Iccrbrief Vol. 18 No.6, 1989

ICCRBrief Vol. 18 No.6, 1989

White Wheels of Fortune: Ford and GM in South Africa

After decades at the top of the South reevaluated their involvement in South the largest union, the non-racial Na African motor industry, both Ford and Africa. When rumors surfaced that Ford tional Automobile and Allied Workers General Motors moved during might be pulling out, analysts sensed an Union (NAA WU). 1987 -1988 to end all direct investment in important turning point in the history of the country. But neither withdrawal was the industry. Companies like Alfa GENERAL MOTORS: "Braaivleis, what it appeared to be. Both companies Romeo, Peugeot, Renault and Leyland, Rugby, Sunny Skies and Chevrolet" continue to play important behind-the though neither large nor influential in The Ford-Amcar merger left scenes roles in South Africa. They re South Africa, abandoned commercial General Motors as the only wholly- own main a prominent focus for the antiapar manufacturing there. ed American motor vehicle manufac theid movement because of their contin turer in South Africa. GM had followed uing ties to their former South African The Ford-Amcar Merger of 1985 Ford to South Africa in 1926, and like subsidiaries, because of the controversial Ford, chose to build its assembly plant in way in which they sold their South In mid-1984 Ford .secretly began Port Elizabeth. Over the years GM and African assets and because their suc negotiating with Anglo-American's car Ford shared top billing as the leading cessors have resumed vehicle sales to the making company, Amcar, over a possi manufacturers. Even today GMs adver South African police and military. ble merger of their operations. Both tising jingle makes the most of things This brief endorses the antiapar companies had suffered losses in quintessentially white South African: theid movement's call for General preceding years, lost market share and "Braaivleis (barbecue), rugby, sunny Motors and Ford to fully and responsibly carried excess capacity. The companies skies and Chevrolet." (In the U.S. GM's withdraw from South Africa. It urges in had a natural affinity as Amcar held the slogan was "Baseball, hot dogs, apple stitutional investors and purchasers to local license to produce Mazda and Mit pie and Chevrolet.") But through the refine their selective purchasing and subishi cars while Ford USA held a 1970s GM lost its position as market responsible investment (and divestment) substantial share in Toyo Kogyo (Maz leader; by 1985 it could claim a bare 9 regulations to maximize pressure on da) in Japan. With such overlap in design percent share of the passenger vehicle companies like Ford and GM for authen between Ford and Mazda products, a market. tic withdrawal from South Africa. ICCR merger provided plenty of room for ra members also support tougher federal tionalization of models. GM Searches for a Way Out sanctions backed by strong penalties Both companies denied merger which would oblige Ford and GM to rumors virtually to the day the deal was As 1986 passed and the motor in sever all ties to South Africa. Finally, made public. In January 1985, Ford and dustry sales deteriorated, GM was ICCR member organizations urge com Amcar announced they would become unable to hold its already low market panies to negotiate with their workers the partners in the new South African Motor share in a declining market. The press terms of withdrawal well before the date Corporation (SAMCOR), with Anglo was alive with rumors of possible of disinvestment. holding 58 percent and Ford 42 percent mergers between GM and a number of of the shares in the company. Over the competitors. In early 1986 the managing FORD: Leading South Africa's next year, Ford closed its Port Elizabeth director of General Motors South Africa Motor Industry automobile and truck assembly opera (GMSA), Bob White, gave assurances tions, except for a small engine assembly that the company would not disinvest Ford was the first car maker to factory. As a result, nearly 4,000 hourly and later gave assurances that GMSA assemble vehicles in South Africa. It paid workers, most of whom were black, would remain in Port Elizabeth. opened a factory in Port Elizabeth in were laid off. In 1986 the U.S. Congress enacted 1924 and for many years was the leading Ford refused to admit its plans to its the Comprehensive Anti-Apartheid Act, producer. Ford was also one of the most own workers or their unions. By the time which barred U.S. firms from making important firms in the Eastern Cape the deal was announced, workers could new investments in their South African region with more than 5,000 employees do little but contest the terms of their operations. GM's response to the legisla and dozens of supplier companies. retrenchment package. After a series of tion was disclosed in October 1986 when As a result of the crisis in the South strikes, workers achieved a substantial GM Chairman Roger Smith mentioned African motor industry dating from improvement in their retrenchment in an interview that GM was reviewing its 1983, many multinational auto firms payout, which was negotiated through presence in South Africa.

