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The Impact of Technology
on Labor in Four Industries
Textiles/Paper and paperboard/
Steel/Motor vehicles
U.S. Department of Labor
Bureau of Labor Statistics
May 1985
Bulletin 2228

S .M .S .U . L IB R A R Y
U.S. D E P O S IT O R Y

JUL 18 1985

The Impact of Technology
on Labor in Four Industries
Textiles/Paper and paperboard/
Steel/Motor vehicles
U.S. Department of Labor
William E. Brock, Secretary
Bureau of Labor Statistics
Janet L. Norwood, Commissioner
May 1985
Bulletin 2228

For sale by the Superintendent of Documents. U.S. Government P rinting Office, W ashington, D.C. 20402

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Preface

This bulletin appraises some of the major
technological changes emerging among selected
American industries and discusses the impact of these
changes on productivity and labor over the next 5 to 10
years. It contains separate reports on the following four
industries: Textiles (sic 22); pulp, paper, and paperboard (sic 2611,21,31,61); steel (sic 331); and motor
vehicles (sic 371).
This publication is one of a series which presents the
results of the Bureau’s continuing research on produc­
tivity and technological developments in major in­
dustries. Previous bulletins in this series are included in
the list of b l s publications on technological change at
the end of this bulletin.
The bulletin was prepared in the Bureau’s Office of
Productivity and Technology, Jerome A. Mark,

iii

Associate Commissioner, under the direction of Charles
W. Ardolini, Chief, Division of Industry Productivity
and Technology Studies. Individual industry reports
were written under the supervision of Rose N. Zeisel
and Richard W. Riche, by A. Harvey Belitsky (textiles),
Richard W. Lyon (pulp, paper, and paperboard),
Charles L. Bell (steel), and Robert V. Critchlow (motor
vehicles).
The Bureau wishes to thank the following organiza­
tions for providing the photographs used in this study:
Russell Corporation, Paper Trade Journal, American
Iron and Steel Institute, and Automotive Industries.
Material in this publication, other than photographs,
is in the public domain and, with appropriate credit,
may be reproduced without permission.

■'

' : ■ •

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Contents

Page
Chapters:
1. Textiles............................................................................................................................
2. Pulp, paper, and paperboard..........................................................................................
3. Steel..................................................................................................................................
4. Motor vehicles.................................................................................................................

1
9
20
35

Tables:
1. Major technology changes in textiles.............................................................................
2. Major technology changes in pulp, paper, and paperboard..........................................
3. Major technology changes in steel..................................................................................
4. Major technology changes in motor vehicles.................................................................

2
10
22
36

Charts:
1. Output and employee hours, textiles, 1970-82...............................................................
2. Employment in textiles, 1970-83, and projections, 1983-95..........................................
3. Output per employee hour and related data, pulp, paper, and paperboard, 1970-83..
4. Employment in pulp, paper, and paperboard, 1970-83, and projections, 1983-95___
5. Projected changes in employment in pulp, paper, and paperboard by
occupational group, 1982-95........................................................................................
6. Output per employee hour and related data, steel, 1970-83..........................................
7. Employment in steel, 1970-83, and projections, 1983-95..............................................
8. Output per employee hour and related data, motor vehicles, 1970-83...........................
9. Employment in motor vehicles, 1970-83, and projections, 1983-95.............................
10. Projected changes in employment in motor vehicles by occupational
group, 1982-95...............................................................................................................

v

4
7
14
16
17
28
31
42
45
46

Chapter 1. Textiles

Summary

intensive industry, although less so than 10 years ago. In
the last decade, a strong shift toward greater capital in­
tensity has occurred in a highly motivated effort to com­
bat domestic and import competition, and to meet
Federal cotton dust and noise standards.
In addition, the industry has contracted and con­
solidated as two major recessions resulted in the closure
of less efficient plants. These changes will result in a
smaller industry with improved productivity.

Diffusion of advanced technologies is revitalizing the
textile industry (sic 22), enabling it to compete more ef­
fectively with imports. Almost every aspect of fiber and
fabric manufacture is being affected by faster, more
automated machinery requiring less unit labor and
energy. Nevertheless, many small mills do not find it
economically feasible to change over to newer, more ex­
pensive equipment.
Definitive measurements of textile industry produc­
tivity are not available, but output and hours data sug­
gest that productivity growth during the period 1970-82
was relatively high—about 3l percent. This was largely
A
a function of a sharp reduction in hours and a modest
increase in output. In contrast, productivity growth in
the 1960’s accompanied strong demand.
Large capital expenditures during the 1970’s im­
proved the productivity and effective competitiveness of
the industry. A larger share of these outlays was re­
quired to meet Government health and safety standards
than in many other industries. The outlook is for
continued high outlays for new, more productive
machinery.
Total textile employment declined at an average an­
nual rate of -2.0 percent during 1970-83, reversing the
growth trend of 1960-70. In 1983, employment stood at
744,000 persons, or 26 percent below the 1973 peak. The
outlook for 1995, according to Bureau of Labor
Statistics projections, is for modest employment ad­
vances for the industry as a whole, but with con­
siderable variation among the industry’s sectors.

Technology in the 1980’s
The technology of textile manufacture consists of
transforming fiber into finished fabric. This requires
many complex, integrated operations which may in­
clude opening and carding and/or combing the fiber;
spinning or texturing the yarns; knitting, weaving, or
tufting; dyeing, printing, and finishing; and processing
into consumer goods, e.g., sheets.
Open-end spinning and shuttleless-loom weaving are
probably the technologies of prime interest today, great­
ly affecting productivity and labor. However, almost
every other step in fiber and fabric manufacture from
texturizing1 to printing is also being affected by faster,
more automated machinery requiring less unit labor and
energy.
In this section, selected developments in spinning,
weaving, and electronic changes and their impact on
labor are discussed; these are summarized in table 1.
Direct-feed carding

While in most mills yarn is still made on a series of
discrete machines, more plants are adopting a con­
tinuous opening-blending-carding operation, known as
direct-feed or chute-feed carding. This eliminates the
handling of fiber from machine to machine and actually
eliminates an entire process called picking. In the old
system, the picking process rolls the fiber into large
heavy “ laps” which then must be moved manually or
mechanically to the carding machine for the next pro­
cess. Output with direct-feed carding is about 3 to 4
times greater per hour than the older manual system.
Direct-feed carding greatly reduces the need for un­
skilled and semiskilled labor compared to the conven­
tional processes of opening, blending, picking, and card-

Industry Structure
The textile industry is making significant strides in the
adoption of modern technology, following the lead of
Europe and Japan. Fundamental changes in textile pro­
cessing in the United States are revitalizing the industry.
But the catchup is not complete. Most small mills have
not changed over to the newer, more productive
spindles and looms, and even the larger mills are still in
the transition stage.
About 5,500 companies convert fiber into some
form of yarn or fabric, and some companies turn their
fabric into finished consumer goods like sheets, towels,
or carpets. Basically, it is still a fragmented, labor­

1
A process which crimps filament yarn for use in knitting and some
weaving.

1

Table 1. Major technology changes in textiles
Technology

Description

Labor implications

Diffusion

Direct-feed carding

Integrates several processes into Reduces unit labor for unskilled and Conversion
a continuous operation; eliminates semiskilled workers in opening and rapidly.
picker machines and associated blending. Eliminates picker operator.
processes; output per hour increased
about 4 times.

Open-end spinning

Integrates the conventional process­ Reduces unit requirements for semi­ In use for 40 percent of the coarser
es of roving, spinning, and winding. skilled spinning, roving, and winding filling yarn output but is still a small
Can produce filling yarn at 4 or operators, and associated unskilled proportion of total yarn output.
more times the output of conven­ labor.
tional ring spinning.

Shuttleless-loom weaving

Operates at speeds 3 times that of the Reduces unit requirements for weav­ In use for 30 percent of fabric
average shuttle loom, is quieter, ing operators; output per hour output. Expected to be 40 percent
and needs fewer auxiliary opera­ averages 2Vi times that of shuttle by 1990.
tions. New shuttleless looms are loom.
wider.

Electronic controls

Sophisticated electronic process Reduces unit labor requirements for Small electronic controls widely
controls for operating and maintain­ laborers, operators, and maintenance used. More expensive sophisticated
ing machinery; computer-controlled personnel. Increases need for elec­ computer controls in large plants
production in wrap preparation, tronic specialists.
only, primarily in dyeing and finishing.
finishing, and carpet production;
Production robots in very early stages
robotic technology for materials
of development. Newest computerhandling.
controlled carpet printing used by at
least one manufacturer.

ing. In this new continuous system, no picker operators
are required nor are the laborers who move the heavy
fiber laps. Without the fiber laps, labor for cleaning and
maintenance is also greatly reduced. In addition to be­
ing considerably more productive than conventional
operations, the direct-feed or chute-feed process also
meets Federal requirements for lower cotton dust levels,
since the opening-to-carding operations are the major
areas of cotton dust generation.

advancing

relatively

cess greatly improves productivity. With this automated
process, the job of the doffing operator can be
eliminated. Although commercially available for a
dozen years, the application of automatic doffing to the
older spindles was not efficient.
Rotor or open-end spinning, which has greatly im­
proved since its introduction in the mid-1960’s, will con­
tinue to replace ring spinning, but slowly. Now produc­
ing stronger yarn than previously feasible, new rotor
spindles have automatic cleaning, doffing (removal of
full packages), and piecing (repairing broken yarn) on
many models. Moreover, new models of rotor spinning
are now available for a wider range of yarns. Never­
theless, ring spinning will continue to be the major pro­
cess.

Open-end spinning

The final step in yarn manufacture is spinning. Only
10 years ago, ring spinning was almost exclusively used
in the United States, but today, open-end or rotor spin­
ning produces about 40 to 50 percent of the coarser fill­
ing yarn. (Filling yarn used in weaving is the crosswise
yarn.) While rotor spinning is now the method of choice
for the coarser yarn, its diffusion in the United States
has been slow compared to that in other major coun­
tries. In Europe, open-end spinning has been the major
process for this type of filling yarn for many years.
Where applicable, the advantages of open-end spinn­
ing are manifold. It eliminates two processes of draw­
ing, one of roving, and can produce 4 to 5 times the out­
put per hour of the conventional spindle with less labor.
It reduces space requirements, maintenance and clean­
ing requirements, and downtime. Altogether, it is less
labor intensive, requiring less unskilled and semiskilled
labor.
Moreover, automatic doffing machinery can be built
with the new open-end spindles. Since doffing (removal
of full bobbins) is one of the most labor-intensive opera­
tions in the mill, the successful automation of this pro­

Shuttleless-loom weaving

New shuttleless looms are faster, wider, quieter,
cleaner, and require considerably less unit labor than
shuttle looms. The U.S. industry was slow in accepting
shuttleless looms, but now, diffusion is increasing
rapidly in an effort to stay competitive. Also, Govern­
ment regulations to reduce unhealthy noise levels of the
old loom shed give additional motivation. In 1982, U.S.
mills had in place or on order almost 5 times as many
shuttleless looms as in 1973. Shuttleless looms are now
producing about one-third of the total fabric output,
and this ratio is expected to increase to 40 percent by
1990.
Unit labor requirements are lower than on a conven­
tional fly shuttle, particularly for maintenance person­
nel and semiskilled operators and auxiliary workers.
Shuttleless looms require less maintenance, and
2

ing, which makes small batch operations economically
feasible.
Solid-system controls (programmable controls) are
performing many functions in the mill. They are being
programmed with a “ simple language’’ that requires lit­
tle training, and they have a “ memory.’’ These controls
are now being used in the mills for materials handling,
management reporting, and process control.
A growing number of companies now have computercontrolled operations. In one mill, a computer-directed
handling system moves material from truck unloading
to the placement of heavy beams of yarn in racks. This
eliminates much of the unskilled labor in the mill.
Robots have been introduced in some mills. While on­
ly a few mills have this newest technology, it is an in­
dication of the industry’s shift toward a capitalintensive system. In one mill, the robot, when directed
to do so, places the filling yarn on a conveyor for
delivery to the weaving shed.

The operator monitors the spinning machine.

downtime is reported to be less. Most shuttleless looms
are self-lubricating, and electronic controls permit
monitoring of the looms to aid maintenance personnel
and supervisors. Unit requirements for operators are
reduced because output per hour is greater. Moreover,
since output per machine hour is greater than on the flyshuttle loom, fewer machines are required for a given
output. One mill of a major textile company replaced
6,600 older shuttle looms with about 1,150 shuttleless
jet looms.
However, newer looms are relatively expensive and
require more highly skilled technicians. It is not
economically feasible for many smaller mills to replace
older operating looms with the new shuttleless looms.
Many types of shuttleless looms are available to U.S.
mills: Rapier (the largest number in place), missile,
water jet (restricted to 100-percent synthetics), and air
jet (currently very popular). As an example of the
operation, the air-jet looms weave the cloth by propell­
ing the filling (crosswise yarn) across the warp
(lengthwise yarn) on high-pressure streams of air.

Output and Productivity Trends
Output

Textile mill output (roughly measured by the deflated
value of shipments2 fluctuated sharply during 1970-82.
)
It followed the general cyclical pattern of the overall
economy with sizable declines in the economic reces­
sions of 1974-75 and 1980-82 (chart 1). The industry’s
average annual rate of increase in 1970-82 was less than
1.5 percent, compared with about 5.0 percent in
1960-70. While the textile rate of growth in 1970-82 was
about one-half of the manufacturing rate, it was quite
similar to the manufacturing rate in the earlier decade.
Peak output occurred in 1979, after increasing at an
annual rate of about 2.5 percent from 1970. Output
then declined in the following 3 years. Textile output in
1982 was more than 10 percent below the 1979 peak.
However, the 1983 production index of the Federal
Reserve Board indicates a sharp upward trend.
Although the industry recorded slow output growth
overall, several sectors remained relatively strong during
1970-81 (data for 1981 are the latest available). The
floor-covering sector grew at the fastest rate, about 4
percent, but this was only one-third the rate in the
1960’s. Knitting, one of the strongest sectors in the past,
increased at an average rate of less than 2 percent in
1970-81 compared with over 8 percent a decade earlier.
Of the major sectors, only two showed a decline in out­
put from 1970 to 1981: Cotton weaving (about -1 per­
cent average annual rate) and wool weaving and
finishing mills (about -3 percent).
Most sectors of the industry did not substantially
change their share of total output between 1970 and

Electronic instrumentation

Extensive diffusion of electronic instrumentation is
an integral part of the industry’s changeover to a more
capital-intensive system. Microprocessors and more
sophisticated instrumentation are reducing labor re­
quirements for machine operators, maintenance person­
nel, and unskilled laborers. They are reducing downtime
and improving quality while upgrading requirements for
repair technicians and electricians.
Electronic controls are widely used in large and small
mills and are incorporated into the newer machines. But
more expensive computer-controlled systems are
generally used only in large plants. Dyeing and finishing
operations, which lend themselves more readily to con­
tinuous operation, have been adopting these electronic
technologies for some time. At least one manufacturer
utilizes a computer-controlled system for carpet print­

2
Deflated value-of-shipments data (shipments data from the
Bureau o f the Census) are used to represent output for total textile
mill products and the individual sectors o f the industry.

3

Chart 1. Output and employee hours, textiles, 1970-82
(lndex,1977 = 100)

1970

1972

1974

1976

1978

1980

1982 p

1 Deflated value of shipments, unpublished data.
p = preliminary.
SOURCE: Bureau of Labor Statistics.

1981. But important shifts did occur within the sectors.
Knitting continued to account for about one-quarter of
total output. The combined output of the weaving sec­
tors was also about one-quarter of output in 1981, but
that share had fallen from 30 percent in 1970. Within
the weaving sector, sharp output declines occurred in
cotton and wool, with only a slight increase in syn­
thetics. The floor-covering sector increased its share to
13 percent, but the yarn and thread sector and the
finishing sector remained relatively stable, with about
10 percent and 15 percent, respectively, of total output.
Basically, the outlook for textile demand depends on
the strength of the economy, particularly on the ap­
parel, auto, and housing markets. Demographic
changes will also play a major role. For example, the
number of persons in the age group 25-39—the largest
consumers of apparel—will be increasing more rapidly
than total population over the next decade. In addition,
new industrial textile products are being developed;
some of these replace older products, but some involve
new applications. However, import penetration of tex­
tiles and apparel remains of prime importance in any
evaluation of textile demand.

spite of international agreements to control their
growth. From 1972 to 1975, imports declined sharply,
reflecting currency changes and fiber shortages.
However, when economic conditions were reversed, im­
ports started climbing. By 1983, the strong dollar and
the worldwide recession brought imports of textile and
apparel products to 16 percent of apparent domestic
consumption (production plus imports minus exports;
in pounds) compared with 9 percent 10 years earlier.3
Most of the increase was in cotton products.
To control import growth, the Federal Government
has entered into bilateral arrangements with countries
around the world within the framework of the
Multifiber Arrangement of 1974 extended in 1982. In
1983, the four largest suppliers of apparel and nonap­
parel textiles (in square yard equivalents) to the United
States were Taiwan, South Korea, Hong Kong, and
China. The new agreements are all more restrictive than
in the past but no rollbacks were made.
Productivity

Because of the limitations of available data, the
Bureau of Labor Statistics does not publish measures of
3
U.S. International Trade Commission, U.S. Imports o f Textiles
and Apparel Products Under the Multifiber Arrangement, 1976-83,

Imports

Imports continue to be a problem to the industry in

USITC 1539, June 1984.

4

industry. Outlays for plant and equipment in the 5 years
ending with 1983 averaged nearly $1.5 billion annually,
30 percent above the previous 5-year period. Even after
adjustment for inflation, the industry’s capital expen­
ditures stood at relatively high levels in most years of the
last decade. Nevertheless, in constant dollars, annual
expenditures for the 5-year period ending with 1983
were 8 percent below the outlays of the previous 5
years.4
To meet the standards of the Occupational Safety
and Health Administration (OSHA) and the Environmen­
tal Protection Agency (EPA), the textile industry has had
to allocate a larger share of its capital outlays for safety
and health equipment than many other industries.
In some operations, such as in the opening-to-carding
processes where cotton dust levels are highest, Federal
regulations are difficult to meet without new or
overhauled equipment. Although opinions differ, some
industry specialists believe that Federal regulations for
reduced cotton dust levels have been “ contributing to
the increased pace and intensity of modernization.’’5
While capital outlays for safety and health equipment
are expected to decline in future years, large outlays for
newer and more productive equipment will continue to
be important. According to a McGraw-Hill survey of
executives of large textile companies, 27 percent of tex­
tile equipment was technologically outmoded in 1980,
compared with 11 percent in 1978. No later data are
available, but as newer machines improve their perfor­
mance, and if labor and energy costs rise, the propor­
tion of equipment considered obsolete will continue to
increase.

productivity for the textile industry. However, the ap­
proximate trend in productivity growth can be estimated
from available output (deflated value of shipments) and
employee hour data. These data suggest that textile pro­
ductivity growth has been relatively high in the last two
decades. From 1970 to 1982, the average annual rate of
growth of about 3.5 percent was not much below the
rate in the 1960’s. This was considerably stronger than
the rate for all manufacturing of 2.3 percent for the
period 1970-82 and 2.9 percent in the 1960’s.
While productivity growth in the last decade was
relatively high, it did not reflect the economic strength
of the 1960’s, when output grew sharply and hours rose
moderately. The productivity advance between 1970
and 1982 was largely a function of reduced employee
hours, as output fluctuated. In 1982, employee hours
were at a very low level, having declined almost steadily
since the peak in 1973.
Considerable variation in productivity growth pat­
terns was evident among sectors of the industry during
1970-81 (1981, latest data), but the rate was relatively
high for almost all sectors. Using deflated value of
shipments as an output measure, the data show that
1981 was a year of peak productivity and sharply reduc­
ed hours in almost every major sector. Floor-covering
mills and textile finishing mills had the largest produc­
tivity advances of all major sectors (about 5 percent)
over those years. Productivity growth in the synthetic
fiber weaving mills was also comparatively high, almost
4 percent for the same period, while knitting mills were
only slightly lower. Although the wool weaving mills
had a sharper decline in output than the cotton weaving
mills, a very steep decline in employee hours in the
former resulted in a productivity growth rate of over 3
percent, or twice the rate in the cotton weaving mills.
Only cotton weaving and narrow fabrics had less than a
2-percent productivity growth rate.
Official b l s measures are available for two sectors of
the textile industry, hosiery and non wool yarn mills.
While the hosiery industry’s productivity advanced at
the rapid average annual rate of 4.8 percent during
1970-83, nonwool yarn mills increased 2.5 percent. The
productivity rates of these two industries were based on
small average annual rates of increase in output over the
period (2.2 percent in hosiery, and 1.5 percent in non­
wool yarn mills), but their experiences with employee
hours were quite different. Hours in the yarn industry
declined relatively slowly (at an annual rate of -1.0 per­
cent), while hours in hosiery moved down more sharply
(-2.4 percent), responding to technological advances.

