THE NORTH AMERICAN AUTO INDUSTRY BEYOND NAFTA

1

THE NORTH AMERICAN AUTO INDUSTRY

BEYOND NAFTA

Productivity and Industrial Relations

JOHN P. TUMAN

NOVEMBER 14, 2000

POLICY PAPERS ON THE AMERICAS

Volume XI, Study 2

THE NORTH AMERICAN AUTO INDUSTRY

BEYOND NAFTA

Productivity and Industrial Relations

JOHN P. TUMAN

NOVEMBER 14, 2000

POLICY PAPERS ON THE AMERICAS

Volume XI, Study 2

The Center for Strategic and International Studies (CSIS), established in1962, is a private, tax-exempt institution focusing on international publicpolicy issues. Its research is nonpartisan and nonproprietary.

CSIS is dedicated to policy analysis and impact. It seeks to inform and shapeselected policy decisions in government and the private sector to meet theincreasingly complex and difficult global challenges that leaders will confront inthe next century. It achieves this mission in four ways: by generating strategicanalysis that is anticipatory and interdisciplinary, by convening policymakersand other influential parties to assess key issues, by building structures forpolicy action, and by developing leaders.

CSIS does not take specific policy positions. Accordingly, all views, positions,and conclusions expressed in this publication should be understood to besolely those of the author.

CSIS Americas Program Leadership

Georges Fauriol, Senior Fellow and Director, Americas ProgramAmy Coughenour Betancourt, Deputy Director, Americas ProgramChristopher Sands, Director, Canada ProjectM. Delal Baer, Chair, Mexico ProjectMichael May, Director, MERCOSUR-South America ProjectArmand Peschard-Sverdrup, Director, Mexico ProjectJessica Rich, Program Coordinator

This report was prepared for the North American Auto Industry Project, Center forStrategic and International Studies, Washington, D.C. The author thanks SidneyWeintraub, Christopher Sands, Danielle Roth-Johnson, and the anonymous reviewersfor their comments and suggestions. He would also like to thank officials in the researchdepartments of the Canadian Auto Workers Union and the United Auto Workers Unionfor providing copies of collective-bargaining agreements. The author is grateful to thestaff of the U.S. Bureau of Labor Statistics for providing unpublished data and toofficials in Mexico’s Ministry of Labor and Social Welfare and Federal Arbitration andthe Federal Arbitration and Conciliation Board for giving him access to their archives.

© 2000 by the Center for Strategic and International Studies. This report wasprepared under the aegis of the CSIS Policy Papers on the Americas series.Comments are welcome and should be directed to:

CSIS Americas Program1800 K Street, NWWashington, D.C. 20006Phone: (202) 775-3150Fax: (202) 466-4739E-mail: [email protected]

Foreword

In 1996, CSIS embarked on a major study of the North American auto industry. Thissector, which accounts for 40 percent of all trade in North America, was in ourjudgment the key to understanding how the North American Free Trade Agreement(NAFTA) was performing, and how arrangements for the continental economy itfostered would need to evolve over time.

In the first phase of the study, we addressed the performance of the industry inCanada, Mexico, and the United States in the years since NAFTA took effect. Theresearch from this initial phase, including assessments of the environmental andlabor market conditions in the industry, was included in an edited volume, The NorthAmerican Auto Industry under NAFTA (CSIS Press, 1998).

Research in this second phase has focused on the future of North Americanintegration, viewed from the perspective of what may be required by the region’s autoindustry. The present study, by John P. Tuman of Texas Tech University in Lubbock,Texas, considers the future of relationships between auto industry firms andorganized labor in the context of three distinct, national approaches to labor law andcollective bargaining rights. Using the relationship between productivity and earningsgrowth as a standard, Tuman questions the degree to which these two indicators arepositively linked in each of the three countries, and the respective roles played bygovernments, unions, and firms in narrowing existing gaps. Tuman makes aparticularly important contribution here by reviewing the charge that auto firms haveused the threat of shifting work to Mexico in order to extract concessions from laborunions in Canada and the United States in light of the collective agreementsconcluded since 1994.

In the coming months, we will publish three additional papers from the secondphase, addressing separately the potential in North America for a common currency, acustoms union, and enhanced trilateral environmental cooperation.From the beginning, this study has benefited from the support and active participation of firms inthe industry. We are grateful to senior executives at General Motors, TRW Inc., Ford, Daimler-Chrysler, Bethlehem Steel, Dana Corporation, Eaton Corporation, GenCorp Inc., Goodyear Tireand Rubber Company, ITT Industries, Johnson Controls Inc., LucasVarity, Lear Corporation,MascoTech Inc., Meritor Inc., PPG Industries and Tenneco. Together, these firms sponsored theCSIS study and contributed to it intellectually throughout by permitting experts within each firmto review and comment on research in draft form. In no case should their involvement orcontribution be interpreted as an endorsement of this or any other paper in this series,responsibility for which lies with the author alone, who had final say over the content andanalysis.

Christopher SandsFellow and Director, Canada Project

Sidney WeintraubWilliam E. Simon Chair in Political Economy

1

Introduction

Since the early 1980s, the automotive sector in North America has become a highlyintegrated industry. Spurred by trade and investment liberalization, auto firms in theUnited States have expanded and integrated production operations in the region andhave invested considerable sums of money to construct new facilities and tomodernize existing plants. As a result, most vehicles and automotive parts producedin Canada, the United States, and Mexico are now traded within the North Americanmarket.1 The automobile industry has gained strategic importance in North America.Automotive production accounts for a significant amount of manufacturingemployment and economic activity in Mexico, Canada, and the United States. Inaddition, the sector has generated inflows of foreign direct investment from Japan,Germany, and South Korea.

Despite the high level of integration in the North American automotiveindustry, the pattern in industrial relations varies widely among the auto sectors ofthe three countries. Canadian and U.S. automotive workers are represented bynational unions, while Mexican workers are organized into “state corporatist”2 plantand enterprise unions that are tied to Mexico’s former ruling party, the PartidoRevolucionario Institucional (Institutional Revolutionary Party, or PRI).3 The

1 In 1998, for example, 92 percent of the vehicles exported from Mexico went to North America.Similarly, in 1996, 97 percent of Canadian automotive exports were destined for the United States and Mexico(see U.S. International Trade Commission, The Impact of the North American Free Trade Agreement on the U.S.Economy and Industries: A Three-Year Review, Investigation No. 332-381 [Washington, D.C.: U.S. InternationalTrade Commission, 1997]; Industry Canada, Statistical Review of the Canadian Automotive Industry, 1998[Ottawa: Statistics Canada and Industry Canada, 1998]; and Asociación Mexicana de la Industria Automotriz[AMIA], Boletín, various years and issues).

2 According to Collier and Collier, a state corporatist system involves “(1) state structuring ofgroups that produces a system of officially sanctioned, noncompetitive, compulsory interest associations;(2) state subsidy of these groups; and (3) state-imposed constraints on demand-making, leadership, andinternal governance. Corporatism is thus a non-pluralist system of group representation . . . in the case ofcorporatism the state encourages the formation of a limited number of officially recognized, non-competing,state-supervised groups” (Ruth Berins Collier and David Collier, Shaping the Political Arena: CriticalJunctures, the Labor Movement, and Regime Dynamics in Latin America [Princeton: Princeton UniversityPress, 1991], p. 51, emphasis in the original). Significantly, in many Latin American countries, the leadersand members of corporatist unions receive state benefits and subsidies in exchange for supporting theregime and for making demands that are consistent with the regime's economic policies.

3 This paper was written prior to the July 2000 elections in Mexico. Although the long-term effects of theelection remain unclear, several preliminary observations can be made. The election of Vicente Fox Quesada,presidential candidate of the center-right Partido Acción Nacional (National Action Party, PAN) marks a turningpoint in Mexican politics. The PRI, which had been in power continuously for 71 years, is now in the opposition.Mexico’s center-left Partido de la Revolución Democrática (Democratic Revolutionary Party, PRD) has lost seatsin the Congress but continues to have a presence in national politics.

Fox seeks to reduce the size of the federal bureaucracy, reform public administration, eliminatecorruption, and increase employment. He will face a series of challenges in trying to achieve these goals. Inparticular, employees in the federal bureaucracy are organized into a labor federation linked to the PRI; therefore,they will undoubtedly resist efforts to cut jobs.

The question, of course, arises: Will the election change industrial relations in Mexico’s automobileindustry? In the short term, patterns of union affiliation will remain the same, although some unions may becomemore militant. Mexico’s largest labor association, the Confederation of Mexican Workers (CTM), continues to be

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2 The North American Auto Industry Beyond NAFTA

participants in wage bargaining in the United States and Canada are generallyconfined to unions and employers, with little or no government involvement. Bycontrast, Mexican officials often play an important role in collective bargaining. Inaddition, the levels of quality and productivity are markedly different in each country.Productivity levels in some Mexican plants approach those in the United States, butthe Mexican auto industry is generally less efficient than that of its northernneighbors.

This study examines recent developments in the North American automobileindustry, with a focus on productivity, compensation, and collective bargaining in theUnited States, Canada, and Mexico. After examining trends in employment and unionorganization in each country, the study will analyze the relationship betweenproductivity and earnings in an attempt to answer several broad questions:

1. What role does the government play in linking productivity and income inthe automobile sector?

2. Is there a gap between productivity and earnings among automotiveworkers in the United States, Canada, and Mexico?

3. How is productivity taken into account in collective-bargaining agreementsand wage settlements in the North American automotive industry?

4. Have firms used the North American Fair Trade Agreement (NAFTA) toprevent unions from organizing or to moderate wages in the United States?

This study argues that the variation in labor laws and institutions in thegovernments of the three countries have partly influenced the patterns of wagebargaining in the North American automotive industry. In the United States andCanada, labor institutions are based on a liberal industrial relations system, whichlimits the role of the state in wage and productivity bargaining. In this context,unions and management assume primary responsibility for bargaining on theseissues. On the other hand, the Mexican industrial relations system reflects a statecorporatist tradition, which contemplates a strong role for government in collectivebargaining. Yet, even though the Mexican government plays a more active role incollective bargaining, the relationship between productivity and real wages is muchstronger in Canada and the United States than it is in Mexico.

integrated into the PRI; the CTM also represents the majority of automobile workers in Mexico’s engine andvehicle assembly plants. In the past, the PRI expected the leadership of the CTM to guarantee labor peace in thesector, and the CTM obliged. Now that the PRI is in the opposition, the CTM may be more willing to use strikes asa way to increase wages and benefits.

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John P. Tuman 3

The U.S. Automotive Industry

Employment

In analyzing the effects of NAFTA on the U.S. automotive industry, it is instructive tobegin with a discussion of trends in employment in the sector. The proportion of themanufacturing workforce employed in the U.S. automotive industry has fallen inrecent years—from 7.7 percent in 1992 to 3.8 percent in 1997, the lowest percentagesince 1972. Still, the relatively small size of the industry implies that its performancecan have direct and indirect effects on employment in the manufacturing sector.

The growth of employment in the motor vehicle assembly and car body sector(Standard Industrial Classification [SIC] 3711) was anemic or negative during the1980s and early 1990s. As a result of the implementation of restructuring plans, theannual change in employment figures averaged only 0.25 percent between 1982 to1988. The employment situation in the vehicle assembly sector became noticeablyworse between 1989 and 1992. The sector registered job losses for every year duringthis period, while total employment in 1992 reached 314,000, a 20-year low; theannual change in employment between 1989 and 1992 averaged –2.97 percent.

Despite a slowdown in 1996, employment in the vehicle assembly sector hasgrown moderately since 1993—from 319,000 in 1993 to 341,000 in 1997, a gain ofapproximately 7 percent, with the annual variation averaging 1.7 percent between1993 and 1997. (Table 1 shows the figures for total employment in the industry forselected years.)

Table 1

Total Employment in the Automotive Industry, United States, Canada, and Mexico, 1980-97

United States Canada Mexico

Year Vehicle Assembly

and Car Bodies

(SIC 3711)

Parts and

Accessories

(SIC 3714)

Vehicle Assembly

(SIC 3231)

Parts

(SIC 3251-3259)

Vehicle Assembly

(SIC 384110)

Parts

(SIC 384122-

384126)*

1980 368,000 350,000 44,900 NA NA NA

1985 409,000 394,000 56,900 NA 53,600 128,700

1990 329,000 401,000 56,100 86,396 52,700 173,600

1995 355,000 483,000 54,088 100,637 53,600 145,400

1997 341,000 535,000 56,208 115,870 66,900 150,600

*Excludes employment in maquiladora plants.

