BusinessWeek describes how Subaru defies recent trends in the car business.
In its 22-year history—a period that has spanned three recessions, a global financial crisis, massive U.S. auto bankruptcies, and the departure of Isuzu, a founding partner, from the operation—SIA has rolled out more than 3 million vehicles and has never resorted to layoffs. Instead, it’s given workers a wage increase every year of its operation. Staffers also enjoy premium-free health care, abundant overtime ($15,000 each, on average, in 2010), paid volunteer time, financial counseling, and the ability to earn a Purdue University degree on-site—all in a state that has lost 46,000 auto jobs and suffered multiple plant foreclosures in the past decade. And the truly astonishing thing is how it achieved all this: through a relentless focus on eliminating waste. “This is not about recycling, or a nice marketing to-do,” says Dean Schroeder, a management professor at Valparaiso University who has studied the plant. “This is a strict dollars-and-cents, moneymaking-and-savings calculation that also drives better safety and quality.”
Toyota made kaizen—the Japanese principle of constant “change for the better,” with a special focus on efficiency, aka “pushing lean”—famous. SIA, you could say, has instilled green kaizen, or pushing green. Starting in 2002, SIA set a five-year target for becoming the nation’s first zero-landfill car factory. That meant recycling or composting 98 percent of the plant’s waste—with an on-site broker taking bids for paper, plastic, glass, and metals—and incinerating the remaining 2 percent that isn’t recoverable at a nearby waste-to-fuel operation to sell power back to the grid. Within two years, the results spoke for themselves.
There’s always a catch, and at SIA it’s this: All that ultra-efficiency—when applied to employees—can lead to unforgiving schedules. SIA workers, who start at just over $14 an hour and peak at about $25 an hour, put in 47-hour workweeks that include two Saturdays a month at time and a half—good for $50,000 to $60,000 a year in per-employee salary. (That means roughly 100 employee salaries were protected by the aforementioned $5.3 million zero-landfill rebate.) The upside? When the Japan earthquake interrupted the supply of parts in March, slowing down the plant’s breakneck output, SIA was able to keep paying its workers in full to volunteer in town. The downside: “Everyone’s burned out here,” says Kay Tavana, a 48-year-old who installs airbags and headlights. Not that she isn’t grateful for the work and the SIA perks. Working while on chemotherapy for a blood disease, Tavana avails herself of SIA’s free gym to rev up for her shift from 4:30 p.m. to 3:30 a.m.
The cost savings and social programs at SIA wouldn’t amount to much if Subaru’s cars weren’t in demand. From 2008 to 2010, unit sales jumped 41 percent, while last year the company’s 22 percent rise in vehicle sales was double the broader car market’s increase. “You get worker commitment to productivity by offering job security,” says Kristin Dziczek, who studies labor issues at the Center for Automotive Research in Ann Arbor, Mich. “But the best job security is still a product people will buy.”