Research and development

In general, research and development (R&D) in the tex­
tile field is carried out by the chemical companies that
produce synthetic fibers and the predominantly foreign
companies that manufacture textile equipment. With
few exceptions, domestic textile manufacturers of yarn
and fabric spend only small amounts on r &d and con­
centrate instead on design, styling, and market research.
According to the National Science Foundation, r &d
outlays as a percent of net sales of textile and apparel
companies performing r &d has been the lowest of the
major manufacturing industries surveyed. (Data for the
textile industry only are not available.) In 1981, textile
and apparel company outlays were only 0.4 percent of
net sales, compared with 3.2 percent for total manufac­
turing. Only the food industry was at this low a level.
* Bureau o f Economic Analysis, U.S. Department o f Commerce.
The data include outlays for replacement o f existing equipment, for
expansion, and for major alterations, repairs, and improvements.
5
Brian Toyne, et al., The U.S. Textile Mill Products Industry:
Strategies fo r the 1980’s and Beyond (University o f South Carolina,
Center for Industry Policy and Strategy, 1983), p. 3-2; and Ruth Ruttenberg, Compliance With the OSHA Cotton Dust Rule, the Role o f
Productivity Improving Technology, for Office o f Technology
Assessment, March 1983, p. 103.

Investment
Capital expenditures

Large capital expenditures during the 1970’s improved
productivity and the effective competitiveness of the
5

Employment and Occupational Outlook

The ratio of production workers to all employees has
remained relatively high. This is associated with the dif­
ficulty or cost of automating some processes, and the
relatively limited diffusion of some new machinery. In
1983, production workers constituted about 86 percent
of all textile workers, compared with 68 percent in all
manufacturing.
The proportion of women in the textile industry’s
work force rose slightly from 1970 to 1983. It was at its
peak of nearly 48 percent in 1983, considerably above
the 32 percent for all manufacturing industries. Of the
major textile sectors, knitting mills consistently had the
highest proportion of women employees, about 65 per­
cent, and the narrow fabrics sector followed with 58
percent.

Employment

Total employment in the textile industry declined at
an average annual rate of -2.0 percent during 1970-83,
reversing the growth trend of 1960-70. Employment
rose in only 3 of the last 13 years (chart 2). It fell sharply
in the 1974-75 recession, and, after only 1 year’s
recovery, declined steadily during 1977-83. In 1983,
employment stood at 744,000 persons, or 26 percent
below the 1973 peak.
Employment declined in every major sector in the
1970-83 period, and the patterns were very similar, as
shown on chart 2. Employment in the combined sectors
of spinning and weaving fell -2.0 percent annually but
the rates of decline within the sectors differed con­
siderably. The cotton and wool weaving sectors had
relatively large rates of decline while synthetic weaving
had the slightest decline of any major sector. In the knit­
ting sector, employment fell an average of -1.9 percent,
but the finishing sector recorded a relatively larger rate
of -2.5 percent. Floor-covering and miscellaneous textile
sectors declined at slower average rates, -1.6 and -1.4
percent, respectively.
The 1982 recession caused many plant closings. In
that year, 43 textile plants closed permanently in North
and South Carolina alone. While these closings reflect
the recession, the majority of the plants closed because
they were too old to retrofit. According to a South
Carolina public administrator, the plants “ were in
many ways victims of technological advances. They just
couldn’t effectively compete with textiles’ progress to­
day.” 6
The various sectors’ shares of total textile employ­
ment generally showed only small shifts during 1970-83.
Spinning and weaving accounted for 49 percent of the
total; knitting, for 28 percent. The other major sectors,
finishing and floor covering, made up about 9 and 7
percent, respectively. Miscellaneous textile goods ac­
counted for 8 percent and included such diverse pro­
ducts as lace goods and tire cord and fabric.
Looking ahead to 1995, b l s projections, based on
three versions of economic growth,7 suggest modest
employment advances for the industry as a whole, but
with considerable variation among the industry’s sec­
tors. For the total industry, the b l s projections show an
average annual rate of increase of between 0.8 and 1.2
percent from 1983 to 1995. Advances are projected for
seven sectors, while two sectors—cotton weaving and
wool weaving and finishing—are expected to incur
relatively large declines.

Occupations

With mill modernization, greater demand has
developed for more highly skilled workers. In some
areas, skilled technicians and engineers are in short sup­
ply. Similarly, managers’ jobs now require technical as
well as managerial skills in order to make the best use of
machines and labor. For example, computer informa­
tion is available to the manager for every loom in the
plant and requires skilled technical analysis.
Although higher skill levels are required for technical
and professional personnel, the skill requirements for
some operators may actually be lower. For example,
skills required to operate rotor open-end spinning
equipment may be less than those required to operate
conventional ring spinning. Although newer machines
are more complex than those they replace, they are also
more automated or mechanized and require less manual
dexterity or speed.
Training for new equipment is usually offered by the
machine manufacturer, and lengthier on-the-job train­
ing follows. Because the newer machines are more
automated, training time is relatively shorter than on
the older equipment. For example, retraining the
operator from ring spinning to open-end spinning may
require only several hours, according to one manufac­
turer. In contrast, retraining the fixer would take a couple
of weeks. Training for computer operators and elec­
tronic technicians is often a joint venture of a vocational
training school, the machine manufacturer, and the tex­
tile mill.
Unskilled jobs have been greatly reduced in the
modern plant. Mechanization of materials handling and
transport and warehouse operations is now quite com­
mon. Also, the use of unskilled maintenance workers
has been reduced where vacuum devices on machines
and mechanical means of cleaning have been installed to
comply with o s h a regulations.
Worker involvement has increased in some plants.
While not a new concept, worker participation has
grown in an attempt to reduce defects or absenteeism

6 Douglas McKay III, South Carolina Statistics and Research Ad­
ministrator, in Textile World, January 1983, p. 23.
7 BLS projections for employment in 1995 are based on three alter­
native versions o f economic growth for the overall economy. The
alternative assumptions are described in the November 1983 issue o f
the Monthly Labor Review.

6

Chart 2. Employment in textiles, 1970-83, and projections, 1983-95
Employees (thousands)

Employees (thousands)

1050

1050

950

950

850

850

750

750

650

650
Knitting

550

\ 7

V

550

X

Finishing

450

450
Spinning and weaving

350

350
A verage annual percent change 2
A 1 employees
1

250

Spinning
and
weaving

Total
industry

Finishing3

Knitting

Floor
covering

250

Miscella­
neous
textiles

1970-83 ................ ............- 2 . 0 ......... - 2 . 1 ........ - 2 . 5 ........ - 1 . 9 ........ - 1 . 6 ........ - 1 . 4 ..........

150

0

1983-95
(projections). . . .

i

1970

i

i

i

i

i —L

i

1975

150

....... 0.8 to 1.2

1980

1985

1 See text footnote 7.
2 Least squares trends method for historical data; compound interest method for projections.
3 Except wool.
SOURCE: Bureau of Labor Statistics.

7

i

U i

1990

i

i

1995

0

and improve productivity. In one major yarn plant
which has instituted quality circles, 8-12 employees
from the same area of the plant meet regularly to discuss
problems and solutions for improving efficiency.
Working conditions have dramatically improved in
modernized mills, largely in response to Government re­
quirements. Dust-free rooms, greatly reduced noise
levels, and lighter, cleaner work areas are now quite
common. As described in the technology section, new
machinery incorporates Government requirements for
noise limitation, cleanliness, and safety.

inform the union about changes in workloads, job
assignments, and related pay changes. Some contracts
require 1- to 2-weeks’ advance notice to the union of
changes in workload or job assignments. According to
one agreement: “ At least (6) days before the proposed
effective date of any revision in a piece rate or change of
workload, the Company will notify the Union of same
and furnish necessary information . . . to enable the
Union to understand the nature and extent of the
change. . . . Upon request of the Union, the Company
will meet to discuss the proposed change.’’8A grievance
may be filed regarding a change in rate or workload and
a retroactive adjustment in the change may result.
A continuous work schedule involving around-theclock operation of a mill, 7 days each week, has become
more prevalent as the industry has adopted costly
machinery. While no official data are available, union
representatives believe that a substantial portion of the
work force is employed in a variety of different workshift schedules. These schedules continue to involve
most workers in the traditional 8-hour, 5-day week.
However, in one version of continuous work, workers
are employed for 3 12-hour workdays during 1 week and
4 12-hour workdays during the following week.
In case of permanent separation from a company as a
result of plant shutdown or technological change, some
contracts in northern mills provide severance pay.
However, this is not the typical practice in the South
where, in recent years, most of the plant closings have
taken place. Only about 6 percent of the production
workers employed in cotton and manmade fiber textile
mills in the Southeast have formal provisions for
technological severance pay.
Nonetheless, even in the absence of a pertinent clause
a union may secure some benefits for workers who lose
their jobs. The Supreme Court ruled in June 1981 that a
company is required to bargain over the effects of a
plant closing.9 During bargaining, the union may raise
such job security issues as relocation, severance pay,
and retraining.

Adjustment of workers to technological change

Programs to protect the worker from the adverse
effects of changes in machinery and methods may be in­
corporated into union contracts, or they may be infor­
mal arrangements between workers and management.
In general, such programs are more prevalent and
detailed in formal contracts.
Formal labor-management contracts cover only
about 15 percent of the workers in this industry. Con­
tracts exist with the Amalgamated Clothing and Textile
Workers Union, the United Textile Workers of
America, and the International Ladies’ Garment
Workers Union (ILGWU)—all of which are members of
the AFL-CIO. The i l g w u is limited to knitted outerwear.
Union penetration remains lowest in the Southeast,
where the industry is heavily concentrated.
Plant wide seniority, which prevails in all agreements,
provides a measure of job security when technological
change takes place. In general, seniority rights apply to
layoff, recall, job bidding, and other similar situations.
Even though training and retraining (generally
associated with technological change) are usually not
mentioned in contracts, seniority is often a pertinent
consideration when training or retraining is offered.
Although requirements for advance notice of
technological change are usually absent from the
bargaining contracts in southern mills, it is often the
practice of management to inform union representatives
about the intended introduction of a technological
change involving a new machine process. In any case,
new machines often lead to changes in job re­
quirements, and it is quite common for management to

8 Agreement between Fieldcrest Mills, Inc., and the Amalgamated
Clothing and Textile Workers Union.
9 First National Maintenance Corp. v. National Labor Relations
Board, 101 U.S. 2573 (1981).

SELECTED REFERENCES
“ Air Jets Get the Big Slice o f Weaving’s P ie,” Textile World, October
1982, pp. 37-38.

“ Textiles,” Standard and Poor’s Industry Surveys, July 8, 1982, pp.
T62-T72.

“Carolina Closings in ’82 ‘Devastative’,” Textile World, January 1983,
pp. 23, 27.

Toyne, Brian, et al. The U.S. Textile Mill Products Industry:
Strategies fo r the I980’s and Beyond, University o f South Carolina,
Center for Industry Policy and Strategy. University o f South
Carolina Press, 1983.

National Academy o f Engineering. The Competitive Status o f the

U.S. Fibers, Textiles, and Apparel Complex: A Study o f the
Influences o f Technology in Determining International Industrial
Competitive Advantage. Washington, National Academy Press,

U.S. Department o f Labor, Bureau of Labor Statistics. Industry

Wage Survey: Textile Mills and Textile Dyeing and Finishing
Plants, August 1980, Bulletin 2122, (1982).

1983.
National Science Foundation. National Patterns o f Science and
Technology Resources, 1982, NSF 82-319, 1982.

“ What’s New in Spinning Plus Top 15 Forecasts,” Textile World,
August 1983, pp. 63-68.

“ Rotor Spinning: Speeds Are Up, Labor Costs Dow n,” Textile
World, May 1983, p. 50.

Zeisel, Rose N. “ Modernization and Manpower in Textile M ills,”
Monthly Labor Review, June 1973.

Ruttenberg, Ruth. Compliance With the OSHA Cotton Dust Rule,
The Role o f Productivity Improving Technology. For Office o f
Technology Assessment, Ruttenberg, Friedman, Kilgallon and
Associates, Inc., March 1983.

Zeisel, Rose N. Technology and Manpower in the Textile Industry o f
the 1970’s, Bulletin 1578, U.S. Department o f Labor, Bureau of
Labor Statistics, 1968.

8

Chapter 2. Pulp, Paper,
and Paperboard

Summary

period was 0.6 percent. Although the modernization of
plant and equipment has not resulted in extensive in
dustrywide displacement, significant reductions in unit
labor requirements were reported by mills which install­
ed high-speed papermaking machines and other im­
provements, and some high-cost facilities were closed
down. Moreover, machine tenders and other operators
increasingly monitor computer controlled and highly in­
strumented production equipment which reduces their
manual tasks. Looking ahead, the industry is not expected
to be a major source of new jobs through 1995; b l s projec­
tions indicate that employment may remain about the
same, or increase only moderately.
The pulp, paper, and paperboard industry is highly
unionized; nearly all the work force is employed in mills
where collective bargaining contracts cover the majority of
the work force. Provisions in these agreements pertaining
to seniority, reassignments and layoffs, training, and
related matters can facilitate adjustment to technological
change. The training of maintenance employees to become
skilled in several crafts and the creation of labormanagement committees to promote productivity and
other goals are major important developments.

The pulp, paper, and paperboard industry1 is highly
mechanized, and innovations underway primarily in­
volve improvements in speed and capacity of basic con­
ventional technology. Technological changes are being
adopted in the major steps of production of pulp,
paper, and paperboard, from the initial woodyard and
woodroom operations to the end-stage finishing and
shipping tasks. Major innovations include an increase in
the capacity of papermaking machines and other basic
production equipment, the more widespread use of
computer process control and advanced instrumenta­
tion, and the installation of more highly mechanized
materials handling and warehouse systems.
Productivity (output per employee hour) rose at an
annual rate of 2.7 percent during the period 1970 to
1983, with the largest gains in the early and middle
segments of this period. The productivity increase
resulted when output increased at an annual rate of 1.6
percent over this period, and employee hours declined at
an annual rate of 1.1 percent. Prospects for productivity
gains into the mid-1980’s appear improved, as output
and capacity utilization increased as the economy
recovered in 1983.
The industry has allocated substantial funds to
modernize plant and equipment and to protect the en­
vironment through control of pollution. Between 1970
and 1981, expenditures for new plant and equipment
totaled nearly $25 billion (current dollars), with spend
ing by paper mills (sic 2621) accounting for about onehalf of total outlays. Investments increased during the
late 1970’s as the industry sought to lower manufactur­
ing costs through modernization of facilities. The in­
dustry also spends millions of dollars annually on
research and development (R&D), although expenditures
are relatively low when compared to other manufactur­
ing industries.
Employment in the pulp, paper, and paperboard mills
industry has declined steadily since 1970. In 1983,
employment totaled 253,700 workers, down by 36,000
from 1970 levels. The annual rate of decline over this

Technology in the 1980’s
The technological changes underway in the pulp, paper,
and paperboard industry, summarized in table 2, generally
involve improvements in the size and capacity of paper­
making machines and other conventional production
equipment. The introduction of advanced computer con­
trol and instrumentation systems and major improvements
in materials handling systems in finishing and shipping
operations are among the most significant changes. Im­
provements in the basic processes to produce pulp will
reduce pollution and utilize energy and raw materials more
efficiently. Research to develop new paper products with
special properties will continue to broaden markets.
Although technological improvements are expected to
continue to bring about productivity gains in key opera­
tions, widespread displacement of workers is not an­
ticipated. However, training programs to provide workers
with the skills required to operate and maintain advanced
equipment will continue to be important.

1
The pulp, paper, and paperboard industry covered by this report
includes the following Standard Industrial Classification (SIC) in­
dustries: SIC 2611, pulp mills; SIC 2621, paper mills (except building
paper mills); SIC 2631, paperboard mills; and SIC 2661, building paper
and building board mills.

9

Papermaking machines

The introduction of papermaking machines of greater
speed and capacity is a major source of productivity

Table 2. Major technology changes in pulp, paper, and paperboard
Technology
Improved papermaking machines

Description

Labor implications

Diffusion

New machines are larger and fas­ T ech nological im provem ents in Data on use of new, modernized
ter and feature advanced compu­ papermaking machines have re­ papermaking machines are not
ter control systems. Older ma­ sulted in productivity gains. One available; outlook is for more
chines, including smaller ones, mill with a new, high-capacity widespread adoption. New mills
are also being modernized. Aux­ papermaking machine produced are installing advanced model ma­
iliary equipment such as devices to twice the volume of uncoated chines. New machines are expen­
wind and slit paper rolls leaving white paper with about the same sive, and their introduction will
the machine are being automated. size crew used on less advanc­ depend on market demand for pa­
ed machines. Crew size generally per and availability of funds for
remains unchanged on existing modernization.
machines that are modernized but
duties are different.
Some mills are getting more out of Crews are being trained to moni­
their high-output machines as part of tor and maintain the advanced
an automation program that extends process control and instrumenation
capacity and improves efficiency. systems. These duties are markedly
different compared to less advanced
machines where crew members lo­
cated at stations along the machine
make adjustments manually.

Improved pulping technology

Improved methods increase yield, Labor impact has been minimal; About 50 percent of kraft pulp
quality, and control of pollution. some modification of job duties asso­ (the leading type) is prepared in
They include continuous digesters ciated with conversion to continuous continuous digesters, which are
that produce pulp in uninterrupted pulping and computer process con­ being installed in new plants and
flow rather than separate batches, trol has resulted. Labor require­ some existing mills. The proportion
batch pulping systems with advanced ments per ton of pulp are lower of pulp produced by continuous
process control, and modification in new systems, but significant dis­ methods is expected to increase.
of equipment used to process pulp. placement of operators and other
Thermomechanical pulping systems, crew members has not occurred. Thermomechanical pulping systems
which prepare mechanical pulp un­ Operators in continuous pulping are forecast to account for 30 per­
der high operating temperatures, are systems monitor operations from cent of mechanical pulping capacity
being adopted more widely to pro­ central control centers, and the man­ by 1985, up sharply from 2 percent
duce groundwood pulp. Use of the ual labor associated with tending and in 1975. The technology to wash,
chemical anthraquinone (AQ) in cer­ loading separate batch cooking ves­ bleach, and refine pulp will be modi­
tain pulping processes has increased sels is no longer required.
fied, but radical departure from past
productivity and achieved other
methods is not anticipated.
benefits.

Computers and instrumentation

Computers and advanced instrumen­ The impact of these changes on ma­ The industry is a major user of
tation are being introduced to con­ chine tenders and other operators process control equipment, and their
trol production throughout the cycle generally involves a modification of purchases account for about 10 per­
of making pulp, paper, and paper- job duties and training in new cent of the U.S. market.
board. Latest systems incorporate skills. New job duties involve more
microelectronic devices that improve extensive monitoring from control Computer control is used most widely
performance and reliability.
centers, and less manual tasks. on papermaking machines and on
Displacement has been minimal, but digesters. Programmable controllers
crew size has been cut back in some and other types of instrumentation
installations.
are being extended to more manu­
facturing operations.
Outlook is for continued application
of advanced control technology;
some experts predict that millwide
process control networks ultimately
will tie together separate processes.