Sources: Bureau of Labor Statistics, U.S. Department of Labor; Statistics Canada and Industry Canada, Strategis Database,http://strategis.ic.gc.ca (accessed November 1, 1998); SECOFI, as cited in Jorge Carrillo V., “Productivity, Income and Labor in theAutomotive Industry in Mexico” (paper presented at the Second North American Seminar on Incomes and Productivity, Secretariat ofthe Commission for Labor Cooperation, Dallas, Texas, February 26-27, 1998), table 9.

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An analysis by the U.S. International Trade Commission (ITC) suggests thatNAFTA has had a minor, but positive, effect on employment growth in vehicleassembly;4 other factors—such as the growth in the U.S. economy and newinvestments—have played a much more important role in the employment figures.

In contrast to the trends in vehicle assembly, job losses in the automotive partsand accessories sector (SIC 3714) showed mild growth. Despite a significantcontraction in 1982, the average annual change in employment between 1982 and1988 was 1.85 percent. As a result of a strong recession in the sector, the changebetween 1989 and 1992 was somewhat lower (0.73 percent). Since 1993, however,employment in this sector has made strong gains: from 430,000 in 1993 to 535,000 in1997, an increase of 24.5 percent. During the same period, the annual change inemployment in the automotive parts sector averaged 5.15 percent, far above theperformance of the vehicle assembly sector. Thus, it is clear that the introduction ofNAFTA has had a positive—but only minor—effect on employment in plants thatproduce automotive parts.5

Industrial Relations and Union Organization

Overview of the U.S. Industrial Relations System

In the United States, the National Labor Relations Act (Wagner Act of 1935) hasplayed a key role in shaping government labor institutions as well as the industrialrelations system as a whole. The Wagner Act, along with subsequent legislation,regularized collective bargaining, created institutions—such as the National LaborRelations Board (NLRB)—to resolve disputes, and it also regulated the certification ofunions. Although the government is responsible for resolving disputes and protectingworkers’ rights, the law does not contemplate a strong role for the state in bargainingor other relations.

Because U.S. labor legislation imposes very few requirements on the substanceof collective-bargaining agreements, unions and employers have primaryresponsibility for establishing contract wages and benefits and for bargaining overproductivity. In addition, except in unusual circumstances, government labor officialsplay no direct role in collective bargaining. As noted below, this feature of the U.S.system stands in stark contrast to the situation in Mexico, where government officialsshape the outcomes of collective bargaining.

Union Organization

Detailed information on the rate of unionization in different branches of the U.S.motor vehicle industry is not generally available. The U.S. Department of Labor’sBureau of Labor Statistics (BLS) tracks the rate for the motor vehicle andtransportation equipment industry at the three-digit classification (SIC 371), but theirdata do not distinguish among vehicle and engine assembly, automotive parts, and

4 ITC, Impact of the North American Free Trade Agreement, sec. 6-47.5 Ibid., sec. 6-53.

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John P. Tuman 5

other forms of production of transportation equipment. The BLS data indicate that therate of unionization in the U.S. motor vehicle and transportation equipmentindustries fell from 43 percent in 1995 to 40.2 percent in 1997.6 This finding isconsistent with the short-term decline in unionization in the manufacturing sector.

Vehicle and engine assembly plants in the United States continue to be wellorganized by the United Auto Workers Union (UAW). In 1997, the UAW hadapproximately 775,000 active members, with 392,800 concentrated in plants operatedby the “Big Three”: General Motors, Chrysler,7 and Ford. Although Nissan and Hondaoperations in the United States are nonunionized, the UAW represents workers inseveral other Japanese and foreign “transplants” (for example, Mazda, Mitsubishi, andVolvo).

The effects of NAFTA on union-organizing campaigns in the U.S. automotiveindustry are unclear. Some union leaders allege that employers have threatened totransfer production to Mexico as one step in limiting union-organizing drives in U.S.plants. In a survey of union officials who participated in 525 organizing campaigns indifferent sectors between 1993 and 1995, the Commission for Labor Cooperationnoted that approximately 50 percent of respondents reported that managers hadthreatened to close their plants in response to possible unionization.8 As the reportindicated, however, the survey presents only the perceptions of union leaders anddoes not provide conclusive evidence that such threats were actually made. Althoughthere is anecdotal evidence of threats in a small number of automotive parts plants,9

assessing the effects of employers’ threats is a complicated task. Given thewidespread negative publicity concerning NAFTA, some workers may already perceivethat their jobs face the risk of being transferred to Mexico. In such cases, it is difficultto sort out the reasons why workers choose to avoid unionization. Moreover, evenwhen threats are made, they may not be reported.

To assess whether threats of plant closures have occurred in the U.S.automotive industry, 339 cases reviewed by the NLRB between 1990 and 1996 wereexamined. All cases involved allegations made by unions that management hadthreatened to close down plants while union certification drives were under way. Ananalysis of the data suggests that only 2.4 percent (8 cases) involved a company thatwas producing automotive parts or transportation equipment, indicating that threatsof plant closures have been infrequent in the automotive sector in the United States.Moreover, most of the complaints were brought against parts companies that were notcaptive suppliers, and no complaints were registered against firms that producefinished vehicles. In all 8 cases involving companies producing automotive parts,

6 The 1997 data are unpublished figures from the Current Population Survey, provided by theBureau of Labor Statistics, U.S. Department of Labor, December 1998.

7 The time period for this study includes years prior to Chrysler’s merger with Daimler. Thus, throughoutthe paper, “Chrysler” is used instead of “Daimler-Chrysler.”

8 Commission for Labor Cooperation, Plant Closings and Labor Rights (Dallas and Lanham, Md.:Bernan Press and Secretariat of the Commission for Labor Cooperation, 1997), p. 69.

9 Ibid., pp. 69-70.

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unions fared well: the NLRB issued a bargaining order, proposed a standard remedy,or ordered a second election.10

Table 2

Annual Change in Output and Earnings per Hour in the Vehicle Assembly and Parts andAccessories Sectors, United States, 1988-96

SIC 3711, Motor Vehicle Assembly SIC 3714, Automotive Parts and Accessories

Year Change in Output

per Hour*

Change in

Nominal

Earnings

Change in Real

Earnings**

Change in Output

per Hour*

Change in

Nominal

Earnings

Change in Real

Earnings

1988 9.9 5.0 0.9 4.8 3.3 -0.8

1989 0.2 2.6 -2.2 -5.9 1.1 -3.7

1990 -1.3 4.5 -0.9 2.1 -0.3 -5.7

1991 -5.3 6.3 2.1 -2.5 3.0 -1.2

1992 12.7 -0. 1 -3.1 8.6 4.4 1.4

1993 -0.4 6.1 3.1 7.0 3.7 0.7

1994 1.4 6.5 3.9 4.6 5.6 3,0

1995 -2.1 -0.7 -3.5 -0.3 4.0 1.2

1996 3.9 2.4 -0.6 -0.9 1.7 -1.3

Average,

1988-96 2.1 3.6 -0.03 1.9 2.9 -0.7

Average,

1988-92 3.2 3.7 -0.6 1.4 2.3 -2.0

Average,

1993-96 0.7 3.6 0.7 2.6 3.7 0.9

*Sector output divided by total hours expended. BLS uses a Tornqvist formula to calculate the industry output.**The change in nominal earnings is calculated from BLS data on gross payrolls and corresponding paid hours for productionworkers. The payroll data are reported before deductions for old age and unemployment insurance, withholding tax, union dues, orretirement plans. Compensation for overtime, vacations, holidays, and sick leave that is paid directly by the firm is included.Bonuses, commissions, and other types of nonwage cash payments are excluded, unless they are given regularly (at least once amonth). In-kind payments are excluded. The nominal figures are deflated according to the annual change in the CPI for urbanconsumers.

Sources: Calculated from data in U.S. Department of Labor, Bureau of Labor Statistics (BLS), Office of Productivity andTechnology “Industry Productivity Database”; U.S. Department of Labor, BLS, “Consumer Price Index, All Urban Consumers (CPI-U)”; and U.S. Department of Labor, BLS, “National Employment, Hours, and Earnings Database,” <http://stats.bls.gov>, AverageHourly Earnings of Production Workers, Series ID EEU31371106 (motor vehicles and car bodies) and EEU 31371406 (automotiveparts and accessories).

10 Calculated from unpublished data on cases involving plant closings provided by the NLRB and theCommission for Labor Cooperation, March 18, 1998. The 1997 report of the Commission for Labor Cooperationpresents a general analysis of the results of 339 cases for the period 1990-95. Their results do not, however,distinguish among unions in different sectors (ibid., pp. 18-19). I am grateful to the staff of the Commission forLabor Cooperation for providing the NLRB data.

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John P. Tuman 7

Although they are instructive, these findings should be treated with caution. Thissample of cases may represent only a small fraction of the total number; casesinvolving unfair labor practices may be dismissed, settled, or withdrawn in one of theregional NLRB offices before they reach the full NLRB;11 and data from regional NLRBoffices are not summarized or readily available. In addition, it is possible that some ofthe remedies ordered by the NLRB have been reversed in federal courts of appeal.

Productivity and Compensation

Labor productivity in the U.S. automotive industry has grown modestly since 1988.Between 1988 and 1996, the average annual change in output per hour in the vehicleassembly sector (SIC 3711) was 2.1 percent (see table 2).12 Dividing the data into twoseries allows an examination of changes that might have occurred since NAFTA tookeffect.

Viewed from this angle, performance was slightly better in the first period.Between 1988 and 1992, the annual average change in hourly output in vehicleassembly plants was 3.3 percent. The corresponding figure for the period 1993-96was 0.7 percent. In addition, in 1990, 1991, 1993, and 1995, the annual change inoutput per employee was negative.

In the automotive parts and accessories sector (SIC 3714), labor productivitydisplayed a similar tendency throughout this period, as shown in table 2. From 1988to 1996, the average annual change in output per hour was 1.9 percent. In contrast tovehicle assembly, the average annual growth in labor productivity was stronger in thesecond part of the series, that is, between 1993 and 1996.

Other measures suggest that the productivity of automotive workers in theUnited States has improved as well. As table 3 shows, the average number of workersper vehicle in U.S. car assembly plants fell from 3.72 in 1993 to 3.15 in 1995. Duringthe same period, the number of workers per vehicle in truck assembly plants alsofell—from 3.91 to 3.78.13 The United States has also fared well within the context ofNorth American production. Because of the paucity of data and the absence of othermeasures of labor productivity, this study uses the number of workers per vehicle asa substitute measure to compare productivity. The figures in table 3 show the numberof workers per vehicle in the Big Three truck and car assembly plants in Canada, theUnited States, and Mexico. (Because data are lacking on Japanese transplants inMexico, the Japanese plants in Canada and the United States have been excludedfrom the comparison.) These figures clearly indicate that U.S. plants outperform theircounterparts in Mexico, but they remain slightly less efficient than the Big Three

11 Commission for Labor Cooperation, Plant Closings and Labor Rights, pp. 66-68.12 In several subsamples of SIC 3711, the average annual change in hourly output ranged from 6.2 percent

to 8.8 percent (see Stephen Herzenberg, “Regulatory Frameworks and Development in the North American AutoIndustry,” in Social Reconstructions of the World Automobile Industry, ed. Frederic C. Deyo [New York: St.Martin's Press, 1996], p. 274, table 9.1).

13 Calculated from raw data on workers per vehicle in U.S. plants, presented in Harbour and Associates, TheHarbour Report 1994 (Flint, Mich.: Harbour and Associates, 1994), pp. 19-23; and ibid., 1996, pp. 33, 38-39. Thefigures include data from Japanese transplants in the United States.

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plants in Canada during the period under study. As noted below, these trendscontinued through 1996.

John P. Tuman 9

Table 3

Workers per Vehicle in Car and Truck Assembly Plants, United States, Canada, and Mexico, 1993and 1995

Number of Workers

1993 1995

Canada

Cars (Big Three) 3.34 3.08

Trucks (Big Three) 3.23 3.30

Cars (including transplants) 3.21 2.88

Trucks (including transplants) 3.23 3.17

Mexico



United States



Cars (including transplants) 3.72 3.15

Trucks (including transplants) 3.91 3.78

Source: Calculated from data in Harbour and Associates, The Harbour Report 1994 (Flint, Mich., 1994), pp. 9-23 and TheHarbour Report 1996 (Flint, Mich., 1996), pp. 33, 38-39.

Despite the improvement in labor productivity, the movement in real hourlyearnings has not followed trends in productivity. The data in table 2 show annualchanges in output per hour—as well as changes in nominal and real hourlyearnings—for the vehicle assembly and automotive parts sectors. The data, derivedfrom industry surveys conducted by the Bureau of Labor Statistics,14 report on hourlywages for production and nonsupervisory workers in the SIC 3711 and SIC 3714

14 U.S. Department of Labor, Bureau of Labor Statistics, Office of Productivity and Technology,“Industry Productivity Database, Selected from 4-Digit Industries, Output per Hour Annual Rates of Change,”< http://ftp.bls.gov/pub/special.requests/opt/dipts/oaeh4drt.txt (accessed October 6, 1998).