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3A Efforts to Fight Back Fail estimated 100 million rand debt of the for, but at least we' re back on the buying li st subsidiary by transferring money to again, NAA WU shop stewards, with the GMSA ahead of the sanctions bill invest After receiving "significant" orders memory of the Ford closure fresh in their ment deadline. Finally, GMC would from two or three major departments, he minds, immediately asked GMSA continue to supply components, designs predicted Delta would do "more govern management to clarify Smith's remarks. and spare parts to GMSA largely ment business in 1987 than GM did in the They were told that the chairman had through its Opel subsidiary in West Ger last five years. "3 Buoyed by such been misquoted. But more than a week many and its associated Isuzu Motors in measures, management stabilized later GMSA announced that the com Japan. market share for the first time in years pany would be sold, withholding mean GMSA claims to have transferred a and'looked poised to break even, if not ingful details. portion of its assets to a trust "designed The workers were not satisfied with to enable those employees who con report a small profit. management's lack of responsiveness tribute to the growth and success of the and called a general meeting of approx company to participate in its future prof Fighting Corporate Camouflage: imately 1,000 of NAA WU's General itability." However, it has not disclosed The Union Responds Motors South Africa members. They how much of the assets were given to the demanded severance pay, that their pen trust, how many employees will benefit South African trade unions sion fund contributions be paid out and or how their benefits will be determined. vigorously debated the question of the right to select two worker represen Company representatives confirmed in disinvestment in response to the GM tatives to the board of directors. Finally, 1988 that they had not discussed the trust strike and similar cases of corporate they asked for an urgent meeting with with the employees or distributed any withdrawal and restructuring. In the course of the GM strike, the unions, GMSA management to discuss the situa money.' which would soon merge to form the new tion. With the return to work and union In a letter leaked to the press before plant leadership decimated, GMSA has National Union of Metalworkers of it was received by the union, a GMSA permitted only four shop stewards in the South Africa (NUMSA), issued a joint director rejected the union demands, ig plant and greatly restricted their freedom statement setting forth their demands to nored the request for a meeting and to operate on worker business. In addi any company contemplating with threatened to hire unemployed workers tion, NAA WU has charged that a new drawal. NAA WU, the Metal and Allied to replace anyone unwilling to "assist" sweetheart union has appeared at the Workers' Union and the Motor Industry the company. Two days later workers plant with the unofficially backing of the Combined Workers' Union demanded downed tools and began a sit-in. The sit company. The Free and Independent that disinvesting companies give workers in ended two weeks later after the com Workers Association, as the new union is sufficient notice, provide full details of pany called in police to evict strikers and called, gave assurances not to strike and plans, negotiate their terms of fired 567 workers. The company allowed agreed not to embrace the broad political withdrawal and guarantee that no a police brigadier to direct his operations concerns of the black community.' benefits would be prejudiced by the sale. against the workers from a strike com Thus, the company could reorgan Further, they demanded that worker mand post on company premises. ize without the encumbrance of labor op wages and benefits be protected for General Motors broke the strike position. GMSA cut its hourly twelve months from the date of after it threatened to fire workers who re workforce and drastically reduced its withdrawal. mained out and began hiring unem salaried staff in pursuit of a general In May 1987 the Chemical Workers' ployed people to replace those fired dur austerity program. With its books wiped Industrial Union (CWIU) expanded on these demands in a statement which ex ing the sit-in. Worker support faded clean by GM's liquidation of its out pressed "conditions for acceptable under repeated interventions by the standing debt, Delta Motors was freed police. Sixteen people were arrested and from interest payments. As a South