Materials handling and storage

Innovations in materials handling in­ Advanced materials handling sys­ Automation of sheet cutting and
volve larger capacity conveyors and tems lower labor requirements of packaging is broadly diffused in pa­
related equipment, and integrated equipment operators and materials per mills, but advanced paper roll
control systems which mark a higher handlers. New technology modifies handling and wrapping systems
level of automation. They incorporate job requirements to include a greater which feature computer control and
computer control, laser scanning de­ degree of equipment monitoring from laser scanning technology are less
vices, and other features which a central control station, and less widely used. Automated warehouse
achieve economies. Computerized manual handling of products and ma­ operations are in limited use.
systems to transport and store pro­ nipulation of control devices. One
ducts in warehouses also are in­ firm which introduced a state-of-thecreasing.
art system to automate warehouse
tasks eliminated 20 jobs and achiev­
ed other efficiencies.

turn out twice the volume of uncoated white paper using
about the same size crews as the less advanced model—a
substantial gain in productivity.
Advance computer control systems and improved in-

gains. Plants which are modernizing facilities are in­
troducing the latest model Fourdrinier and twin-wire
machines. One large mill reportedly is spending $200
million to install a new papermaking machine which will
10

cess control technology also are achieving operating
economies and provide flexibility in production.
Thermomechanical pulp (TM P), which involves
mechanical pulping using a refining process, is being us­
ed more extensively, and increasingly with a brief
chemical pretreatment. Pulp produced by this process
has stronger fibers compared with pulp prepared by the
conventional mechanical, or groundwood, process.
Thus, thermomechanical pulp can be used for newsprint
without the customary addition of more expensive
chemical pulp. Other advantages of t m p include lower
labor requirements and less pollution. Moreover, both
logs and sawmill waste can be utilized, and t m p pulp has
excellent drainage which allows high-speed papermak­
ing machine operation.3 In the t m p process, heat can be
recovered to generate power and for use in other mill
operations.4 Although t m p capacity comprises only
about 4 percent of the total for all pulp grades, t m p ’s
share of total mechanical pulping capacity has increased
markedly, from 2 percent in 1975 to 30 percent forecast
for 1985, according to the American Paper Institute

strumentation are features of the new papermaking
machines. Machine crews are being trained to operate
new process control computer systems which require
changed job duties and skills. Increasingly, operators
located in an air-conditioned control room monitor and
control papermaking machines, a marked contrast to
the former manual adjustments undertaken by the crew
at stations located along the papermaking machine.
Automated equipment to wind and slit paper leaving the
papermaking machine feature advanced control systems
which reduce labor requirements of the backtender or
other crew members assigned these tasks. Quality also is
improved by these new machines.
Improvements in smaller papermaking machines
(with under a 130-inch wide forming wire) have failed to
keep pace with those on the larger machines. Moreover,
some technologies, such as twin-wire forming and highload presses, are not economically feasible for small-size
papermaking machines. However, recent developments
in technology, such as drainage devices and controls,
new types of press rolls, and high-efficiency dryer fabrics
have achieved improvements in the approximately 600
smaller papermaking machines operating in the United
States in 1983. One firm, for example, modified the
main drive and dryer section of a small papermaking
machine and initiated other improvements which
resulted in a 15-percent increase in machine speed and a
19-percent increase in output.2 Crew size and the struc­
ture of occupations generally remain unchanged on the
smaller machines

(A P I).5

The use of anthraquinone (AQ), a chemical added to
certain types of chemical pulpmaking processes, is
another development in limited but growing use. a q
reportedly increases output of pulp per hour, lowers
consumption of wood per ton of pulp produced,
reduces energy requirements, and lowers pollution
associated with emission of sulfide.6
Computers and instrumentation

Pulpmaking

The application of process control computers and
instrumentation to pulp and papermaking is expected to
continue to increase during the 1980’s. The industry is
reportedly the fourth largest purchaser of process con­
trol equipment, and accounts for about 10 percent of
the U.S. market.7 As indicated earlier, the impact of
computer control and instrumentation on papermaking
machine tenders and other operators primarily involves
a change in job duties to more extensive monitoring of
the process from control centers and reduced physical
involvement in setting of control devices. Displacement
is minimal, but training of operators and maintenance
staff is becoming more important as process control is
being diffused more widely.
Technology to improve control of production is being
applied throughout the cycle of making pulp, paper,
and paperboard. Computer control is most widely

Innovations are underway in the three basic methods
used to prepare pulp: Chemical, mechanical, and
semichemical. These include the limited use of new pro­
cesses and modifications to the basic equipment to pro­
duce pulp, and in auxiliary equipment where the pulp is
further treated prior to being transported to the paper­
making machine. The major benefits of these changes
include improved pulp yield, strength, and quality.
Continuous digesters (equipment that produces pulp
continuously rather than in separate batches) are com­
monly used. Continuous digesters with automatic con­
trols eliminate the intermittent flow of wood chips and
the manual starting and stopping of each batch of pulp
required in batch pulping. According to one major sup­
plier of this technology, about 50 to 55 percent of kraft
pulp (the leading type) is prepared in continuous
digesters, with the proportion expected to increase over
the next decade. New mills are using continuous
digesters, and some older mills are converting batch
systems. Advantages of continuous pulping include in­
creased production, improved quality, steam savings
per ton of over 50 percent, and higher yield.
Batch pulping systems incorporating advanced pro­

3 Jacques Bastien and Gilles Marquis, “ Soucy’s Six Years’ Ex­
perience with 100 °7 TMP Furnish for Newsprint,” Pulp and Paper,
o
June 1983, pp. 78-80.
4 U.S. Industrial Outlook, 1982 (U.S. Department o f Commerce,
Bureau o f Industrial Economics), p. 42.
5 1983 Statistics o f Paper, Paperboard, and Wood Pulp. American
Paper Institute (New York, 1983), pp. 32-33.
6 Ibid., p. 42.
7 “ Paper—Key Market for Process Controls,” Paper Trade Jour­
nal, Feb. 28, 1982, p. 3.

2 E. Richard Woodard, “ Smaller Papermaking Machines: Im­
proving Preformance Via Modern Technology,” Pulp and Paper,
April 1983, pp. 86-88.

11

Modern crane removes logs from truck prior to processing.

from the recession. Demand for products of the paper
industry generally increases at a rate above general
business activity during the early stages of a recovery.
However, combined capacity for paper and paperboard
between 1983 and 1985 is projected to increase at a rate
somewhat below the 2.2-percent gain achieved over the
preceding 15-year span.1
3
Productivity

Productivity in the pulp, paper, and paperboard in­
dustry (output per employee hour) increased at an
13
Peter Wuerl, “ API Sees Annual Capacity Growth Drop Through
1984,” Paper Trade Journal, Jan. 30, 1983, cover and pp. 45, 46, and 48.

12

average annual rate of 2.7 percent during the period
1970-83. The productivity gain reflected an output in­
crease at an annual rate of 1.6 percent over this period,
and a decrease in employee hours at an annual rate of
1.1 percent. The largest year-to-year gain was 9.6 per­
cent from 1975 to 1976 when output rose by over 16 per­
cent as the paper industry recovered from recession.
However, the productivity rate varied within the
period. Between 1970 and 1973, for example, the annual
growth rate of output per employee hour averaged a
substantial 6.0 percent; between 1973 and 1978, it slowed
to 2.8 percent; and, during 1978-83, again slowed, to 1.7
percent.

and package sheets which have eliminated several posi­
tions. Large portal-type gantry cranes are achieving sav­
ings in a few woodyards where high volume, layout of
the woodyard, and log dimensions justify their in­
troduction.
Computers and laser beam scanners are key com­
ponents in some modern handling and storage systems.
Automatic systems to transport and wrap rolls of paper,
for example, feature automatic laser scanning of bar
codes containing packaging instructions located on the
rolls, improved conveyor networks that require
less maintenance and cause less damage to rolls in tran­
sit, and devices that lubricate equipment automatically.
In less mechanized roll handling systems that lack laser
scanning and other advanced technology, an operator
typically removes a card from the roll and inserts it into
a card reader, or enters the data manually, to generate
information on processing instructions.1
1
Computerized systems to handle warehousing opera­
tions also are beginning to be adopted by the paper in­
dustry. An integrated system to store and handle paper
products at one large firm consists of a laser beam scan­
ner, a computer, conveyors, transfer cars, a stretch
wrap machine, and related devices. The company
reported savings of $3 million following the elimination
of 20 jobs, a 28-percent reduction in damaged cases,
and improved inventory control.1
2

employed on papermaking machines and on large steel
vessels called digesters where pulp is prepared by cook­
ing action. Computer control also is being extended to
other pulping operations. However, programmable con­
trollers and other types of instrumentation extend to a
broader scope of manufacturing operations.
New technology to improve process control is achiev­
ing significant operating savings. At one mill undergo­
ing modernization, computer control of two large
power boilers is expected to save 50,000 barrels of fuel
oil and 5,000 tons of coal per year, with further gains
anticipated as the computer system is extended.8
Programmable controllers (PC’s) are being used more
extensively in key production tasks. An example of sav­
ings being achieved by PC ’s is illustrated at a mill which
introduced a programmable controller to automate a
digester which manufactures pulp. In this installation,
the operator monitors the mixing of ingredients using a
control panel, and manual participation in the process is
reduced. Advantages of the control system include a
cutback from two operators to one per shift, a reduction
in errors, and the availability of reports on the status of
the mixing system generated automatically by the con­
troller.9The outlook is for diffusion of millwide process
control systems that tie together separate processes to
provide a broader scope of control and information
gathering.1
0

Output and Productivity Trends
Output

Journal, May 15, 1982, p. 13.

The market for the multitude of pulp, paper, and
paperboard products is broadly diffused in the United
States and the volume of shipments closely parallels the
level of activity in the total economy. The United States
leads the world in both production and per capita con­
sumption of paper and paperboard, with about 50 per­
cent of total output from mills located in the South.
The production of pulp, paper, and paperboard ( b l s
output index) increased at a relatively moderate average
annual rate of 1.6 percent over the period 1970-83
(chart 3). However, the growth rate of output during the
early 1970’s was substantially higher than the rate for
the later periods. Between 1970 and 1973, output in­
creased at an annual rate of 4.8 percent and slowed ap­
preciably during the middle period 1973-78 to an annual
rate of only 1.5 percent. During 1978-83, the annual
rate of change was zero. Between 1980-82, output
declined at an annual rate of 3.4 percent. Over this
period, the economy turned downward and demand for
pulp, paper, and paperboard slackened.
Prospects for expansion in production appear more
favorable into the late 1980’s. Output in 1983 was 9.5
percent higher than in 1982 as the economy recovered

9 Michael K. Savelyev, ‘‘PC Regulates Mixing o f Pulp Batches at
Georgia-Pacific’s Lyons Falls M ill,” Paper Trade Journal, June 15,
1982, pp. 32-35.
,0 W. L. Adams, ‘‘Significant Process-Automation Changes Ex­
pected in the Next Decade,” Pulp and Paper, February 1982, p. 118.

1 K. Griffiths, ‘‘Automated Roll Packaging Systems Reduce
1
Costs, Manpower,” Pulp and Paper, March 1983, pp. 120-21.
1 Eugene Kittel, ‘‘Automatic Warehousing System Answers James
2
River Mill Needs,” Pulp and Paper, October 1983, pp. 79-81.

Materials handling and storage

The manufacture of pulp, paper, and paperboard
involves the movement of logs, chips, pulp and other
fluids, and rolls of paper through highly mechanized
production operations. Materials handling systems in
woodyards, woodrooms, and finishing and shipping
departments, where materials handling is labor inten­
sive, are being improved and expanded. Some modern
conveyor systems feature computer control and
automatic equipment which move materials through
processing steps with minimum manual intervention. At
plants which have introduced advanced equipment,
labor requirements of equipment operators and workers
who handle materials generally are lowered.
In addition to conventional conveyors and produc­
tion equipment of expanded capacity, some changes
involve a significantly higher level of mechanization.
These include automatic systems to transport and wrap
paper rolls, automated warehousing systems, computercontrolled rewinders, and high-speed equipment to cut
8 “ Westvaco Cuts Energy Costs Via Computers,” Paper Trade

13

Chart 3. Output per employee hour and related data, pulp, paper, and paperboard,
1970-83
(Index, 1977 = 100)

Ratio scale

120

110
100

90
80
70
120

110
100

90
80
-■

70

- «

120

-

110
100

H

90
80
70

14

for 49 percent of the total; air quality, 46 percent; and
solid waste disposal, 5 percent.
The highest levels of capital spending for en­
vironmental protection were during the years 1974-77,
and these outlays, as a percent of total capital expen­
ditures, declined over the period 1970-82. In addition to
the volume of capital spending discussed above, the in­
dustry also allocates a considerable amount for fixed,
administrative, and research costs related to protection
of the environment.
According to n c a s i , planned capital expenditures for
environmental protection for 1983 are $323 million,
with some preliminary estimates for 1984 suggesting
that these expenditures may increase.

As indicated earlier, the introduction of faster and
more efficient equipment to turn out pulp and paper
generally lowers unit labor requirements, and, if higher
levels of investment in plant and equipment continue,
productivity may improve. Moreover, the industry is ex­
pected to close down additional older, high-cost
facilities, which should contribute to productivity im­
provements.

Investment
Total capital expenditures

The industry has allocated substantial funds to
modernize plant and equipment and control pollution
over the past decade. Between 1970 and 1981, capital
spending totaled $24.7 billion, an average of $2.1 billion
per year. The increase was substantially lower in con­
stant 1972 dollars, however, with total spending over
this period amounting to $16.4 billion, or an average of
$1.4 billion annually.1 Funds for plant and equipment
4
in the paper mills (Sic 2621) component of the industry
account for over 50 percent of total spending.
The pace of spending to modernize plant and equip­
ment accelerated beginning in the late 1970’s as firms
sought to increase efficiency to compete more effective­
ly in domestic and overseas markets. New and more
highly mechanized facilities require substantially lower
labor and energy per unit of output, and incorporate the
latest technologies to protect the environment. Average
efficiency is further improved as less efficient, older
plants are closed. These new facilities are expen­
sive—one large firm is well along in a $ 1.5-billion com­
panywide modernization and expansion program. The
centerpiece of modernization at one mill, a large new
twin-wire papermaking machine, cost about $122
million and incorporates extensive new process control
automation.1
5
The manufacture of pulp, paper, and paperboard in­
volves large volumes of water and numerous chemicals,
and the industry allocates substantial funds for
technology to protect the environment. According to
the National Council of the Paper Industry for Air and
Stream Improvement (NCASI), the industry spent $4.9
billion over the period 1970 through 1982, an average of
$379 million per year, for environmental protection
related to water and air quality and disposal of solid
waste from manufacturing processes.1 Over this
6
period, expenditures related to water quality accounted

Research and development

Expenditures for research and development (R&D) by
the broader paper and allied products industry (sic 26)
increased from $178 million in 1970 to an estimated
$625 million in 1982, a gain of 251 percent, according to
the National Science Foundation.1 However, after ad­
7
justing for price increases, growth in r &d spending over
this period was only 55 percent.
The paper industry ranks relatively low in r &d spend­
ing in comparison to other manufacturing industries. In
1980, only 15 full-time equivalent r &d scientists and
engineers per 1,000 employees were employed by the in­
dustry, compared to an average of 29 for all U.S. in­
dustry, and 41 in chemicals and allied products and 21
in petroleum refining and extraction, two other leading
process industries. However, the proportion of r &d
scientists and engineers to total employment in the in­
dustry has risen markedly since 1970, when the Na­
tional Science Foundation reported only 8 per 1,000
employees.
Although funds allocated to r &d and the relative im­
portance of scientists and engineers in total employment
have been increasing, r &d useful to the industry will
continue to be undertaken by equipment suppliers, in­
dustry trade associations, private research groups,
educational institutions, and the Federal Government.
Major areas of r &d activity involve development of new
products, control of pollution, and improvement in pro­
duction processes.

Employment and Occupational Outlook
Employment

Employment in pulp, paper, and paperboard mills
has been declining steadily (chart 4). Between 1970 and
1983, the number of employees in the industry fell from
289,900 to 253,700—an average annual rate of decline

14 U.S. Department o f Commerce, Bureau o f Industrial
Economics, Office o f Research, Analysis, and Statistics.
15 Jeremiah E. Flynn, “ Mead’s ‘Chief’—On Stream at Chillicothe
M ill,” Paper Trade Journal, July 15, 1982, cover and pp. 25-27.
16 A Survey o f Pulp and Paper Industry Environmental Protection
Expenditures— 1982. Special Report No. 83-07 (National Council of
the Paper Industry for Air and Stream Improvement, Inc., New
York), July 1983, 7 pp.

1
7
National Science Foundation, National Patterns o f Science and
Technology Resources—1982 and 1984 (forthcoming).

15

Employment in pulp, paper, and paperboard, 1970-83, and projections, 1983-95
es (thousands)

Employees (thou

300

300

280

280

260

260

240

240

%
\

\

220

220

r
\

\

\V

"i

i
i

Production workers

A verage annual percent change 2
All employees
1970-83.....................................................
1970-73.................................................
1973-78.................................................
1978-83.................................................

200
\

-0.6
-1.7
-0.4
-1.2

200

v
1983-95 (projections)..............................0.0 to
0.4
Production workers
1970-83 .....................................................
1970-73.................................................
1973-78.................................................
1978-83.................................................

180

-0.9
-1.3
-0.9
-1.4

180

160

160
1970

1
2

1975

1980

1985

ie text footnote 18.
;ast squares trends for methods of historical data; compound interest method for projections.
JRCE: Bureau of Labor Statistics.

16

1990

1995

crease by only 5,900 to 15,500 workers over the period
1983-95, or at an average annual rate of only 0.2 to 0.6
percent. The outlook is less favorable in the paperboard
sector, with a decline ranging from 1,900 to 4,500
workers anticipated by 1995—an average annual rate of
decline of 0.3 to 0.7 percent.

of 0.6 percent. Employment in 1983 fell to the lowest
level since 1970 in both the pulp and paper and paperboard segments of the industry. The sharpest year-toyear decline in employment was between 1974 and 1975,
a period of recession in the general economy. More
recently, employment fell significantly from 1981 to
1982 as capacity was cut back in response to slack de­
mand for paper and paperboard products.
The industry is not expected to be a significant source
of new jobs over the next decade, b l s projections of
employment to 1995 range from approximately the
same level as in 1983 to only moderate growth.1 The
8
number employed by the mid-1990’s will be well below
the high in 1970, even under the most optimistic BLS
projection.
Employment in pulp and paper mills is expected to in-

Occupational trends

18
BLS projections for industry employment in 1995 are based on
three alternative versions o f economic growth and include a low,
moderate, and high projection. For details on assumptions and
methodology used to develop these projections, see the Monthly
Labor Review, November 1983.

Technological changes are expected to contribute to
further change in the structure of occupations in pulp,
paper, and paperboard mills, although these shifts are
expected to be moderate. According to b l s projections
(chart 5), fewer sales workers and laborers will be
employed in 1995, and employment in the other major
occupational groups will increase moderately or remain
relatively unchanged over this period.
Although employment in these broad occupational
categories is expected to fluctuate in a narrow range,
new technology may cause more significant changes in
specific job categories within these groups. The number
of computer systems analysts is expected to more than

Chart 5. Projected changes in employment in pulp, paper, and paperboard by occupational group,
1982-95

Occupational group

Percent change to 19951

Percent of
industry
employment,
1982

Professional, technical, and related workers

-5

0

5

10

__________ I
__________ __________ I
--------------- 1

6.6

Managers, officials, and proprietors

-10

4.5

Sales workers
Clerical workers

.9
8.0

Craft and related workers

26.7

Operatives

37.9

Service workers
Laborers, except farm

1.8
13.6

1 Based on the moderate level of employment projected for 1995. bls projects three levels of industry employment for 1995 based on alternative ver­
sions of economic growth: A low. moderate, and high level. For details on assumptions and methodology used to develop these projections, see the
Monthly Labor Review, November 1983.
2 No change.
Source : Bureau of Labor Statistics.

17

double over the next decade, for example, as computer
process control and office automation increase. More
extensive mechanization in finishing and shipping
operations, described earlier, is a factor in the projected
9-percent decline in employment of operators of
packaging and inspecting equipment.
The most significant changes brought about by
mechanization, however, involve a change in job duties,
particularly in occupations included in the operatives
group—the largest category, accounting for 38 percent
of total employment. Since jobs which undergo change
frequently retain the same title, an analysis of occupa­
tional change by examining changes in employment
totals alone is incomplete.
Operatives control specialized pulp and papermaking
equipment and finishing and converting machines. At
mills which have adopted computer process control on
pulp and papermaking equipment, as was pointed out in
the technology section, machine tenders and other
operators monitor the process from control stations,
and the computer maintains temperature, pressure, flow
rates, and other variables. Before computer control,
workers located at various stations made adjustments
manually. Mills which have introduced new materials
handling and continuous process technologies report
modification of job duties of woodyard and woodroom
workers, digester operators, and others.
In general, duties involving the movement of
materials and manipulation of machinery by hand are
being reduced, and some workers increasingly oversee a
greater workflow, relate one processing step to another,
and monitor and regulate operations from highly
automated control stations. Although the extent of
these changes cannot be quantified precisely, they il­
lustrate trends anticipated as the industry further
modernizes.

workers permanently separated from the company
because of a technological change or plant closing. The
proportion of production workers employed in mills
covered by this adjustment provision varies con­
siderably by geographic area, however, from a high of
59 percent in the Pacific States to only 3 percent in the
Middle Atlantic States. Other provisions that facilitate
adjustment and are contained in some agreements relate
to training, crew projects, reassignment rights, advance
notice, and relocation allowances. Other measures pro­
viding assistance to workers adversely affected by
change result from legislation enacted by States. In
Maine and Wisconsin, for example, State laws require
that workers in paper and other industries to be laid off
because of plant closings receive at least 60 days’ ad­
vance notice and other consideration.2
0
Training to operate new equipment will continue to
be one of the most important means for adjustment of
workers to new technology, b l s and other plant studies
disclose that most workers whose job duties have been
modified and those reassigned to new positions are be­
ing retrained by the company and the equipment sup­
plier. Depending upon the nature of the change and the
job affected, training can be brief and provided on the
job or can be more extensive and include lectures,
classroom instruction, and training manuals.
The training of maintenance workers in several skills
is an important development. At one large mill, conver­
sion to multicraft maintenance was undertaken in con­
nection with a program to improve overall plant effi­
ciency. An agreement negotiated between the company
and the United Paperworkers International Union calls
for training in five basic maintenance skills—
millwright, instrumentation, carpenter, machinist, and
pipefitter. The company reportedly plans to train the
entire plant maintenance work force of 70 employees by
the end of 1984. At the conclusion of the 6-month pro­
gram, they will be proficient in all five of these
maintenance skills (four in addition to their original
specialty) with the company achieving a more flexible
work force, and the maintenance crews, higher wages.2
1
Although statistics on the number of multicraft
maintenance programs in place in the industry are not
available, more widespread adoption is expected during
the next decade.
Joint labor-management committees have been
established in some mills to discuss productivity im­
provement, health and safety issues, and a wide range of
related topics.2
2

Adjustment of workers to technological change

The industry is highly unionized, with 96 percent of
the work force in pulp, paper, and paperboard mills
working in mills where collective bargaining contracts
cover a majority of the workers.1 The United Paper9
workers International Union (AFL-CIO) is the predomi­
nant union in the industry, except in the Pacific States,
where most workers are covered by agreements with the
Association of Western Pulp and Paper Workers (in­
dependent).
Some collective bargaining contracts that cover
workers in the industry contain specific provisions to
facilitate worker adjustment to new technology. Ac­
cording to b l s , 40 percent of the production workers are
covered by agreements that provide severance pay to

20 “ Plant Closing Epidemic Prompts Need for Legislative Protec­
tion,” The Paperworker (United Paperworker International Union,
AFL-CIO, June 1983).
2 “Mill Training Programs Change With the Tim es,” Paper Trade
1
Journal, Apr. 30, 1983, p. 44.
22 Resource Guide to Labor-Management Cooperation (U.S.
Department o f Labor, Labor-Management Services Administration,
October 1983).

19 Bureau o f Labor Statistics. Industry Wage Survey: Pulp, Paper,
and Paperboard Mills, July 1982, Bulletin 2180, (1983). This survey
excludes building paper and building board mills, sic 2661.