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sectors. The data suggest that, between 1988 and 1996, the annual change innominal hourly earnings in vehicle assembly plants was higher than the change inlabor productivity.

However, the relationship between productivity and trends in real wages is alsoof interest. To calculate the change in real earnings, the annual variation in nominalwages has been deflated with data on the annual average change in the consumerprice index (CPI) for urban workers. Once inflation is taken into account, a differentpattern emerges: the annual change in output per hour averaged 2.1 percent between1988 and 1996, but the annual change in real hourly earnings averaged –0.03percent. Table 2 shows that the same outcome was evident in the automotive partssector. However, if the analysis is confined to the 1993-96 period, the data show afairly strong correlation between real earnings and labor productivity in vehicleassembly plants and a somewhat weaker one in automotive parts. This comparisonsuggests that, in the short term, productivity bargaining between firms and unions invehicle assembly plants has had a modest effect on wage settlements in recent years.

The relatively weak association between labor productivity and real wagesbetween 1988 and 1992 might reflect changes that were occurring in collectivebargaining between the UAW and management in the 1980s. The following section ofthis study will explore this point in more detail, but several other factors should betaken into account here as well. Firms in the U.S. automotive parts and finishedvehicle sectors invested considerable sums in capital equipment throughout thisperiod, including, but not limited to, the introduction of computer-assisted design andmanufacturing (CAD/CAM) technology, programmable machine tools, and other newmachinery. At the same time, employment levels, while fluctuating, remained fairlystable. If the improvement in labor productivity was a result of investments in newtechnologies and equipment, but there was no reduction in total labor costs becauseof employment stability, then there may have been little upward pressure on realwages.15 The data are insufficient to evaluate the validity of this hypothesis; futurestudies should investigate the role of these factors.

Wages and Productivity in Collective-Bargaining Agreements

Given the importance of efficiency in an increasingly competitive global economy, onemight wonder how productivity is taken into account in collective-bargaining andwage settlements in the automobile industry. Because the automotive parts sector isdiverse and consists of a large number of establishments, it is difficult to assess therole of productivity in this sector’s negotiations on these issues. Some union officialssuggest that contingent compensation and profit sharing have been introduced innonunionized automotive parts plants but not in unionized facilities.16 This evidenceis fragmentary and therefore should be treated with caution.

The role of productivity in collective bargaining has undergone a significantshift in the finished vehicle sector. To fully appreciate the significance of this change,

15 I am indebted to the anonymous reviewers and editors of the CSIS North American AutoIndustry Project for this discussion.

16 Personal interview with an official in the UAW Research Department, June 10, 1998.

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John P. Tuman 11

it is necessary to examine the evolution of wage rules in the sector. Between 1948 and1979, for example, the UAW succeeded in establishing a general set of wage rulesamong the Big Three, which included three key provisions: (1) in all companies andplants, wages were linked to job classifications and seniority levels, (2) firms wererequired to provide cost-of-living adjustments (COLAs) that increased with the CPI,and (3) workers were given annual wage increases during the life of the collective-bargaining agreement. The third provision—referred to as the “annual improvementfactor” (AIF)—led to an annual wage increase that averaged 3 percent.17 Although theagreements did not require workers to reach specific productivity targets, the UAWwas expected to deliver sustained productivity growth in exchange for the AIF and theCOLA.18 Once adopted, wage rules tended to eliminate differences in compensationas a possible basis for competition among original-equipment manufacturing (OEM)firms in the U.S. automotive industry.

As many analysts have noted, the pattern of wage bargaining in the industrychanged significantly in the 1980s. A strong recession, coupled with increasingcompetition from foreign producers, prompted General Motors, Chrysler, and Ford toseek concessions on wages and work rules from the UAW.19 By 1982, the UAW hadratified a new national agreement with General Motors, eliminating the AIF and paidpersonal holidays, postponing COLAs for 18 months, and introducing a new plan toreduce absenteeism.20 The GM changes were quickly incorporated into agreementswith Ford and Chrysler. In exchange, the union gained job security provisions,income protection for laid-off workers (with seniority), and lump-sum payments.21

Ratified in 1984, the national agreement between General Motors and the UAWinstitutionalized the new system of compensation in the automobile sector.Significantly, the 1984 agreement continued to substitute lump-sum payments and

17 While UAW locals were able to negotiate seniority and job classifications, the national headquarters hadresponsibility for negotiating the wage increase and other issues related to compensation (such as paid holidays,vacation pay, and overtime pay).

18 See Barry Bluestone and Irving Bluestone, Negotiating the Future: A Labor Perspective on theAmerican Workplace (New York: Basic Books, 1992); and Pradeep Kumar and John Holmes, “Change, but inWhat Direction? Divergent Union Responses to Work Restructuring in the Integrated North American AutoIndustry,” in Deyo, ed., Social Reconstructions of the World Automobile Industry, p. 164.

19 See Harry C. Katz, Shifting Gears (Cambridge: MIT Press, 1985).20 See Bruce E. Kaufman and Jorge Martinez-Vazquez, “Voting for Wage Concessions: The Case

of the 1982 GM-UAW Negotiations,” Industrial and Labor Relations Review 41, no. 2 (1988): 185.21 The UAW continued to negotiate for job and income security plans (such as job training and the

Supplemental Unemployment Insurance Program) in subsequent contracts throughout the 1980s and early 1990s.For examples, see UAW and General Motors Corporation, Supplemental Agreement Covering Guaranteed IncomeStream Benefit Program, Profit Sharing Plan, Personal Savings Plan, Legal Services Plans (October 24, 1993),exhibits D, D-1, and Supplemental Agreement Covering Supplemental Unemployment Benefit Plan and PensionPlan (October 24, 1993), exhibit E; Chrysler Corporation and UAW, Exhibits to the Production and Maintenance,Parts Depot, Office and Clerical, and Engineering Agreements of October 18, 1993, exhibits C and D, andAgreement Concerning Guaranteed Income Stream Benefit Program (October 18, 1993), parts A-B; and UAW andFord Motor Company, Benefit Plans and Agreements, vol. 3: Supplemental Unemployment Benefit Agreement andPlan, Guaranteed Income Stream Agreement, Profit Sharing Agreement and Plan, Tax-Efficient Savings Agreementand Plan, UAW-Ford Legal Services Plan (October 4, 1993).

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performance bonuses for the AIF, and it also introduced profit sharing for workers.22

Because the profit-sharing bonus was based on corporate profits, an increasing shareof workers’ compensation became contingent on productivity and the firm’s saleslevels.23 As a result, significant differences in salaries emerged at the firm level; in1993, for example, production workers at General Motors received no profit-sharingbonus, while the average bonus given to Chrysler and Ford workers was $4,300 and$1,350, respectively.24

In summary, patterns of wage bargaining in unionized assembly plantsexperienced a significant shift in the 1980s, long before NAFTA took effect. Thebreakdown in rules regarding wages is a possible cause for the weak associationbetween real wages and labor productivity between 1988 and 1992. However, despitethe pressures generated by regional integration and globalization, wage settlementssince 1996 have restored some of the traditional wage rules that existed prior to 1984.Placed on a more secure footing by strong demand and a healthy U.S. economy, theUAW has, in effect, sought to take back some of the wage concessions the union madeduring the 1980s. The 1996 agreements reintroduced a 3 percent AIF during thesecond and third years of contracts with General Motors, Ford, and Chrysler.25 Whilemaintaining various union-management initiatives to improve quality, the agreementsdid not explicitly link the AIF to any performance criteria or productivity targets. Theagreements also provided for a significant cost-of-living adjustment as well as anincrease in the number of paid holidays. The UAW agreed to continue profit sharing in1996. Nevertheless, when compared with previous agreements, a relatively smallerportion of workers’ earnings was contingent on productivity and sales in the contractsthat were negotiated in 1996-99.26

22 See Peter Cappelli and W. P. Sterling, “Union Bargaining Decisions and Contract Ratifications:The 1982 and 1984 Auto Agreements,” Industrial and Labor Relations Review 41, no. 2 (1988): 205.

23 See Katz, Shifting Gears, pp. 2-3.24 Ibid., p. 2. The introduction of a “pay-by-knowledge” compensation system also led to the emergence of

pay differentials among workers in the same job classification. Designed to enhance skills and raise productivity andquality, this system rewards workers who achieve certain performance standards in different jobs in their work areas.Assemblers who participate may earn as much as $2.00 more than their base pay. In many cases, work teams havebeen used to introduce pay-by-knowledge compensation in their work areas.

25 See Chrysler Corporation and the UAW, Agreements Between Chrysler Corporation and the UAW(October 14, 1996), section 110; UAW and Ford Motor Company, Agreements Between UAW and the Ford MotorCompany, vol. 1 (September 30, 1996), article IX, section 1; and UAW and General Motors Corporation, AgreementBetween UAW and the General Motors Corporation (November 2, 1996), paragraph 101. By contrast, in the 1993agreements, a general wage increase was given only for the first year, along with a 3 percent “performance bonus” inthe second and third years of the agreement (see Chrysler Corporation and the UAW, Agreements Between ChryslerCorporation and the UAW [October 18, 1993], section 110; UAW and Ford Motor Company, Agreements BetweenUAW and the Ford Motor Company, vol. 1 [October 4, 1993], article IX, section 2; and UAW and General MotorsCorporation, Agreement Between UAW and the General Motors Corporation [October 24, 1993], paragraph 97).The performance bonus was not folded into base wage rates.

26 See Chrysler Corporation and the UAW, Exhibits to the Production and Maintenance, Parts Depot,Office and Clerical, and Engineering Agreements of October 18, 1993 (October 14, 1996), exhibit F; UAW andFord Motor Company, Benefit Plans and Agreements, vol. 3: Supplemental Unemployment Benefit Agreement andPlan, Guaranteed Income Stream Agreement, Profit Sharing Agreement and Plan, Tax-Efficient Savings Agreementand Plan, UAW-Ford Legal Services Plan (September 30, 1996), pp. 111-29; and UAW and General MotorsCorporation, Supplemental Agreement Covering Supplemental Unemployment Benefit Plan and Pension Plan

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John P. Tuman 13

The Canadian Automotive Industry

Employment

The automotive industry accounts for a large share of employment both in Canada’smanufacturing sector and in its national economy. In 1996, combined employment inautomotive parts and vehicle assembly plants represented 8.4 percent of allmanufacturing employment.27 In addition, a recent assessment by Industry Canadasuggests that the automotive industry indirectly generated 500,000 jobs in 1996.28

Despite significant restructuring of the plants in 1981-82, employment in thevehicle assembly sector posted strong gains throughout the 1980s, as shown in table1.29 From 1983 to 1989, employment in assembly plants increased by 25 percent—from 42,000 to 52,400. Even though employment decreased after a recession in 1990-92, the industry has rebounded since then: between 1993 and 1997, employment inassembly plants rose from 54,192 to 56,208, an increase of almost 4 percent.30 Thepositive performance of employment in Canada is partly a consequence of ongoinginvestment; recent investment has been spurred by lower premiums for medicalinsurance, gains in productivity, and stability in exchange rates.31

Employment in the automotive parts industry has also recovered in recentyears. 32 A lingering recession in the United States and Canada, combined with short-term pressure from imports, led to job losses in the parts sector during the late1980s; however, in recent years, growth in that sector has been fairly strong. Between1990 and 1997, employment increased from 86,396 to 115,870—a gain of 34percent.33 During the same period, the number of establishments in the automotiveparts sector increased from 619 to 744. Much of the growth since 1995 has beenconcentrated in firms producing plastic parts (SIC 3256) and accessories (such asdrive shafts, clutch assemblies, mufflers, and mirrors, grouped together in SIC 3259).

(November 2, 1996), exhibit F-1. In addition, there is no direct evidence that firms made any reference to NAFTA inorder to pressure the UAW into making wage concessions.

27 Statistics Canada, as cited in Industry Canada, The Automotive Competitiveness Report: AReport on the Canadian Automotive Industry (Ottawa: Industry Canada, 1998), table 1.

28 Ibid., p. 1.29 Employment in the motor vehicle sector is concentrated in six firms: General Motors, Chrysler, Ford,

CAMI, Toyota, and Honda. The number of establishments in the vehicle assembly sector—including producers ofbuses, truck chassis, truck tractors, and automobiles—declined slightly, from 32 in 1990 to 29 in 1997.

30 See Industry Canada, Statistical Review of the Canadian Automotive Industry, 1998 (Ottawa:Statistics Canada and Industry Canada, 1998).

31 Ibid., p. 7; see also John Holmes, “From Three Industries to One: Towards an Integrated NorthAmerican Automobile Industry,” in Driving Continentally: National Policies and the North American AutoIndustry, ed. by Maureen Appel Molot (Ottawa: Carleton University Press, 1993), p. 35.