disinvestment." The document specified that disinvesting companies hand over to many more were injured in a particular African-owned company, it was in a ly violent police assault on strikers who much stronger position to raise capital their workers in the form of a trust fund had gathered in front of the plant. inside the country. nominated by the union, all proceeds of Within days most of the strikers went any sale. In addition, the CWIU back to work and soon production Apartheid Government demanded that companies negotiate in returned to normal. Has Confidence in GM good faith with their workers well in ad vance of withdrawal. After this the Congress of South GM Management in the Driver's Seat GMSA's new managers lifted the company's ban on sales to the military African Trade Unions (COSATU) itself and police. New Managing Director strongly condemned the self-interest During the strike, GMSA an Keith Butler-Wheelhouse said the revised which defined the form of corporate nounced ownership would be sold to a policy secured a "vote of confidence" withdrawals. I n a resolution passed at its team composed of many of the leading from the government: 1987 Congress, COSA TU criticized such executives of the firm. In early 1987 the moves as "corporate camouflage which Because GM was not able to bid on company was renamed Delta Motors. often allows these companies (0 increase police and mi litary contracts, this affected Furthermore, the parent General Motors its sales to other government departments, (heir support for (he SOUl h African Corporation would liquidate the , , ,We're nol going 10 " .erything we bid regime." COSA TU demanded (hat the 38 terms of withdrawal be negotiated but stake in SAMCOR would be held by transfer. Congressional aides claim Ford left it to individual unions to give content Anglo-American Investment Corpora played them off against one another, tell to the position. tion and associates, giving Anglo ing each that the others had agreed to the American 76 percent of the stock. transfer.' Worker Share Ownership Dividends on these shares would be used The coup de grace came when Ford only for community welfare and claimed the union supported the capital development activities. NUMSA also transfer. But there is still confusion COSA TU has also debated the won the concession that benefits and ex about the company's assertion. At one question of worker ownership in isting employment conditions of workers point Ford said it notified NUMSA of response to offers by some withdrawing would be guaranteed and union the impending transfer. At another point companies to transfer shares to their representation sustained. Ford claimed NUMSA had "insisted" workers. While worker share ownership Critics point out, however, that the on the fund transfer. And at another was an untested concept for unions and very structure of the plan contradicts Ford said NUMSA agreed in writing to many remain suspicious of the idea, such Ford's stated intention to empower its the action. 6 For its part, NUMSA has plans have not been rejected outright. In black South African workers. The 24 stated that it was indeed informed about stead, two general principles have been percent shareholding stops short of the the payment, but separated itself and the accepted as guidelines for discussion of level needed to veto company decisions. trust negotiations from the company's such packages. NUMSA criticized the package, financial plans. 7 First, COSA TU has discouraged specifically rejecting share participation In its dealings with the U.S. govern workers from taking positions on boards schemes ment, Ford used its workers as hostages, of directors, arguing that workers would as deliberate attempts by companies to threatening that SAMCOR would close not gain effective control of the company 8 weaken unions and to di vert workers' atten unless the transfer took place. Though while running the risk of identifying too tion away from their more militant but the union examined SAMCOR's books, closely with management. Second, justifiable and legitimate demands. the claim is difficult to evaluate. The COSA TU has also criticized share offer company had numerous assets which in ings to individual workers. The Congress The union pledged to continue working for a living wage and better vestors covet: important market share, favors collective ownership where shares an extensive dealer network, skilled will be held in trusts directed by workers working conditions, as " ... share owner ship offers little in comparison to a living workforce and management, prime loca and used as financial resources for tion and one of the most modern in broader community purposes. wage."4 The Ford-NUMSA negotiations set an important precedent for corporate dustrial plants. Moreover, how does one evaluate the fact that SAMCOR's ma Ford Has a (Somewhat) Better Idea: negotiations with unions over the terms of withdrawal. jority shareholder, Anglo-American with all its financial clout, was unable to The debate over shareholdings came cover the needed capital infusion? SAM Ford Breaks Ban on New Investment to a head in the motor industry. In June COR returned to profitability in 1988. 