18

SELECTED REFERENCES
Adams, W. L. “Significant Process-Automation Changes Expected in
Next Decade, ” Pulp and Paper, February 1982, pp. 118-22.

Kittel, Eugene. “ Automatic Warehousing System Answers James
River Mill Needs,” Pulp and Paper, October 1983, pp. 79-81.

Bastien, Jacques and Gilles Marquis. “ Soucy’s Six Years’ Experience
With 100% TMP Furnish for Newsprint,” Pulp and Paper, June
1983, pp. 78-80.

Kramer, J.D. “Pulping Technology; Yesterday, Today, and
Tomorrow, ” Tappi Journal, Vol. 64, No. 7, October 1981.

Brusslan, Carol. ‘‘Mill Training Programs Change With the Times,”
Paper Trade Journal, Apr. 30, 1983, p. 44.
Canup, R.T. ‘‘Process Control System Increases Digester Produc­
tivity at M ill,” Pulp and Paper, September 1981, pp. 159-61.
Cox, Jacqueline. ‘‘Automating Winder Speed To Eliminate Paper
Machine Production Variables,” Paper Trade Journal, Mar. 30,
1982, pp. 28-29.
Flynn, Jeremiah E. ‘‘Mead’s ‘Chief’—On Stream at Chillicothe
M ill,” Paper Trade Journal, July 15, 1982, cover and pp. 25-29.
Ford, M. J. ‘‘Case Study: A Fully Automated High-Speed Wrapping
System,” Tappi Journal, July 1982, pp. 71-74.
Gallimore, Jack. ‘‘Mill-Wide Computer Automation Key Element in
Moderniza tion Strategy,” Pulp and Paper, September 1981, pp.
139-43.

Kurdin, Joseph A. “ The Pulp o f the Twenty-First Century,” Tappi
Journal, Vol. 66, No. 6, June 1983, pp. 9-10.
“ On-Line Laser Inspection System Reduces Scrap at Georgia-Pacific
Mill in Gilman, V t.,” Paper Trade Journal, Apr. 15, 1983, pp.
30-31.
Pluhar, Kenneth. “ Instrumentation Paves Way for Quality Gains,”
Paper Trade Journal, Feb. 29, 1984, pp. 45, 46.
“ Red-Letter Days for Paper Producers,” Business Week, December
5. 1983, pp. 109-10.
“ A Survey o f Pulp and Paper Industry Environmental Protection
Expenditures— 1982.” Special Report No. 83-07. National Council
of the Paper Industry for Air and Stream Improvement, Inc., New
York, N.Y., July 1983. 7 pp.

Griffiths, K. ‘‘Automated Roll Packaging Systems Reduce Operating
Costs, Manpower,” Pulp and Paper, March 1983, pp. 120-21.

Trapp, Phillip R. “ Millwide MIS— Is It an Idea Whose Time Has
Come?” Paper Trade Journal, June 15, 1984, pp. 32-34.

Karojarvi, Risto and Hannu Salakari. ‘‘Pressure Groundwood Status
Report: Ten Mills Now Using the Process,” Pulp and Paper, June
1983, pp. 138-41.

Winter, Ralph E. “ Firms’ Recent Productivity Drives May Yield
Unusually Strong Gains,” Wall Street Journal, June 14, 1983, pp.
37, 57.

19

Chapter 3. Steel

Summary

postwar peak and the lowest level since the 1930’s.
While the outlook is unclear, most employment projec­
tions suggest that a large proportion of recent job losses
could be permanent.

A number of technological changes are being
adopted by the steel industry (sic 331) to reduce unit
costs of labor, raw materials, and energy and to im­
prove product quality. These include both radical in­
novations, which fundamentally alter the basic iron­
making and steelmaking processes, and incremental
changes, which are improvements to existing technology
and operating conditions. Diffusion of many of these
technologies has been slow; the U.S. industry has lagged
behind most major industrialized nations in adopting
them.
A major restructuring is taking place in the steel in­
dustry to deal with shrinking markets and high import
penetration. The major steel companies are substantially
reducing their capacity and consolidating their remain­
ing facilities. In contrast, small, low-cost producers
known as minimills have experienced significant growth
over the past decade, in large part due to their use of
new technologies, product specialization, relatively low
capital investment, and innovative management
policies. The restructuring process is expected to con­
tinue during the 1980’s, resulting in a smaller, more
competitive industry.
Productivity in the steel industry increased at a low
rate of 1.1 percent annually between 1970 and 1983.
This figure is only half the rate registered for all
manufacturing during the same period, and less than
half the industry’s own rate of growth for the 1960’s.
The very modest productivity gains from 1970 to 1983
are associated with declining output and somewhat
greater reductions in employee hours. However, pro­
ductivity soared by 28 percent in 1983, as output rose
and employee hours were cut back substantially.
Preliminary data for the first 6 months of 1984 suggest
continued strong productivity growth.
Real capital investment during the 1970’s was
substantially lower than in the 1960’s. Low industry
profits, weak steel demand, and limited prospects for an
adequate return on the enormous investment required
have all contributed to depressed outlays.
The long-term decline in steel employment ac­
celerated in the early 1980’s as the industry adjusted to
the extraordinary weakness in demand by reducing
operating rates and by closing mills. In 1983, the in­
dustry employed 343,100 workers, less than half its

Industry Structure
The domestic steel industry is currently undergoing a
major restructuring to improve its competitive position.
New technologies and changing markets have facilitated
the entry and growth of small, low-cost pro­
ducers—known as minimills—in the last two decades.
The historically dominant large steel companies,
burdened with obsolete plant and equipment, could not
compete against minimills in their product lines and,
therefore, shifted out of those markets. Due to surging
imports and depressed market conditions, the integrated
mills have been forced to close plants, consolidate
operations, abandon some products, and concentrate in
those markets where they remain competitive. This
restructuring process will likely continue through the
1980’s, resulting in a smaller, more competitive, decen­
tralized industry.
The steel industry is composed of three relatively
distinct sectors: Integrated, minimill, and specialty
steel. Companies in the integrated sector are directly in­
volved in all steps of steel production from processing
iron ore and coal to producing a wide range of carbon
and alloy steel end products. It is by far the largest sec­
tor, accounting for more than 80 percent of domestic
shipments in 1981. The second group, the minimill sec­
tor, accounts for about 16 percent of shipments. It pro­
duces a limited range of low-cost carbon steel products
processed from scrap. A third, less clearly differentiated
sector, specialty steel, accounts for only about 4 percent
of all steel shipments. These independent mills primarily
manufacture higher alloy and stainless steels, frequently
using electric furnaces in small plants.
Rapid development of the minimill sector was made
possible in part by its adoption of two technologies, the
electric furnace and the continuous caster, which enable
it to operate smaller scale plants than is possible in in­
tegrated production. Because minimills use scrap steel
as a basic charge, they do not require the large-scale
sintering plants, coke ovens, and blast furnaces which
are used to process coal, limestone, and iron ore into
steel in the integrated steelmaking process. Consequently,
20

most minimills can operate economically with capacities
ranging from as low as 50,000 to as high as 600,000 tons
a year. By contrast, integrated steel mills with coke
ovens and blast furnaces reach peak efficiency at an
enormous scale of between 2 and 3 million tons a year.1
A number of other factors have contributed to the
minimill sector’s rapid expansion. Low unit labor and
production costs are a function of efficient electric fur­
naces, continuous casting, and a simple product mix.
Low energy consumption and a generally lower paid
and more flexible work force than in the integrated mills
are contributing factors. Efficiencies also result from
product specialization. Most minimills have carefully
matched product and process technology. By producing
a limited range of products, they achieve economies of
scale.
Consequently, some analysts expect the minimills to
increase their market share to 25 percent of the total by
1990 from the current 16 percent.2 Factors limiting
greater market penetration by the minimill sector are the
saturation of their current markets and the unavailabili­
ty of a technology on a scale that would enable the
minimills to produce high-quality, flat-rolled steel, the
major steel product. More than half of the steel pro­
ducts consumed domestically are flat-rolled products
which must now be manufactured in large-scale rolling
mills with a minimum capacity ranging upward of 3
million tons. However, the minimills could expand into
this market if a technology in the developmental
stages—a continuous caster capable of producing slabs
only Wi inches thick—becomes practical. With this
technology, rolling mill capacity requirements could be
reduced to 400,000 tons or less. One minimill expects to
be producing sheet steel by this method in the late
1980’s.
In contrast to the expansion of the minimill sector,
the large, integrated segment has been forced to severely
reduce capacity. The eight largest steel companies which
hold an overwhelmingly dominant position in steel pro­
duction (65 percent of total industry shipments in 1977)
reduced their aggregate raw steel capacity by 24 percent
(30 million tons) between 1979 and early 1984.3
The retrenchment of the integrated mills has been
selective. The large companies are becoming increas­
ingly specialized, concentrating on those markets where
they remain competitive, such as sheet, heavy struc­
tu ral, seamless pipe, and plate. They have largely aban­
doned the low-end markets, like bar, rod, and small
structural to the minimills.
It is likely that the integrated sector will continue to
1 Robert Crandall, The U.S. Steel Industry in Recurrent Crisis
(Washington, The Brookings Institution, 1981), p. 11.
2 Donald F. Barnett, Steel: Upheaval in a Basic Industry (Ballinger
Publishing Co., 1983), p. 278; and Industry Week, July 13, 1981, p. 58.
3 Institute for Iron and Steel Studies (IISS) and Department of
Commerce.

reduce its capacity. According to several estimates,4 as
much as an additional 10 percent of production capacity
could be cut within the next several years. Cutbacks are
expected to result from a recently announced merger of
two large integrated producers. It is anticipated that the
merged companies will rationalize their facilities by
shutting down the duplicative and least efficient mills.

Technology in the 1980’s
A number of major technologies being adopted by the
steel industry are reducing unit labor, material, and
energy costs and, thereby, improving the industry’s
competitive position. They can be divided into two
types. In the first category are radical technologies,
which create entirely new methods of iron and steel pro­
cessing and generally have a substantial impact on labor
and productivity. The continuous caster is the most likely
of these technologies to have a major impact during the
1980’s. In the second category are incremental,
technologies, which modify existing production
methods to improve efficiency. Among the technologies
in this category which are likely to be more widely dif­
fused during the 1980’s are computer process control
and ladle refining, as well as a number of new
technologies which significantly improve the operating
efficiency of the electric arc furnace. Because of the
high capital cost of building new facilities, incremental
changes are being adopted in many areas of existing
mills as the most cost-effective means of making them
competitive.
The major technologies, their labor impact, and dif­
fusion are summarized in table 3.
Iron manufacture

The first step in integrated production is the reduction
of iron ore to molten iron (hot metal) in the blast fur­
nace, using coke as a reducing fuel. In this process, a
mixture of iron ore, limestone, and coke is charged into
a blast furnace and subjected to a very high temper­
ature. In the reaction which follows, molten iron is
separated from the impurities in the ore. The molten
iron is then released from the furnace for use in
steelmaking operations.
Only four new blast furnaces (two of super size) have
been built in the United States within the last decade,
and it is unlikely that any others will be built during the
1980’s. This is due to the high cost of their construction,
inflated by pollution control expenditures, and the
depressed state of the industry. They are also competing
directly with the highly efficient electric arc furnaces,
which uses scrap as a charge and thereby avoid coke
4

Peter Marcus and Karlis Kirsis, “ World Steel Dynamics,” The

Steel Strategist, No. 9, February 1984.

21

Table 3. Major technology changes in the steel industry
Technology

Labor implications

Description

Diffusion

Direct reduction (DR)

DR converts iron ore into highly Employee hours required to produce High cost of direct reduced iron
concentrated iron pellets. In the most
a ton of direct reduced iron are relative to scrap has hindered
common processes, natural gas burns comparable to requirements for pig diffusion and caused the temporary
away oxygen from iron ore, produc­ iron in a blast furnace. Most work­ shutdown of existing plants. Produc­
ing sponge iron, which can be used as ers are semiskilled and can be easily tion unlikely to increase in the next
a substitute for scrap in electric trained to operate equipment. Plant few years.
arc furnaces.
and process engineers require ex­
tensive technical training.

Electric arc furnace (EAF)

Steelmaking process
closed vessel with
by an electric arc.
or direct reduced

Basic oxygen process (BOP)

Steelmaking process used by inte­ Reduces unit labor requirements by BOP accounts for approximately 60
grated mills in which a jet of pure almost half that of the older OHP.
percent of total steel production;
greater diffusion unlikely during
oxygen is blown onto vessels
containing molten iron. Process takes
1980’s, in view of electric furnace
expansion.
about 45 minutes, compared with 5 to
8 hours for older open hearth process
(OHP).

Ladle refining

Molten steel is brought to final speci­ Overall productivity effect uncertain. Use increasing. Widespread diffusion
fications in a ladle instead of inside Productivity gains associated with re­ expected due to expanded use of
ducing the time needed to make steel EAF and continuous casting.
the melting furnace.
in melting furnace are at least partly
offset by additional time required to
refine steel in ladle. Process requires
a skilled operator and helper.

Continuous casting

Molten steel is poured directly into Reduces unit labor requirements by Accounted for 31 percent of total
caster, from which it emerges in as much as 50 percent when com­ steel production in 1983; expected
semifinished form. At least 5 hours pared to older ingot process. Skill to rise as high as 50 percent by
saved in production time compared levels generally higher than for older 1990. Widely used in minimill and
with ingot method which it replaces, method.
specialty steel sectors; use expand­
and up to 50-percent energy savings.
ing in integrated mills.
Increases yields by 10 to 20 percent.

Computer process control

Installed to automatically control Generally results in change of job Greatest diffusion is in hot strip
operations. Results in increased responsibilities rather than any net rolling mills and blast furnaces. Many
yield, improved quality, and energy change in total employment. Skill first-generation systems are being re­
conservation.
level for new positions is generally placed by newer computers.
higher.

Continuous annealing of sheet

Coils of sheet are continuously Substantial time savings reduce unit Two continuous annealing lines have
passed through a series of heating, labor requirements. Only 8 to 10 been built. Construction of additional
soaking, and cooling steps in an hours are required to produce 20 lines has been planned but deferred.
annealer, replacing conventional coils of sheet with new method, com­
methods in which sheet is subjected pared to 7 days with conventional
to temperature treatment over an ex­ line.
tended period of time. Produces high
quality sheet used in automobiles.

in which an en­ Unit labor requirements for EAF pro­ Accounted for 32 percent of produc­
charge is heated cess are lower than for alternative tion in 1983. Expected to be as high
Uses scrap and/ basic oxygen process (BOP), taking as 40 percent in 1990, assuming
iron as charge. preliminary steps into account. Skill no serious problem of scrap avail­
levels are comparable to BOP ability.
requirements.

sulfur content of the molten iron is reduced in a
desulfurization unit located outside rather than inside
the blast furnace. This allows the blast furnace itself to
be operated at higher production rates, lower fuel rates,
and with less slag. Other technologies which are being
adopted to improve blast furnace efficiency include bet­
ter blowing techniques, better heating of air, the use of
higher pressures, and improved “ burden” (charge) con­
trol. Improving the quality of raw materials fed into the
blast furnace is also increasing efficiency. The changes
in raw materials include the use of pellets in place of
coarse iron ore, and better quality coke and sinter
(clumps formed by a process which combines fine ores).
Unit labor requirements and unit costs are substan­
tially reduced when existing furnaces are upgraded with

oven-blast furnace operations.
Instead, a wide range of technologies is being applied
to upgrade existing blast furnaces to make them more
competitive. The retrofitting of existing units, construc­
tion of new superfurnaces, and the closing of the
smaller and least efficient furnaces have caused a
significant decline in the number of employee hours re­
quired to produce a ton of iron. The number of
employee hours required to produce 1 ton (in direct
labor, including materials handling) has declined from
0.6 in 1960, when the average capacity was 1,000 tons
per day, to approximately 0.4 in 1979, when the average
capacity was 2,500 tons per day.
Among the more significant technologies being
adopted is external desulfurization. In this process, the
22

produced natural gas and falling scrap prices in the early
1980’s have made direct reduced iron too costly relative
to scrap, forcing the shutdown of the few existing d r
plants. In the future, however, the process could
become economically feasible if a combination of rising
steel demand and expanded electric arc furnace capacity
drives scrap prices upward. Diffusion could also rise if
coal-based reductants become a practical alternative to
high-priced natural gas and electrical power cost re­
mains stable.

these technologies. In 1980, one company reported that
it was able to produce the same tonnage of pig iron from
25 furnaces as it had from 43 furnaces only 3 years
earlier by applying a combination of these technologies.
At another steel mill, substantial modernization of an
existing 50-year-old furnace increased its ironmaking
capacity from 2,800 to 3,400 tons per day.
Coke ovens. Coke is the primary fuel used in the blast
furnace for iron smelting. On average, about 1,000
pounds of coke are consumed for every net ton of
molten iron produced.
The financially strapped integrated steel companies
have built little new cokemaking capacity in recent
years. This is in large part due to the high capital costs
of building new coke ovens, estimated in 1979 at be­
tween $198 to $220 per ton of capacity or roughly
equivalent to the cost per ton of capacity for a new
minimill that year. A high percentage of these
costs—between 25 and 30 percent—would be required
to meet environmental and occupational safety re­
quirements.
As a consequence, more than one-third of coke oven
capacity was more than 25 years old in 1979, even
though capacity was substantially reduced during the
1970’s. By contrast, no capacity was more than 25 years
old in Japan in that year. Older ovens have higher labor
requirements due to more downtime and greater
maintenance. They also produce less coke, which can af­
fect productivity and cost.

Steel production

After the molten iron is smelted in the blast furnace,
it is converted to steel by decreasing the silicon and car­
bon content with oxygen and by adding small amounts
of other metals. There are three steelmaking processes
used in this country: The basic oxygen (BOP) and open
hearth furnaces are used for integrated production; the
electric arc furnace (EAF) is used for nonintegrated
(scrap based) production. The basic oxygen furnace
became the dominant steelmaking technology in 1970 by
replacing obsolete open hearth capacity.
In recent years, however, the electric arc furnace has
had the greatest impact on steelmaking operations.
More than 15 million tons of electric arc furnace capac­
ity were added between 1975 and 1982,6 compared to
about 5 million tons of b o p capacity.7 The proportion
of total raw steel produced by the e a f process increased
from 19 percent in 1975 to 32 percent in 1983. In this
period, the b o p has accounted for a relatively stable 60
percent.

Direct reduction o f iron. In contrast to the blast furnace
process, a number of iron-producing processes, collec­
tively known as direct reduction (DR), have been
developed in the last 15 years which do not require coke
as a reductant, i.e., fuel used to reduce iron ore to iron.
The d r processes, which generally use natural gas as a
reductant, produce iron or concentrated iron pellets
which can be used in electric arc furnaces as a replace­
ment or a substitute for scrap to make steel.
Labor requirements for steel production were
estimated to be lower when the direct reduction-electric
arc furnace method was compared to the coke ovenblast furnace-basic oxygen furnace alternative. For the
former method, the range was estimated at 1.6 to 1.9
employee hours per ton versus 2.5 hours per ton for the
latter.5
Direct reduced iron appeared to be a viable alter­
native to scrap during the 1970’s, when scrap prices
were rising and shortages were expected to develop.
However, due to changed economic conditions, diffu­
sion of the d r processes has been quite limited in this
country. The rapidly escalating price of domestically

Electric arc furnace. While the electric arc furnace (EAF)
is not a new development, recent technological advances
have made it an increasingly efficient steelmaking pro­
cess likely to have a major impact on steelmaking during
the 1980’s. Its diffusion has been continuously rising,
from 15 percent of total raw steel production in 1970 to
28 percent in 1981 and 32 percent in 1983. In the expan­
ding minimill sector, virtually all plants are being equip­
ped with electric arc furnaces. The large, integrated
companies are replacing their antiquated blast and open
hearth furnaces with new e a f capacity in some of their
plants. And in the specialty steel sector, the e a f process
has long been recognized as the preferred method for
making steel. Minimills currently account for about 46
percent of total e a f capacity; integrated mills, about 40
percent; and specialty producers, the remaining 14 percent.8
The electric arc furnace consists of a closed cylinder
with electrodes mounted on its roof. Electricity flows
through one electrode and the charge (of scrap) then
6 Iron Age, Feb. 4, 1982.
7 “ 33 Metal Producing,” World Steel Industry Data Handbook,
1983, p. 69.
0 William T. Hogan, “ The Expanding Electric Furnace: A Threat
to BOF?” Iron and Steel Engineer, October 1983, p. 18.

5 J.W. Clark, “ Integrated Steelmaking Based on Coal Gasification
and Direct Ore Reduction,” Westinghouse R&D Center, Dec. 8, 1979.

23

estimated that the eaf could account for between 36 and
40 percent of total raw steel production by 1990.1
1
Future growth of eaf capacity will be affected by the
cost of renovating older integrated plants and the price,
availability, and quality of scrap during this period, as
well as the price of energy.

