BY STAS MARGARONIS
Elon Musk is facing the most serious crisis of his career as he struggles to increase production of his Tesla Model 3 electric cars or face possible bankruptcy.
Allegations that Musk and Tesla have tolerated unsafe working conditions at its Fremont, CA plant and have fired workers seeking representation by the United Autoworkers (UAW) may be contributing to the company’s the production crisis.
A Tesla worker, Jose Moran, wrote: “Injuries, poor morale, unfair promotions, high turnover and other issues aren’t just bad for workers — they also impact the quality and speed of production…They can’t be resolved without workers having a voice and being included in the process.”[1]
The high reliance on software driven robotics for car manufacturing seems to have blinded Tesla management to the need for more workers in the production process.
The momentum for moving the United States toward a renewable energy economy is at risk.
IGNORING WORKERS HAS ITS PRICE
Validating criticisms by Tesla employee Jose Moran, Musk’s manufacturing strategy appears to have ignored the potential of workers to improve productivity.
Many years ago, I learned the importance of worker input while working as a warehouse worker at the Thrifty Drug Company warehouse in South Central Los Angeles:
- An automation plan for replacing workers with a trash conveyor backfired when the conveyor system was built too high for workers to reach and further away than the previous trash bin system. Management claimed victory stating that eliminating two jobs saved money. However, by ignoring worker input and the fall-out from replacing trash bins with the conveyor belt system, management failed to grasp that the reduction in productivity and added aggravation to workers walking longer distances negated the savings in eliminating two jobs.
- The company set up a suggestion box that employees used to make suggestions about improving productivity and workplace safety. Then department supervisors started taking credit for the suggestions and failed to recognize the contribution of employees. The result was employees stopped using the suggestion box.
- During a Christmas rush to get merchandise out to stores and avoid excessive overtime, an employee named Bob Esparza came up with a plan for workers to share filling orders so as to reduce the distance they had to walk. The concept speeded up production but was rejected by management because it was a worker’s idea and challenged the power of management and the status quo. The concept was abandoned and production went down.
Similar production disconnects may help explain the problems Tesla is having building the Model 3 cars.
TESLA PRACTICES CREATE DIVISIONS WITH EMPLOYEES
All of these achievements could be in jeopardy if Tesla’s car-making venture fails.
Musk now admits the company made a mistake in relying too heavily on robotics and automation and not enough on the company’s workers.
A report in the U.K.’s Guardian summarizes the situation:
“Elon Musk has admitted that automation has been holding back Tesla’s Model 3 production and that humans, rather than machines, were the answer.
The electric car maker’s chief executive said that one of the reasons Tesla has struggled to reach promised production volumes was because of the company’s “excessive automation”.
Asked whether robots had slowed down production, rather than speeding it up, during a tour around Tesla’s factory by CBS, Musk replied: “Yes, they did … We had this crazy, complex network of conveyor belts … And it was not working, so we got rid of that whole thing.”
“Yes, excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated….”[2]
TESLA IS ACCUSED OF BEING ANTI-UNION
The company is also facing criticism that it has fired pro-union workers and created divisions within its workforce at a time when Tesla desperately needs its employees’ best efforts to improve productivity with making Model 3 cars.
Automotive News reported in March on the labor relations conflict:
“As part of its effort to organize the electric automaker’s Fremont, Calif., factory, the (United Auto Workers) union has filed a string of unfair labor practice charges with the National Labor Relations Board. The complaints, grouped with reports of working conditions at the plant and a changing political environment, could soon turn up the heat on Tesla as it deals with production issues.
‘This is the beginning of something,’ said Harley Shaiken, a labor professor at the University of California, Berkeley. ‘They’re provoking ongoing conflict with a significant number of workers at a point where Tesla needs it the least.’
The UAW’s efforts in Fremont garnered attention in February 2017, when Tesla employee Jose Moran published a blog post detailing harsh working conditions, adding that workers had contacted the union as a result.
Since then, more reports of on-site injuries have emerged, as well as lawsuits documenting employee discrimination. The UAW has also filed charges with the NLRB, alleging Tesla intimidated pro-union employees and forced them to sign nondisclosure agreements barring discussion of plant conditions.
The most recent unfair labor practice complaint, filed with the NLRB in February, claims Tesla disciplined or terminated employees for participating in union activities in the past six months, according to documents obtained by Automotive News via public records request. In October, the automaker fired 700 workers, which Tesla CEO Elon Musk said was part of routine performance reviews.
‘You’ve got a turning point here,’ Shaiken said. ‘Tesla, which has been so innovative in so many ways, seems to be reverting to 1930s-style union avoidance in the way it’s dealing with the UAW.’”[3]
SAFETY PROBLEMS
Consistent with its conflict with employees are allegations that Tesla faces an investigation into unsafe working conditions. The Guardian reported in April:
“Tesla is facing an investigation by Californian safety regulators into reports of serious injuries at its factory in Fremont, California, where it is struggling to scale up production of its Model 3 mass-market electric car.
The California Occupational Safety and Health Administration said on Wednesday it had begun an inspection on Tuesday, a day after the news website Reveal alleged that Tesla failed to disclose legally mandated reports on serious worker injuries, making its safety record appear better than it was.
A Tesla spokesperson said the Californian agency was required to investigate any claims, whether merited or not. They said: ‘We have never in the entire history of our company received a violation for inaccurate or incomplete injury record-keeping.’
The agency typically reviews an employer’s log of work-related injuries and illnesses to ensure serious injuries are reported directly to the administration within eight hours.”[4]
FINANCIAL ANALYSTS LOSE FAITH WITH TESLA
The electric car firm has repeatedly missed production targets and is now trying to reach a production volume of 2,500 vehicles per week. Musk recently said Tesla was managing to make 2,000 Model 3s a week but failed to assuage doubts by financial analysts about the chances of the company reaching its 5,000-a-week target in three months’ time.