32 The data on employment in automotive parts in this section refer to the following subsectors: SIC 3251,engines and engine parts; SIC 3252, wiring assemblies; SIC 3253, stampings; SIC 3254, steering and suspensionsystems; SIC 3255, brake parts and wheels (rims); SIC 3256, plastic parts and accessories; SIC 3257, fabrics andaccessories; and SIC 3259, other automotive parts accessories.

33 See Industry Canada, Statistical Review, 1998.

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An Overview of the Canadian Industrial Relations System

Canada’s labor laws and institutions are modeled on the U.S. National LaborRelations Act (Wagner Act of 1935). Labor legislation in each Canadian province andin the federal government protects the right to organize, regulates strikes and conflict,and establishes health and safety standards.34 Most provincial laws vary little fromone another.

Because provinces have primary authority over industries in their jurisdictions,collective bargaining is largely decentralized, except in a few heavy industries,including automobiles. Canadian federal and provincial labor laws requireagreements to include grievance procedures; however, in other areas—such ascontract wages, benefits, and productivity—legislation (as well as government policy)does not regulate the substance of those agreements.35 Similarly, although Canadahas a long legal tradition of conciliation, the government is not involved directly incollective bargaining within the private sector. With the exception of grievances andmid-contract disputes, unions and employers have primary responsibility fornegotiating collective-bargaining agreements.

Union Organization

The workforce in the Canadian automotive industry is fairly well organized. Therate of unionization in the assembly and parts sectors increased from approximately41 percent in 1992 to 56 percent in 1997.36 Union membership in vehicle assemblyplants is somewhat higher: with the exception of Toyota and Honda transplants, allthe auto assembly plants are unionized. In 1996, approximately 71 percent of vehicleassembly plants were unionized.37

The rate of unionization in the automotive parts sector varies somewhat amongfirms. Nearly all production workers in the in-house (referred to as “captive”) partssuppliers for Ford, General Motors, and Chrysler are unionized. However, in 1996,only about 45 percent of the workers in “independent,” or nonaffiliated, automotiveparts companies belonged to unions.

The majority of unionized workers is represented by the National Automobile,Aerospace, Transportation, and General Workers Union of Canada (CAW), which was

34 See Gilles Trudeau and Guylaine Vallée, “Economic Integration and Labour Law in Canada,” inRegional Integration and Industrial Relations in North America, eds. Maria Lorena Cook and Harry C. Katz(Ithaca: Cornell University, ILR Press, 1994), pp. 66-79; and Mark Thompson, “Current Developments inCanadian Industrial Relations,” in ibid., pp. 37-51.

35 Ibid.36 Statistics Canada, as cited in Sidney Weintraub, “Incomes and Productivity in the Auto Industry

in North America” (paper presented at the Second North American Seminar on Incomes and Productivity,Secretariat of the Commission for Labor Cooperation, Dallas, Texas, February 26-27, 1998), table 6a.

37 Calculated from employment and union membership data from Statistics Canada and CAW Research (seeCanadian Auto Workers, “Sector Profiles: Major Automakers,” 1998). The data include some employment figures inheavy truck plants and exclude employment and union membership in the “captive” (or in-house) automobile partsplants.

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John P. Tuman 15

was formed in 1985 after a major rupture between UAW members in Canada and theUnited States over wage concessions. Since its formation, the CAW has become thelargest union in Canada’s private sector. According to the data provided by the CAW,in 1996-97, the union had a total membership of roughly 215,000, organized into1,295 bargaining units. Approximately 47 percent of the membership is in the vehicleassembly and automotive parts sectors, with the rest distributed in surfacetransportation, fisheries, airlines, mining, and several other sectors. Although theCAW remains concerned about the effects of trade liberalization and regionalintegration, the union has been relatively successful in maintaining its strongmembership. Through a series of aggressive organizing campaigns and mergers withother unions, the CAW gained approximately 56,687 new members in the autoindustry since 1993, and it lost about the same number as a result of downsizing andplant closures.38 Moreover, the union has made progress in organizing more workersin the independent automotive parts sector.

Table 4

Annual Change in Productivity and Real Wages, 1991-96

SIC 3231: Motor Vehicle Assembly SIC 3251: Engines and Engine Parts

Year Change

MVA/Worker*

Change RVMS/

Worker**

Change in Real

Wages and

Salaries***

Change

MVA/Worker*

Change RVMS/

Worker**

Change in

Real Wages

and Salaries***

1991 -13.6 -7.4 -0.8 -2.5 -2.1 -12.8

1992 24.1 8.2 4.4 -15.9 5.7 -1.0

1993 22.0 20.3 10.5 65.0 25.6 -1.7

1994 31.9 8.8 7.6 1.6 4.5 9.8

1995 9.3 7.2 -1.0 21.5 -10.7 1.5

1996 21.4 1.2 0.3 19.4 5.0 2.4

Average

,

1988-96

15.8 6.4 3.5 14.8 4.7 -0.3

* MVA refers to manufacturing value added.** RVMS refers to real value of manufacturing shipments; shown inconstant 1986 Canadian dollars.*** The nominal figures are gross wages and salaries received beforedeductions. The figures include payments for paid holidays, vacation,and overtime and exclude nonmonetary compensation, bonuses, andother benefits not paid regularly. The nominal figures are deflatedaccording to the annual change in the CPI.Sources: Calculated from Industry Canada and Statistics Canada, as provided in Strategis database <http://strategis.ic.gc.ca>(accessed November 1, 1998).


38 Canadian Auto Workers, “Sector Profiles.”

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As in the U.S. automotive industry, labor productivity in the Canadian automotiveindustry has grown steadily in recent years. The data in table 4 were calculated withfigures provided by Statistics Canada and Industry Canada and show changes inmanufacturing value added and the real value of shipments per worker for the vehicleassembly sector and for the engine and engine parts sectors (SIC 3231 and 3251).Although these data differ from those used to examine labor productivity in theUnited States, they are appropriate to use as substitute measures for analyzing theCanadian sector.39 The data indicate that, between 1991 and 1996, the annualchange in the real value of manufacturing shipments per production worker averaged6.4 percent and 4.7 percent, respectively, in the vehicle assembly and engine sectors.During the same period, there were strong gains in manufacturing value added perworker in both sectors as well.

Canadian firms have also made progress in reducing the average number ofworkers per vehicle in their Big Three car plants. Between 1993 and 1995, theaverage number of workers per vehicle in Big Three car plants fell from 3.34 to 3.08(see table 3). Although the number of workers per vehicle in truck assembly plantsrose slightly, the overall performance of these plants is, in comparative terms, quitepositive. Citing more recent data from Harbour and Associates, Industry Canadasuggests that, in 1996, Canada had the best performance in terms of workers pervehicle in all the North American car assembly plants owned by General Motors,Chrysler, and Toyota.40 Because of high productivity, assembly labor costs (pervehicle) may have been 30 percent lower in Canada than they were in the UnitedStates in 1996.41

In contrast to the United States and Mexico, Canada shows a much strongerassociation between the trend in productivity and real earnings in some branches ofthe automotive industry. Although the Canadian data are not strictly comparable tothe earnings figures for the United States and Mexico, the numbers can be used toexamine the relationship between salaries and labor productivity in the Canadianauto industry. (The data refer to salaries per worker in current Canadian dollars,deflated to account for inflation.) In the vehicle assembly sector (SIC 3231), theaverage annual change in real salaries per worker was 3.5 percent between 1991 and1996 (see table 4). This result may reflect the fact that there is a high rate ofunionization in vehicle assembly plants and that the CAW implicitly exchanges gainsin wages for productivity, regardless of the wage rules in collective-bargainingagreements.

The relationship between productivity and real salaries in the automotive partssector is less clear. Between 1991 and 1996, the annual change in real wages andsalaries per worker in the engine and engine parts sector (SIC 3251) was –0.3 percent;however, for the latter part of the series (1994-96), productivity and real salaries in

39 This measure has been used previously to examine the effects of NAFTA on labor productivity, forexample, by the U.S. International Trade Commission (see ITC, Impact of the North American Free TradeAgreement, section 6-47).

40 Industry Canada, The Automotive Competitiveness Report: A Report on the Canadian AutomotiveIndustry (Ottawa: Industry Canada, 1998), p. 1.

41 Ibid., pp. 7-9.

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John P. Tuman 17

that sector were positively correlated. The reason for the weaker association betweenproductivity and salaries is unclear, possibly because of the role played by the lack ofuniformity in compensation practices among unionized and nonunionized facilities.However, as noted previously, the pattern might also reflect the importance of thefirms’ investments in capital equipment. As in the case of the U.S. sector, futureresearchers should investigate the role of institutional factors (collective bargaining,for example), as well as new investment.


In recent years, several nonunionized firms in the Canadian automotive parts sectorhave started to make a portion of compensation contingent on performance; however,there are no reliable data on the number of establishments that have adopted thispractice. Nevertheless, as in the unionized vehicle assembly plants, automotive partsplants that have been organized by the CAW have resisted an explicit link betweenproductivity and wages, although union leaders have considered other policies toraise productivity.42 In the vehicle assembly plants, productivity is not taken intoaccount explicitly in collective-bargaining and wage settlements, and this is part of along-term trend. When the UAW represented Canadian automotive workers, forexample, collective-bargaining agreements in vehicle assembly plants were modeledon the contracts incorporated in the United States, with some provisions added toaddress local issues. As in the United States, Canadian contracts provided for an AIF,an annual cost-of-living adjustment, and wage rates that were tied to seniority andjob classifications.43 Although the agreements did not list productivity targets,Canadian auto workers were expected to improve productivity in exchange for anincrease in their real wages. In addition, the contracts established a uniform set ofwage rates that minimized differences between workers in different firms.44

Although Canadian workers remained concerned about employment andrestructuring in the 1980s, economic conditions in the Canadian vehicle assemblysector were generally stronger than those in the United States. As a result, Canadianworkers had less incentive to support the pattern of concession bargaining that wasproposed to save jobs in the United States. Indeed, after 1982, Canadian workersrejected profit sharing and lump-sum payments and sought to retain the traditionalwage rules that guaranteed annual wage increases and COLAs for workers. As manyanalysts have noted, friction over concession bargaining proved to be the catalyst thatled Canadian workers to leave the UAW and form the CAW in 1985.

Since 1987, the CAW has negotiated successfully for the retention of traditionalwage rules in vehicle assembly and unionized parts facilities. An analysis of the 1996-99 national agreements with General Motors, Chrysler, and Ford shows that wage

42 Personal interview with CAW officials, International Research Department, June 24, 1998.43 See Kumar and Holmes, “Change, But in What Direction?,” pp. 163-64.44 After 1968, the UAW also took steps to minimize differences in wages and working conditions between

automotive employees in both countries. From 1968 to 1981, for example, Chrysler workers in Canada and theUnited States were covered by a single binational agreement (personal interview with CAW officials, June 24,1998). The UAW also bargained for equalization in nominal wages between U.S. and Canadian automotive workersin 1973 (see Kumar and Holmes, ibid., p. 165).

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rules have not changed much since 1979. For example, in the 1996-99 agreements,workers were guaranteed an annual wage increase of 2 percent for each year of theagreement, a COLA tied to the CPI, and new job security provisions.45 It is importantto note that the contracts did not make provisions for profit sharing and other formsof contingent compensation. CAW officials may be willing to match wage gains with anequal (or greater) increase in labor productivity,46 but the contracts do not includeperformance criteria as a condition of any wage increases or compensation.

Although the CAW remains opposed to linking productivity and compensationexplicitly, the union has adopted various measures designed to improve productivity.The CAW administers an extensive training program in each firm, and the union hasnegotiated changes in work practices to improve performance, while maintainingstrong contractual rules over work procedures and organization. These steps seem toimply that union leaders have sought to negotiate changes to raise productivity, butin a way that preserves union control and prevents association of compensation withproductivity.

The Mexican Automotive Industry

Employment

In 1998, there were 8 original-equipment manufacturing firms and 18 assemblyplants operating in Mexico.47 Excluding production of heavy trucks and vehicles,48 fivemultinational companies—Chrysler, Ford, General Motors, Nissan, and Volkswagen—accounted for the majority of the production, domestic sales, and exports ofautomobiles in 1997 and the first half of 1998.49 The dominance of these fivecompanies dates back to at least 1970, if not earlier.50 As recent entrants, BMW,

45 See General Motors of Canada, Ltd., and the National Automobile, Aerospace, Transportationand General Workers Union of Canada (CAW-Canada), Master Agreement Between General Motors ofCanada, Limited, and the National Automobile, Aerospace, Transportation and General Workers Union ofCanada (CAW-Canada) Locals 27, 199, 222, 303, 636, 1163, and 1973 (October 28, 1996), pp. 67-69;Chrysler Canada, Ltd., and the CAW, Agreements Between Chrysler Canada, Ltd., and the CAW-TCACanada (Ajax Trim Plant; Etobicoke Casting Plant) (September 15, 1996), pp. 128-40; and Ford MotorCompany of Canada, Ltd., and National Unions, CAW-TCA Canada, Agreement Between Ford MotorCompany of Canada, Limited, and National Unions, CAW-TCA Canada: Locals 200 (Windsor), 584(Bramalea), 707 (Oakville), and 1520 (St. Thomas) (November 11, 1996), pp. 143-53.

