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OM in the News: Ethical Dilemmas in U.S. Auto Parts Plants

April 11, 2017

Alabama has been trying on the nickname “New Detroit.” Its burgeoning auto parts industry employs 26,000 workers, who last year earned $1.3 billion in wages. Georgia and Mississippi have similar, though smaller, auto parts sectors. This factory growth, after the long, painful demise of the region’s textile industry, would seem to be just the kind of manufacturing renaissance the U.S. needs.

Except that it also epitomizes the global economy’s race to the bottom,” writes Businessweek’s cover story (March 27-April 2, 2017). Parts suppliers in the American South compete for low-margin orders against suppliers in Mexico and Asia. They promise delivery schedules they can’t possibly meet and face ruinous penalties if they fall short. Employees work ungodly hours, 6-7 days a week, for months on end. Pay is low, turnover is high, training is scant, and safety is an afterthought, usually after someone is badly hurt. Many of the same woes that typify work conditions at contract manufacturers across Asia now bedevil parts plants in the South. In 2015, the chances of losing a finger or limb in an Alabama parts factory was double the amputation risk nationally for the industry, 65% higher than in Michigan and 33% above the rate in Ohio–both union states.

Korean-owned plants, which make up roughly a quarter of parts suppliers in Alabama, have the most safety violations in the state, accounting for 36% of all infractions and 52% of total fines, from 2012-2016. According to OSHA, one of them, Matsu Alabama, had provided no hands-on training, routinely ordered untrained temps to operate machines, sped up presses beyond manufacturers’ specifications, and allowed oil to leak onto the floor. “Upper management knew all that. They just looked the other way,” said a staffing specialist. “They treated people like interchangeable parts.”

Classroom discussion questions:

  1. The Ethical Dilemma exercise in Chapter 10 describes Johnson Foundry. Have your students read this Businessweek article and compare the two stories.
  2. What does the article mean by “race to the bottom?”
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