1987, Ford announced that it would be withdrawing from South Africa and Ford's sale plan ran into a number revealed a plan to give workers a share in of difficulties even before it was in place. SAMCOR to South African Police: the company. The remainder of the In late 1987 U.S. Congressional aides Have You Driven a Ford Lately? shares would be transferred to Anglo learned Ford had notified the Treasury American. Though the deal spared Ford Department of its intention to transfer The anti-apartheid movement has some of the troubles which had plagued $61 million to SAMCOR, an apparent particularly criticized Ford's disinvest OM's disinvestment, Ford's plan had its violation of the Anti-Apartheid Act. ment and retention of license agreements own unique problems. Ford claimed the money was needed to with SAM COR because such non-equity Initially the scheme was rejected by assure SAMCOR's health, but the deal ties also opened the door for more workers, primarily because Ford wanted called for wide interpretation of the Act's trouble-free sales to the South African shares distributed to workers on an in provisions governing waivers to the ban police and military. SAMCOR sells a dividual basis. In sharp contrast to on new investment in South Africa. The significant share of its vehicles to the OMSA's refusal to negotiate with request sparked an investigation by U.S. South African government, including workers before or after t he strike and to Representatives, but the Treasury the police and army. The state buys 10 Ford's failure to negotiate with workers Department allowed the transfer. percent of the Ford vehicles produced by before merging with Amcar in 1985, this Ford has been widely criticized for SAMCOR, between 1 percent and 2 per time Ford met with NAAWU. In t he way it handled the transfer. The com cent going to the security forces. 9 In November 1988 Ford and NUMSA an pany dutifully informed its SAMCOR 1987, the South African government nounced a complicated, but creative workers, NUMSA and antiapartheid bought approximately 3,500 Ford cars agreement to establish an employee organizations of its withdrawal plans. and trucks of which over 500 were for trust. Meanwhile Ford was maneuvering to security forces. 10 According to the plan, a 24 percent break the ban on new investment. In its In response to pressure to end sales equity interest in SAM COR would be communications with U.S. I antiapar to the police and military, Ford claims transferred to an employee-cont rolled theid organizations, for example, Ford that restrictions on such sales would t rust and the rest of Ford's 42 percent never mel 'ned the $61 million jeopardize all government tenders under 3C the centralized purchasing system of the withdrawal, especially over the issue of The antiapartheid movement does South African government. individual versus collective ownership of not accept the myth that companies such stock in the new company. The task was as OM and Ford have severed their ties Workers Disagree Over Share Plan more difficult because the issues involv with apartheid. Faith communities along ed were new for rank-and-file and leader with the rest of the antiapartheid move A third area of controversy around ship alike. ment call for corporations to cut all ties Ford's disinvestment plan was employee Time after time, however, the South to apartheid and to do so responsibly disagreement about whether shares African union movement has after having negotiated the terms of such should be distributed individually to demonstrated its ability to reconcile disinvestments with their South African workers or held in trust. Before the deal diverse demands at different levels of workers and their unions. was finalized, NUMSA had endorsed the organization. Indeed, NUMSA's subse plan to put the workers' share in a trust quent withdrawal deal with another Notes and believed it had general membership disinvesting company, Mono Pumps, support. takes into account many lessons from the I. Jennifer Kibbe