46 Personal interview with CAW officials, June 24, 1998.

47 This figures includes forges, stamping facilities, and engine plants operated by the OEM assemblers.Some assembly plants are integrated facilities that also produce parts (for example, Ford-Cuautitlán, Volkswagen-Puebla, and Chrysler-Toluca).

48 There are 12 bus and truck assembly plants in Mexico, including DINA, Kenworth Mexicana, andDaimler-Benz México. Since approximately 1985, General Motors and Ford have been the lead producers of smalltrucks. Renault de México and Fábrica de Autotransportes de México suspended production of small trucks in 1987and 1990, respectively.

49 See AMIA, La Industria automotriz en México.50 By 1987, declining sales had forced Renault and Vehículos Automotores de México (VAM) to suspend

automobile production in Mexico. However, Renault maintains an engine assembly plant in Durango.

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John P. Tuman 19

Honda, and Daimler-Benz continue to establish a presence in export production andin Mexico’s domestic market, although their market share remains small.

While showing stability in recent years, the employment figures in Mexico’svehicle and engine assembly plants have fluctuated since 1982. Employment in thevehicle assembly sector increased by 10.9 percent between 1983 and 1988, but theaverage annual growth in employment was only 1 percent during the same period,largely because of restructuring in the early part of the decade (see table 1). As aresult of the construction of new plants, investment in older facilities, and animproved business climate, employment levels improved after 1989. Between 1989and 1992, employment increased by 37.4 percent, growing at an average annual rateof 9.2 percent. Despite significant growth in exports, the 1995 peso crisis—coupledwith a weak domestic market—has generated employment problems since 1993.Between 1993 and 1997, employment increased by 1.05 percent, reaching 66,900 in1997; nevertheless, the average annual change in employment over the same periodwas –1.8 percent.51

Hoping to reap the benefits of NAFTA, producers of automotive parts haverapidly expanded operations in Mexico since 1988.52 Excluding in-bond processingplants (maquiladoras), the automotive parts industry employed 150,600 workers in1996—representing approximately 7 percent of employment in the manufacturingarea. Despite problems in the domestic market, employment in the parts sector grewat an average annual rate of 4.71 and 4.82 percent, respectively, between the periods1983-88 and 1989-92. In recent years, however, liberalization has generated morecompetition in this sector, driving some firms out of business. From 1993 to 1996,employment contracted at an average annual rate of –5.73 percent; the cumulativechange was 14 percent between 1993 and 1996.

Relations between the OEM firms and automotive parts producers remain fairlystrong. The National Association of the Automotive Parts Industry (INA) estimatesthat in 1994, 111 automotive parts companies (out of a total of approximately 500)were direct suppliers to the OEM firms, all of which work with first- and second-linesuppliers.53 However, since 1990, Ford, General Motors, Nissan, and Volkswagen haveattempted to develop just-in-time networks, while simultaneously promoting quality

51 Calculations of average annual growth in this section are from data compiled by the Secretariat ofCommerce and Development (SECOFI), as cited in Jorge Carrillo V., “Productivity, Income and Labor in theAutomotive Industry in Mexico” (paper presented at the Second North American Seminar on Incomes andProductivity, Secretariat of the Commission for Labor Cooperation, Dallas, Texas, February 26-27, 1998), table 9.These data include employment figures for both unionized workers and employees who are legally prohibited frombecoming unionized.

52 In contrast to the OEM segment of the industry, the structure of the automotive parts sector is fairlydiverse. Using data obtained from SECOFI, Carrillo suggested that in 1996 there were roughly 600 automotive partscompanies (ibid., p. 6). Another estimate from the National Association of the Automotive Parts Industry (INA)indicates that, in 1994, there were approximately 500 automotive parts manufacturers (INA, as cited in ClementeRuíz Durán, Enrique Dussel Peters, and Taeko Taniura, Changes in Industrial Organization of the MexicanAutomobile Industry by Economic Liberalization, Institute of Developing Economies, Joint Research ProgramSeries, no. 120 [Tokyo: Institute of Developing Economies, 1997], pp. 59-60). Of these firms, 34 percent wereregistered as subsidiaries of U.S., Japanese, and German multinational companies, while the remaining firms werecontrolled by Mexican capital. Most of these are large and mid-sized firms.

53 Ibid.

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control among suppliers (for example, ISO-9000, QS-9000).54 Quite often, thesesupply networks are located close to the assembly plants, thus creating localproduction zones.55


Overview of the Mexican Industrial Relations System

Table 5A

Affiliation of Unionized Workers in Industries Under Federal Jurisdiction, Mexico, 1978 and1997

1978* 1997**

Number of workers 2,317,828 2,844,295

Number of unionized workers 943,989 2,246,970

Members of the Confederation of 315,883 926,455

Mexican Workers (CMT)

Members of other confederations, 517,796 1,235,776

federations, and national unions affiliated

with the Congreso del Trabajo (CT) and PRI***

Members of independent unions 184,639 84,739

*Data on the total number of workers and unionized workers is taken from CésarZazueta and Ricardo de la Peña, La Estructura del Congreso del Trabajo(Mexico City: Fondo de Cultura Ecónomica, 1984), tables II.13, and VIII.12. Theestimate includes workers in various service industries under federal jurisdictionand 21,184 workers in an “unspecified” category.**Data as of June 1997, when a complete accounting was done.***Includes 55 labor organizations: national confederations, federations, andautonomous industrial unions that are affiliated with the Labor Congress (CT).

Sources: Zazueta and de la Peña, La Estructura del Congreso del Trabajo, and unpublished data from the Dirección General de

Registro de Asociaciones, Secretaría del Trabajo y Previsión Social, Subsecretaría “A,” 1997.

54 See Carmen Bueno, Eduardo Aguilar, Luis Márquez, and Rosa María Vázquez, “Relacionesestratégicas comprador-abastecedor en la industria automotriz: Una Comparación entre México y Japón,” inJapón Inc. en México: Las Empresas y modelos laborales japoneses, ed. by Jordy Micheli (Mexico City:Universidad Autonoma Metropolitana, 1996), p. 113; and Carrillo, “Productivity, Income and Labor in theAutomotive Industry in Mexico.”

55 See José Carlos Ramirez, “Recent Transformations in the Mexican Automobile Industry,” IDS Bulletin24, no. 2 (1993): 58-64; and John P. Tuman and John T. Morris, “The Transformation of the Latin AmericanAutomobile Industry,” in Transforming the Latin American Automobile Industry: Unions, Workers, and thePolitics of Restructuring, eds. John P. Tuman and John T. Morris (Armonk, N.Y.: M.E. Sharpe, 1998), pp. 3-25.

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John P. Tuman 21

Compared with the United States and Canada, Mexico’s government plays a majorrole in industrial relations, as provided by the country’s Federal Labor Law. Thegovernment regulates the substance of agreements in a number of areas (such asemployment status, severance payments, and so forth), and it mediates disputes andexercises legal supervision over strikes and labor protests. The law also assumes thatworkers and employers do not operate on a level playing field. As a result, Mexico’slabor law makes it relatively easy for workers to form a union. In practice, however,the process of union registration has often been politicized.

The application of regulations concerning union registration is mediated by asystem known as “state corporatism.”56 Despite recent reforms, the Mexicangovernment has traditionally exercised significant control over the structure ofrepresentation of interests within the labor movement. The government guaranteedthe Confederación de Trabajadores de México (Confederation of Mexican Workers,CTM)—as well as other confederations allied to the ruling Institutional RevolutionaryParty—a virtual monopoly with regard to union membership (see tables 5A and 5B).57

Table 5B

Affiliation of New, Successfully Registered Unions in Industries Under Federal Jurisdiction,Mexico, 1989-94

Other Official Total OfficialYear Total CTM Unions* Unions** Independent

1989 18 5 9 14 4

1990 19 3 12 15 4

1991 34 10 23 33 1

1992 29 4 21 25 4

1993 8 2 5 7 1

1994 14 2 7 9 5

*Includes the Confederación Revolucionaria de Obresos Campesinos (CROC), Confederación Regional Obrera Mexicana (CROM),and other confederations, federations, and unions affiliated with the CT and PRI.**Includes CTM plus unions affiliated with the CT.

Source: Dirección General de Registro de Asociaciones, Secretaría del Trabajo y Previsión Social, Subsecretaría “A,” unpublisheddata, as cited in Tuman and Greenway, “Reconstructing State-Labor Relations in Contemporary Mexico: Foundations andImplications of a New Bargain” (paper presented at the annual meeting of the American Political Science Association, Washington,D.C., August 1997).

56 For a detailed explanation of state corporatism, see note 2.57 See Francisco Zapata, “Social Concertation in Mexico,” in Participation in Public Policy Making: The

Role of Trade Unions and Employers' Associations, ed. by Tiziano Treu (New York and Berlin: Walter de Gruyter,1992), pp. 146-58; and Collier and Collier, Shaping the Political Arena. Until recently, legal mechanisms have beenused to make it difficult to join independent unions and to change affiliation (see Graciela Bensusán Areous, “TheMexican Model of Labor Regulation and Competitive Strategies,” in Cook and Katz, eds., Regional Integration andIndustrial Relations, pp. 52-66). As a result, while some “independent” unions managed to gain recognition duringperiods of political liberalization, the majority of workers remains affiliated to the CTM and official confederations.

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In addition, the operating budgets of “official” unions have been subsidized bythe government, and the labor elite has received a variety of social and economicbenefits. In exchange, union leaders mobilized workers to support the (former) rulingparty during elections and periods of crisis and have moderated unions’ bargainingpositions to conform to the government’s development objectives.58 Although theprocess of union registration has become more transparent since 1997, and newindependent federations have emerged since then, the legacy of state corporatismcontinues to influence the structure of union representation (see tables 5A and 5B).59

Indeed, in the short run, the election of the National Action Party’s presidentialcandidate, Vicente Fox, is unlikely to change the pattern of union representation inMexico.

The Mexican government also plays an important role in collective bargainingand in the process of wage determination. Government officials frequently participatein negotiations and attempt to influence the outcome of collective-bargainingnegotiations.60 Working through tripartite bodies or directly in negotiations, theMinistry of Labor and Social Welfare seeks to persuade unions and employers toincorporate specific policies into collective contracts. Significantly, recent governmentefforts have included not only initiatives to link wage hikes to productivity but alsopolicies that impose ceilings on increases in wages as a way to control inflation (forexample, topes salariales).

Union Organization in Vehicle and Engine Assembly Plants

Since the early years of the industry, Mexico’s automobile assembly plants have beenhighly unionized. The two major assemblers in Mexico—Ford and General Motors—were already unionized by the late 1930s.61 Shortly after initiating assemblyoperations, Chrysler (Fábricas AutoMex), Nissan, and Volkswagen also becameunionized.62 Union membership in OEM firms remains high. Excluding employeeswho are legally prohibited from being organized, nearly the entire workforce infinished vehicle and engine plants was unionized in 1998 (see table 6)—a rate that ishigher than the rate of unionization for the automobile industry as a whole. Data fromthe Ministry of Labor and Social Welfare suggest that, in 1994, approximately 42.3

58 See Francisco Zapata, El Sindicalismo mexicano frente a la reestructuración (Mexico City:Colegio de México, 1995).

59 See John P. Tuman and Gregory Greenway, “Reconstructing State-Labor Relations inContemporary Mexico: Foundations and Implications of a New Bargain” (paper presented at the annualmeeting of the American Political Science Association, Washington, D.C., August 1997).

60 In 1993, for example, the archival evidence shows that officials attempted to enforce compliance with a9.9 percent ceiling on wages.

61 See Javier Aguilar García, La Política sindical en México: Industria del automóvil (MexicoCity: Ediciones Era, 1982), pp. 44-67, tables 32 and 35; and Armando Meza Ponce, Fabrica y poder,mecanismos de control empresarial: El Caso de la ensambladora de automóviles Ford Villa (Mexico City:Centro de Investigaciones y Estudios Superiores en Anthropología Social, 1984).

62 See Aguilar García, La Politica sindical en México; and Ian Roxborough, Unions and Politics inMexico: The Case of the Automobile Industry (Cambridge and New York: Cambridge University Press,1984).

