When the going gets tough working with people and communities makes it easier to keep going without major conflict says Giles Gibbons
No industry has suffered more in this recession than the car industry. So, surely, now is the time to put worries about social and environmental issues aside, and focus on recovery. This is just about survival, right?
Wrong. Governments (and many non-governmental organisations) actually see the lack of focus by the industry on many of these issues, particularly the environmental ones, as one of the main reasons the industry is where it is. And the only way the industry will receive the support many manufacturers are calling for is for them to move faster towards more environmentally friendly models.
They are already being pushed in this direction. Barack Obama earlier this year announced plans for all new vehicles built in the US to average 35.5 miles per gallon by 2016, which will force car and truck makers to manufacture vehicles that are 30% more efficient than current models.
Steps are being taken to help this become a reality. At present General Motors does not make any cars that meet this standard but is being offered state funding to build a new plant to make them. And the recent US Cash for Clunkers subsidised scrappage programme has encouraged buyers to trade in inefficient vehicles for those achieving higher than 25 miles per gallon. It may not be the silver bullet, but these are all steps in the right direction.
But it’s not just governments and NGOs that care about the need to go green – consumers do too. In a recent Concerned Consumer Index, environmental credentials ranked as the second most important factor influencing the choice of car – ahead of performance, brand, appearance and features.
So the longer-term goal may be improved environmental performance, but there is also a real need to focus on the social issues in the short term too. The way manufacturers communicate the crisis to their staff, the way they keep the communities in which they operate on side, and the way they keep their existing customers as active supporters are all critically important.
And you don’t have to go too far back in automotive history to find a very high profile example of social issues coming last. In 2005 the collapse of MG Rover in the UK led to 6,000 workers losing their jobs and four of the senior management from the private equity group Phoenix making about £40m (through pay, pensions and the sale of their stake in the business) in the five years they controlled the business.
Careful planning
Compare this with the example set by Honda in the UK. Through pay cuts, reduced hours and partial closure the company carefully managed to avoid forced redundancies and got the factories up and running again. Most importantly this example shows the place of people in the equation. There were not any strikes; the company bosses worked with the union to agree pay cuts and redundancy terms.
And it’s not just the employees that matter; it’s also the communities that they support. When Burberry closed its factory in Rhondda, Wales, in 2007 it agreed to help its employees find jobs inside or outside of the company. This led to the founding of the Rhondda Trust “to further the education and training opportunities of people in the Rhondda”. The firm has paid a loyalty bonus to workers and will give £1.5m over the next decade to the trust. The closure may have been met by challenge, but Burberry’s action demonstrated that the community affected by the change mattered to the company.
All this must not be forgotten by the car industry, just as Honda has shown. Treating people as intelligent individuals, involving them in the process, providing transparency throughout and showing that no one group is benefitting over and above another will help ensure the sector can make it through to its medium-term goal of delivering low-carbon personalised transport.
Giles Gibbons is founder and chief executive of Good Business
www.goodbusiness.co.uk