In April, Musk tweeted that Tesla would be profitable and cash flow positive in the third and fourth quarters, with no need to raise money.
Many analysts dispute this analysis, because it hinges on a rapid rise in production of the Model 3 sedan that they do not see happening.[5]
IN 1913 FORD’S CRISIS OVER AUTOMATION CAUSED A WORKER MUTINY
Tesla and Musk are facing a crisis similar to what Henry Ford and the Ford Motor Company faced in 1913 when the assembly line was first instituted to increase production of Ford’s Model T cars:
The moving assembly line was developed for the Ford Model T and began operation on October 7, 1913, at the Highland Park Ford Plant, and continued to evolve. The assembly line, driven by conveyor belts, reduced production time for a Model T to just 93 minutes by dividing the process into 45 steps… It had an immense influence on the world.” [6]
In his history “From the American System to Mass Production 1800-1932, David Hounshell writes that the assembly line came about as a result of a century of American production innovations that were perfected by the team at the Ford Motor Company.[7]
The problem was that the adoption of the assembly increased stress on workers to speed up production causing many workers to quit. Another factor was low wages. Ford’s turn-over of workers was so bad that for the company to keep 100 men working, the company had to hire nearly 1,000 men.[8]
Ford’s future hung in the balance.
FORD’S SOLUTION: DOUBLING WORKERS WAGES
In an act of desperation Ford instituted the $5 a day wage doubling the existing wage of workers. He believed “it was a mistake to spend money on the finest machinery and then put those precious machines into the hands of disgruntled, unreliable, and perhaps incompetent men.”[9]
When the $5 wage was announced, Ford was criticized for undermining the conventional low wage regime. This caused the Wall Street Journal to describe Ford’s $5 initiative as an “economic crime.”[10]
A PBS report recalls that in 1914, the announcement of the $5 a day wage caused workers to flock to Ford’s Highland Park factory in Detroit:
“January 1914 was a frigid month in Detroit… but nonetheless thousands lined up in the bitter cold outside to take Henry Ford up on an extraordinary offer: $5 a day, for eight hours of work in a bustling factory.
That was more than double the average factory wage at that time, and for U.S. workers it was one of the defining moments of the 20th century.” [11]
Ford had the pick of the best workers to hire. These workers were motivated to embrace the assembly line and automation thanks to being paid good wages.[12] The turn-over crisis ended: Ford Motor Company profits rose from $30 million in 1914, the first year of the $5 a day wage, to $60 million in 1916.[13]
DECENT WAGES HELPED WORKERS JOIN THE MIDDLE CLASS
The $5 a day wage made Henry Ford a hero to working people all over the world and began an era of progressive labor relations in the United States. This came into full force during President Roosevelt’s New Deal reforms in the 1930s. The unionization of workers was another factor and included victories by the United Autoworkers. Ford’s contributions were later seen as paternalistic and he became rabidly anti-union, but he also changed lives for the better. Higher wages for workers showed that companies could benefit not only from higher productivity but also from higher consumption rates that benefit all businesses. As workers made more money they were able to buy consumer items such as cars. Ford’s reforms helped American working men and women join the ranks of the American middle class.
This era began to end for workers as a result of high inflation during the 1970s and the outsourcing of American jobs and downsizing of companies from the 1980s onwards. During the 1980s, companies complained about “overpaid American workers” and the need to outsource American jobs abroad and cut wages and benefits at home. In 1981, the Reagan administration broke the strike of the Professional Air Traffic Controllers Organization (PATCO). This signaled the federal government’s support of anti-union policies that undermined the power of American unions. The rationalization for all of this was to bring inflation down, but there were less destructive ways to do this. The result was wages went down, profits went up and millions of Americans lost their livelihoods, lost decent paying jobs and lost their middle-class status.
The gap between haves and have nots continues in 2018.
CONCLUSION: MUSK NEEDS TO APPEAL TO HIS WORKERS
Like Henry Ford, Elon Musk needs to invest much more in Tesla employees in order to make the mass production of Tesla’s Model 3 cars a success.
Embracing unionization by the United Autoworkers is a good faith gesture to appeal to workers to help solve production problems.
It is a better strategy than punishing them for wanting to join the union.
Ford defied conventional business wisdom by investing in the $5 a day wage
Musk needs to follow Henry Ford’s example and give Tesla workers a stake in this fight.
[1] http://www.autonews.com/article/20170209/OEM01/170209795/tesla-plant-unionizing-effort-gains-momentum-in-calif.
[2] https://www.theguardian.com/technology/2018/apr/16/elon-musk-humans-robots-slow-down-tesla-model-3-production
[3] http://www.autonews.com/article/20180318/OEM01/180319753/uaw-tesla-relations-turning-point
[4] https://www.theguardian.com/technology/2018/apr/19/tesla-california-factory-investigated-safety-concerns-model-3
[5] https://www.theguardian.com/technology/2018/apr/17/tesla-halts-model-3-electric-car-production-improve-automation
[6] https://en.wikipedia.org/wiki/Assembly_line
[7] David Hounshell, From the American System to Mass Production 1800-1932, p. 217
[8] David Halberstam, The Reckoning, p.91
[9] Halberstam, Ibid, p. 91
[10] Halberstam, Ibid, p. 91
[11] https://www.npr.org/2014/01/27/267145552/the-middle-class-took-off-100-years-ago-thanks-to-henry-ford
[12] Halberstam, Ibid, p. 92
[13] Halberstam, Ibid, p.92