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John P. Tuman 23

percent of workers in the assembly plants and parts industries (that were underfederal jurisdiction) belonged to unions.63

63 This total includes workers in vehicle assembly and automotive parts, excluding in-bond processingplants (maquiladoras).

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Table 6

Union Organization in the Engine and Vehicle Assembly Plants, Mexico, 1998

Firm / Plant Affiliation Number of

Members

Chrysler* (Saltillo, DF, and Toluca

plants)

Confederación de Trabajadores de

México (CTM)

7,266

Dina-Hidalgo (assembly and engines

plants)

Independent 3,349

Ford* (Chihuahua, Cuautitlán, and

Hermosillo plants)

CTM 6,771

General Motors-Silao CTM 3,737

General Motors-Ramos Arizpe

(engine plant)

CTM 2,130

General Motors-Ramos Arizpe

(assembly plant)

CTM 2,664

General Motors-Toluca CTM 3,226

Daimler-Benz-Estado de México CTM 2,503

Nissan-Aguascalientes CTM 2,282

Nissan-Cuernevaca Independent 1,847

Renault-Durango CTM 460

Volkswagen Federation of Goods and Services

Union (Fesebes)

9,391

Total 45,626

* Indicates an enterprise union; membership data refer to the number of members in all the Mexican vehicle and engineassembly plants listed for Chrysler and Ford.

Source: Dirección General de Registro de Asociaciones, Secretaría del Trabajo y Previsión Social, unpublished data,1998.

Union organization in the terminal sector is highly fragmented. Most unionsare organized at the plant and enterprise level; collective bargaining takes placealmost exclusively at the plant level.64 Unions in automobile plants also have differentpolitical affiliations, as shown in table 6, although the majority of workers and unionsbelong to the CTM, the largest “state corporatist” labor confederation. Lacking internaldemocracy and dominated by PRI labor leaders, the CTM’s automobile unions havehad difficulties in aggregating and representing workers’ demands.65 Workers haveoften complained that the CTM is more likely to represent the government’s economic

64 Collective bargaining reflects local issues. For Chrysler, however, the national general secretary of theunion and a legal adviser from the CTM handle negotiations. For Ford, negotiations involve representatives from thelocal union and officials on the National Executive Committee (see John P. Tuman, “The Political Economy ofRestructuring in Mexico’s ‘Brownfield’ Plants: A Comparative Analysis,” in Tuman and Morris,eds., Transformingthe Latin American Automobile Industry, pp. 148-78).

65 Ibid.

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John P. Tuman 25

and development policy objectives than workers’ interests. As a result, the CTM hasperiodically faced significant challenges to its rule. In the late 1960s, growingdiscontent with the CTM—combined with the government’s liberalization program—sparked the growth of union democratization movements.66 A number of unions—including those at DINA, Nissan-Cuernevaca, and Volkswagen—gained independencefrom the PRI and adopted reforms that promised more internal democracy.Independent unions in the terminal sector have been prone to strikes and more likelyto adopt militant bargaining positions with employers.67

Some independent unions managed to win legal recognition between 1968 and1975, but the CTM succeeded in organizing every engine and vehicle plant thatopened since 1980. Several newer CTM affiliates (for example, Ford-Hermosillo, Ford-Chihuahua, General Motors-Ramos Arizpe) enjoy a measure of internal democracy,although the confederation maintains a strong presence in bargaining talks. Thesuccess of the CTM in the auto export plants reflects a convergence of interestsamong the confederation, the firms, and the Mexican government. Human resourceofficials sought to prevent the militant and independent automobile unions (in centralMexico) from organizing workers at the new automobile export plants.68 Althoughmanagers had hoped to avoid unionization altogether, they accepted the CTM afterofficials gave assurances that the confederation would agree to major contractconcessions.69

For their part, government policymakers were interested in securing labor’sconsent to reforms designed to facilitate export-oriented development. Policymakersrecognized that rapid introduction of reforms was imperative in the aftermath of the

66Following the 1968 protests, the Echeverría administration (1970-76) legalized some parties and alsoallowed “independent unions” to become registered (see Jorge Basurto, En el Régimen de Echeverría: Rebelión eindependencia [Mexico City, DF: Siglo Veintiuno Editores, 1983]; and Kenneth Coleman and Charles Davis,“Preemptive Reform and the Mexican Working Class,” Latin American Research Review 18, no. 1 [1983]: 3-31).For their part, automobile workers took advantage of liberalization to push for independence from the CTM.Workers’ principal demands were for improvements in wages and working conditions. These issues became salientin the late 1960s, when Mexican regulators implemented policies that led to growth in production (see Douglas C.Bennett and Kenneth E. Sharpe, Transnational Corporations versus the State: The Political Economy of theMexican Auto Industry [Princeton: Princeton University Press, 1985], pp. 95-154; and Rhys Jenkins, TransnationalCorporations and the Latin American Automobile Industry [Hampshire, England: Macmillan, 1987], pp. 58-62).The CTM was unable to cope with this changing context. The confederation had relied on appointed plant delegatesto resolve grievances stemming from larger workloads, but this system proved to be inadequate as production—andinjuries—grew rapidly. As one step in securing better conditions, workers demanded independence from the CTM aswell as democracy within their unions (see Tuman, “The Political Economy of Restructuring in Mexico’s‘Brownfield’ Plants,” p. 155).

67 See Tuman, “The Political Economy of Restructuring in Mexico’s ‘Brownfield’ Plants,” pp.159-69, tables 6.3-6.6.

68 See Harley Shaiken and Stephen Herzenberg, Automation and Global Production: AutomobileEngine Production in Mexico, the United States and Canada (San Diego: Center for U.S.-Mexican Studies,University of California at San Diego, 1987); Arnulfo Arteaga, “La Reestructuración de la industriaautomotriz en México y sus repercusiones en el viejo nucleo fabril,” in Proceso de trabajo y relaciones ella industria automotriz en México, ed. Arnulfo Arteaga (Mexico City: Friedrich Ebert Stiftung, 1993), pp.1-54; and Tuman, “The Political Economy of Restructuring in Mexico’s ‘Brownfield’ Plants.”

69 Personal interviews with labor officials and company human resources officials (Interviews 3, 17D, 20,21, Mexico City, 1993; Interview 29, Mexico City, 1997). At General Motors-Silao, the CTM and the company hadnegotiated an agreement before plant construction had even begun (Interviews 5, 17D, Mexico City, 1993).

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debt crisis. Led by pragmatic labor leaders, the government viewed the CTM as a loyalally that could generate a cooperative climate in the field of industrial relations. Theimplicit bargain struck between the CTM and the government allowed theconfederation to regain its monopoly on union representation in exchange forcommitments that the CTM would accept the government’s policy reforms.70

Union Organization in the Automotive Parts Sector 71

Little is known about the rate of unionization in the automotive parts sector inMexico. Data from the Registrar of Associations (Registro de Asociaciones) indicatethat, in 1998, there were 24 unions organized in the automotive parts sector, with atotal membership of 7,358, or approximately 5 percent of the workforce.72

Nevertheless, these data may understate the real level of unionization. Because of thesize and diversity of the sector, it is possible that some unions in automotive partsplants have been included with the figures in another sector, which is under federaljurisdiction.

In plants that produce automotive parts union organization is fragmented.Since all unions are organized as plant and enterprise organizations, collectivebargaining occurs at the local level. In addition, the political affiliation of automotiveparts unions is fairly diverse. The CTM and other Labor Congress (CT) affiliates haveenterprise unions in several of the larger firms (such as Grupo Industrial Casa); 5,322workers belong to the CTM and CT affiliates.73 Some unions also experiencedmovements for union democratization and independence, with varying degrees ofsuccess.74 Currently, six unions—with a membership of 2,036 workers—are notaffiliated with either the Labor Congress or the PRI.

70 As the primary basis for striking a bargain with the state, protection of union membership undoubtedlyrepresented the second best option for labor elites. Given the government’s commitment to restructuring, laborleaders first sought to guarantee that the CTM would continue as an organization. Such a strategy would ensure theirability to negotiate for inducements beyond membership in the future and was also consistent with labor leaders’preference for pragmatic solutions to problems in the relationship between the state and labor (see Tuman andGreenway, “Reconstructing State-Labor Relations in Contemporary Mexico”).

71 The data in this section do not cover workers and unions in in-bond processing plants (maquiladoras) thatproduce automotive parts. For good analyses of maquiladora unions, see Edward Williams and John T. Passé-Smith,The Unionization of the Maquiladora Industry: The Tamaulipan Case in National Context (San Diego: Institute forRegional Study of the Californias, San Diego State University, 1992); and Alfredo Hualde, “Industrial Relations inthe Maquiladora Industry: Management’s Search for Participation and Quality,” in Cook and Katz, eds., RegionalIntegration and Industrial Relations in North America, pp. 207-17.

72 The majority of the large automotive parts firms is unionized (see Herzenberg, “Regulatory Frameworksand Development in the North American Auto Industry,” p. 277).

73 CT affiliates include four affiliates of the Revolutionary Confederation of Workers and Peasants (CROC)and two affiliates of the Regional Confederation of Mexican Labor (CROM).

74 See J. M. Sandoval, I. Cisneros, and L. Concheiro, “El Nuevo Sindicalismo en la ramaautomotriz,” in Los Sindicatos nacionales en el México contemporaneo, vol. 3, ed. Javier Aguilar García,(Mexico City: Editores G.V., 1989), pp. 101-110.

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John P. Tuman 27

Productivity

Since the early 1980s, productivity in Mexico’s automobile industry has improvedsignificantly; labor productivity, as measured by output per hour, has increased aswell. The annual change in output per hour in the vehicle assembly sector averaged11.2 percent between 1995 and 1997 (see table 7).

Table 7

Annual Changes in Hourly Output and Real Earnings in the Vehicle Assembly Sector, Mexico, 1995-97

Year Change in Output

per Hour*

Change in Real

Hourly Earnings**

1995 5.40 -38.49

1996 26.20 7.77

1997 1.97 -9.22

Average,

1995-97 11.20 -13.31

*Output by total hours expended (unit method) for SIC 384110.**The change in nominal earnings is from data provided by INEGI. The data measure wages plus additional compensation for paidholidays, vacation, bonuses, social benefits (such as coupons for essential items), and contributions to social security, before anydeductions. Pension payments, honoraria, and commissions are excluded. The nominal change is deflated according to the annualchange in the CPI.

Sources: U.S. Department of Labor, BLS, National Employment, Hours, and Earnings Database, Average Hourly Earnings ofProduction Workers, Series ID EEU31371106 (motor vehicles and car bodies), 1999; and INEGI, Banco de InformaciónEconómica, “Indicadores de la Cuesta Industrial Mensual por División y Clase de Actividad Económica, Cifras Absolutas, 384110,Fabricación y Ensamble de Automóviles y Camiones, January 1994-December 1997” <http://dgcnesyp.inegi.goc.mx?cgi-win/bdi.exe>.

In their review of productivity over a longer period, Ruíz Durán, Peters, andTaniura found that output per employee (measured in millions of 1980 pesos perworker) in vehicle assembly plants grew at an annual rate of 5.3 percent between1980 and 1996.75 This rate was higher than the rate in manufacturing and in theeconomy as a whole over the same period. In addition, the number of vehiclesassembled per employee increased from 6.6 vehicles in 1983 to 9.88 in 1988. Thetrend continued between 1989 and 1996, as vehicles per employee grew from 12.23vehicles to 21.17.76 The trends in labor productivity might reflect company investment

75 Ruíz Durán, Peters, and Taniura, Changes in Industrial Organization of the Mexican AutomobileIndustry, p. 39. The real value of production per worker in automobile assembly (Industrial Classification 384110)grew at an average annual rate of 37.85 percent between 1994 and 1997 (calculated from Instituto Nacional deEstadística Geografía e Informática [INEGI], “Indicadores de la encuesta industrial mensual por división y clase deactividad económica, 384110: Fabricación y ensamble de automóviles camiones,” http://dgcnesyp.inegi.gob.mx/cgi-win/bdi.exe [accessed January 16, 1999], and unpublished data on producer prices provided by AMIA).

76 Calculated from data on employment and production in AMIA, La Industria automotriz en México(various years); and SECOFI data, as cited in Carrillo, “Productivity, Income and Labor in the Automotive Industryin Mexico,” table 9. Because the employment data include supervisory employees and office staff, these figures mayactually understate the real level of productivity.

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in new plants in northern Mexico as well as a renewed emphasis on employeetraining.

