Targeting Planned Bottlenecks

Overnight the United Auto Workers initiated walk-outs at assembly plants operated by Ford in Wayne, Michigan by GM in Wentzville, Missouri and by Stellantis’ Jeep brand in Toledo, Ohio (more and more). The walk-outs involve 12,700 workers out of a total UAW Big 3 membership of almost 150,000. According to Reuters, this job action “will halt production of the Ford Bronco, Jeep Wrangler and Chevrolet Colorado pickup truck, along with other popular models.”

This is a surgical strike intended to maximize Big 3 pain while minimizing the proportion of UAW members hurt (and draw-downs on the UAW strike fund.) The vehicles no longer being produced are among the most profitable in each company’s line-up. This reflects a sophisticated understanding of the auto industry’s value-chain as well as its supply chain.

As this blog often notes, contemporary high volume, high velocity (and high value) supply chains tend to be highly concentrated. When these capacity concentrations are hit hard — intentionally or not — there is an amplified effect. Supply Chain Resilience attempts to identify these “targets” and reduce systemic vulnerability. It appears that the UAW has conducted similar analyses to exploit Big 3 vulnerabilities in a way that requires the least cost to the UAW.

Much smarter than any hurricane.


September 19, Update: Bloomberg has a Big Take on the strike entitled, How Auto Executives Misread the UAW Ahead of Historic Strike. The story highlights personal tensions between UAW President Shawn Fain and auto industry leaders. The Bloomberg narrative prompted bad old memories.

From late 1979 into early 1980, I was part of a crisis communications team consulting with International Harvester — then among the top ten largest US companies — as it “negotiated” a new contract with the United Auto Workers. I was not involved with IH prior to the UAW beginning strike action, but it is my impression that IH senior management anticipated, even welcomed, the strike as a means to wrangle substantial salary concessions from their employees.

Archie McCardle, CEO of International Harvester, was two years into a major restructuring of the company. He envisioned a radical reordering of corporate objectives and behavior calibrated to increasing global competition and post-OPEC economic realities. Especially in retrospect, it was a smart strategy. McCardle and the Board were working to proactively manage seismic changes that did reshape the global economy during the last quarter of the Twentieth Century.

Many labor-management structures that made sense in the 1960s were unsustainable by the 1980s. But while most US corporations (and even some labor unions) recognized this reality, cost-containment and incremental streamlining became the typical transition path. Instead McCardle insisted on radical, arguably rational reductions in labor costs and much more agility to deploy labor assets.

McCardle came to see the UAW as an existential threat to his strategic vision. I’m not sure this was his position at the beginning of the strike, but by Christmas 1979 McCardle had become a wanna-be Union Buster. He despised Union leaders. The feeling was soon mutual. In meeting after meeting I watched predictable — thereby manageable — disagreements descend into fever-dreams of mutual destruction. I also came to perceive my client, Mr. McCardle in particular, as the principal aggressor. There was bad behavior on all sides. There were also opportunities to defuse the conflict that Mr. McCardle used to escalate tensions. I resigned my modest role sometime in late February.

The cascading financial consequences of the 172-day strike essentially destroyed International Harvester… and the lives of many employees.

This is not — thank goodness — a perfect analogy for the current UAW strike. The Big 3 have offered more not less. Mr. McCardle was an unusually abundant source of arrogance, disdain, and aggression. Yet I expect arrogance is at play today, the Bloomberg piece offers some evidence. I am certain the automobile industry — and the global economy — is in the midst of a fundamental inflection point. These transitions are always treacherous. When any of us feel under attack, rationality can be an early casualty.

Supply chains are sometimes called socio-technical systems. Vast flows of digital signals now communicate precise measures of demand velocity. Pallets are planned by algorithms and sometimes picked by robots. In the last half-century technological change has fundamentally altered the relationship of demand and supply. The technologies of the last thirty years have accelerated this revolutionary change. Today’s technology is supercharging change.

But again and again those of us inside the system encounter the deeply human, profoundly social character of the network. Every minute choices made by just one person speed or impede flow. Our technologies tend to be linear, while reality is usually not. Human relationships inform and shape flows in ways that, so far, our technologies do not anticipate or stupidly over-estimate. CEOs meet and do deals when personalities mesh as well as their spreadsheets. What looks great on paper explodes when personalities clash. Progress is often the product of mutual restraint.

Many of us have been on a dock or in a fulfillment center or on a production line that is humming happily and experienced the ugly results when that hum is replaced by congestion, collisions, shouts, and excuses. In either case technology is seldom the principal cause. Technology usually amplifies social content and context.

Today the UAW and the Big 3 are engaged in deciding how a big part of our world will behave going forward. This task is tough enough even if union and company leadership behave themselves. The more they behave badly, the more likely bad results for everyone.

September 26 Update: Late last week Ben Cohen at the Wall Street Journal explained how the current UAW strike strategy is related to a 1990s strike by flight attendants against Alaska Airlines. The playbook for that labor action was named Create Havoc Around Our System (Chaos). Great acronym. Very accurate use of “system” (from Ancient Greek σύστημα (sústēma, “musical scale; organized body; whole made of several parts or members”), from σῠνίστημῐ (sunístēmi, “to combine, organize”) + -μᾰ (-ma, resultative suffix). σῠνίστημῐ is from σῠν- (sun-, “with, together”) + ἵστημι (hístēmi, “to stand”), from Proto-Indo-European *steh₂- (“to stand (up)”)

The UAW’s labor action — like the Association of Flight Attendants’ approach before it — is targeting core characteristics of each sector’s system service levels. Cohen wrote, “Both are meant to sow confusion, keep companies guessing and paralyze interconnected systems. Both amplify uncertainty and create opportunities for mistakes that the union can exploit.”

By intentionally — strategically — striking some places and not others a comparably few strikers can have a cascading systemic effect. The UAW’s recent escalation of strike action against General Motors and Stellantis (but not Ford) increased the number of strike venues and shifted from upstream vehicle manufacturing to midstream parts distribution (more and more and more). Hits to the midstream will accelerate downstream impacts and distress.

Airlines are even more networked than automobiles, but especially in the last twenty years the US automotive industry has sufficiently streamlined and concentrated its network topology (more) that it is much more efficient on most days and much more vulnerable to hard-hits in the wrong-places on bad days.

The UAW calls this their “Stand Up Strike.” This is intended to recall successful “Sit Down Strikes” of the 1930s. It is also — no doubt unintentionally — an etymologically accurate description of intentional targeting of capacity concentrations.