“ arcs” back to the electrode. The charge is melted by
the intense heat generated by the flow of electricity. To
produce a “ heat” generally takes more than 2 hours for
a 200-ton unit compared to about 45 minutes for a
similarly sized bop furnace.
The major advantage of the eaf process is its use of
scrap, rather than pig iron, as a charge. Because it is
scrap based, it does not require the massive complex of
raw material facilities, coke ovens, and blast furnaces
needed to process iron ore in integrated production.
Consequently, capital, labor, and maintenance costs for
eaf are smaller than that for integrated facilities.
Recent estimates indicate that the capital costs of install­
ing eaf ’s are approximately one-third of that required
for a blast furnace-basic oxygen combination.9
There could be problems associated with using scrap
as a raw material, however. Because of sharply fluc­
tuating demand for scrap, its prices are volatile. For ex­
ample, between 1971 and 1974, the record year for steel
production, the price per ton of the most widely used
grade of scrap more than tripled. On balance, however,
the generally low cost of scrap relative to hot metal has
provided a substantial advantage to the eaf process.
Unit labor requirements tend to be lower for the eaf
than the bop , if preparatory operations are taken into
account. That is, labor requirements for the eaf , in­
cluding scrap handling operations, average about 0.75
to 1.2 employee hours per ton. By contrast, the bof , in­
cluding coke oven-blast furnace operations, requires
about 2.5 employee hours per ton of steel produced.
Also contributing to the expansion of eaf usage dur­
ing the 1970’s and early 1980’s were substantial im­
provements in operating technologies which have made
the electric furnace increasingly attractive as a carbon
steel producer. During the 1940’s and 1950’s, the eaf
was generally considered a specialty steel producer
because of its then high production costs. However,
with improvements such as higher strength refractories,
high-power transformers, water-cooled panels, oxygen
lancing, and oxy-fuel burners, it has become the lowest
cost producer. Together, these innovations increase the
rate of production per hour (that is, reduce tap-to-tap
times), decrease energy consumption, and allow for
more efficient use of raw materials. As a result, a
100-ton furnace which could produce steel at the rate of
20 tons per hour 10 years ago might produce as much as
65 tons per hour today.1 Moreover, these technologies
0
have enabled the development of large-capacity fur­
naces ranging up to 350 to 400 tons, compared to the
15-to 50-ton units typical during the earlier stages of
electric furnace development.
Use of the electric arc furnace is expected to continue
to rise during the remainder of the 1980’s. It has been

Basic oxygen furnace. The basic oxygen furnace is the
most widely diffused steelmaking process, account­
ing for about 60 percent of total raw steel production
since 1975. It is used by integrated producers to make
carbon and low-alloy steels. In this country, steel was
first produced by the basic oxygen process (BOP) in 1953,
and its diffusion increased steadily in the 1960’s and early
1970’s. However, no bop capacity has been added since
1978, and it seems unlikely that any will be added during
the 1980’s, in part due to depressed markets and com­
petition from the electric arc furnace.
In the basic oxygen process, a high-speed jet of ox­
ygen is blown directly on the surface of a charge or
“ heat” molten iron, scrap, and fluxes in the furnace. In
the chemical reaction which follows, the oxygen com­
bines with the impurities and leaves the solution as slag
or gases. The entire process requires only about 45
minutes “ heat-to-heat,” compared to between 5 and 8
hours for the open hearth process.
Some incremental technologies are currently being
adopted to improve the productivity and yield of the
bop furnace. The most significant of these technologies,
bottom blowing, involves blowing oxygen from both the
top and the bottom of the vessel simultaneously. A
second technology, off-gas recovery, is being adopted as
an energy conservation measure. It enables gases, which
would otherwise be released, to be recovered and stored
for use as fuel.
Ladle refining. Ladle refining is being extensively
adopted by steel producers as a means of improving
steel quality. Ladle refining refers to a variety of pro­
cesses which clean, purify, and homogenize steel in a
ladle located outside the steelmaking furnace (bop or
eaf ) after it has been tapped. Before, these operations
had been performed at the end of the steelmaking pro­
cess inside the furnace. Refining operations which can
be executed in the ladle include desulferization, oxygen
and hydrogen removal, addition of alloys, and
temperature control.
Separating refining from melting operations can
boost the productivity of melting furnace operations,
particularly for the eaf . For example, by using ladle
refining, a 3-hour heat cycle in an eaf can be cut by at
least 20 to 45 minutes. However, the overall effect on
productivity is uncertain, since the ladle refining process
itself can take nearly as long. This process generally re-

9 Ibid., p. 18.
10 Kenneth E. Caine, “ A Review o f New Electric Arc Furnace
Technologies,” Iron and Steel Engineer, October 1983, p. 47.

1
1
William T. Hogan, “ The Expanding Electric Furnace: A Threat
to BOF?” pp. 17-18.

24

quires two workers: A skilled operator and a semiskilled
helper.
Until recently, most ladle treatment of steel was
associated with specialty grades. However, because of
expanded use of continuous casting which is facilitated
by ladle metallurgy, it is being applied to common car­
bon grades of molten steel as well.
Diffusion of ladle refining is expected to be
widespread during the 1980’s, in large measure due to
expanded use of e a f and continuous casting
technologies. Many steel companies are either now in­
stalling this technology or expect to do so during the
mid-1980’s.
Continuous casting. The continuous casting process,
which converts raw steel into semifinished forms, is the
technology likely to have the greatest impact on steel
production during the 1980’s. Continuous casting
replaces with one operation the separate steps of ingot
casting, mold stripping, heating of ingots in soaking
pits, and primary rolling, which are required for the
conventional ingot-teeming method of production. In

continuous casting, molten steel is poured from a ladle
into an open-ended mold, resulting in a continuous rib­
bon of steel which is subsequently cooled, then cut to
form semifinished billets, slabs, or blooms. It has been
estimated that production time is reduced by at least 5
hours compared with the ingot-teeming method from
the time molten steel is poured from the ladle to the
semifinished forms. Moreover, yields for continuous
casting are between 10 and 15 percent higher than for
the old process.
Labor requirements are sharply reduced for con­
tinuous casting since it does not require the many pro­
cessing steps necessary for the conventional ingotteeming method. With continuous casting, the number
of employee hours required per net ton of cast steel is
estimated to be only half of that required in the conven­
tional ingot process. In one plant which recently installed
a continuous caster, only 12 workers (including indirect
labor) were required for its operation, compared to 20
for the older ingot-teeming method. The skill level for
the continuous caster is generally higher than for the
ingot-teeming method because the caster system is more

Steelworkers monitor a steel slab as it emerges from a continuous caster.

25

complex. It requires more skilled operators and
maintenance workers. In addition, because the caster is
generally more fully automated, there is a shift from
manual control to monitoring the equipment.
Substantial energy savings of about 10 to 20 percent
are an additional advantage of this process. Other
reasons cited for its adoption include improved quality
and lower pollution levels.
Despite its many advantages, continuous casting is
not widely diffused in the United States except in
minimills. The rate of adoption in the United States has
lagged behind all other major industrialized nations
during the 1970’s. In 1983, for instance, only 31 percent
of total raw steel production was produced on a con­
tinuous caster in this country, compared to 86 percent in
Japan and a 61-percent average in Europe.1
2
However, this technology is extensively diffused in
the small minimill and specialty steel sectors. According
to one industry analyst, 78 percent of raw steel produced
in minimills was continuously cast in 1981, compared to
only 17 percent in the integrated sector.1 It has been
3
easier for the minimills to adopt continuous casting
because new plants do not have the problem of coor­
dinating new casters with existing obsolete equipment,
which has posed major technological difficulties for in­
tegrated producers.
Diffusion is expected to increase significantly through
the 1980’s. Most major companies have plans to replace
at least some of the obsolete equipment with continuous
casters. In 1983, 20 major casting machines with a
capacity of more than 16 million tons were being added,
a 60-percent increase over existing capacity. It has been
estimated that as much as 50 percent of steel production
could be continuously cast by 1990.

strip mill with a computerized setup, an operator
punches out the number, width, and thickness of slabs
required. The computer will in turn make the necessary
calculations and adjust settings in the mill accordingly.
It will direct the slabs through the rolling sequence and
make adjustments to ensure proper operation. By con­
trast, without the computer, initial setup by the
operator and processing of sheet through the mill would
take considerably longer.
Some reduction in labor requirements can result from
the adoption of computer process control, although the
extent will differ with the production process. For ex­
ample, one steel company official reports that in one
fully computerized 84-inch hot strip mill, only 6 workers
were required for operation, whereas a similar noncom­
puterized mill required 12 workers.
Frequently, however, no net reduction results from
the introduction of the computers. Rather, more skilled
workers, such as programmers, replace unskilled per­
sonnel, such as reporting clerks. A highly skilled
maintenance team could also be required to service the
computer system. One company reports that about 45
percent of its computer systems personnel are used for
system upkeep.
Aside from labor savings, several other factors ac­
count for the rapid adoption of computer process
technology. Energy savings can be substantial. For ex­
ample, after a computer process system was installed in
one soaking pit, energy consumption decreased by
about 20 percent. Higher quality and improved yield are
additional benefits associated with process computers,
and capital costs are low relative to other means of
achieving comparable boosts in yield and productivity.
Future growth of computer process control is ex­
pected to be significant. New applications are an­
ticipated, and extensive retrofitting of older plants will
likely continue.

Computer process control

Use of computers to control steelmaking operations
has dramatically increased since oxygen furnaces and
new generation strip mills were first equipped with them
in the early 1960’s. Computer process systems have
become standard components in many areas of new and
old mills. In addition, older equipment is being retro­
fitted with computer process controls. According to one
1981 survey, these accounted for between 50 and 85 per­
cent of installations at that time.1 And because of the
4
rapid obsolescence of computer technology and rapid
payback potential of new installations, many firstgeneration systems are being replaced by state-of-the-art
technology.
Computer process control can significantly facilitate
mill operation and result in time savings. In one hot-

Continuous annealing of sheet

After sheet steel has been cold-rolled, it must be pro­
cessed through an annealing furnace to make it more
formable. In the last decade, a continuous annealing
process was developed in Japan to replace the conven­
tional batch-type process, and two such lines began
operating in this country in 1983. While not new con­
ceptually, continuous annealing applications previously
had been limited to tinplate and specialty steels.
In this process, coils of sheet are unwound and con­
tinuously passed through a series of heating, soaking,
and cooling steps in an annealer. By contrast, in the
conventional batch method, the coils are stacked and
sealed in a furnace, then subjected to hot and cold
temperatures over an extended period of time. Produc­
tivity is higher with continuous annealing because 20
coils can be processed in 8 to 10 hours by this method,
compared with 7 days for the conventional method. The
same number of workers are required on the new line as

12 Merrill Lynch, Steel Industry Quarterly, October 1984.
1 Joel Hirshhom, Continuing Success for United States Mini-Mills,
3
p. B-3.
14 Based on a survey o f membership o f the International Iron and
Steel Institute conducted for David H. Clark, Republic Steel Corp.

26

steel in this sector is the manufacture of smaller cars. As
a result of smaller cars, product substitution, and use of
lighter weight steel, one automobile company is making
cars that contain 30 percent less steel than 5 years ago.
Between 1978 and 1987, the company estimated that its
purchase of steel would decline by 600 pounds per
passenger vehicle.
Product substitution for steel is occurring in other
markets also. In the important container market (beer
and soft drinks), for instance, steel is being replaced by
aluminum. In spite of an increase in total can output,
steel shipments declined from 6.1 million tons in 1973 to
less than 3.4 million tons in 1983.
In addition, steel demand has been affected by struc­
tural changes in the overall economy. Rapidly growing
service industries, such as finance, health, and com­
munications, are not steel-intensive. On the other hand,
the capital goods industries (i.e., heavy construction,
business vehicles, machinery, etc.), which historically
have accounted for more than half of steel consump­
tion, have been growing less rapidly.

on the old, although workers on the older line may be
responsible for other furnaces. Because the new equip­
ment is more sophisticated, skill levels are generally
higher.
In addition to reduced unit labor requirements,
energy savings are also substantial with the new process.
Another advantage of continuous annealing is that it
can process some high-quality sheet steels which cannot
be produced by the conventional batch method.
Further diffusion of this process is expected. Other
continuous annealing lines have been planned, but their
construction has been deferred due to the uncertain
demand by the automobile sector for high-strength lowalloy steels. Also, since the two mills have only just
begun operating, other manufacturers are waiting to see
whether the high capital costs of new facilities are suffi­
ciently offset by lower production costs.

Output and Productivity Trends
Output

As a result of these trends, domestic demand for steel
(as measured by domestic shipments plus imports less
exports, in net tons) declined at an average annual rate
of 2.9 percent between 1973 and 1983, compared to an
increase of 3.9 percent between 1960 and 1973.
Measured in terms of tons consumed per $1 million of
real gross national product, consumption declined from
97 tons in 1959 to 56 tons in 1983.
Due to the extreme sensitivity of steel to domestic and
world economic conditions, the outlook for steel de­
mand is uncertain. A mid-1982 forecast by the Office of
Technology Assessment projected that U.S. steel de­
mand would rise between 1 and Wi percent annually
during the 1980’s. That would be above the 1970’s rate
but below the rate of the more prosperous 1960’s.

About 85 million tons of steel were produced in 1983,
only slightly more than half the peak level of 151 million
tons in 1973. Nevertheless, this figure represented a
slight improvement over the even lower 1982 level of 75
million tons, which was the lowest since 1946. While the
industry’s operating rate rose to 56 percent in 1983,
from 48 percent in 1982, it has remained well below the
average for the 1970’s. Declining demand for steel pro­
ducts and rising imports are principally responsible for
the sharp reduction in output (chart 6).
Sharply reduced demand for steel in two of its prin­
cipal markets, automobiles and construction, account
for a large part of the overall decline. From 1978 to
1982, shipments to the automobile industry fell from 21
to 9 million tons and to the construction industry, from
13 to 9 million tons. In 1983, shipments to these markets
rebounded partially, to 12 million tons for autos and 10
million for construction.1
5
Adverse cyclical trends are a major cause of the
weakness in the automobile demand, historically steel’s
largest market. Two recent severe recessions had a
devastating impact on auto production, which fell by
5.9 million vehicles, or 46 percent, between 1978 and
1982.1 Motor vehicle imports increased by 300,000, or 7
6
percent, during that time.

Imports

While domestic production has been declining, im­
ports have captured an increasing share of the U.S. steel
market. Contributing to the surge of imports has been
the rapid expansion of steel capacity worldwide in the
last two decades and weak demand due to the prolonged
global recession of the early 1980’s. In 1982, steel im­
ports represented a then record 22 percent of apparent
consumption (domestic shipments plus imports less ex­
ports), but slipped slightly to 21 percent in 1983. To
some extent, the high import share in these years was a
reflection of the contraction of the domestic market; the
import volume was actually greater in several earlier
years. However, for the first 9 months of 1984, steel was
being imported at a record volume and import penetra­
tion jumped to 25 percent.

Also contributing to the decline in steel demand is
product substitution. For example, plastics, aluminum,
and lighter weight steels are replacing heavier carbon
steels in autos as the industry attempts to increase fuel
efficiency. By 1979, for instance, the average
automobile utilized 200 pounds of plastic, compared to
25 pounds in I960.1 A third factor reducing demand for
7
15 American Iron and Steel Institute, Annual, p. 34.
1 Data from Motor Vehicle Manufacturers Association.
6

17

U.S. Congress, Office o f Technology Assessment, Technology

and Steel Industry Competitiveness, 1980, p. 175.

27

Chart 6. Output per employee hour and related data, steel, 1970-83
(Index, 1977 = 100)

Ratio scale

120
110
100
90
80
-

70

-

60

-

50
120
110
100

90
80
70
60
50
120
110
100

90
80
70
60
50

SOURCE: Bureau of Labor Statistics.

28

the the least productive mills and the expansion of the
more efficient minimill sector.
Although productivity data for the minimill sector as
a whole are unavailable, it was estimated that in 1980
the minimills required an average of only 3 Vi employee
hours to produce a ton of wire rod compared to 6 ‘2
/
employee hours for the integrated mills. The major ad­
vantage of the minimills was the absence of primary
processes (i.e., coke oven-blast furnaces operations) . 20
Better communication with workers in integrated
mills through labor-management participation teams
has also boosted productivity in plants where they have
been established. With no capital outlays, one company
was able to increase output from 2,900 to 4,400 tons per
shift in one of its sheet mills, a rise attributed by
management to improved communications between
supervisors and workers.21
The outlook is for some improvement in productivity
growth during the 1980’s, depending on the degree to
which economic conditions improve. The impetus will
come from continued rationalization of production;
i.e., specialization by mills and shutdown of the most
obsolete mills. And some gains are anticipated from im­
proved flexibility of the work force.

A recently completed study by the Steel Advisory
Committee to the Cabinet Council on Commerce and
Trade, chaired by the Secretaries of Labor and Com­
merce, concluded that the major reason for rising im­
port penetration was the low level of import prices
relative to domestic prices, attributable to such factors
as the appreciation of the dollar, unfair trading prac­
tices, the lower wages and benefits paid to foreign
workers, and in some cases more modern mills
overseas. 18
Despite the substantial rise in imports, some imported
products directly competitive with minimill products
have actually decreased in quantity and as a proportion
of the U.S. market. This is evident for two major
minimill product markets, light-shape bars (minimills
had a 90-percent market share in 19811 ) and reinforcing
9
bar (with a 75-percent minimill share in 1981). For in­
stance, imports of light-shape bars decreased from 48
percent of apparent consumption in 1971 to 7 percent in
1981 and, in quantity, fell from 550,000 tons to 105,000
tons during that period. Imports of reinforcing bar fell
from 10 percent to 1 percent of apparent consumption
(domestic shipments plus imports less exports), and
quantity fell from 515,000 tons to 53,000 tons during
the same period.

Investment

Real capital expenditures22 for steel plant and equip­
ment were 19 percent less during the 1970’s than during
the previous decade. Following 5 years of rapid growth,
capital expenditures peaked in 1967 and, thereafter, the
trend has been generally downward. Per production
worker, however, real outlays declined 12 percent dur­
ing the same period because of the substantial drop in
employment. In current dollars, the industry spent $3.2
billion on new steel plant and equipment in 1981 (latest
data).
Low industry profits, weak steel demand, high im­
ports, and little prospect for adequate return on invest­
ment have contributed to the decline in capital expen­
ditures in the last decade. Between 1970 and 1980, the
return on book value of the eight largest integrated steel
companies averaged 7 percent, only about half the
manufacturing average return. (These data include in­
come from nonsteel subsidiaries, whose returns are
generally higher.) For the entire industry, the return on
stockholders’ equity between 1970 and 1982 was
substantially below the manufacturing average in every
year but one (1974).
The low profits of the integrated companies have
hampered investment since they have largely financed
capital projects through retained earnings and equity

Productivity

Output per employee hour in the steel industry edged
upwards at an average annual rate of 1.1 percent bet­
ween 1970 and 1983 (chart 6 ). This was less than half the
rate for all durable goods manufacturing registered dur­
ing the same period and less than half the steel
industry’s own average of 2.3 percent for the 1960’s.
The low productivity growth rate for the period
1970-83 reflects the decline in output (2.2 percent an­
nually). The strongest productivity growth was concen­
trated in the early part of this period. During the later
part of the period (1979-83), productivity increased by
only 0.4 percent annually. The very low growth rate
during these years is attributable to very sharp shifts in
output. However, in 1983, productivity soared 28 per­
cent above the 1982 level, as output bounced back but
employee hours dropped by an additional 10 percent.
Preliminary data for the first 6 months of 1984 indicate
continued strong productivity growth.
Factors contributing to the low productivity rate are
the sharp cyclical swings in output and the declining
level of capital expenditures, which resulted in an in­
crease in the degree of obsolescence of plant and equip­
ment. Moreover, as output declined precipitously, most
plants have been operating considerably below their
most efficient levels. Somewhat offsetting these
negative influences in recent years were the closure of

Barnett, Steel, pp. 119, 135-36.
2 Business Week, Oct. 12, 1981, p. 86.
1

20

18 “The State o f the Steel Industry,” prepared by the Subcommit­
tee o f the State o f the Industry o f the Steel Advisory Committee.
19 Donald F. Barnett, Steel: Upheaval in a Basic Industry, p. 88.