Despite these improvements, Mexico’s vehicle assembly sector would appear tobe less efficient than those in Canada and the United States. As noted previously, in1993 and 1995, the number of workers per vehicle in Mexico’s Big Three plants washigher than in the United States and Canada (see table 3). Nevertheless, some ofMexico’s export assembly plants are performing at high levels. In studies of Ford’sChihuahua and Hermosillo export plants, researchers found that quality, operatorproficiencies, hours per vehicle, and other measures of productivity in Mexico wereclose or equal to those in comparable plants in the United States.77 Compared withother Mexican plants, the performance of several export assembly plants (for example,Ford-Hermosillo, General Motors-Ramos Arizpe)—in terms of workers per vehicleassembled—was much closer to levels found in both its northern neighbors in 1993and 1995.78 During the same period, however, the number of workers per vehicleactually increased in many of the older Mexican assembly plants.

Although the productivity gap between the export plants and the older import-substitution industrialization (ISI) plants may be attributable to differences inproduction technology, other factors are important as well. Case studies of the newexport plants indicate that the workforce is relatively young, educated, and receptiveto management initiatives that emphasize flexibility and productivity.79 In addition,employees in the export plants are organized into teams, a practice that has a markedeffect on productivity and quality.80 As the dominant labor union in the export plants,the CTM has cooperated with managers of these plants to facilitate the introduction ofwork teams, continuous training, and other programs designed to boost workers’performance. These programs were recently introduced in the older plants, butworkers and unions often resisted such efforts.81 Consequently, raising productivity inthe ISI plants remains an important priority for plant managers.

Mexico’s automotive parts sector has also registered gains in productivity. RuízDurán, Peters, and Taniura have estimated that both labor and capital productivity inthe parts sector grew by approximately 37 percent (in dollar terms) between 1988 and

77 See Shaiken and Herzenberg, Automation and Global Production, p. 10; and Harley Shaiken,Mexico in the Global Economy: High Technology and Work Organization in Export Industries (San Diego:Center for U.S.-Mexican Studies, University of California at San Diego, 1990), p. 24.

78 See Harbour and Associates, The Harbour Report 1994 and 1996 (Flint, Mich.: Harbour andAssociates, 1994 and 1996).

79 See Shaiken and Herzenberg, Automation and Global Production, pp. 54-55, table 12; Shaiken,Mexico in the Global Economy, pp. 72-74; Arteaga, “La Reestructuración de la industria automotriz”; JorgeCarrillo V., “Flexible Production in the Auto Sector: Industrial Reorganization at Ford-Mexico,” WorldDevelopment 23, no. 1 (1995): 87-101; and Alex Covarrubias V., “Cambio en las relaciones laborales, losmercados de trabajo y el perfil obrero en México: El Caso de Ford Hermosillo,” Estudios Sociológicos 15,no. 44 (1997): 468-70.

80 See Shaiken, Mexico in the Global Economy; Jorge Carrillo V., “Maquilización de la industriaautomotriz en México: De la Industria terminal a la industria de ensamble,” in La Nueva Era de la industriaautomotriz en México, ed. Jorge Carrillo V. (Tijuana: El Colegio de la Frontera Norte, 1990), pp. 62-116;Carrillo, “Flexible Production in the Auto Sector”; and Herzenberg, “Regulatory Frameworks andDevelopment in the North American Auto Industry.”

81 See Tuman, “The Political Economy of Restructuring.”

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John P. Tuman 29

1994.82 As a result, total factor productivity in the sector increased. INEGI dataindicate that, between 1994 and 1997, the parts sector registered a gain of 28.6percent in labor productivity (value of production/number of workers).83 Theimprovements in productivity and quality stem from investment in plantmodernization, increased worker training, and the prevalence of teamwork in thesector. 84


Given the increase in labor productivity, one might expect some gains in the realwages of production workers. Reliable data for the automotive parts sector areunavailable; for the vehicle assembly sector, however, the available data suggest thatproductivity and earnings have not moved in the same direction.85 Between 1995 and1997, the annual growth in hourly output in the vehicle assembly sector wasapproximately 11.2 percent; during the same period, the average change in realhourly earnings (as measured in the national currency) was –13.3 percent (see table7). These findings are consistent with studies that have noted a negative relationshipbetween productivity and real wages at the plant level.86

The weak association between real earnings and labor productivity is puzzling,but this may reflect competing priorities in the government’s labor and economicpolicies. As noted below, both the Salinas and Zedillo administrations urgedemployers to reward productivity in wage settlements. However, both administrationsplaced greater emphasis on controlling inflation by imposing ceilings on contract wageincreases (topes salariales). Under pressure from the government, union leadersassociated with the CTM—the predominant union in the sector—have bargained forwage increases consistent with the government’s wage ceiling. Moreover, managershave noted that these ceilings forced employers to grant smaller wage increases thanwould have been justified by increases in quality and productivity.

The evidence also suggests that there is a serious gap in hourly earningsbetween automobile workers in Mexico and the United States. The data in table 8show average hourly wage rates for workers at selected vehicle and engine assemblyplants in Mexico. The figures—converted into U.S. dollars at market exchange rates—show that, in dollar terms, hourly rates in these plants are fairly low.

82 Ruíz Durán, Peters, and Taniura, Changes in Industrial Organization of the Mexican AutomobileIndustry, p. 67.

83 As cited in Carrillo, “Productivity, Income and Labor,” table 7.84 Data from the Worldwide Competitiveness Study (as cited in Rick Delbridge, Jim Lowe, and Nick Oliver,

“Economics Rules: Continuity and Change under Global Capitalism” [paper presented at the 13th AnnualInternational Labour Process Conference, Blackpool, England, March 1995, table 12]) show that 50 percent ofMexico’s automotive component plants in the sample used work teams; relatively fewer plants employed suggestionsystems or problem-solving activities. See also Bueno, Aguilar, Márquez, and Vázquez. “Relaciones estratégicascomprador-abastecedor en la industria automotriz”; and Ruiz Durán, Peters, and Taniura, Changes in IndustrialOrganization of the Mexican Automobile Industry.

85 Although the data on earnings do not distinguish between unionized and nonunionized workers, theyreflect earnings for unionized production workers in vehicle assembly plants, because that sector has a high rate ofunionization.

86 See Tuman, “The Political Economy of Restructuring,” pp. 169-70.

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Table 8

Hourly Wage Rates in Selected Assembly Plants, Mexico, 1994-98(in current pesos and U.S. dollars)a

1994 1995 1996 1997 1998

Chrysler-Saltillo

Pesos/hour 5.40 NA 7.89 NA NA

U.S.$/hour 1.60 NA 1.03 NA NA

Chrysler-Toluca

Pesos/hour. 6.51 8.21 10.67 12.81 NA

U.S.$/hour 1.92 1.27 1.40 1.61 NA

Ford-Hermosillo

Pesos/hour 6.25 7.81 9.59 11.50 NA

U.S.$/hour 1.85 1.21 1.26 1.45 NA

Ford-Chihuahua

Pesos/hour 6.03 7.54 9.42 11.30 13.44

U.S.$/hour 1.78 1.17 1.24 1.42 1.41

Ford-Cuautitlán

Pesos/hour 6.90 8.62 10.86 13.03 NA

U.S.$/hour 2.04 1.34 1.42 1.64 NA

Volkswagen

Pesos/hour 8.69 10.52 12.94 15.91 16.10

U.S.$/hour 2.57 1.63 1.70 2.01 1.69

a Average of the wage scale in current new pesos and as converted into U.S. dollars at average annual market exchangerates. The data refer only to hourly wage rates before deductions. Additional compensation from benefits, cost-of-livingcoupons, paid holidays, and so forth, are excluded. Some scales are converted from daily wage rates to hourly ratesbased on data regarding the length of each shift.

Source: Wage revision agreements and collective contracts in STPS-CGCFC and JFCA Archives.

To gauge the effects of benefits and additional payments, table 9 presentsfigures on average hourly compensation rates for workers in the vehicle assemblysectors in Mexico and the United States. (Once again, the compensation data fromMexico have been converted into U.S. dollars at market exchange rates.) This is anappropriate measure of comparative labor costs, but it does not show differences inthe purchasing power of wages.87 Measured in U.S. dollars, average Mexican earnings

87 To measure differences in the relative standard of living, it is necessary to use “purchasing power parities”(PPP). According to the Organisation for Economic Cooperation and Development, some of the PPP data from

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John P. Tuman 31

are far below those in the United States—U.S. $2.13 in 1997. Some of theinstitutional variables noted above—including corporatism, government interventionin collective bargaining, and adjustment policies—play a role in this outcome. To besure, the gap in labor costs between Mexico and the United States also reflects thevolatility in exchange rates and the devaluation of the peso since December 1994.However, even if the exchange rate had remained frozen at 1993 rates, hourlyearnings in Mexico would have reached only U.S.$ 5.41 in 1997, approximately one-fourth the value of hourly earnings of auto workers in the United States.

Table 9

Comparison of Average Hourly Earnings in the Finished Vehicle Sector,United States and Mexico, 1994-97a (in current U.S. dollars)

1994 1995 1996 1997

United States (SIC 3711) 20.71 20.57 21.06 21.63

Mexico (SIC 384110) 3.05 1.82 2.06 2.13

a The U.S. and Mexican data are based on a similar measure; see notes to tables 2 and 7.

Source: U.S. Department of Labor, BLS, National Employment, Hours, and Earnings Database, Average Hourly Earnings ofProduction Workers, Series ID EEU31371106 (motor vehicles and car bodies), 1999; and INEGI, Banco de InformaciónEconómica, “Indicadores de la Cuesta Industrial Mensual por División y Clase de Actividad Económica, Cifras Absolutas, 384110,Fabricación y Ensamble de Automóviles y Camiones, January 1994-December 1997” <http://dgcnesyp.inegi.gob.mx/cgi-win/bdi.exe>.

Cross-national variations in productivity may also influence differences inearnings between workers in the United States and Mexico. As noted, the averagenumber of workers per vehicle in U.S. car and truck plants is approximately twice aslow as the number in Mexican plants. Nevertheless, it is noteworthy that the earningsgap is larger than the productivity gap, and that some plants approaching U.S. levelshave nominal wage rates that remain far below those in comparable plants in theUnited States.


Patterns of wage bargaining in vehicle and assembly plants in Mexico differ from thosein Canada and the United States in a number of ways. First, although seniority andjob classifications play an important role in wage determination, the prevalence ofbargaining at the plant level has led to a wide degree of variation in wage ratesthroughout the industry (see table 8).88 Second, in contrast to U.S. and Canadian

Mexico are unreliable, requiring the analyst to make estimates. For this reason, I have used market exchange rates toconvert the compensation figures.

88 The number of job classifications remains small, however, particularly in Mexican export assembly plants.In 1996-98, for example, the Ford-Hermosillo plant had only one classification (with 10 steps) for the entireworkforce; similarly, in 1996-98, the Ford-Chihuahua engine plant had only four classifications (with 3 steps in eachgroup). Although seniority remains important, managers have introduced rules that make competency, training, and

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agreements, Mexican contracts do not provide for a cost-of-living adjustment that istied to the consumer price index. Instead, unions attempt to deal with inflation byincreasing wages annually and by negotiating for monthly (or annual) payments orcoupons that may be used to purchase essential items. The amount of cost-of-livingbenefits varies greatly in the industry.89

In addition, pursuant to the country’s labor laws, Mexican contracts cover atwo-year period, but wage increases are negotiated annually. A general wage increaseis granted at the time the contract is negotiated, and a separate wage revision(revisión salarial) is made during the second year of the agreement. Consequently, theconcept of an annual improvement factor, which establishes an annual wage increasethrough the life of the agreement, has never taken root in Mexico. Finally, prior to1992, collective contract and wage agreements did not offer bonuses (or othermonetary incentives) for improvements in productivity. A review of agreements andwage revisions in 15 assembly plants for the period 1981-91 indicates that firms didnot explicitly link wage increases to productivity, nor did firms offer a separate bonusfor improvement in productivity.90 Throughout this period, firms focused on rewardingperfect attendance and employees deemed “helpful” by means of a bonus, as opposedto rewarding increases in productivity.91

The manner in which productivity is taken into account in collective bargainingin Mexico has changed since 1991. Compared with the United States and Canada, theMexican government is more actively involved in promoting a link between wages andproductivity, and this has had a modest effect on collective bargaining. Because ofongoing concerns about the performance of the sector under liberalization, theSalinas administration introduced a policy on productivity and wages in 1992. Avoluntary accord—Acuerdo Nacional para Elevar la Productividad y la Calidad(National Accord for Raising Productivity and Quality, or ANEPC)—committedemployers and the government to invest in workers’ training, while firms promised to

skill important factors in promotion and compensation (see Ford Motor Company S.A. de C.V., Planta de Motoresde Chihuahua, Revisión del Contrato Colectivo de Trabajo 1996, in Coordinación General del Cuerpo deFuncionarios Conciliadoras, Secretaría del Trabajo y Previsión Social Archive (hereafter STPS-CGCFC Archive),Expediente 2.1/(6) “82”/3311, February 26, 1996; and clause 51.1, Contrato Colectivo de Trabajo, Planta deEstampado e Ensamble de Hermosillo (1995), and Ford Motor Company S.A. de C.V., Planta de Estampado yEnsamble de Hermosillo, Revisión del Contrato Colectivo de Trabajo 1996, in STPS-CGCFC Archive, Expediente2.1/(22) “87”/7085, February 29, 1996. In the export plants, unions have generally accepted rules regarding pay-for-knowledge and other forms of contingent compensation; by contrast, some unions in the ISI plants have resisted suchprograms (see Tuman, “The Political Economy of Restructuring”).

