Beyond our control: labour adjustment in response to the global recession by multinational auto companies in Australia.

• Author: Auer, Peter
• Position: Invited Article - Company overview

Abstract

In response to the global recession, many multinational companies (MNCs) in the auto industry adjusted labour levels in their plants around the world. This paper examines the responses of Ford, GM, and Bosch in relation to plants in their home countries and in their subsidiary companies in Australia. The case studies revealed the emergence of 'hybrid' forms of employment relations practices among these MNCs, which were the product of convergence around commercial imperatives, as well as divergence due to the roles played by governments and trade unions in the respective countries.

1. Introduction

   Multinational companies (MNCs) play a key role in the global economy as well as in major industry sectors such as automotive manufacturing. A defining characteristic of MNCs is their ability to transfer human resources and industrial relations policies and practices across national boundaries and potentially to influence local patterns of employment relations (Ferner 1997). The transfer of these practices within MNCs has been the source of power struggles between various actors, including headquarters and subsidiary managers, as well as with trade unions (Ferner and Tempel 2006).

   MNCs often seek to improve their profitability by moving some or all of their operations from higher-cost to lower-cost locations as well as from declining markets to expanding ones. The accompanying process of transferring employment relations policies and practices across national boundaries may be charged with friction (Dorrenbacher and Geppert 2009, p. 376)

   This paper examines the response of US and German MNCs in the auto industry to the global recession during 2008-09 and the means by which they undertook labour adjustment in manufacturing plants within their home countries as well as in their subsidiary companies in Australia. This enables an assessment to be made about the extent to which the MNCs standardised their methods of adjusting labour levels to meet declining demand and to what extent such responses were localised. The paper seeks to determine the key variables which influenced the employment relations strategies adopted by the US and German MNCs in response to the global recession.

2. Employment Relations Practices in MNCs

   A dominant theme in employment relations research on MNCs is the role played by institutions, broadly defined, in tempering the process of transferring employment practices from one country to another. Systems of business and other institutions in an MNC's country of origin, as well as in the country of operation (or host country), are found to shape employment relations practices within the MNC (Ferner 1997). In support of this proposition, Lane (2003) found that German and British MNCs respond to intensified global pressures in distinctively different ways. Similarly, MNCs originating in the United States have been found typically to exert strong central control over employment practices in overseas subsidiaries and to enforce standardised systems as far as permitted by local regulations (Harzing, Sorge and Paauwe 2002; Harzing and Sorge 2003). Meanwhile, German MNCs have been found to favour a more consensual approach to employment relations both in their home country and in foreign subsidiaries (Ferner and Ouintanilla 1998).

   Clark and Almond (2006) note, however, that it is difficult to generalise across the large varieties of MNCs. In regard to US MNCs, some argue that they tend to standardise practices involving executives, but will follow local practices in relation to rank and file workers (Rosenzweig and Nohria 1994, p. 241). Ferner and Varul (2000) argue that employment relations within German MNCs tend to be legalistic and reactive, a reflection of their approach being embedded in Germany's unique interlocking labour market institutions and its system of strong national labour regulation (Wachter and Stengelhoten 1992). Other studies argue that German MNCs do not consciously seek to export their home country employment relations system (Tuselmann, McDonald and Heise 2003) and, furthermore, that some companies engage in 'model flight' and seek to 'escape' the German system of employment relations by establishing operations elsewhere (Meardie and Toth 2006).

   Institutionalist approaches have been criticised as being too deterministic and failing to account for many variations and influences which occur outside the national-level model (Crouch 2005), as well as variations within each national business system (Edwards and Kuruvilla 2005). Deeg and Jackson (2007) argue for a contemporary treatment of institutions in which they a re more dynamic, and where actors operate to the extent that they ca n obtain their desired outcomes. Even accepting that institutions change over time (Streeck and Thelen 2005), institutionalist approaches can view 'organisations as passive in their interaction with the institutional environment' (Edwards, Coiling and Ferner 2007, p. 203).

   Another approach in the literature emphasises the role of corporate strategy within MNCs. Studies have linked the human resource strategies of MNCs to their business strategies and structure 'stage of internationalisation' (Bartlett and Ghoshal 1998) in order to allow for more complex factors that can impact on decision making within MNCs (Schuler and Tarique 2007). Even within these frameworks, the role of human resource management is still viewed as largely reactive and operational, linked directly to firm strategy (Hall and Wailes 2009). Nevertheless, emphasising the role of corporate strategy does emphasise that decisions about the transfer and implementation of employment relations practices by MNCs are made in the context of a combination of labour, financial, and product-market conditions.

   An integrated political economy framework, suggested by Edwards, Coiling and Ferner (2007), combines consideration of comparative institutional, market-based, and political factors which have an impact on the transfer of employment relations practices by MNCs. Adding a political dimension takes into account the fact that individuals within organisations act in their own interests or those of their principals or constituents when deciding which employment practices should be transferred (Hall and Wailes 2009). It is also important to acknowledge the role which actors outside the organisation or firm may have in shaping the outcomes of employment relations practices within MNCs and their subsidiaries. In their political economy framework, Edwards, Coiling and Ferner (2007) acknowledge a 'range of indeterminancy' created by markets and national institutions within which actors can manoeuvre. This has been demonstrated by Zou and Lansbury (2010) in their study of the Korean auto company Hyundai in its operations in China.

   Clibborn (2012) has expanded the political economy framework of Edwards, Coiling and Ferner (2007) in order to demonstrate that there are three realms of influence on the transfer of employment relations practices. These realms exist at the micro level (between workers and management), at the meso level (between subsidiary and headquarters), and of the macro level (between the MNC and external actors). Clibborn also distinguishes between three forms of power exercised by actors: economic power, related to the control of resources; political power, related to physical force and rights of authority; and ideological power, related to ideas, meaning systems and symbols (Belanger and Edwards 2006). Hence, employment relations practices are developed and implemented within institutional and market contexts and are influenced by a variety of actors utilising a range of powers. This framework gives an appropriate place for actors, as well as taking into account both institutional and market forces, which help shape the way in which employment relations practices are transferred and adapted by MNCs from their headquarters in their home countries to subsidiaries located elsewhere.

3. Case Studies of MNCs and Their Subsidiaries in the Australian Auto Industry

   Three MNCs were selected for this study on the basis of their having operations in Australia. US-based General Motors and Ford have had assembly manufacturing plants in Australia since the mid 1920s, while the German-based company Robert Bosch has been a major manufacturer of auto components in Australia since 1969.

   Interviews were conducted during 2009-2011 with managers and other employees in the three firms, both in their subsidiaries in Australia and at their...