Essentials for Labour Peace

MR. HERMANT: Members and guests of The Empire Club of Canada: Since many of us came into this Hotel one hour ago the General Motors Corp. has produced 2,000 cars, trucks, and busses in its manufacturing and assembly plants in the United States and Canada and 23 other countries including, in the Empire, England, Australia, New Zealand, India, Pakistan and Africa. In its great plant at Oshawa 33 cars and trucks have been completed during the last hour, all of this in addition to the planes, motors, locomotives, refrigerators, accessories, home appliances, and other auxiliary products which have been coming off G.M. assembly lines steadily. At the same time research projects and defence planning have continued at an accelerated pace. We, in Canada, regard ourselves as senior partners in this great enterprise whose 4 Canadian operating divisions have been substantially expanded in recent years.

In this week's issue of "Life" magazine the General Motors Corp. is described as the biggest, most successful, and most profitable manufacturing enterprise in the history of man, which achieved its commanding position by farsighted policies, a broad research programme, an increasingly enlightened labour policy, and a sharp insistence on manufacturing efficiency and soundness of product. "Life" continues in characteristic style to point out that G.M. can deliver so intricate a package of labour and metal as a Chevrolet Sedan for 40 cents a pound, while a pound of hamburger costs 69 cents ... and I understand that hamburger is the more likely of the two to increase in price!

In paying this well deserved tribute to General Motors we in fact recognize the whole automotive industry, which in Peace and in War is essential to our economy; which stands as a symbol of the production of real wealth in terms of goods and services, produced by the intelligence, integrity and skill of a free people working under a free enterprise system; which has created the high standard of living that we enjoy, and can be the means of protecting and ensuring our way of life.

We are particularly honored this afternoon to have as our guest the President of General Motors Corp., Mr. Charles E. Wilson. Mr. Wilson of all people can certainly be described as a "self-starter" and needs little introduction. However, for the purpose of our Year Book, which goes to all our Members and contains a full transcript of all our Talks, I would say that Mr. Wilson graduated in Engineering from the Carnegie Institute of Technology in Pittsburg at the age of 19, and immediately went to work with the Westinghouse Company. Shortly after wards he designed the first automobile starting motors made by Westinghouse. Later Mr. Wilson joined one of the divisions of General Motors as Chief Engineer, eventually becoming General Manager of the Delco Division. He then went to Detroit as the Vice-President of the Corporation, and was primarily responsible for their great expansion in the early 30's. This included the purchase of McKinnon Industries at St. Catherines, Ontario, and considerable development and expansion in General Motors of Canada at Oshawa, and latterly in Toronto and London.

During the War years Mr. Wilson became President of the Corporation, and it was under his inspiring and indefatigable leadership that General Motors produced an irresistible volume of armament. At V-E Day G.M. was producing materials of war at a rate of ten million dollars' worth per day.

In addition to achievement as a brilliant Engineer, Industrialist and Financier, Mr. Wilson has received universal recognition for his broad concept of the social responsibilities of business, for his contribution and enlightened thinking and leadership in the field of labour relations and industrial peace.

It is now my privilege to present Mr. Charles Wilson, the President of the General Motors Corporation, who will address this meeting of The Empire Club of Canada on the subject: "Essentials for Labor Peace".

MR. WILSON: I wish to express my very real appreciation of your invitation to speak to you today. I would also like to take this opportunity to express our appreciation for the wonderful co-operation we in General Motors have had from the business men of Toronto and of others throughout all Ontario and Canada.

While I am not a frequent visitor in your city, I am always impressed by it and the development of Canada which it symbolizes. Toronto, I understand, is growing very rapidly and is getting to be one of the finest of the larger cities on the North American continent. Furthermore, the spirit of enterprise which had its first intellectual development in England has especially flourished here as well as throughout all of Canada, while the same spirit has become less virile in the land of its origin. As a result, your country is continuing to post new records of progress year after year. Your future is still before you. Your land is a vast storehouse of mineral and agricultural wealth awaiting further development for the benefit of mankind. It potentialities are magnificent.