89 Tuman, ibid., table 6.5.90 Under Mexican labor law, firms are required to give workers a profit-sharing bonus. However, the size of

the bonus has varied significantly. Because of ongoing problems in the sector in the 1980s and 1990s, some firms didnot offer a profit-sharing bonus. As a result, neither unions nor managers have viewed profit sharing as a reliablemonetary incentive to increase productivity.

91 For examples, see clauses 74 and 75 of the Nissan-Cuernavaca, Contrato Colectivo de Trabajo, 1984-86,1988-90, 1990-92, in Junta Federal de Conciliación y Arbitraje (hereafter cited as JFCA) Archive, Expediente No.218-XII-Mor(1); Clause 74, Ford-Cuautitlán, Contrato Colectivo de Trabajo, 1985-87, in JFCA Archive No. CC-260/87-XII-J15. Nevertheless, as managers noted in interviews, the attendance and assistance bonus did not functionwell as an incentive for raising productivity (Interviews 6A, 10F, Mexico City, 1993).

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John P. Tuman 33

raise wages in exchange for improvements in productivity and quality.92 For their part,unions were expected to support the introduction of more flexible work rules.93

Although companies offered public support for the ANEPC, the evidencesuggests that the accord has had only a modest effect on contract settlements in theindustry. Table 10 summarizes the outcomes of wage and productivity negotiations inthe industry between 1996 and 1999. The data, which show the general increase innominal wages and any additional increase for productivity and COLA and socialbenefits, suggest that the increase for productivity was quite small during thisperiod—averaging less than 0.5% percent. Once again, the amount of the wageincrease given to reward productivity is quite small in comparison with the generalincrease in wages, which averaged more than 20 percent in the same period.

Table 10

Average Wage Increases, Increases for Productivity, and Other Adjustments in the AutomotiveIndustry, Mexico, 1996-99 (in percent)a

Year General Increase Increases for Productivity Other* Total

1996 22.0% 0.3% 2.4% 24.7%

1997 21.4% 0.3% 1.1% 22.8%

1998 18.9% 0.6% 1.6% 21.1%

1999 18.5% 0.4% 1.6% 20.5%

a Includes cost-of-living adjustments and social benefits.Source: Secretaría del Trabajo y Previsión Social, unpublished data.

When wage and contract revisions for selected plants are examined, a clearerpattern emerges, and some differences among cases can be discerned. (Table 11presents this comparison.) By 1995, nearly every plant in the terminal sector hadadopted a program to increase training, productivity, and quality. Only a few plantshave offered a wage increase (or bonus) specifically for productivity, however. Between1991 and 1996, a wage increase for productivity was given in several older plants(such as Ford-Cuautitlán, Volkswagen, General Motors-DF, and Nissan-Lerma).94

Nevertheless, with the exception of Nissan-Aguascalientes and Chrysler-Saltillo,managers and unions in the newer export plants have not implemented a wage

92Alfredo Hualde, “Sindicatos y tratado de libre comercio,” in Sindicalismo, relaciones laborales ylibre comercio, ed. by Alejandro Covarrubias and Vicente Solis (Mexico City: El Colegio de Sonora,1993), p. 183.

93 Although systematic data are lacking, some survey evidence suggests that a fair number of workers interminal and parts firms went through training programs in 1995 and 1996 (see Ruíz Durán, Peters, and Taniura,Changes in Industrial Organization of the Mexican Automobile Industry, pp. 84-85).

94 In these cases, the agreements did not specify a target for productivity; rather, the increase was given as anincentive to raise performance (see Ford Motor Company, S.A. de C.V., Planta Cuautitlán y Area Metropolitana,Revisión Integral del Contrato Colectivo de Trabajo, in STPS-CGCFC Archive, Expediente No. 2.1/(12) “83”/3504,March 25, 1991; General Motors [Planta DF], Convenio de Productividad, in JFCA Archive CC-147-XII-J15,February 4, 1993; Revisión de Contrato Colectivo de Trabajo [Volkswagen], August 2, 1992, and Revisión Integraldel Contrato Colectivo de Trabajo [Volkswagen], August 8, 1994, in STPS-CGCFC Archive, Expediente2.1/313(29)/2579.

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increase or bonus linked to productivity.95 Although the reasons for this patternremain unclear, it is possible that managers in the export sector believe that suchagreements are unnecessary because workers’ productivity and quality are already ata high level.

Table 11

Bonus or Wages Increases Given for Productivity in Selected Assembly Plants, Mexico, 1992-96

Plant Number Average

Size

Chrysler-Saltillo 1 3.0%

Chrysler-Toluca

0 NA

Ford-Chihuahua

0 NA

Ford-Cuautitlán 1 2.0%

Ford-Hermosillo

0 NA

General Motors-DF

1

Nissan-

Aguascalientes 1 4.5%

Nissan-Lerma 3 2.6%

Volkswagen 2 3.5%

Source: Wage revisions and collective contracts, in STPS-CGCFC and JFCA Archives, Mexico City.

Among the plants that offer wage increases for productivity, such agreementswere negotiated regularly in Nissan and Volkswagen facilities but less frequently inthe other cases. For example, in the Chrysler-Saltillo plant, management grantedworkers a 4 percent increase for productivity in 1992. Since then, no other increaseshave been given specifically for productivity. Chrysler’s Toluca plant adopted amodified collective contract in 1995, which included new language emphasizingproductivity and training, but it did not offer direct financial incentives for workers’improved performance.96 Although Ford emphasizes training and performance indecisions concerning job advancement, the 1996-98 collective contracts for itsChihuahua and Hermosillo installations did not mention productivity in the wagesettlements.97

95 This finding is consistent with an analysis completed by Carrillo (see “Productivity, Income and Labor inthe Automotive Industry in Mexico,” pp. 223-25).

96 See Chrysler-Toluca, Contrato Colectivo de Trabajo (1995-97), clauses 46-49, in JFCA Archive,Expediente CC-6-XII-J15.

97 See Ford Motor Company S.A. de C.V., Planta de Motores de Chihuahua, Revisión del ContratoColectivo de Trabajo 1996, in STPS-CGCFC Archive, Expediente 2.1/(6) “82”/3311, February 26, 1996, clause 13;

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John P. Tuman 35

By contrast, Nissan has made productivity a condition of part of its wageincreases. An ANEPC program implemented in its Lerma plant in 1994 grantedworkers a 2 percent increase for productivity and established clear productivity andquality targets for each production area. During the wage revision for the followingyear, Nissan gave workers in Lerma another 2 percent increase to rewardproductivity.98 Similar patterns have been evident in the Aguascalientes plant since1995.99

In plants where productivity has been incorporated into wage settlements,management and unions sometimes disagree about the mechanisms for evaluatingand rewarding performance. For example, in 1994, the union at the Volkswagenplant proposed incorporating a new contract clause related to productivity. Theproposed clause (claúsula 26 Ter. [clause 26, part 3]) would have created a regularbonus for productivity improvement as well as a system for evaluating productivityand quality targets.100 The union’s proposal was unexpected because, only two yearsearlier, a strike had broken out over the introduction of work teams in the plant.Consequently, it was surprising that Volkswagen’s management rejected the union’sproposal.

Conclusion

This paper has examined the variations in union organization, compensation, andproductivity in the North American automotive industry. The findings suggest thatlabor productivity in the Canadian, U.S., and Mexican automotive industries hasimproved. Nevertheless, the results also indicate that the role of productivity in wagebargaining differs markedly among countries.

Although productivity has increased in all three countries in recent years, agap remains in levels of performance cross-nationally. Labor productivity, asmeasured by workers per vehicle, is slightly better in Canada than it is in the UnitedStates, but, as noted, the difference is quite small. The gap between laborproductivity in Mexico and the United States or Canada is much wider, particularly inthe Mexican truck assembly plants operated by the Big Three. Part of this difference isundoubtedly attributable to the poor performance of some of Mexico’s older ISI plants.With the closure or modernization of some plants (for example, General Motors-DF)and the opening of newer plants, the gap between the United States and Mexico may

Contrato Colectivo de Trabajo, Planta de Estampado e Ensamble de Hermosillo, (1995), clause 42; and Ford MotorCompany S.A. de C.V., Planta de Estampado y Ensamble de Hermosillo, Revisión del Contrato Colectivo deTrabajo 1996-1998, in STPS-CGCFC Archive, Expediente 2.1/(22) “87”/7085, February 29, 1996, clause 13.

98 See Nissan-Lerma, Convenio para el Establecimiento de un Bono de Productividad-Calidad, October 18,1994, and October 26, 1995, in STPS-CGCFC Archive, Expediente No. 2.1/311(12) “77”/2669.

99 In 1995, for example, Nissan granted workers in Aguascalientes a direct wage increase of 11 percent, anda 4.33 percent increase for productivity (see Convenio, June 1, 1995, in STPS-CGCFC Archive, Expediente No.2.1/(1) “91”/7237). Compared with the other firms in the sector, Nissan gives a much larger increase for productivityimprovement.

100 See Estado Comparativo de Pliegos Petitorios Revisión Contractual 1994-96, PetiticiónSindical (Volkswagen), Claúsula 26 Ter., Prima de Productividad, June 26, 1994; and Revisión Integral delContrato Colectivo de Trabajo (Volkswagen), August 8, 1994, in STPS-CGCFC Archive, Expediente2.1/313(29)/2579.

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narrow somewhat. Indeed, a number of Mexico’s export plants already exhibit highlevels of productivity and quality. Although the use of other measures of laborproductivity might alter the results of the comparative analysis presented here, thepaucity of data for Mexico makes it difficult to compare other measures ofperformance.

Another implication involves the relationship between productivity and realsalaries in the North American automotive industry. The association betweenproductivity and salaries is fairly strong in Canada, moderately strong in the UnitedStates, and fairly weak in Mexico. The situation in Mexico is puzzling. Firms andunions in Mexico are continuing a dialogue on productivity and salaries, and it ispossible that they will implement a new system of evaluation that improves therewards for productivity granted in wage settlements. However, the government’scompeting policy objectives may frustrate efforts to establish a better fit betweenproductivity and real wages in the Mexican automotive sector. As one step incontrolling inflation, the government has exerted strong pressure on union leaders torespect the ceilings on contract wage increases. Because inflation control remains apriority for the Mexican government, other labor policies that seek to link wages andproductivity have not played an important role in wage determination. As a result, itwould appear that firms and unions have been unable to reward productivity in aconsistent manner.

Finally, the substance of wage settlements differs among the three countries inimportant ways. The Canadian Auto Workers Union has rejected profit sharing andother forms of contingent compensation. These compensation practices wereintroduced in the United States throughout the 1980s, but, in recent years, theUnited Auto Workers Union has struggled to reintroduce traditional wage increasesthat make less of a worker’s compensation contingent on performance (the annualimprovement factor, for example).101 Mexico is the only country that has implementeda bonus or wage increase tied specifically to productivity, but the productivity bonusis often small and is not implemented regularly. Given the competitive pressures inthe automotive industry, one might expect productivity to be a salient issue in wagebargaining in North America. Unless union organization in each country changesdramatically, however, cross-national differences in productivity and wage settlementswill persist in the future.

101 The CAW, the UAW, and Mexican unions have adopted a variety of (nonmonetary) programs toraise productivity and performance; this point is not in dispute. The analysis in this report deals solely witheach union’s position on the linkage between productivity and the outcomes of wage settlements.

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John P. Tuman 37

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About the Author

John P. Tuman received his Ph.D. in political science from the University ofCalifornia, Los Angeles. He is assistant professor and academic coordinator for U.S.-Mexico Border Studies in the Department of Political Science and the Master’s ofPublic Administration Program at Texas Tech University. His articles have appearedin Political Research Quarterly, Latin American Research Review, Social ScienceQuarterly, Industrial Relations Journal, State and Local Government Review, andStudies in Comparative International Development. He is also author of RegionalIntegration and Organized Labor in the North American Automobile Industry(forthcoming by Continuum in 2001) and coeditor (with John T. Morris) ofTransforming the Latin American Automobile Industry: Unions, Workers, and thePolitics of Restructuring (published by M.E. Sharpe in 1998).