Does America Still Work?

Interview with Richard Teerlink: Part II

Q: Concerning the new plant, is it a union plant?

Teerlink: It will be a union plant...we are not going to have an anti- union campaign. It's likely that it will be an organized plant from the two bargaining units -- dual unit international unions that we have.

Q: And that's fine with you.

Teerlink: That's fine with us.

Q: Let me ask you a little bit about outsourcing. I mean, do you contract out a lot of parts work?

Teerlink: Oh, yes. Outsourcing is a very important part of any organization, but unfortunately it gets a bad rap. What outsourcing really should be based on is what are the core competencies of the organization. What are those things that make a distinctive, competitive difference that you produce vs. what someone else produces. And for every company they're different. And for the things where you don't have competency, let's go to the people who are experts at it, because that's how we get to utilize technology. If we tried to make our own brake systems, you know, it would be heavy, heavy investment going against people who make brakes. And the same goes with carburetors and certain elements of suspension.

Q: Time and again companies say this and yet when they outsource, invariably the part is made by a company that's paying significantly lower wages than they are.

Teerlink: Well, remember, I've always said the cost is an important determinant. We can keep wages high. The question is how many products can you sell at the price that you're going to charge. And, you know, we always forget that. We want to bang on the issue of wages, but we never deal with the issue of consumer price. Where do efficiencies come from-- how can we pay higher wages? How do we get more productive? By not having labor contracts that are feather bedded; contracts that pay for non-work. For instance, people know they're coming around to ask about overtime, so they go to the john and then they didn't get asked for overtime and come Monday they put in a grievance. And what happens? They get free money. And we've got to get rid of free money. We've got to pay for work. People should come to work, and they should do their job -- as they define their job, as their team defines their job.

Q: But let me ask you this with all sincerity. A lot of companies will go look for a low wage plant to supply them or they'll move a plant to a low wage area. They won't invest in upgrading their facilities. They won't reorient management practices. They develop a very narrow attitude about what makes them competitive. It's all wages.

Teerlink: And if that is their decision and if that's what they found in the marketplace that it takes, that's legitimate.

Q: But that's a big if.

Teerlink: Oh sure. But it's a big if whether or not I can sell products, too. I don't think the people who are leading companies are stupid. I don't think they purposefully make products that they can't sell. And I think we have to understand that a lot of the costs that are in many products are there because employees aren't working hard, because we aren't productive. So how do we bring the balance back? We hear all the comments about bad business -- they do this and they do that. How about the jobs they're creating? Do we hear much about those? I don't hear much. Maybe I just don't read the right papers. But every time someone's going to, you know, have to lay off people it's a headline. The question I have to ask is if I didn't have to lay off 10,000 people, what would they agree to do? Oh, can't do that, that's concessions. I've got it and I'm going to keep it. It's a global economy. We're competing against everybody else in the world. And as long as we've got an "I got it, I keep it" mentality, we can expect only one thing -- more businesses moving elsewhere. We have to figure out how do we become competitive as a family. I know people say, Oh, there he goes. Company is a family. But that's really where it's at. It's all the stake holders.

Q: I'll just stay on this issue one more a little bit longer, because it's a little hard for me to believe that every businessman is making the correct decision for his company. And there certainly is an attitude in America now that didn't exist a while ago. It's okay to go for the lowest wage, and you know what, if wages don't rise, who's going to buy the products that people like you make?

Teerlink: Well, if wages don't rise, they'll buy the foreign product that comes in at a lesser cost. That's why they price it that way. So we just open up the markets to foreign products. But, you know, let's have some shared responsibility here about cost structure. And let's go back to free money. Let's go back to grievance procedures or contracts that prevent people from doing something at their own machine because that's a skilled trade, even though you know it just means squirting oil on something once. Now, I don't think people who are chasing low wages are doing it because they're bad people. I think they're doing it because they're trying to preserve whatever jobs they have. Now when are people going to come up and say, I think our costs are getting too high around here. I think we should do something about that. And you say, well, that's management's job. Sorry, that's everybody's job.

Q: Let's talk a little bit about the inner city. What are some of the difficulties in keeping a plant like yours in the central city?

Teerlink: We live with all the problems that the inner city lives with. Safety. You know, you live with crime. So you have some additional costs. But by the same token you try to be a responsible member of the community so that people look there and say, hey, we don't want anything to happen to that area. Drugs. We've got drug problems. If you go through the litany of things that people suffer in the inner city, we suffer all those also, and we have to do something around that.

Q: What is the agenda? What's the agenda for Milwaukee? What does Milwaukee have to do to make it a better business environment?

Teerlink: Oh gosh. I think it's a pretty good business environment. You know, we really can't do a lot of complaining about what we've gotten in Milwaukee. We're in the midst of building a warehouse. We've had excellent cooperation with regard to that. We've had some incentives to do that. So, I think what we have to do is just not view business as being bad and looking for something for nothing. And maybe we all have to sit down and talk about how do we get mutual benefit out of something we're doing. And, you know, we had a thing with a tariff in 1983. The U.S. government provided a tariff for the U.S. motorcycle industry. Now what a lot of people don't understand is that Honda made motorcycles here, too, at that time and Kawasaki assembled them here, but it gave us an opportunity to grow our business and to expand and advance. We knew we were not what we should be. And we sais, these are the things we're going to do. And when we do them, the tariff should go away. We asked to have the tariff taken back early, because we were where we thought we had to be. Was there a PR advantage to that? Absolutely. But the fact is we did it. All businesses aren't sitting around just waiting for a hand-out. If they're given an opportunity to perform and if there are measures, you might find that they will do the right thing. But ours was an industrial protection and I think that kind of protection is legitimate. But it has a sunset. We can't just protect or businesses are not going to be competitive.

Q: So there is a role for government?

Teerlink: For total industry, yes. The difficulty is what is the industry? The motorcycle industry was very simple to get at. Other industries are very difficult.

Q: So, you don't think this is the kind of solution that could be widespread?

Teerlink: I don't think it's a widespread solution, no.

Q: A lot of people would say that even pegging the motorcycle industry was a tough thing to do, wouldn't they?

Teerlink: It's a very small specific industry that we were protecting and since we were the major player, you know, you were protecting an American industry. By Harley getting benefits you are in effect protecting the only American motorcycle manufacturer that was available. Then they went away and here we are. We're competitive in the world market and that had something to do with it. But what had more to do with it was, we started to understand our customers, we started producing.

Q: But it gave you that window of opportunity.

Teerlink: A little window of opportunity protected us. So a little bit of protection is fine.

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