The degree of dependence of the United States on your resources is frequently overlooked. For example, Canada is the source of virtually all of our nickel and most of our newsprint, of much of our zinc and of some of our iron ore, with the promise of a great deal more iron ore when the Labrador development is completed.

We in General Motors have great confidence in Canada, both in the present and for the future. We are conscious of the relatively rapid increase of population over here. We are even more conscious of the economic improvement in Canada, and of the political, social and spiritual background that has made this possible. We know that the people of Canada are independent, freedom-loving folks who are willing to work for the things they would like to have. Canada has great natural resources, and its people have the spirit and ability to develop them. Our expanding Canadian operations are concrete evidence of General Motors confidence in Canada.

We completed our locomotive plant in London, Ontario, early this year. We recently decided to build a 500,000 square-foot plant for Frigidaire Products of Canada, Ltd., on a 70-acre tract in Scarboro Township adjacent to Toronto. The Frigidaire plant, as many of you know, is now at Leaside. It is expected that this plant will continue to operate after the new one is built. Six new buildings have been completed or are under construction by General Motors of Canada, Ltd., including large warehouses at Montreal, Vancouver and Edmonton. Other construction will be started shortly by General Motors of Canada, Ltd., at Oshawa. This new construction and expansion will permit resumption of Buick production in Canada beginning with the 1951 models. A new plant providing approximately 135,000 square feet of floor space located on a new 300-acre tract will be built at St. Catherines, Ontario, by McKinnon Industries, Ltd., for the output of automotive parts and accessories. Engine and parts production was also expanded at Windsor. The total capital expenditures for buildings and facilities amounted to $13,270,00 for the year 1950, and contemplated expenditures for 1951 amount to $17,280,000. These new facilities, when they are all completed, will importantly expand our employment in Canada.

This increased capacity to produce cars, trucks, household appliances and locomotives, together with the facilities necessary to balance and expand the output of parts and accessories, are necessary to meet the increased customer demand resulting from the growth of the Dominion, both in population and living standards.

Last August we celebrated the opening of our new diesel locomotive plant at London and the completion of the first Canadian-built General Motors diesel locomotive. This plant produced ten locomotive units in December and now employs 850 people. The Diesel electrification of the railways in the United States is about 50% completed. The railroads that have purchased this new locomotive power have found that it has improved their operating schedules, reduced their cost of operation and helped them out in many kinds of ways. You can almost list the railroads in the United States in the order in which they adopted diesel locomotives by looking at their financial statements. Those that are in good financial shape adopted diesels early, but those that were a little slow in getting around to it have less favourable balance sheets. We are sure that the railroads of Canada will profit even more by diesel power than our railroads have in the United States. We believe this is because the distances are relatively greater over here and the weather in the wintertime more severe. Diesel locomotives really show up to best advantage when it is cold and the going is a little tough.

We think that, with the development of your wonderful oil fields in Western Canada, you will be able to produce your diesel fuel requirements. I understand that Canada now imports each year thirty-seven or thirty-eight million dollars worth of coal from the States for its locomotives. I have nothing against that or the coal industry, but from the Canadian point of view, I think you will find that it is helpful not to have to dig up that many more American dollars.

The business and social relations between our two countries are very close. We have a common ethical and religious background. We understand each other better perhaps than do the people of any other two nations in the world. The citizens of our countries enjoy great personal freedom, and as compared to the citizens of most other nations, are very progressive and prosperous.

Why are the people of Canada and the United States so much better off than the people in the rest of the world?

Our high standards of living cannot be explained on the grounds of great natural resources, important as they are. Others, too, have great natural resources. Nor, can it be explained by claims of racial superiority. We have a common racial background with many other nations, since most of our ancestors came from Europe. We must look elsewhere for the answer to our important question.

For more than 150 years free men in our countries have had the opportunities to educate themselves, choose their own religions, select their own occupations, accumulate capital and invent better ways of doing things. The reason the people of our countries are relatively more prosperous results from the simple fact that, by accepting the challenge of individual competition as a responsibility that comes with personal freedom, we have done a better job of applying our human energy and individual initiative to the improvement, not only of ourselves, but of all.

