February 17, 2007
Tough Love in the Auto Parts Industry
On the same black Thursday that Borg Warner announced that it would close its Muncie manufacturing facility in 2009, the price of its stock surged by six percent. Are the traders on Wall Street heartless, prejudiced against Muncie, or do they simply like bad news? In truth, none of these answers are probably correct, although we really have no way of knowing. But the divergent reactions of stockholders and workers and their families to the news that nearly a century of Warner Gear history in east central Indiana will soon be coming to an end reminds us that there are many sides to the larger story of manufacturing’s evolution in the industrial Midwest.
When you mention sides in any story about manufacturing, one immediately thinks of management and workers, and in many shops, company and union. If anything is familiar to lifelong residents of the Midwest, it is the ebb and flow of labor and management relations – sometimes harmonious, sometimes acrimonious, and always, seemingly, adversarial.
That is the side of the story most of us are familiar with. Should the union have negotiated? Was the company telling the truth? These kinds of questions have been asked and answered – often speculatively – since the day factory floors were first organized.
But there is a completely different story – a much larger story – that has been slowly unfolding about U.S. manufacturing at the same time. Its main actors are more difficult to photograph or interview. But they are extremely powerful, and their influence has greatly affected the course of events.
Let’s start with investors and other providers of capital. Every minute the stock market is open, these faceless, nameless individuals and funds collectively vote on the future prospects of the companies that they own, with the stock prices reflecting the result. At the end of the day, money and capital is channeled to successful enterprises and effectively taken away from those that are not.
On Thursday morning, those investors saw a company shedding an underperforming asset, and as a result they voted – with their dollars – to upgrade the future prospects for returns on investment as a result. It is a harsh, cruel, disruptive turn of events for workers and the communities. But in a larger sense, redirecting investment to its most profitable use lies at the heart of what makes the American economy remain competitive.
That story is not new. But the environment in which the story is taking place – the motor vehicle manufacturing industry – has changed greatly. That’s because the biggest actor of them all – the customer – has new options, and is making different choices than before.
Ten years ago, Big Three automakers’ nameplates were on 3 out of every 4 new vehicles sold. Today that share is just over 50 percent. That change, more than anything else, is reverberating through communities like Muncie, Anderson, Connersville and Kokomo today. Every segment of the vehicle market – from luxury cars, to full size pickups, to minivans – has five or six companies vying for market share today, keeping prices in check while mandating expensive research and development to keep products fresh.
That’s been a good news story for the customer, and even for the industry as a whole. Today there are more motor vehicles registered in the U.S. than there are licensed drivers. But it has been an enormous challenge for companies, workers, and communities – one that cannot be solved with a handshake at the negotiating table.
About the Author
Recent
My Apology to LogansportThe city is well known as an immigration success story in the Midwest.
Indiana Is Ground Zero for Anti-American IdeologiesBad ideas rarely die of their own accord.
Lessons in Home PricesIndiana’s dominant housing problem is a surplus of homes that are unlikely to ever again be occupied.
Worsening Brain DrainThe declining educational spending at state universities should be of big interest to elected officials in all the towns around public universities.
View archives