd prefer to do that.

Q: Is the government doing enough in terms of trade to help in American business?

Eaton: There's been a tremendous increase in the effort that America's put forth in trade since the close of the Cold War. Up through that period, we always compromised trade for geo-political reasons. We wanted to get along with everybody. We wanted them to be part of the Western coalition. That's not nearly as important now, and we've gotten much more aggressive in trade. An example is the efforts that have been put forth to open Japan's market. We're now in there. We're making big investments. We're building right-hand drive vehicles, by the way -- jeeps using engines out of Kenosha that are going to Japan in significant numbers. That would never have happened if the government hadn't helped open that market up. Japan was a unique situation. They had total and complete access to our markets. We are the freest market in the world, period. Yet we didn't have access there. So, yes, we now do. We've just in the past year alone invested over 200 million dollars just for the Japanese market. And that's going to mean jobs here. I think after having ten or fifteen, twenty, thirty, forty years of neglecting that area because of the Cold War, government has still got an awful lot to do. Korea's a classic example. There's less than two-tenths of one percent of the vehicles sold in Korea that come from America, you know. And yet they have complete access. We basically have no access to Korea.

Q: What about the attitude of you auto makers yourselves? As you well know, you didn't use to think about selling Japan right-hand drive cars, for instance.

Eaton: Well, why would you invest when you can't do it? What comes first? Do you invest first and then wait for somebody to open up the market, or do you work together with government and then start investing. Obviously, that's what happened. If the companies there have total control of the market, if it takes seven feet of paper -- a seven feet high stack of paper to be able to get a vehicle in there and certified -- does that make sense to invest? To do that? The answer is absolutely no. We still don't have anywhere near the access that they have to our market, but we're making progress and they've made a commitment to further open that market, and as a result, we're investing. We're investing big. Two hundred million dollars, as I said, just last year from Chrysler.

Q: Let me ask you what you, personally, have learned over the years about competitive methods. You've been in this industry a long time. You were there in the seventies and eighties when, as you say, the auto industry wasn't competitive, and the Japanese and maybe some others were beating us at our own game and pretty badly. When did you, personally, begin to learn that, hey, we have to -- we can do things better. We have to do things better.

Eaton: I personally got very involved in ways to improve quality, to change the culture of the workplace to group activity in about 1980, '81. And almost every job I've been involved with since that time has had that as a major focus.

Q: Was there an epiphany? I mean, did the light go on somehow? Was it an event?

Eaton: Well, the bottom occurred somewhere around that time. At that point in time, the Japanese had over a three-thousand dollar per vehicle edge on the cost basis that we had. A lot of it was due to our own making. A part of it was due to an artificially cheap Yen. But we were either going to change or we weren't going to survive. We almost didn't survive. The Chrysler Corporation, as you know, just about didn't survive that period. And we had another brush with bankruptcy only six or seven years ago, and I think there's nothing that focuses people like that survival instinct. I think that started occurring throughout the American industry and not just in the auto companies. I think that in the last five or six years you are really starting to see the fruits of that effort that started back then -- in many cases in a very small way.

Q: There's been a lot of talk, as you well know, about corporate social responsibility, and I want to ask you, what is your definition of corporate responsibility?

Eaton: Well, the first priority has to be to build a product or provide a service that people want to buy so that companies can employ people, they can make a profit, and so that they will pay taxes. But the community is also an integral part of that. The health of the communities that we live in determines our ultimate results, as well as the kind of people we can attract -- the overall vibrancy of the community. So I think we have a big part to play in all of that.

I was recently misquoted saying that we didn't have a social responsibility. When President Clinton said that "big government was dead," quote, unquote, there was a lot of discussion in the media about maybe there ought to be tax incentives, or whatever, for business to pick up the social responsibilities that big government has traditionally had. And I think that's fundamentally wrong, very definitely wrong. The only way we can provide that basic economic foundation is if we are healthy and profitable. To saddle us with current obligations that the government has would simply detract from that. We'd ultimately be able to employ less people and pay less taxes. But we try to be a good citizen and contribute not only time but also money to every community that we are in. In fact, just in the past couple of weeks we announced a five million dollar contribution to the Detroit area -- to the arts and to charities. And most all of our people are involved in those things. I personally chair the Detroit Renaissance, a business group that is focused on the economic development of this area and works with governments to make that happen. So we have a big responsibility, but it's not picking up, you know, the things that government has traditionally been responsible for. For example, government has been very unsuccessful in managing Medicare and Medicaid. There was a little move, there, about why don't corporations pick up that responsibility. If we do the job right in providing outstanding products, making good profits, our employees benefit, the communities benefit, and the nation benefits because of the taxes we pay.