Our political systems that permit and promote individual enterprise, personal responsibility, free competition, respect for the rights of others, freedom of choice and decision, freedom itself, are the final and important factors that make the difference between our countries and others. In my fifty years of experience and memory, I have seen the most amazing increase in the standard of living of a people ever achieved anywhere in the world. This is why I am so sure that our system of free competition and industrial development is sound and must be preserved.

I do not know how anyone who had witnessed all of these developments, starting with the great improvements in modern plumbing and electric lights and followed by the automobile, airplane, household appliances, radio and television, the things that have added so much to our standard of living both in cities and on farms, can believe that our free enterprise system is fundamentally wrong.

Nor do I understand how anyone can feel that industrial progress has been made at the expense of social values. Look at our churches, colleges, schools, hospitals, theatres, art centres and recreation parks. No one should suffer from the great delusion that any form of communism or socialism which promotes the dictatorship of the few instead of the initiative of the millions can produce a happier or more prosperous society.

To continue this marvellous progress labour and management must work together. Solutions for the problems of industry must be found consistent with the basic principles on which our countries were founded.

We in General Motors hope that our recent labour agreements amount to fundamental progress in this direction. Our thinking behind these agreements is that we want all jobs in General Motors to be good jobs. We want our employees to want to work for General Motors; we want their willing co-operation. Only in that way can we continue to make the kind of progress we have made in the past and build quality products for our customers. On this last depends the progress of everyone connected with the business-stockholders, dealers, suppliers, as well as employees and the unions.

Our recent 5-year labour agreements, in Canada as well as the United States, are based upon experience, logic and principle rather than on pressure, propaganda and force. The principles are important, can be applied generally, and, we believe, are essential to labour peace. They are:

1. That it is logical, fair and reasonable to maintain the purchasing power of an hour's work in terms of goods and services the employee must purchase in his daily living. There may be some backward countries where the mass of the people are on a subsistence level and where, as an aftermath of wars or partial crop failures, the standard of living has to be drastically reduced, but this certainly is not the case in our prosperous nations.
2. That all of us look forward to improving our condition, and that workmen along with other citizens are entitled to share in the advancing prosperity of the nation. If workmen are denied any increase in real wages and they can look forward only to a better standard of living through reduction of prices, progress for them is terribly slow, and they become impatient and dissatisfied. Furthermore, there is no good ethical or economic reason for asking workmen and current producers to forego all economic gain in order to increase the purchasing power of all the wealth accumulated in past years.
3. That productivity is the only road to an economy of plenty. That the way to achieve higher standards of living for all is through science and technology, taking advantage of better tools, methods and organization. That machines are the friends of man, and that to produce more with the same amount of human effort is a sound economic and social objective that discards the false philosophy of made work, featherbedding and the erroneous idea that machines take the bread out of the workmen's mouths.
4. That insecurity worries people and that it was reasonable for General Motors to assist employees in acquiring life insurance, sickness and accident benefits, hospitalization and surgical coverage and pensions to protect them to the degree possible against the individual hazards of life.
5. That co-operation and peace rather than industrial strife and strikes will best promote the prosperity of the employees the company and all of the people and even strengthen the nation.

Many people do not realize that where unions have bargaining rights employers cannot raise wages or improve benefit plans any more than they can reduce them without of the consent of the union. As a result, the impression is created that improvement in wages, working conditions and benefit plans are brought about year by year only as a result of union pressure.

Unfortunately, in collective bargaining one party or the other too often tries to gain an advantage--a bargain, like buying something in a store for less than it is worth. The only sound approach to collective bargaining is to work out an agreement that clarifies the rights and responsibilities of the parties, establishes principles and operates to the advantage of all concerned.