22 U .S. Department o f Commerce, Bureau o f
Economics, Office o f Research, Analysis, and Statistics.

29

Industrial

meet environmental and safety requirements, is almost
double the expenditure level of the late 1970’s. While
some other estimates are lower, it is unlikely that invest­
ment will come anywhere near the amount required, due
to existing low utilization and continuing financial
losses of the major companies.

financing. The industry has maintained that inadequate
depreciation allowances have prevented it from recover­
ing inflation-elevated costs. During the 1970’s, the
United States had the longest cost recovery period of
any major industrial country. The Economic Recovery
Tax Act of 1981, which established shorter depreciation
schedules and increased tax credits for investment,
should benefit the industry once it returns to profitability.
Because of the limited prospect for an adequate
return on investment, a number of the integrated com­
panies have diversified into other sectors, including
chemicals, oil, and financial institutions. One leading
steel company reported that only 25 percent of its total
assets were deployed in steel in 1983, compared with
about 57 percent in 1975.2
3
As investment in steel facilities has declined, the
degree of obsolescence has increased. A 1978 survey by
McGraw-Hill of executives of large companies concluded
that 26 percent of the steel industry’s plant and equip­
ment was considered technologically obsolete—higher
than that of any other major manufacturing industry.
Unlike the integrated sector, the minimill sector’s
high profitability has enabled it to more readily generate
funds for investment. In a comparative financial study
of four major minimills and four integrated companies,
the return on stockholders’ equity in the years 1972-81
averaged 16 percent for the minimill companies, or dou­
ble the return of the integrated companies.2 However,
4
in 1982 and 1983, both sectors sustained substantial
losses.
The relatively low construction costs of minimills
have also facilitated investment. In 1979, six minimills
were built for an average cost of $200 per ton of capacity.
In the same year, one integrated company estimated
that a new integrated mill would cost about $1,400 a
ton. Moreover, because minimill capacities are quite
small, total minimill construction costs are only a frac­
tion of the cost of an integrated mill.
Expenditures for pollution control have been steadily
declining since 1979 and now constitute a relatively
small proportion of total capital outlays. In 1983, 4.3
percent of capital outlays were spent on pollution con­
trol compared to 19.3 percent in 1979.
Estimates differ on the size of expenditures needed
for modernization of the industry. The American Iron
and Steel Institute estimated that $4.9 billion (1978
dollars) would be required annually through 1988 for
modernization and a modest expansion of capacity,
conceived as essentially a “ rounding o u t’’
option.2 This figure, which also includes outlays to
5

Employment and Occupational Outlook
Employment

The long-term decline in steel employment ac­
celerated in the early 1980’s as the integrated mills
reduced operating rates to historically low levels and
closed mills. Industry efforts to reduce costs by con­
solidating jobs and reducing the size of work crews are
also contributing to the employment decline. In 1983,
total industry employment slipped to 343,100, one-third
below its 1981 level and less than one-half its postwar
peak (726,000 in 1953). Since 1970, the employment
decline averaged 3.1 percent annually (chart 7).
In contrast to the integrated mills, employment in the
minimill sector grew rapidly during the last decade but
remains a small percentage of the industry total.
Although no precise data are available for this sector,
estimates show an increase from under 5,000 employees
in 1970 to between 25,000 and 30,000 in 1981, which
was less than 8 percent of total steel employment.
Because of the minimill sector’s relatively high produc­
tivity and simple product mix, its employment share is
considerably less than its output share. Employment
probably decreased in 1982 due to the severity of the
recession.
The decline has been far more precipitous for produc­
tion workers than for nonproduction workers. Since
1970, production worker employment has declined by
3.5 percent annually, more than double the 1.6-percent
annual drop for nonproduction workers. As a result,
production workers slipped from 80 percent of total in­
dustry employment in 1970 to 75 percent in 1983, still
considerably above the ratio for all durable goods
industries.
While some employees are being recalled to work as
the economy improves, it is likely that a large propor­
tion of recent job losses are permanent, b l s projects
that employment will rise by 30 percent between 1983
and 1995 to 447,330, assuming moderate growth in the
economy,2 but this figure is 22 percent lower than the
6
1979 level. Employment in the minimill sector is pro­
jected to nearly double from its 1981 level to about
50,000 by 1990.2
7
26 BLS projections for industry employment in 1995 are based on
three alternative versions o f economic growth and assume a low,
moderate, and high projection. For details on assumptions and
methodology used to develop these projections, refer to the Monthly
Labor Review, November 1983.
27 U.S. House of Representatives, Crisis in the Steel Industry, March
1982, p. 55.

23 United States Steel Corp., Annual Report, 1975 and 1983.
24 Donald F. Barnett, Steel: Upheaval in a Basic Industry, p. 97.
25 “ Rounding out” is defined as increasing the capacity o f an ex­
isting facility by removing production bottlenecks. For basis of
estimate, see American Iron and Steel Institute, Steel at the

Crossroads: The American Steel Industry in the 1980’s.

30

. Employment in steel, 1970-83, and projections, 1983-95
ees (thousands)

Employees (thou

700

700

600

600

500

500

400

400

300

300

A verage annual percent change 2
All employees

200

1970-83.......................................................
1970-73...................................................
1973-78...................................................
1978-83...................................................

200

-3.1
-1.2
-1.9
-9.7

1983-95 (projections)................... 0.7 to 1.0

100

100

Production workers
1970-83....................................................... -3.5
1970-73................................................... -0.9
1973-78................................................... -2.3
1978-83................................................... -10.8

0

j........ ( |
M

1970

i

I

I

I

i

1975

I

!

I

i

I

I

I

I

1980

I

i

1985

See text footnote 26.
.east squares trends method for historical data, compound interest for projections.
HJRCE: Bureau of Labor Statistics.

31

I

I

|

J

1990

i

[

I

|

i

1995

0

However, the net effect of the adoption of continuous
casting to replace ingot-pouring and associated pro­
cesses is a substantial reduction in employment—as high
as 50 percent compared to the older method.
Generally, the adoption of computer process control
has had little net effect on employment, although, as
cited previously, a reduction in the number of workers
has occurred in some instances. More frequent,
however, is the case where new positions requiring
higher skills are created, superseding the old positions
on a one-for-one basis. The most skilled positions are
those associated with maintenance of the computer pro­
cess control system. Where a system is installed to
control complex operations, requirements for skilled
electronic maintenance workers may be extensive; one
company reports that 45 percent of its computer person­
nel are devoted to system upkeep.
At present, in the typical integrated mill, there are
hundreds of occupations which are arranged into 34 job
classes. In the highest class is the tandem mill roller in a
continuous hot strip mill. In the lowest is the Class I
laborer. The two occupations with the largest numbers
of workers are laborer and millwright.

Occupations

Diffusion of new technology and the severe economic
problems confronting the steel industry are having a
major effect on job content and occupational re­
quirements. Moreover, labor and management are likely
to accelerate such job changes in the 1980’s.
Jobs are being reduced wherever possible through
consolidation of positions, changes in work rules, and
cuts in crew size. For example, in one reopened mill, 25
unskilled laborer positions were eliminated in the
casting shop. The responsibilities for those jobs were
assumed by machine operators and other skilled
workers, who now clean up their own work areas in­
stead of relying on a cleanup force.2 In a second plant,
8
the union agreed to eliminate all crane operators
through the installation of remote control and to
substantially reduce the number of maintenance
workers. Similarly, in reopening another plant, the
union agreed to wipe out many longstanding work rules
to enable management to make changes which could im­
prove productivity. At another large plant, the work
force at two electric furnaces was reduced from 30 to 15
once the units were brought back on line.2
9
During the 1983 contract negotiations, the major
union, the United Steelworkers of America (USW A), for
the first time authorized its locals to allow combining a
limited number of craft jobs. Consolidation of crafts in­
creases the flexibility of the work force and reduces unit
labor requirements. For instance, at two large in­
tegrated plants, the millwright has assumed some of the
responsibilities of the rigger and the welder. Previously,
the millwright had to summon a rigger or welder from
the central shops for assistance when making repairs.
With the changed work rules, the millwright can now
expedite the work by doing simple welding or rigging.
All three of these occupations—millwright, welder, and
rigger—are high-paying maintenance jobs. Other craft
occupations which can be combined with rigging,
welding, and fabricating include motor inspector,
hydraulic repairer, and ironworker.
Continuous casting is presently the technology having
the greatest impact on labor both because it is a radical
transformation of the steelmaking process and because
of the sizable number of casters now being built. With
the increased diffusion of continuous casting, occupa­
tions in continuous casting mills are one of the few areas
of employment growth. Between 1978 and 1983, four
major continuous casting occupations increased by a
total of 8 percent, while during the same period, total
production worker employment fell by almost half.3
0

Adjustment of workers to technological change

Programs to protect employees from the adverse
effect of advanced technology and methods of produc­
tion may be incorporated into contracts, or they may be
informal arrangements between labor and management,
or they may be unilaterally established. In general, such
programs are more prevalent and detailed in companies
with formal labor-management agreements. Such con­
tract provisions to assist workers in their adjustment to
technological and associated changes may cover wage
rates, job assignments, retraining, transfer rights, layoff
procedures, and advance notice of changes planned by
management, such as machine changes or plant clos­
ings. They may include various types of income
maintenance programs, such as supplementary
unemployment benefits and severance pay.
The steel industry is highly unionized. In 1983, more
than 90 percent of the entire industry’s work force was
covered by the United Steelworkers of America
(USW A).31 The Independent Steelworkers and the United
Auto Workers represent a small number of workers. In
the integrated mills, nearly all production and
maintenance workers are covered by labor-management
agreements. By contrast, in the minimills, a large pro­
portion of workers are not union members.
The u s w a is concerned with technological displace­
ment but has generally not resisted the adoption of new
technology. Management has the right to change local
work practices such as crew size, work rules, or job
descriptions, when supported by “ changed” conditions,

28 Wall Street Journal, July 30, 1982, p. 12.
29 Ibid.
30 Industry Wage Survey: Basic Iron and Steel, 1978-79, BLS
Bulletin 2064 (Bureau o f Labor Statistics, 1980), p. 14; and Industry
Wage Survey: Basic Iron and Steel, August 1983, BLS Bulletin 2221
(Bureau o f Labor Statistics, 1984), p. 11.

3
1
Industry Wage Survey: Basic Iron and Steel, August 1983,
Bulletin 2221, p. 3.

32

bls

weaken the union’s bargaining power.
The u s w a and seven large integrated companies
renegotiated the existing master contract prior to its
August 1983 expiration date. The new contract for the
first time cut wages, which had been rising rapidly under
the industry’s Experimental Negotiating Agreement
(ENA), in effect since 1973. (The e n a provided a cost-ofliving adjustment and an annual wage increase in return
for a no-strike clause.) In addition, several cost-ofliving adjustment (COLA) payments were cancelled, and
the c o l a formula was modified. Some vacation time,
holidays, and sabbatical leave were also cut. Savings
from wage and benefit cuts will be used to support steel
operations.
Additional concessions by both management and
labor have been made at the local level to keep plants
open. In one plant, for instance, local arrangements
have included more substantial wage cuts, scheduling
changes to allow 10-hour shifts with no overtime pay,
and a relaxation of all seniority regulations governing
layoff and recall. In return, management agreed to con­
tribute 75 cents per employee hour for 2 years to a fund
to be used to help train displaced steelworkers for jobs
which might open up outside the plant.
The 1980 master contract provided for the establish­
ment of labor-management participation teams (LMPT’s)
on a limited and experimental basis to deal with such
issues as productivity, work arrangements, and quality
control. By early 1982, about 100 teams, typically con­
sisting of two to three supervisors and 10 to 15 workers,
had been established in 13 plants belonging to 5 large in­
tegrated companies. Due to the full cooperation of both
parties, the experiment has been considered helpful. For
example, as a result of the worker input of one team in a
rolling mill, a number of small changes were made which
boosted productivity 19 percent during the first year after
adoption of the task force recommendations.3 Output
5
increased by 30 percent at a second plant due to l m p t
suggestions. The 1983 agreement extends l m p t ’s to plants
of all seven large integrated companies.

including technological change.3 Affected employees
2
have recourse to arbitration.
An earnings protection plan included in the master
contract covering most workers is designed to help
workers adjust to technological change. “ The purpose
of the plan is to protect a level of earnings for hours
worked by employees, with particular emphasis on
employees displaced in technological change.’’3 The
3
plan provides additional compensation based on hours
worked during a quarter if earnings fall below 85 per­
cent of hourly earnings during a previous base period.
Strengthening supplementary unemployment benefits
(SUB) was a major goal of the union in contract negotia­
tions which were concluded in the spring of 1983. While
a major proportion of workers are eligible for s u b
payments,3 s u b funds have been drained due to the
4
sharp rise in laid-off workers drawing on the funds and
the decline in the number of employed workers paying
into the fund. In 1982, in most companies, only laid-off
workers with more than 20 years service were receiving
s u b payments. The new contract increases the com­
panies’ payments into the depleted s u b funds and
guarantees minimum benefits for a set period for a
greater proportion of employees.
The new steel pact also makes several improvements
in an interplant job opportunities program, which was
first established in 1962. These changes make it easier
for laid-off workers to locate and fill vacant positions in
other plants owned by their company. They include a
waiver of waiting periods for transfer and liberalization
of rules governing determination of continuous service.
During the past several decades, the u s w a has
developed the strength to bargain uniform wage pat­
terns on an industrywide basis, effectively eliminating
wages as a competitive factor. However, the shrinking
market share of the large integrated producers may
32 Agreement Between United States Steel Corporation and the
United Steelworkers o f America, p. 11.
33 Agreement, p. 27.
34 Supplementary unemployment benefits were provided by
establishments employing more than 90 percent of workers in 1978
and 85 percent in 1983. See Industry Wage Survey: Basic Iron and
Steel, 1978, p. 8, and 1983, p. 29.

35 Iron Age, Feb. 2, 1981, p. 4.

SELECTED REFERENCES
The

“ Electric Furnace Succeeds in Technology and Profit,” Iron Age,
Feb. 4, 1980, pp. MP-7 and following.

“ A New Challenge Takes Shape in Rolling M ills,” Iron Age, Sept. 6,
1982, pp. MP-3 through MP-36.

“ Givebacks or Layoffs? Pick One or the Other, Steelmakers Tell
USW ,” Wall Street Journal, July 30, 1982, p. 1.

“ A Work Revolution in U.S. Industry,” Business Week, May 16,
1983, pp. 100-10.

Hirshhorn, Joel E. Continuing Success fo r United States Mini-Mills.
Address at Metal Bulletin’s Second International Mini-Mills
Conference, March 1981.

American Iron and Steel Institute. Steel at the Crossroads:
American Steel Industry in the 1980’s, January 1980.

Barnett, Donald F. Steel: Upheaval in a Basic Industry. Cambridge,
Massachusetts, Ballinger Publishing C o., 1983.

“ Incentive Programs at Nucor Corporation Boost Productivity,”
Personnel Administrator, August 1981, pp. 33 and following.

Clark, David H. Computer Process Control in the Steel Industry.
Address at International Iron and Steel Institute Meeting,
October 1981.

“ Korf, Voest-Alpine Ready To Hit U.S. With a New Process for
Minimills,” Iron Age, Oct. 4, 1982, pp. M P-23-24.

“ Concessionary Bargaining—Will the New Cooperation Last?”
Business Week, June 14, 1982, pp. 66-81.

“ Steel Gets a Respite From the Wage Spiral,” Iron Age, Mar. 16,
1983, pp. 33 and following.

Crandall, Robert. The U.S. Steel Industry in Recurrent Crisis.
Washington, D .C ., Brookings Institution, 1981.

“ Steel Jacks Up Its Productivity,” Business Week, Oct. 12, 1981,
pp. 84 and following.

33

U.S. Department o f Labor, Bureau o f Labor Statistics. Industry
Wage Survey: Basic Iron and Steel, August 1983, Bulletin 2221,
November 1984.

“ Steel Mood: Hopeful but Wary,” New York Times, Mar. 4, 1983,
pp. D -l and following.
“ Steel Seeks Higher Output Via Workplace Reform,” Business Week,
Aug. 18, 1980, pp. 98 and following.

U.S. Department o f Labor, Bureau o f Labor Statistics. “ Steel” in

Technological Change and Manpower Trends in Five Industries,
U.S. Congress, House o f Representatives, Committee on Energy and
Commerce. Crisis in the Steel Industry: An Introduction and The
Steel Industry in Transition, March 1982.

Bulletin 1856, 1975, pp. 21-33.
“ Work Rule Changes Quietly Spread as Firms Try To Raise Pro­
ductivity,” Wall Street Journal, Jan. 25, 1983, p. 35.

U.S. Department o f Labor, Bureau o f Labor Statistics. Industry
Wage Survey: Basic Iron and Steel, 1978-79, Bulletin 2064, May
1980.

34

Chapter 4. Motor Vehicles

The motor vehicles industry employed 772,700
workers in 1983 in about 3,000 plants ranging in size
from huge assembly plants to small parts suppliers. Be­
tween 1978 and 1983, employment fell off sharply, from
just over 1 million workers to 772,700 workers, as the
economy slackened and competition from foreign pro­
ducers intensified. The Great Lakes region, where a ma­
jor portion of the work force is located, was particularly
hard hit. The employment situation improved in 1983 as
the economy strengthened, demand for autos increased,
and many unemployed auto workers were recalled.
The outlook is for employment to move higher by
1995 but still remain below the record 1 million workers
employed in 1978. New production technologies will
continue to lower unit labor requirements, with
machinists, welders, tool-and-die makers, assemblers,
painters, and drafting employees among those most
affected. Prospects for employment growth are
favorable for some categories of workers, including
computer personnel, scientists and engineers, electri­
cians, and maintenance workers. The topic of job
security will be prominent in labor-management
negotiations during the 1980’s, and training programs
to facilitate work force adjustments will be implemented
more extensively.

Summary
The motor vehicles industry (sic 371) is adopting the
latest technologies to increase productivity and improve
quality to compete more effectively in domestic and
overseas markets. The innovations range from the widely
publicized use of industrial robots to less dramatic
refinements in conventional machinery. The scope of
diffusion is broad, with new technologies being adopted
in all three of the major stages involved in the manufac­
ture of autos and trucks: Design, engineering, and
testing; production of parts and subassemblies; and
final assembly. They include computer-aided design and
computer-aided manufacturing (CAD/CAM ) as well as
computerized data processing and equipment monitor­
ing; industrial robots for welding, materials handling,
painting, assembly, and inspection; programmable con­
trollers; and a wide range of improvements in basic pro­
duction machines and transfer lines.
Output in the motor vehicles industry increased at an
average annual rate of 1.6 percent over the period
1970-83, with the substantial gains in output during the
early and middle years of this period offset by declines
the later years, through 1982. Between 1978-83, output
declined at an annual rate of 5.0 percent as the economy
experienced inflation, high interest rates, growing
unemployment, and recession. Moreover, imported cars
captured an increasing share of the domestic market.
Sales of autos and trucks moved sharply higher in 1983
and early 1984, however, as the economy strengthened,
and workers were recalled as plants increased produc­
tion. From 1982 to 1983, output increased by 30.6 percent.
Productivity in the motor vehicle industry (output per
employee hour) increased at an average annual rate of
2.5 percent over the period 1970-83. The pattern of pro­
ductivity change was uneven over this period, with out­
put per employee hour increasing at an average annual
rate of 6.4 percent during 1970-73 and of 4.1 percent
during 1973-78. From 1978 to 1983, however, output
per employee hour increased at a lower annual rate of
2.1 percent, due to a decline in productivity during
1978-80 followed by an increase during the more recent
period 1980-83. Productivity increased strongly—by
14.2 percent—from 1982 to 1983. The outlook for pro­
ductivity gains appears generally favorable, with the
announced plans to spend billions of dollars during the
1980’s to modernize plant and equipment expected to
bring about labor and other cost savings.

Technology in the 1980’s
A number of technological changes are underway as
the motor vehicle industry seeks to redesign product
lines and modernize plants. Competition from Japan
and elsewhere is intense, and the latest manufacturing
technologies are being adoped to raise productivity,
lower costs, and improve quality.
A wide range of technologies are being adopted.
Computers are being used intensively in design applica­
tions and in c a d / c a m and other plant operations. The
industry leads in the application industrial robots, and
their use is increasing in welding, materials handling,
painting, assembly, and inspection operations. Pro­
grammable controllers also are being used more exten­
sively to regulate production processes more efficiently.
Basic metal-cutting and metal-forming machines are be­
ing improved, and transfer lines are becoming more
highly automated. The widely employed unit-body con­
struction method facilitates automatic welding.
The major technologies, their labor impact, and dif­
fusion are summarized in table 4.
35

Table 4. Major technology changes in motor vehicles
Technology
Computers

Description

Labor implications

Diffusion

Computer-aided design and manufac­ CAD typically reduces by 50 percent Data on extent of use are not avail­
turing (CAD/CAM) systems assist in the time required to design vehi­ able. However, computers are in gen­
design of mechanical and structural cle components and reduces require­ eral use for business and production
components used in motor vehicles. ments for drafting personnel. CAM applications, and CAD systems also
Computer simulation of physical data and other forms of computer control are broadly deployed. Although al­
used to test vehicle components are expected to reduce demand for ready in place, continuous improve­
and production line operations.
equipment operators, will increase ments in computers and CAD sys­
demand for maintenance and techni­ tems have increased their capability.
Computer systems also used to con­ cal workers.
CAM and computer-controlled plant
trol manufacturing processes and
data networks are less widely used
manage plant energy systems
and located primarily in new and re­
through direct control of individual
designed plants.
machines or entire production lines.
Plantwide data networks are built
around computers which provide
considerable statistical information
on equipment performance, output,
and quality levels.

Industrial robots

Spotwelding is most important appli­ Each robot performs the functions Approximately one-third of the esti­
cation; robot welding fits very well of about Wi workers per shift for mated 13,000 robots used in the United
with unit-body construction of pass- spot welding. In materials handling, States in early 1985 were in motor vehi­
senger cars and light trucks.
the relationship may be more like one cle manufacturing plants. One esti­
to one. Estimates of dislocation are mate is for 31,350 robots by 1990.
Materials handling is second most im­ more difficult to make in other About half of all robots currently are
portant application, including the applications.
used for spot welding. Number of ro­
transfer of parts from one place to
bots is expected to grow in all appli­
another, and loading or unloading
cations by 1990, with growth rates
machines.
lowest for welding operations (where
already widely used) and highest for
Robots useful in painting where po­ Robots require maintenance and re­ assembly tasks, where the largest
tentially hazardous conditions exist pair services, which provide jobs for number of workers are employed.
for human painters.
skilled craft workers—especially
electricians, as most problems in­
volve the electrical control panels
that direct a robot’s operations.
A wide range of assembly and inspec­
tion operations are potentially avail­
able for robots when their capability
improves and costs are lower.

Unit-body construction

Vehicle bodies constructed from Method involves a substantial a- Most passenger cars and some light
sheet-metal panels welded together mount of welding, increasingly car­ trucks are built from the unit-body
to form a strong, rigid box. There ried out by industrial robots and concept.
is no separate frame onto which the automatic methods displacing weld­
body is mounted.
ers.

