OM in the News: Mississippi’s “Right-to-Work” vs. the UAW

A Canton Nissan worker signing a petition calling for union recruitment
A Canton Nissan worker signing a petition calling for union recruitment

The United Automobile Workers, desperate to make inroads in the anti-union South where Toyota, Volkswagen and other foreign automakers have assembly plants — has never tried a unionization drive quite like the one at the Nissan plant here in Canton, Miss.,” writes The New York Times (Oct. 7, 2013). It has enlisted thousands of union members in Brazil to picket Nissan dealerships there and sent a team of Mississippi ministers and workers to South Africa, where Nissan has an assembly plant, to try to embarrass the company with accusations that it violates workers’ rights at the Canton plant.

At a time when the U.A.W. has fewer than 1/3 of the 1.5 million workers it had in 1979, its organizing push in the South has taken on urgency and is being watched closely by labor leaders across the country. “It’s a life-and-death matter for the U.A.W. to succeed in the South,” says a U. of California prof. “If the U.A.W. fails to win at the foreign companies’ plants in the South,” adds an industry expert, “they will pull down wages at General Motors, Ford and Chrysler.” The union faces rough going in Mississippi, considering the embarrassing loss it suffered in 2001 when workers at Nissan’s plant in Tennessee voted two to one against joining the U.A.W.

“We’re a right-to-work state,” says a Canton businessman. “Back in the Industrial Revolution I could see why unions were needed, but we’re now in 2013, and I don’t see the need.” For Mississippi, landing Nissan was a coup. The 10-year-old auto plant was the state’s first, and its work force has climbed to 5,200, making Nissan the state’s second-largest private employer. Nissan has invested $2 billion in its state-of-the-art plant, which uses 1,200 robots. The base wage for most of the plant’s workers is $23.22 an hour, making them the envy of many blue-collar workers in Mississippi.

Classroom discussion questions:

1. Justify the positions of the union, of Nissan, and of the state.

2. Why is this a “life or death matter” for the UAW?

OM in the News: Incentives Help Toyota’s Move to Mississippi

It was 4 years ago when the Mississippi governor doled out some big incentives to get  Toyota to locate its next plant in Tupelo. The offer (see USA Today,Mar.5,2007) included $294 million to build out a factory infrastructure, add a 2-mile RR spur, and run 11 miles of natural gas lines. Not enough? How about closing the deal with a 20-year corporate tax holiday?  Toyota signed on, promised 2,000 jobs, and the state finished the plant in 2008. Mississippi forecast a 10-year ROI, but hoped that more models would be one day added to the large SUV (Toyota Highlander) line, with dreams of new suppliers and spinoffs setting up nearby…meaning even more jobs in the future.

The problem, as The Wall Street Journal reports (Dec.27, 2010), is that the buildings have sat as empty shells for the past 2 years, thanks to the recession.  Will the governor’s decision pay off?  Toyota  announced last year that it planned to proceed…but with the Prius gas-electric model instead. Then in June, it decided that the cheaper Toyota Corolla would be the product that rolls out—at the rate of 140,000 per year.

This decision, not discussed in the WSJ  piece, is the latest setback for the beleaguered UAW union.The Corolla was previously built in a unionized plant—NUMMI, in Fremont CA that Toyota shut down in March,2010. The car has been built for the US market in Japan since that date. Mississippi is, of course, a “right-to-work” state and happy to have the $20/hour jobs.

As a side note, Toyota’s utilization of production capacity (Ch.1) at existing North American plants fell to 60% last year after peaking at 106% in 2006. The company expects 2010 capacity to climb back to 90% as sales pick up.

This is our 4th blog on incentives being used in location decisions. To see the others, type “incentives” in the search box on the right.

Discussion questions:

1. Discuss the incentives given to Toyota?  How do they compare with  offers to other auto firms?

2. Will the investment pay off for the state one day? Why?

3. Read the Ethical Dilemma in Ch.8, regarding UAL. What happens when a firm moves out, or in this case, if  Toyota had never opened?