The cost-of-living formula in our Canadian agreements by which wages are adjusted each three months in line with changes in the Dominion Bureau of Statistics Cost of Living Index is an application in Canada of the same principle used in our 1948 and 1950 agreements in the United States, applied in the same way. This provision protects our employees against inflation and to some extent protects the Corporation against deflation. In itself it is neither inflationary nor deflationary. It simply adjusts the wages of our employees to what inflationary pressures have forced on the national economy. Inflation depends upon money supply, the tax and other fiscal policies of governments, credit policies of banks and finance companies, tariffs and subsidies, lack of production created by wars, strikes, export policies, speculation, stockpiling and hoarding, or partial crop failures, little of which can be controlled or even directly influenced by the Corporation or its employees in either of our countries.

A study of the history of wages back through the years indicates clearly that when the cost-of-living rises appreciably wages have shortly been adjusted upward also. As a matter of fact, through the years wages on the average have risen faster than the cost-of-living. However, where there are organized groups and frozen wage contracts are involved, crises are always created if the cost-of-living rises rapidly during the period of such a contract. Under such circumstances dissatisfaction and unrest mounts, efficiency declines and a big issue develops when the contract expires. In such situations, wages are adjusted by pressure bargaining with a great deal of antagonism created in the process, frequently resulting in bitter strikes. No one should be so naive as to think that wages among organized groups will not be increased, under pressure if necessary, to make up for increases in the cost-of-living, nor should anyone ordinarily object to such adjustments. Our formula is designed to accomplish this necessary adjustment smoothly and in a manner which avoids the friction inherent in the old method. We find that this method of adjusting wages in line with the cost-of-living appeals greatly to our employees.

The annual improvement factor, which is 3 cents per hour in our Canadian agreements, is between 2% and 2 1/2% of average wages. This rate of improvement is somewhat less than manufacturers in Canada and the United States have been able to achieve on the average in the last fifty years. Furthermore, fifty years ago the standard work week was sixty hours. It has been gradually reduced in both Canada and the United States, and workmen have acquired more leisure time as well as more real wages with which to enjoy the leisure.

The annual improvement in real wages that we have subscribed to is about what we think is the average improvement that can and should be made. Of course, we hope to make more than 2 or 2 1/2 % annual improvement in our operations so that in addition to raising real wages, we can continue our policy of improving our products and giving the public more for their money year by year. Small businesses have just as great an opportunity to improve their efficiency and their operations and take advantage of modern knowledge and technology as large businesses have.

This principle of annual improvement in real wages based on technology we also hold to be neither inflationary nor deflationary. It does share promptly with workmen part of the fruits of technology. Unit costs are not increased when productivity increases at least as fast as hourly wages. Therefore, no price increase should result from such wage increases. On the other hand, the purchasing power of a dollar would tend to be stabilized instead of increased as would be the case if wages were held down and prices reduced and there were no inflationary pressures.

Costs of manufactured articles importantly depend on the cost of raw materials as well as labour. The prices of raw materials do not fluctuate directly with the labour cost of producing them. Witness the recent price increases in non-ferrous metals, cotton, wool and rubber, which have risen, not 2 1/2% or 5%, but from 25% to 200%.

To quote one of the important paragraphs of our labour agreements

"The annual improvement factor provided herein recognizes that a continuing improvement in the standard of living of employees depends upon technological progress, better tools, methods, processes and equipment and a co-operative attitude on the part of all parties in such progress. It further recognizes the principle that to produce more with the same amount of human effort is a sound economic and social objective."

We believe that full acceptance by both parties that higher living standards depend upon technological advancements, mechanical power and better machines, and the co-operative attitude of all parties in such progress, is a very significant step ahead in labour-management relations. It is full recognition that productivity is the key to progress.

The benefits of technology in raising the standard of living of a country can be dissipated through strikes, work restrictions, featherbedding, absenteeism, excessive military expenditures, inefficient government, or an artificially short work week. If the people really understand this principle of progress through technology and are willing to work for the things they would like to have just as they have been willing to do in the past, I have no worries about either of our countries being able to stand the cost of pensions, insurance and high wages, and even a reasonable rearmament program.