Programmable controllers (PC’s)

Solid-state electronic controls used PC’s reduce time required for engineers Data on number in use are not
to regulate machines and production and electricians to change control available. However, programmable
lines. PC control functions can be functions. Maintenance and repair controllers are diffused fairly exten­
easily changed to meet new manu­ requirements are also much lower, due sively in modern plants. The auto
facturing needs. Also, PC’s are to inherent reliability and electronic industry worldwide reportedly ac­
reliable and use logic symbols famil­ diagnostic capability available to counts for about 40 percent of the
iar to engineers, electricians, and electricians.
total market for programmable con­
trollers.
other technicians.

Changes in basic production
machines

Improvements include higher operat­ Labor requirements for machine op­ QDC presses are in limited use, but
ing speeds, automatic controls, erators are reduced. A modern automatic controls, faster speeds,
coated edges on cutting tools, and quick die change (QDC) press, and improved cutting tools are more
faster die changing capability for for example, can be operated by 1 broadly used.
operator at a master control panel
stamping presses.
compared to the 6 to 12 workers for
conventional presses.

Improved transfer lines

Highly mechanized machine lines Decrease in number of semiskilled Most new manufacturing and assem­
that manufacture or assemble auto­ machine operators, assemblers, and bly lines incorporate some of these
mobile components. Improvements inspectors. Some increase in craft improvements.
include greater use of automated and technical workers who program
equipment, including numerical and repair, and maintain equipment.
computer control; programmable
controllers; industrial robots; and
more automatic testing and inspection
stations.

36

manufacturing operations. In one c a d / c a m system,
body dies are made directly from computer data; the
customary wooden models are eliminated. This method
saves 6,000 hours of work, and tools made from these
dies are of higher quality.2 As a general assessment,
c a d / c a m systems reduce unit labor requirements for
engineers, drafters, machine operators, and tool-anddie makers. The number of manual tasks is reduced
substantially.

Computers

Computer-aided design (c a d ) and computer-aided
manufacturing (CAM). Computers, linked with display
terminals and using sophisticated software, greatly
enhance the ability of engineers to perform design work
on vehicles. Mechanical and structural components can
be designed or modified very quickly, and mathematical
models of auto components can be tested by computer
simulation. The concept extends even to simulating the
operation of production lines. With computer simula­
tion, engineers can anticipate potential problems and
develop solutions in advance of actual production.
c a d makes large productivity gains possible for
engineers and drafters, typically reducing by half or
more the amount of time previously required in design
tasks. As an example, the time required to produce
drawings related to the clearance of the hood and engine
components at one plant totaled only 80 hours with
c a d , compared to
240 hours with conventional
methods.1 Once the design specifications for a compo­
nent have been computerized, the information can be
stored and used to operate machine tools, program­
mable controllers, and robots.
Combining c a d / c a m into a unified system can lead
to improvements in design and testing work and in
1 “ U.S. Automakers Ease Toward

cad / cam ,”

Plant data networks. Computers are being used to
establish plant-wide data communications networks to
assist plant managers and technicians. In these systems,
data are collected and stored for a wide range of
variables, including the performance of production
machinery, the results of tests performed on vehicles in
production, and rosters of technicians and specialists
presently on duty in the plant who can be alerted by CRT
terminals and dispatched promptly to problem areas.
Many other capabilities are possible with data com­
munications networks, including statistical programs to
assess the quality of components received from sup­
pliers, as well as to track output and quality levels for
the entire plant. The range of occupations affected by
these data systems is broad, but the common result is
greater efficiency and higher productivity.

Automotive In­

2 Lester V. Ottinger, “ Robots and Other Technologies in the
Automated Factory,” Industrial Engineering, September 1982, p. 28.

dustries, December 1982, p. 29.

Layout technicians compare accuracy of a front fender to computer-generated blueprints.

37

ficult to make, and even the most simple welding opera­
tions are not pleasant jobs. Robot welding frees people
from this type of work and is more consistent than
human welding. All of the welds are completed, and the
accuracy of each weld, from one car body to the next,
hour after hour, is more precise than what can be
achieved by most human welders.
The technology involved in robot welding developed
at a faster pace than other robot applications over the
past decade. General Motors estimates that 1,000 of its
2,300 robots in 1983 were used in welding operations.5
Currently, about one-half of all robots sold to the auto
industry are being used to spot weld on car bodies.6
Robot welding will continue to grow. General Motors
plans to increase the number of welding robots from
1,000 in 1983 to 2,700 in 1990—a nearly threefold gain.
The rate of growth, however, will be lower for welding
than for any other major applications planned by GM—
an indication of the fast pace of diffusion of robot
technology planned for the 1980’s. An official in one
assembly plant estimates that about one-half of all
assembly welding carried out by domestic auto
manufacturers in 1983 performed by robots and other
automatic welding equipment, while almost 90 percent
of all welding in Japan was by automated methods.

Computers also are being used to manage energy
systems. One automaker reported annual savings of
$400 million by using computer controlled systems that
require only 20 seconds to turn equipment on and off
automatically throughout a plant at the beginning and
end of work shifts. This is a fraction of the 4 or more
hours required by maintenance or operating crews to
perform this task manually.
Robots

The industrial robot is one of the most important
technologies to be introduced in the motor vehicle
manufacturing industry. Contemporary robots incor­
porate three basic components: (1) One or more arms
that can move in several directions, (2) a manipulator or
“ hand” that holds the tool or part to be worked on, and
(3) a controller that provides instructions on how the
robot is to move. Robots are flexible and can be
reprogrammed quickly and inexpensively to handle a
variety of tasks associated with the manufacture of
motor vehicles.
According to the Robot Institute of America, motor
vehicle manufacturers use robots more intensively than
any other industry, accounting for about one-third of
the estimated 13,000 robot installations in the United
States in early 1985. The number of robots in the in­
dustry is expected to increase substantially during the
1980’s. One expert forecasts just over 31,000 robots to
be installed by 1990.3
Robots are having a significant impact on jobs: Each
robot installed on a production line performs the func­
tions of at least one worker per shift. However, addi­
tional labor is required to maintain and repair robot in­
stallations. To date, welders and other auto workers
dislocated by robots reportedly have been reassigned to
other positions in the plant without major difficulty.
Several major types of robot applications have been
developed in the auto industry: Welding (predominately
spot welding), painting, various types of materials
handling, and some assembly operations. These applica­
tions are described in the following paragraphs.

Materials handling. The second most important use of
robots has been in materials handling. Such applications
include transferring parts from one pallet or conveyor
to another, and the loading or unloading of machines.
The work involved is usually simple and very repetitive.
Sometimes it involves moving heavy or bulky parts,
such as engine block castings. Robots are also useful
where working conditions could be hazardous or
unpleasant for human workers—situations involving
heat, noise, flying sparks, etc.
Robots applied to materials handling operations
usually interface with machines and conveyors in a man­
ner similar to that of human workers. Dislocation of
human workers is usually on a one-to-one basis, per
shift.
Machine loading and parts transfer applications are
expected to grow strongly during the 1980’s. General
Motors reports 100 robots in use in these functions in
1980, and an estimated 4,800 robots are planned for
these operations by 1990.

Spot-welding. This has been the most important robot
application. Robots were first installed in large numbers
in General Motors’ Lordstown, Ohio, assembly plant
around 1970. About 85 percent of all body assembly
welding in this plant was done automatically—by a
combination of automatic welding transfer lines and
industrial robots fitted with welding tools.4 The opera­
tions pioneered in this plant have become fairly stan­
dard in plants building passenger cars and light trucks.
A contemporary, small, unit-body passenger car (or
light truck) is estimated by one industry official to have
2,400-2,500 spot welds. Some of these welds are dif­

* Automatic welding machines have been in use for many years, so
this part of the process is not new technology. It is referred to as
“ hard automation” because the machinery was built to do a specific
welding operation and cannot be changed easily. Automatic welding is
useful when the same welds must be made over and over—as on a
vehicle floor pan.
Since robot welders can easily be programmed to perform a number
of different welds, they are useful for doing the variety of welds
necessary on several body styles that can be built on one floor pan.
5 McElroy, “ Robots Take Detroit,” p. 29.
6 Ibid., p. 28.

3 John McElroy, “ Robots Take Detroit,” Automotive Industries,
January 1982, p. 28.

38

could have a significant impact because assembly opera­
tions are labor intensive. Thousands of semiskilled
“ small parts” assemblers are employed in the auto in­
dustry. If robot assembly is diffused at the rate forecast,
a substantial number of workers could be affected.
However, the total number of assembly robots in use in
1990 is expected to be small in relation to the total
number of assembly jobs.
Robots are currently used in a limited number of in­
spection operations—for instance, probes or gauges can
be attached to a robot’s arm to ensure that parts have
been installed on an assembly line, or that certain
measurable parts are within the proper tolerances.
Growing use of electric robots, which are often less ex­
pensive than other types of robots and are capable of ac­
curate and finely tuned arm movements, should increase
the opportunities for inspection applications.
Developments are underway to create a sense of “ vi­
sion” and “ touch” for robots—in fact, there are a
limited number of robots with these capabilities already
in use. Robots equipped with video cameras, pressure
sensors, etc. can be applied to a number of inspection
jobs. This will have an impact on labor by reducing
manual inspection activities.

Painting. R.obots are also being applied to painting
operations. Spray painting automobile bodies in closed
painting booths is necessary to produce a clean, dustfree coat of paint, but the closed booths must have costly
ventilation systems to protect human workers from in­
haling the hazardous solvents. Robots, however, can
survive in an unventilated environment, and the higher
temperature that can be used in unmanned, robot in­
stallations dries paint faster.
Automobile painters are among the most highly skilled
operatives in an assembly plant. Training requirements
are longer than for most other operative jobs, and the
skill of the painter largely determines the quality of the
paint application. A robot cannot produce a better paint
job than a skilled human painter; but properly program­
med, the robot can paint with greater consistency.
A substantial growth in the number of robots applied
to painting operations is expected during the 1980’s.
Assembly and inspection. Industrial robots have been
applied to only a limited number of assembly and in­
spection operations. Such applications generally require
more sophisticated equipment and software than is
needed for welding or materials handling. Such
sophistication is expensive and not always technically
achievable. However, as robot capability is enhanced,
experts foresee a sharp gain in their use for assembly
and inspection during the 1980’s.
Industrial robots presently carry out several assembly
tasks. A robot in one modern plant applies sealant
around the edge of auto windshields prior to the in­
stallation of the glass into the auto body. In an engine
plant, robots deburr holes drilled into crankshafts and
tighten spark plugs that have been placed in the engines
by hand. In another example, robots equipped with
lasers measure auto bodies with great precision to insure
that body panels fit properly.
Over the past few years, electric robots have been
developed as alternatives to the older, hydraulicpowered robots. Most electric robots are smaller and
frequently less expensive than hydraulic models, and
they operate at higher speeds and with greater accuracy.
However, they generally cannot handle heavy parts.
Auto manufacturers are working on a number of
potential robot assembly applications including: In­
stalling piston rings, assembling engine oil pumps, inser­
ting light bulbs into instrument panels and tail light
assemblies, and installing wheel-and-tire assemblies on­
to autos and starting the wheel nuts. Robots can be used
to put together “ sub-assemblies” of door panels, instru­
ment clusters, etc., that are carried by conveyor to ma­
jor assembly areas. General Motors estimated that the
number of assembly robots will grow from 17 in 1980 to
5,000 in 1990, and, in the process, will ultimately
become the largest type of robot application.
The application of robots to assembly operations

Programmable controllers

Programmable controllers (PC’s) are replacing elec­
tromechanical relay controls which serve as “ on-off”
switches used to regulate the sequence of production
steps on transfer lines or other manufacturing
technologies. The primary advantage of PC’s is that
changing a manufacturing process is relatively simple
and labor requirements of engineers and technicians are
lowered. A circuit change that would require an hour or
more to make on a conventional electromechanical relay
can be done in minutes on a p c . To change an operation
controlled by electromechanical relays, a new wiring
diagram to accomplish the new process is developed by
engineers, and the wiring in the relay panel is changed to
fit the diagram. A large transfer line incorporates a
substantial number of relays, each needing to be
rewired. An hour or more of work on each relay adds up
to a considerable amount of time and labor.
By contrast, a p c needs only to be reprogrammed. An
engineer can write a new program into the PC memory,
using a keyboard or some combination of keyboard and
computer-prepared tape. Once entered, the p c will carry
out this program until it is changed. Entering and im­
plementing the new program requires only a few
minutes. Modifications to the program are equally
easy—as opposed to pulling wires loose from relay
panel connections and relocating them. One p c can
often do the work of several relays, further reducing the
workload on engineers and technicians.
The experiences of one large firm which, in connec­
tion with a change in the production line, installed six
39

PC’s to replace 60 conventional relays illustrates the
types of savings being achieved by this technology. At
this firm, electrical maintenance costs were reduced by
about 30 percent, because programming and start-up
operations involved less work with the PC’s than the con­
ventional relays would have required. Moreover, the
PC’s need less floor space than the relay panels which
they replace, and they are far more reliable. In all, pro­
duction downtime has been reduced significantly by the
installation of PC’s in place of conventional elec­
tromechanical relays.7
Another major advantage of PC’s is that they use the
same kind of logic symbols—“ relay ladder logic” —that
are used by mechanical relays. No special computer
languages are necessary. Consequently, plant engineers,
electricians, technicians, and other operating personnel
understand and are comfortable with PC’s. This similarity
of language to mechanical relays is reported to be a
primary reason for the initial success and acceptance of

Unit-body construction of passenger cars

Most passenger cars and small trucks are now built as
unit-body vehicles—a manufacturing technique which is
having an impact on employment of welders. In this
process, the major body panels, such as floor pan and
side panels, are welded together to form a strong and
lightweight box. There is no separate steel frame to
which the body is attached. Relatively small subframe
assemblies are bolted into the front and rear of the unit
body, to which engine, drive train, steering, and suspen­
sion components are attached.
Constructing an automobile by the unit-body process
involves a considerable amount of spot welding—an
estimated 2,500 to 3,500 individual welds. The process
lends itself readily to automatic and robotic welding ap­
plications. As an example, at an assembly plant visited
by b l s staff in the early 1970’s, automatic welding ac­
counted for 20 to 30 percent of the welds on a unit-body
passenger car, and the remainder were done by human
welders. At this same plant in the early 1980’s, however,
virtually all the welding is carried out by automatic and
robot welding equipment.

PC’s .8

The range of PC applications is diverse and too
numerous to discuss in detail. However, two examples
illustrate their key role in the production of motor
vehicles—both alone and in combination. In one ap­
plication, a large number of PC’s are used for in-process
gauging of parts and to undertake automatic tool-wear
compensating adjustments in the manufacture of trans­
axle housings. In another application, a single p c con­
trols an automatic camshaft-straightening system, in
which two camshafts at a time are rotated, gauged, and
peened by a series of airhammers, at a rate of 220 cam­
shafts per hour per machine.9
The potential of PC’s to achieve productivity gains
and other benefits is increasing. PC’s being installed in
manufacturing facilities in the early 1980’s featured in­
creased input/output capabilities, more data processing
capacity, and expanded memories. PC’s can be tied
together in networks to control complex manufacturing
operations. Moreover, these PC networks can be
brought under computer control, and can be part of a
plantwide data communications system.
The motor vehicle manufacturing industry will con­
tinue to be the major user of PC’s. In 1980, sales to the
auto industry accounted for over 40 percent of the p c
market (worldwide), with some experts anticipating an
annual growth rate of about 35 percent.1
0

Changes in basic production machines

Although robots and other advanced technologies
have received widespread attention, a series of less
dramatic but nonetheless significant improvements in
conventional equipment has taken place. Auto
manufacturers, in conjunction with machinery
manufacturers, are improving productivity of basic pro­
duction machines such as metal-cutting and metal­
forming machines. The design of many of these
machines is 20 to 50 years old; and, while some im­
provements have been made in durability, there has
been little improvement in productivity. Contemporary
models, however, are faster and incorporate automatic
controls. As improved machinery becomes diffused
more widely, a further shift toward more skilled
technical and craft workers and a decline in semiskilled
machine operator jobs are anticipated.
Cutting edges on some machines have been improved,
which has increased productivity of machine operators.
Machine tool cutting edges coated with titanium oxide,
tungsten carbide, or ceramic composites remove metal
up to twice as fast as conventional, uncoated cutting
tools.
Quick die change (QDC) presses can reduce by 50 per­
cent or more the time required by a press operator to
change the dies in a major stamping press, q d c presses
are considerably more expensive than conventional
stamping presses, and they require more floor space
because of the die-changing equipment that is part of
the press assembly. But the additional costs and space
requirements can be justified in situations where stamp­
ing dies must be changed frequently.

7 Jennifer M. George, “ Minding Your PC’s in Machine Control,”

Automotive Industries, March 1980, p. 54.
8 Russell M. Loomis, “PC’s Boost Quality Management Control
and Productivity; Minimize Downtime,” Industrial Engineering,
September 1982, p. 34; and Robert J. Sibthrop, “ Hybrid of
Microcomputer and PC Is Control Solution,” Industrial Engineering,
September 1982, p. 55.
9 Ibid., p. 42.
10 “ PC’s Adapt to Automakers’ Needs,” Automotive Industries,
February 1982, p. 102.

40

period resulted from the interaction of a series of
developments, including a major industry strike in 1970,
higher prices for gasoline, competition from foreign
automakers, and changes in the economy.
Output increased at a relatively modest average an­
nual rate of 1.6 percent during 1970-83, with substantial
gains in output during the early, middle, and final years
of this period. Between 1970-73, output increased at an
average annual rate of 16.2 percent, reflecting the
strong demand for new cars and trucks during this
period. Output continued to increase during 1973-78,
increasing at a lower—but nonetheless substantial— an­
nual rate of 5.9 percent. During these years, gasoline
prices rose significantly, and imported cars captured an
increased share of the domestic market. However, de­
mand remained strong and output reached its highest
level in 1978.
From the high point of 1978, output declined by an
average of 10.6 percent a year through 1982. From 1982
to 1983, however, output increased by a substantial 30.6
percent as economic conditions improved. During the
years of decline, the economy experienced inflation,
high interest rates, growing unemployment, and reces­
sion—all of which had a negative impact on auto sales
and production. Consumer fears about gasoline
availability and price caused a strong market shift
toward small, fuel-efficient cars. Small cars (subcom­
pacts and compacts, domestic and imported) accounted
for 47 percent of all new car sales in 1978 but increased
to 63 percent in 1981.1
3
At the beginning of the 1978-83 period, the small cars
being produced by domestic manufacturers were not
strong competitors in the marketplace. Later in this
period, however, a number of new and more competitive
compact and subcompact models were introduced.
These have generally been smaller and lighter than their
predecessors for improved fuel economy. Most are
front-wheel drive models powered by 4- and 6-cylinder
engines.
During the several years that domestic manufacturers
were setting up plants and beginning to produce new
small car models, a number of attractive, marketable
imported compacts and subcompacts already were
available. The imported small cars sold well, taking
potential sales away from domestic auto makers. It is
significant that Japanese auto makers have been able to
ship their cars to the United States with suggested retail
prices lower than those for comparable domestic autos.
Thus, the proportion of imported cars grew from 17.7
percent of total retail car sales in 1978, to an estimated
27.8 percent in 1982.

Improved transfer lines

Transfer lines—the highly mechanized machine lines
that manufacture and assemble engines, transmissions,
and other automotive components—are becoming more
automated and flexible. More of the machines are being
operated by numerical control, direct computer control,
or programmable controllers. Robots are being used
more extensively at stations within transfer lines, most
frequently in materials handling operations. Automatic
testing and inspection equipment allows more thorough
and rapid operations, sometimes including the testing of
all components on a line where only a sample had been
tested previously. Statistical data on equipment perfor­
mance and maintenance requirements are maintained to
reduce machine downtime. Automated parts storage
points between machining and assembly stations allow
operations to continue if a station on the line shuts
down.
In a highly automated transmission plant, bolts are
inserted and torqued to specifications automatically,
and valves and speed controls are automatically tested
before being installed. A combination of automatic and
mechanical checking stations, incorporating laser in­
spection technology, contribute to making assembly
tolerances so close that transmission band adjustment is
eliminated. Completed transmissions are tested on
computer-controlled test stands.1
1
In an engine assembly plant where advanced
technology is used, engine blocks are secured to pallets,
and bolts for a number of engine parts—cylinder heads,
rod caps, oil pumps, water pumps, oil pans, and other
parts—are torqued automatically. Camshafts are balanced
and inspected on equipment run by a programmable
controller. Automatic hot test stands are used to test
completely assembled engines at the end of the line.
Engines are connected (by mostly automatic devices) to
testing stands that provide fuel, electrical power, and
cooling water; and engines are automatically fired up
for the first time and checked in a number of operating
conditions.1
2
Engine, transmission, and other mechanical compo­
nent assembly plants have been highly automated for
many years. But the degree of automation—automatic
control and automatic assembly operations—is increas­
ing. This trend is expected to further reduce labor re­
quirements for semiskilled operatives. There will pro­
bably be a need for more craft and technical
workers—but this increase may be smaller than the
decline in operative positions.

Output and Productivity Trends

1 John McElroy, “ Making Production Pay O ff,” Automotive In­
1

Output

dustries, August 1979, p. 48.
12 Ibid., p. 54.

Output in the motor vehicle industry varied
significantly during the period 1970-83. (Chart 8). The
dramatic swings in production that occurred over this

13 1983 U.S. Industrial Outlook (U.S. Department o f Commerce,
Bureau o f Industrial Economics, 1982), pp. 30-34.