Q: You don't think these tax incentive proposals by Senator Kennedy, by Senator Bingaman, by Labor Secretary Reich to reward companies for social responsibility -- you don't think they're going to work?

Eaton: Absolutely not.

Q: And that's all you have to say about it?

Eaton: Absolutely not.

Q: What does it do?

Eaton: Government wasn't successful with those programs. That's what we're talking about -- getting government out of those things. Why would you want to take industry and get them involved in those things, make them less competitive? Ultimately the system starts to crumble. If we were running the kind of deficits the government's been running for a long, long time, we wouldn't be able to provide employment, we wouldn't be paying any taxes. So again, if we can be competitive, we will ultimately earn profit. That profit will go back to our shareholders and to our employees. Chrysler alone has paid $15,700 in extra profit sharing checks to each of our employees in the last four years, over and above, a very, very good wage. So our employees share in our success. The communities share in our success. The government shares in our success in taxes and so forth. To put a damper on that could cause the whole system to start to tumble.

Q: So what you're saying is that your social responsibility is to be competitive.

Eaton: Yes. And the benefits of that competitiveness gets shared with all the stake holders, whether they are employees or they are communities. Unquestionably.

Q: The bottom line, then, for you is -- American business is in good shape?

Eaton: It's in better shape than it's been in. It's not as good as I want to see and I'm not satisfied in any way, shape or form. You know, I try to keep this company and all the people in it focused on continuous improvement. Doing today whatever you do better than you did it yesterday. Smarter. You know, working together in teams, focused on improving quality, focused on better products, focused on value. We've got to work to continue to build a product that people want or enjoy driving and want to buy again. That's the ultimate reason that we're in business. And that's what we all have to keep focused on.

Q: So going back to where we began this discussion, those were rough times in 1987 when Kenosha was closed. Was it -- looking back -- was it really necessary?

Eaton: Oh, without a doubt. The Chrysler Corporation, again, almost did not survive in the period 1989 and 1990. We had to completely redo our products. We had to become more competitive. If we had continued the way we were going -- if we had laid nobody off, if we had continued all of our costs -- we wouldn't have survived. There's been an awful lot of talk about how downsizing has been a bad thing. Downsizing is a necessary thing to become competitive. There isn't any company in the world that is competitive and doing well that says, "Golly, I'd like to downsize." Downsizing -- when you lay off people and so forth -- that's because you're not going to succeed. You're not going to survive if you don't do that. The proof that downsizing is working very well in this country is the fact that we have created -- had a net increase -- in jobs of something in excess of eight million in the last three and a half years or so. At the same time, yes, there has been some significant displacement of workers because of downsizing and they've gone to other jobs. The alternative is for those companies to go out of business and for unemployment to go up. Now, you know, there's no question about that fact. This whole issue of downsizing, it's gotten a very negative connotation out there, and it shouldn't at all.

Q: But let's not deny that hardship on the workers. A lot of them don't make as much money now as they used to, and many haven't found jobs again.

Eaton: I -- I don't agree with that. The data is very clear that the per capita income in this country has been going up.

Q: The only reason per capita income has gone up is because a lot of spouses now work. It's really per worker income, I think, that's the serious measure. Worker income is by every measure slowly going up or not going up at all.

Eaton: A greater percent of the take-home benefits from work have been in the form of benefits; yet, that's just as important an element of compensation than the actual cash. In the auto industry, benefits have escalated far faster than the take-home wage and yet they are real. It's a real contribution to the lifestyle of the employee. And hourly wages have continually gone up at a fairly significant rate, but the data out there does not support the general conception out there that compensation -- when you can include all aspects of compensation -- has been going down in this country at all. That's simply not the case.


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