Can USPS Learn From Auto Industry?

I recently read an article in The New York Times comparing the efficiency of automobile plants in the United States with those in Japan. What was fascinating about the comparison was that the chairman of the local unit of the United Auto Workers wrote a letter to his members saying that “attendance must improve” for the plants’ efficiency to stay high. Note that the absentee rate had recently increased from 2 percent to 3 percent.

It was quite a letter, but what is of interest is the history of the UAW and the domestic automobile manufacturers and how their relationship has changed. We recall that back in the 1970s, the domestic automakers were king of the hill – they owned the marketplace.

However, there were disturbing signs. Product quality was poor. Those who bought a car during those times can recall returning to the dealer for the 2,000-mile check, which was standard at the time, with a lengthy list of problems to be fixed. At the same time, car prices were rising steadily, but consumers had few choices. Indeed, the U.S. automobile market was an oligopoly with General Motors, Ford and Chrysler controlling most of the market.

On the labor side of the ledger, things were not going well either. There were periodic strikes and work stoppages, much worse than the relatively few that occur these days. Life inside the auto plants was extremely structured with many job classification levels. Horror stories abounded about the proverbial union electrician who was needed to put a plug into an electrical outlet.

However, since consumers seemed to have few other choices when it came to buying a new car, the automobile industry and its heavily unionized employees continued to act as they did.

Lo and behold, something happened. The Japanese entered the U.S. auto market, and the landscape changed very rapidly. Consumers soon learned that it was possible to buy a well-made car at a lower price. Americans changed their car-buying habits overnight, and domestic producers began to bleed heavily. Employees also felt the impact as factories were closed and many were laid off.

After much angst, calmer heads prevailed, with management and union leaders getting together to figure out how to save the industry and employees’ jobs.

For mutual survival, they agreed on a number of significant changes: simplified job classifications; outsourcing of work; emphasis on product quality; bonuses for employees based on profitability; and, in one situation, placement of a high union official on the board of directors at one of the domestic auto companies.

These changes and many others were accomplished over a number of years and were not easy to put in place. However, the result has been a very strong and very profitable domestic automobile industry. The quality of the product they produce is similar to that of the cars produced by the Japanese and Germans, i.e., no long list of new car problems to be fixed. A level of anxiety remains from an employee standpoint because there is always the possibility of more outsourcing.

On the other hand, the remaining employees have received significant bonuses based on the profitability of the auto companies. Indeed, given recent high profit levels, some employees have recently received bonus payments close to $10,000.

How does this history lesson relate to the U.S. Postal Service?

The situation in which the postal service finds itself is, in many ways, similar to that of the domestic auto industry of the ’70s. Here are the similarities:

• Consumers and businesses have few choices for delivery of hard-copy messages.

• Price increases for many postal products often exceed the rate of inflation.

• A very poor relationship exists between the postal service and its unionized employees, demonstrated by the high level of employee grievances filed and still unresolved.

• Delivery service quality is difficult to judge because standards only exist for First-Class mail – and while delivery service for overnight mail is good, the service is not meeting its standards for two- and three-day mail.

And similar to the entry of Japanese cars into the domestic automobile market, we have an external force – e commerce – entering into the monopoly environment of the postal service.

Much effort has been put into the development of postal reform legislation. However, as important as that reform legislation is, it primarily affects only the postal service’s flexibility over its products and the pricing of those products. The legislation is silent on the troubled relationship between the postal service and its employees. Similarly, the legislation makes no changes in the collective bargaining process, which calls for binding arbitration if the parties are unable to reach agreement on their own.

Another aspect of the postal reform legislation is that, according to postal officials, it would take more than five years for all the legislative elements to be implemented.

But on a positive note, I’m encouraged by a recent series of articles in the Postal Record, a magazine of the National Association of Letter Carriers. These articles seem to be an attempt by union leadership to educate members about the changing and now highly competitive nature of the postal world. These articles ranged from a discussion of e-commerce and its impact on USPS workload, to a discussion of the aggressive actions of foreign postal administrations to control mail flow into and out of the United States.

Perhaps these articles are the opening statements from the NALC to alert its membership that change is necessary.

In my view, the ability of the postal service to compete effectively in this new world will be determined by whether there is a solution to the present inability of labor and management to figure out how to increase productivity, reduce labor costs and share in the gains.

Perhaps as a starting point, the two sides can mimic the automobile union official quoted at the beginning of this article and figure out how to improve attendance. My guess is that if the postal absentee rate, currently at 4 percent, were to reduce to the auto union objective of 2 percent, approximately $500 million would be saved annually.

It’s not unusual in the private sector for employees to get a reward for perfect attendance. Maybe this should be considered in the postal arena.

Related Posts