41

jtput per employee hour and related data, motor vehicle and equipment,

I

I

f

>

0)

latio s
<

20

10

Output per employee hour
■

00
90 ■
■

80 ■
70 ■
60 ■
50 ■

r

20

10

Output

■

00
90 ■
■

80 ■
70 ■
60 ■
50 -

r

20

10

Employee hours

-

00
90 ■

80 ■
70 ■
60 50 ■

.... I .. .

1970

I

I

I

1972

I

1974

I,

I

,

,

1976

J

........ 1 . 1

1978

urce: Bureau of Labor Statistics.

42

1980

I

I

1982

I

Productivity moved higher during the second half of
the period 1978-83. From 1980 to 1981, output per
employee hour increased at an average annual rate of
3.0 percent, and from 1981 to 1982, by a sharply higher
annual rate of 4.9 percent. The sources of these produc­
tivity gains were markedly different, however. The gain
of 3.0 percent resulted when output increased more than
twice as fast as employee hours; the gain of 4.9 percent
occurred when the decline in employee hours substan­
tially exceeded the fall in output.
When auto sales jumped upward in 1983, productivity
increased dramatically. Output increased by 30.6 per­
cent over 1982, and employee hours grew by a
significantly lower 14.3 percent. The result was an in­
crease of 14.2 percent in output per employee hour.
The outlook for productivity gains appears generally
favorable, although forecasting productivity movement
is difficult because new technology is only one of several
factors, including levels of output and capacity utiliza­
tion, which determine productivity change. The an­
nounced plans to spend billions of dollars for moderniz­
ed plant and equipment during the 1980’s, if realized,
are expected to achieve labor and other cost savings and
make U.S. producers more competitive in domestic and
world markets.

The combination of bad economic conditions for the
country and specific problems within the auto industry
placed domestic auto makers in a very difficult position.
Total auto sales declined every year between 1978 and
1982—but the decline primarily affected domestic auto
makers. Sales of imported cars grew from 2 million in
1978 to a high of 2.4 million in 1980, then declined to
2.2 million in 1982. In contrast, sales of domestic cars
dropped from 9.3 million in 1978 to 5.8 million in 1982.
Sales of domestic trucks and buses also were lower over
this period.
Auto sales rebounded sharply during 1983 and into
1984, leading to a strong increase in output (31 percent
from 1982 to 1983) and a recall of many workers who
had been laid off during the several previous years. An
interesting market development was the resurgence in
demand for large, less fuel-efficient autos—a result of
gasoline prices stabilizing at levels that are high, but ac­
ceptable to consumers who prefer larger passenger cars.
Productivity

Output per employee hour in the motor vehicle in­
dustry increased at an average annual rate of of 2.5 per­
cent over the period 1970-83 (chart 8). The pattern of
productivity change over the period was uneven. Output
per employee hour increased at an average annual rate
of 6.4 percent during 1970-73 and 4.1 percent between
1973-78; productivity declined at an annual rate of 0.4
percent between 1978-82, then increased by 14.2 percent
from 1982 to 1983.
Over the period 1970-78, when productivity gains
were substantial, output per employee hour increased in
6 out of 8 years, with the gains in 5 of these years
associated with output gains exceeding increases in
employee hours. An exception was 1974-75, when the
decline in employee hours exceeded the decline in out­
put. Over this period of relatively strong productivity
growth, gains in output per employee hour were par­
ticularly large in 1971—up by 16.2 percent—when out­
put turned up sharply following the strike in 1970. The
two periods of decline in output per employee hour dur­
ing 1970-78 were in 1973-74, when output declined at a
greater rate than employee hours during a slowdown in
the economy, and 1977-78, when employee hours in­
creased by slightly more than output.
During 1978-83, a span of years when output per
employee hour increased at an annual average rate of
2.1 percent, the productivity record showed sharp con­
trasts, declining at an annual average rate of 3.8 percent
during 1978-80 and increasing at an annual rate of 7.1
percent in 1980-83. During the first 2 year period of
decline, output per employee hour fell by 1.2 percent
from 1978 to 1979, and by a substantially higher 6.4 per­
cent from 1979 and 80, when both output and employee
hours fell sharply—by 27.2 percent and 22.2 percent,
respectively.

Investment
Capital expenditures

Motor vehicle manufacturers are investing a con­
siderable amount of money in new plants and produc­
tion equipment. Capital expenditures (in constant 1972
dollars) totaled $3.6 billion in 1981, the first year in
which expenditures exceed $3.0 billion. Expenditures in
1972 were $2.1 billion.1
4
Most of the capital expenditures over this period have
been for new equipment, including special tools. New
structures have accounted for 7 to 14 percent of the
total. Generally, when a new assembly or manufactur­
ing line is to be started up, an existing plant structure is
stripped of its old equipment, and all new equipment is
installed. By 1985, the industry will have retooled many
of the engine and transmission plants and will have
rebuilt a number of assembly plants.1
5
Capital expenditures per production worker (in cons­
tant 1972 dollars) nearly doubled between 1972 and
1981. In 1972, expenditures averaged $3,096 per pro­
duction worker, reaching a level of $6,081 per produc­
tion worker in 1981.
Capital expenditures should continue to be high
through 1990. Domestic auto manufacturers plan to in­
troduce a number of new, generally small-to-medium14 U .S. Department o f Commerce, Bureau o f Industrial
Economics, Office o f Research, Analysis, and Statistics.
15 “ Detroit’s Merry-Go-Round,” Business Week, Sept. 12, 1983,
p. 72.

43

percent, as some of the unemployed were recalled to
meet higher demand.
The outlook is for employment to increase moderately
between 1983 and 1995, but the total number employed
will still be well below the 1978 high of just over 1
million workers. Most of the expected employment
growth should take place by the mid-1980’s; very little
growth is expected after the current recovery. Produc­
tivity increases are expected to largely offset further
increases in labor requirements due to future growth in
output. According to b l s projections, the number
employed in the motor vehicle industry is expected to
range from 846,000 to 871,000 in 1995, an average
annual rate of increase of between 0.8 and 1.0 percent
over the period 1983 and 1995.1
8

sized autos during the 1980’s. This will require stripping
and refitting a number of older plants. To be com­
petitive, these plants must be equipped with the latest
and, usually, most expensive technology. This will
require an estimated expenditure of $65 billion between
1978 and 1985.1
6
The domestic auto industry has generally raised its in­
vestment capital from internal sources (depreciation,
retained earnings, and amortization allowances). But
the large financial losses caused by low auto sales over
the past several years have forced firms to use other
financial sources, such as increased corporate in­
debtedness and sales of assets including unused plants
and subsidiary companies.

Employment and Occupational Outlook

Occupations
b l s projects that employment in each of the major
occupational groups associated with the manufacture of
motor vehicles will move to higher levels between 1982
and 1995 as production is expanded to meet higher
demand (chart 10). Although the technologies described
earlier will reduce unit labor requirements in such areas
as data processing, design and engineering, welding,
assembly, painting, and machine-tool operation, the
prospects are for employment in affected occupations to
increase nonetheless.
As a broad overview, professional and technical
workers are expected to record the largest gains through
1995, with the operatives group expected to increase at
the lowest rate. In the other six occupational groups
which fall between these extremes, managers, officials,
and proprietors and craft workers are expected to
exceed the average rate of change for employment in all
groups over this period and clerical workers are pro­
jected to increase at approximately the average rate. The
categories of sales workers, service workers, and
laborers are expected to show slower growth over the
next decade.
The impact of technological change on specific
occupations within these broad groups varies con­
siderably. The category of operatives is the largest of the
occupational groups, and includes machine-tool
operators, welders, production painters, and
assemblers, which are among the occupations most
affected by new technology. In 1982, more than 300,000
workers were employed in the occupations that make up
the operatives group, or nearly 50 percent of the total
work force.
As indicated earlier, automated techniques are being
applied to many production line operations where
operatives are employed. Automatic and programmable

Employment

The number of employees in the motor vehicle in­
dustry declined by slightly more than 26,000 between
1970 and 1983, as demand for domestic cars and trucks
slackened and the economy weakened during the latter
part of this period (chart 9). Although total employment
declined at an average annual rate of 0.8 percent over
the period 1970-83, the trend in employment varied
markedly.1
7
Employment moved generally higher during 1970-78,
at an annual rate of 1.8 percent, as the industry added
employees to the work force to accommodate higher
levels of demand. The period 1970-73 was one of par­
ticularly strong employment growth, with the work
force increasing at an average annual rate of 6.5 per­
cent. Between 1973 and 1978, however, the annual
growth rate fell sharply to 1.1 percent. During 1973-75,
employment declined at an annual rate of 9.9 percent
because of a downturn in the economy, before begin­
ning a sharp and steady increase between 1975 and 1978
at an annual rate of 8.2 percent. By 1978, a record 1
million workers were employed in the industry, the
majority in the Great Lakes region.
Employment moved sharply lower between 1978-83
as the economy slackened and competition from
overseas producers slowed sales of domestic cars and
trucks. Over this period, employment declined at an
average annual rate of 6.5 percent, or by 232,000
workers, as operations were scaled back and less effi­
cient plants were closed. By 1982, the number of
workers had fallen to 704,800, the lowest level in two
decades. The employment situation subsequently im­
proved, however, and in 1983, total employment was in­
creased to 772,700, up by almost 68,000 workers, or 9.6
16 1983 U.S. Industrial Outlook (U.S. Department o f Commerce,
Industry and Trade Administration, 1982), pp. 30-35.
17 In evaluating these rates o f change, it is important to keep in
mind that the period began in 1970, a year in which employment was
12 percent below 1969 because o f an industrywide strike.

18
bls projections for industry employment in 1995 are based on
three alternative versions o f economic growth and include a low,
moderate, and high projection. For details on assumptions and
methodology used to develop these projections, see the Monthly
Labor Review, November 1983.

44

Chart 9. Employment in motor vehicles, 1970-83, and projections, 1983-95
Employees (thousands)

Employees (thousands)

1000

900

800

700

600

500

400
1 See text footnote 18.
2 Least squares trends method for historical data; compound interest method for projections.
SOURCE: Bureau of Labor Statistics.

45

C hart 10. P ro jected c h a n g e s in e m p lo y m e n t in m o to r veh icles and e q u ip m e n t by o c c u p a tio n a l
group, 1982-95

Occupational group

Percent of
industry
employment,

Percent change to 19951

1982
0

-10

20

30

40

50

60

70

Professional, technical, and related workers
Managers, officials, and proprietors
Sales workers
Clerical workers
Craft and related workers
Operatives
Service workers
Laborers, except farm

1 Based on the moderate level of employment projected for 1995. BLS projects three levels of industry employment for 1995 based on alternative ver­
sions of economic growth: A low, moderate, and high level. For details on assumptions and methodology used to develop these projections, see the
Monthly Labor Review, November 1983.
2 No change.
SOURCE: Bureau of Labor Statistics.

accomplished with automatic equipment, compared to
bulky headliners or seats which assemblers install
manually. The use of robots for assembly tasks is
expected to increase during the 1980’s, with some major
manufacturers projecting assembly to become the major
robot application. However, despite further mechaniza­
tion, assemblers will continue to be the largest occupa­
tional group.
Craft workers also are being affected by the
technological changes occurring in the auto industry;
but the overall impact is difficult to assess. Increased
use of automatic controls and automatic inspection and
testing equipment could reduce the need for inspectors
and testers. However, the increased use of complicated
equipment requires more sophisticated maintenance.
Skilled maintenance craft workers—millwrights,
maintenance mechanics, and especially electri­
cians—will be needed to install, maintain, and repair
robots, programmable controllers, and many other
forms of automated equipment.
Increased use of computers, data networks, and
statistical analysis techniques in manufacturing and

controllers are being used on many metal-cutting and
metal-forming machines, and an increasing number of
materials handling and assembly operations are being
performed by automatic or robotic devices. Testing and
inspection operations—ranging from simple checks to
insure bolts are installed to complete tests of assembled
engines—are being more intensively automated. Many
welding and painting tasks are being carried out by
industrial robots and advanced automatic equipment.
These changes reduce job opportunities for drill press
and punch press operators, lathe operators, milling and
planing machine operators, testing and inspecting
operatives, welders, and spray painters.
Assemblers make up the largest single production-line
occupation in the motor vehicle industry and account
for nearly one-third of total employment in the
operatives category. Assembly tasks are difficult to
automate, and diffusion of new technology is expected
to be slower than in other areas of motor vehicle manfacturing. Small assembly jobs—inserting piston
assemblies into engine blocks, or turbine blades into
transmission torque converters—are more easily
46

and laboratories. Facilities of some junior colleges or
technical schools located near manufacturing or
assembly plants are beings used for training programs.
At least two manufacturers have established special
centers for robotics where applications are developed and
professional, technical, and craft personnel are trained.
In another example of training for new technology,
more than 900 employees received in-plant training for
job skills associated with a new production line to
assemble light trucks. The new line is highly mechanized
and makes extensive use of industrial robots—a
technology that was new to most of the plant personnel,
from managers to assembly-line workers, and an inplant training program was developed.
Most attention was given to instruction in
maintenance of solid-state electronic devices—a key
component of robot control systems and programmable
controllers—and the total work force of electricians
received training. By bringing the skill levels of all plant
electricians up to at least the minimum level necessary
for working with robotic electronic controls and pro­
grammable controllers, the 80-hour training program
resulted in a group of electricians of more uniform and
generally higher skill levels.
Special training programs to assist unemployed auto
workers are also underway. In 1983, General Motors
and the u a w announced a joint program to retrain up to
9,300 former GM employees in areas such as computer
systems operations, computer programs, electronics,
building maintenance, medical technology, and
machine operation. The goal is to retrain the
unemployed for jobs both at GM and in other in­
dustries. A reported $7 million has been allocated to
fund the program in the first year, with g m contributing
5 cents per employee hour worked in accordance with
provisions of a renegotiated 1982 labor agreement. Ford
Motor Company and u a w announced the employment
development and training program in 1982. This pro­
gram involves training and career planning for active
and laid-off workers; funding is provided for in the
agreement. Programs include tuition assistance for laidoff employees, a range of vocational, technical, and
skill training projects, career and vocational counseling,
and plant closing assistance.
There also are programs developed by several of the
auto manufacturers and the u a w to promote greater
employee participation in resolving problems concern­
ing work environment, product quality, job satisfaction
and morale, operational problems, training goals and
programs, and other issues. These programs often take
the form of small groups of skilled or operator
employees meeting at regular intervals with supervisory
or senior management personnel to resolve issues. Such
programs have solved operational problems, improved
productivity, and reduced absenteeism, among other ac­
complishments.

assembly plants affect plant management, professional
and technical staffs, and, to a lesser degree, craft
workers and operatives. The use of these data collection
and analysis networks requires training in computer and
statistical techniques.
Adjustments of workers to technological change

Training and other techniques to facilitate work force
adjustments are expected to be employed extensively
during the 1980’s. Although the rebound of auto sales in
1983 led to a recall of some unemployed auto workers
and higher employment levels, plants which have
modernized are not expected to require work forces as
large as in the past for comparable levels of output.
Moreover, foreign producers are expected to provide
strong competition in domestic and overseas markets
during the 1980’s, and U.S. producers will further
mechanize to lower labor and other costs.
Collective bargaining contracts contain provisions
that ease the impact of new technology on employees.
Almost all hourly paid employees in motor vehicle
manufacturing plants are members of the United
Automobile, Aerospace, and Agricultural Implement
Workers of America (UAW and are covered by such
)
agreements; many employees of automotive equipment
suppliers also are covered. The contracts contain
general provisions concerning seniority, layoffs, retire­
ment, and supplementary unemployment benefits that
could be applied to job displacement resulting from
technological changes. In addition, all national and
local contracts with motor vehicle manufacturers con­
tain clauses which require management to provide
advance notice to the union concerning plans to
introduce new technology and to meet with local union
officials to discuss the impact of these changes.
In late 1984, the u a w reached agreement with General
Motors and Ford in a new contract with very strong job
security and retraining provisions. The agreement with
GM provides for a $1 billion fund, financed by GM, over
the 3-year contract period. This program will pay wages
and benefits to employees while they are being retrained,
if they are displaced by new technology, plant closings,
productivity improvements, or parts outsourcing. The
retraining may be for other jobs within GM, or for jobs
outside of the company. Also, in some instances, early
retirement is encouraged by providing financial
incentives. While the agreement protects most of GM’s
employees, it gives the company considerable flexibility
in outsourcing parts, closing plants, and bringing in new
technology. The agreement between Ford and the UAW
is similar, except that Ford has agreed not to close any
plants during the contract period.
Training to provide workers with the skills required to
operate new manufacturing technologies will be a major
technique to facilitate adjustment during the 1980’s.
Training programs are being initiated in a number of
plants, often involving space dedicated to classrooms
47

SELECTED REFERENCES
12, 1983,

“Methodical Robots Work Line at GM,” Automotive Industries, February
1979, p. 95.

Engelburger, Joseph F. “ Robotics in Practice,” AMA-COM, 1980,
291 pp.

Ottinger, Lester V. “ Robots and Other Technologies in the
Automated Factory,” Industrial Engineering, September 1982,
pp. 26-32.

“ Detroit’s Merry-Go-Round,” Business Week, Sept.
pp. 72-76.

George, Jennifer M. “ Minding Your PC’s in Machine Control,”
Automotive Industries, March 1980, pp. 54-55.

Sibthorp, Robert J. “ Hybrid o f Microcomputer and PC Is Control
Solution,” Industrial Engineering, September 1982, pp. 55-56.

Loomis, Russell M. “ PC’s Boost Quality Management Control and
Productivity; Minimize D ow ntim e,” Industrial Engineering,
September 1982, pp. 34-35.

“ U.S. Automakers Ease Toward CAD/CAM,” Automotive In­
dustries, December 1982, pp. 29-31.

McElroy, John. “ Robots Take Detroit,” Automotive Industries,
January 1982, pp. 28-29.

Resource Guide to Labor-Management Cooperation, U.S. Depart­
ment o f Labor, October 1983, pp. 35, 57, 63-68.

McElroy, John. “ Making Production Pay O ff,” Automotive In­
dustries, August 1979, pp. 43-60.

48

Other BLS Publications
on Technological Change

major structural and technological changes in the bitu­
minous coal industry and their impact of labor.

Bulletins still in print may be purchased from the Su­
perintendent of Documents, Washington, D.C. 20402,
or from regional offices of the Bureau of Labor Statis­
tics at the addresses shown on the inside back cover.
Out-of-print publications are available at many public
and school libraries and at Government depository li­
braries. Publications marked with an asterisk (*) also
are available on microfiche and in paper copy from the
National Technical Information Service, U.S. Depart­
ment of Commerce, 5285 Port Royal Road, Springfield,
Va. 22161.

Technology and Labor in Five Industries* (Bulletin 2033,
1979), 50 pp. Out of print.
Appraises major technological changes emerging in
bakery products, concrete, air transportation, telephone
communication, and insurance, and discusses their cur­
rent and potential impact on productivity and
occupations.
Technological Change and Its Labor Impact in Five En­
ergy Industries* (Bulletin 2005, 1979), 64 pp. Out of
print.
Appraises major technological changes emerging in
coal mining, oil and gas extraction, petroleum refining,
petroleum pipeline transportation, and electric and gas
utilities, and discusses their current and potential impact
on productivity and occupations.

Technological Change and Its Labor Impact in Four In­
dustries (Bulletin 2182, 1984), 44 pp. Price $2.
Appraises major technological changes emerging in
hosiery, folding paperboard boxes, metal cans, and
laundry and cleaning, and discusses their current and
potential impact on productivity, employment, and oc­
cupations.

Technological Change and Its Labor Impact in Five In­
dustries* (Bulletin 1961, 1977), 56 pp. Out of print.
Appraises major technological changes emerging in
apparel, footwear, motor vehicles, railroads, and retail
trade, and discusses their current and potential impact
on productivity and occupations.

The Impact of Technology on Labor in Five Industries
(Bulletin 2137, 1982), 60 pp. Price, $5.
Appraises major technological changes emerging in
printing and publishing, water transportation, copper
ore mining, fabricated structural metal, and intercity
trucking, and discusses their current and potential im­
pact on productivity and occupations.

Technological Change and Manpower Trends in Five In­
dustries* (Bulletin 1856, 1975), 58 pp. Out of print.
Appraises major technological changes emerging in
pulp and paper, hydraulic cement, steel, aircraft and
missiles, and wholesale trade, and discusses their cur­
rent and potential impact on productivity and
occupations.

Technology and Labor in Four Industries* (Bulletin
2104, 1982), 46 pp. Out of print.
Appraises major technological changes emerging in
meat products, foundries, metalworking machinery, and
electrical and electronic equipment, and discusses their
current and potential impact on productivity and
occupations.

Outlook for Technology and Manpower in Printing and
Publishing* (Bulletin 1774, 1973), 44 pp. Out of print.
Describes new printing technology and discusses its
impact on productivity, employment, occupational re­
quirements, and labor-management adjustments.

Technology, Productivity, and Labor in the Bituminous
Coal Industry, 1950-79* (Bulletin 2072, 1981), 69 pp.
Out of print.
Chartbook with tables and text; appraises some of the

49
* U .S . GOVERNMENT PRINTING OFFICE : 1985 0-461-087/20007

Bureau of Labor Statistics
Regional Offices

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John F. Kennedy Federal Building
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Phone: (617) 223-6761

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