and David Hauck, "Leav But workers from SAMCOR's ing South Africa: The Impact of U.S. Corporate SAMCOR case. 12 It includes a direct engine plant in Port Elizabeth mobilized Disinvestment," Investor Responsibility Research cash transfer to .workers, a company con Center, July 1988 . in opposition to the plan. These activists, tribution to a trust fund controlled by many of them from a union that had 2. Ibid. been a rival to NAA WU before it joined workers, but no actual share ownership. in forming NUMSA, falsely claimed that 3. "Delta Ready to Branch Out," The Motor if workers opposed the trust, they could Industry, supplement to the Financial Mail, July receive cash for their shares amounting Corporate Withdrawal: 17, 1987, p. 18 . to 49,000 rand, approximately $24,000 "You Say Goodbye and I Say Hello" per employee. 4. NUMSA Central Committee Statement on Workers at SAMCOR's Pretoria Employee Share Ownership. plant went on a wildcat strike to protest Despite claims they have the plan, repudiating NUMSA's man withdrawn, both Ford and OM remain 5. Debbie Budlender, "Assessing U.~. Cor date to negotiate with Ford over the trust embroiled in the South African car porate Disinvestment: The CASE Report for the Equal Opportunity Foundation," 1989, p. 16. and rejecting the shop stewards who had market. OMC maintains the right of first refusal on any Delta share offering, supported it. Workers appointed a new 6. Ford Motor Company, Internationa l body to negotiate with Ford, called the which affords the possibility of returning Governmental Affairs, "Ford's Disinvestment Anti-Trust Committee. The Committee to the South African scene. Both com Alternative, " February 1988 , p. 3. threatened it would refuse to build Ford panies maintain licensing arrangements products at SAM COR unless Ford paid which permit their designs and com 7. Budlender, Op. Cit. workers 100 million rand. The company ponents to be used by their former sub rejected the demand, but no industrial sidiaries. Both SAM COR and Delta sup 8. Budlender, Op. Cif., quotes one Congres sional Aide as saying Ford "blackmailed" govern action was taken. 1 1 ply vehicles to the South African security Ford ultimately transferred the ment officials opposed to the transfer by insisting forces . the company would close without the $61 million shares to the worker trust and appointed Ford's transfer of $61 million, like and that the livelihood of more than 100,000 people company representatives to its board. In the OM bail-out, shifted the burden of would therefore be threatened. the midst of the disruption among maintaining the subsidiaries off South employees, no worker representatives African financial sources and the 9. From transcript of di scussion between have been elected. When the SAMCOR Ford executives, Michigan state officials and government. Without external capital in dividends for 1988 were announced, divestment advocates, "Meeting about Ford Motor fusion, the companies' debts would have company trustees offered dividends on Company Arrangement in South Africa," Lans an individual basis to worker par been covered by funds obtained within ing, Michigan, September 29, 1988. ticipants in the trust. It is not known how the country, soaking up South African many workers chose to receive their capital and thereby making it 10. Extrapolated from National Association of Automobile Manufacturers of South Africa, dividends. unavailable for bolstering some other part of the apartheid economy. 1987 sales statistics for SAMCOR-Ford. Furthermore, by maintaining licen Workers Support Sanctions II . "Update on Developments Re: Ford 24 070 sing arrangements with their former sub Share Transfer to Employee Trust," NUMSA, It would be unwise to read these sidiaries, both companies preserve South Automotive Department, 19 May 1988, p. I; Jabu conflicts as fundamental disagreements Africa's links to international Matiko, "Samcor Workers Strike Against Share between leadership and members over technology. The government has been Ownership," South African Labour Bulletin, Vol. 13, NO . 6 p. 33 . sanctions policy. During the course of eager to preserve such channels as a means of evading high technology sanc the OM strike and SAMCOR debates, no 12. Adrienne Bird , " The Mono Pumps workers publicly asked either company tions, which may explain its willingness Disinvestment Story," and "ESOPs - Part of a to remain in South Africa. Rather, the to facilitate this form of ownership Strategy to Smash Democracy," SOllth African disputes were over the terms of transfer. Labour Bulletin, Vol. 13, No. 6, pp. 39-50. 3D