Both the insurance package and the pension plan were worked out in order to assist employees in protecting themselves against the individual hazards of life. Many people forget how hard it is for the average workman to save money for a rainy day or for his old age. We have millions of salesmen abroad in our land trying to entice these same workmen and their wives to spend every last dollar they can get their hands on and go in debt besides. It is important that the nation's workmen should spend for what they need or feel they should have and still have reasonable security. Basically they are customers as well as the producers. In a progressive and prosperous society such as exists in Canada and the United States, a diminishing portion of national income is spent for subsistence living. The balance is spent for other things that make up a higher standard of living. The purchase and hence the production of these other things depend on the desire, the confidence and the ability to buy.

We put a great deal of value on the non-economic provisions of our agreements. They are very important in maintaining efficiency and order in our plants and avoiding misunderstandings and work stoppages. They provide for the establishment of fair work standards and for fair treatment of employees. They recognize the basic principle that all individuals have a right to a hearing over any grievances they may have regarding their work.

We received many letters concerning our first 5-year agreement made last May--most of them favourable. I would like to read one to you:

"As the wife of one of your employees, I am writing to thank you for the wonderful thing you have done. I am glad you realize men don't want to strike--and that they do have to provide for their families, and that insecurity worries people. My husband said the next day after the good news the men were happy and worked hard and well."

All of the workmen in our plants understood the wage formula at once and were highly pleased since they understand money as a medium of exchange. Many employers and financial people did not seem to understand the agreement so well. Many of those were skeptical of our fair wage determination formula two-and-a-half years ago have decided that it is probably a pretty good plan since they have observed how well it worked.

The question has been raised as to whether these five-year contracts, providing for increasing or decreasing wage rates every three months in line with the change in the cost-of-living and providing an annual improvement factor are sound in a period where our nations will have to make substantial and even huge expenditures for military materials. We believe they are. If workmen as well as all other citizens have to temporarily accept some reduction in their living standards, they will do so more willingly if their nation's necessities in the form of taxation force them to do so than they would if they were forced to the same condition by employers holding down their wages.

We recognize the difficulties inherent in stabilizing the cost of food, clothing and shelter--the basic cost-of-living items--but it must be done in order to remove the pressures for wage adjustments. If it is done, the cost-of-living provision for wage adjustments in our labour contracts is no problem. If the cost of living cannot be completely stabilized and should continue to creep upward, we still believe that our agreements provide the best solution for the problem.

The details of our five-year labour agreements and the factual data we developed in analyzing the problem of how to determine fair wages are too voluminous for me to present to you today. If any of you wish copies of our labour agreements, you may obtain it by writing to Mr. William Wecker, President of General Motors of Canada, Ltd., Oshawa.

Most people think of General Motors labour relations as being relations with the Auto Workers, because the UAW-CIO represents more General Motors employees in the U.S. and Canada than all the other unions and because the first five-year agreement was negotiated with them. As a matter of fact, in the U.S. we have in all over 100 different labour agreements covering some 225 bargaining units. Our Personnel Staff has now completed five-year contracts with all of them and with all the bargaining units in Canada, except the new one at G.M. Diesel, Ltd., in London, where such a contract is in the process of negotiation. This could not have been done unless the employees were convinced that this type of five-year contract is fair and desirable, for in many cases the union leaders we were dealing with were quite skeptical to begin with and until they checked with the membership.

Our workmen want industrial peace on the home front just as they want international peace. Good citizens, in both Canada and the United States, cannot accept the philosophy of class conflict as the best way to make social and economic progress.

Certainly General Motors believes in free enterprise, in producing more and better things for more people and in serving its customers well. It also believes in fair treatment of its employees and holds that this is not in conflict with treating customers right. And business large or small that expects to show good profits should expect to earn them through efficiency and progress. We in General Motors believe in the double profit system--a profit for the customer in increased value and a manufacturing and merchandising profit for ourselves when we do our job well.

We do not expect our labour agreements to set a pattern of so many cents per hour or of so many dollars a month in the form of a pension nor in the form of certain insurance benefits intended to improve the health of the worker and his family. It is our hope that these agreements will set a pattern for bargaining based on principles that are fair to all, that minimize industrial strife and that will promote industrial peace and prosperity not only for General Motors and its employees but for all people of our two countries.

VOTE OF THANKS, moved by The First Vice-President, Mr. Warren Hastings.