L <2. 3 : S

The Impact of Technology

on Labor in Four Industries

Textiles/Paper and paperboard/ 

Steel/Motor vehicles

S.M.S.U. LIB R A R Y

U.S. D EPO SITO R Y

U.S. Department of Labor 

Bureau of Labor Statistics 

May 1985

JUL 18 1985

Bulletin 2228
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 Printing 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 productivity and technological developments in major industries. 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,

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 organizations 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.

iii
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Contents

Page

Chapters:

1. Textiles............................................................................................................................ 1

2. Pulp, paper, and paperboard.......................................................................................... 9

3. Steel.................................................................................................................................. 20

4. Motor vehicles................................................................................................................. 35

Tables:

1. Major technology changes in textiles............................................................................. 2

2. Major technology changes in pulp, paper, and paperboard.......................................... 10

3. Major technology changes in steel.................................................................................. 22

4. Major technology changes in motor vehicles................................................................. 36

Charts:

1. Output and employee hours, textiles, 1970-82............................................................... 4

2. Employment in textiles, 1970-83, and projections, 1983-95.......................................... 7

3. Output per employee hour and related data, pulp, paper, and paperboard, 1970-83.. 14

4. Employment in pulp, paper, and paperboard, 1970-83, and projections, 1983-95___ 16

5. Projected changes in employment in pulp, paper, and paperboard by

occupational group, 1982-95........................................................................................ 17

6. Output per employee hour and related data, steel, 1970-83.......................................... 28

7. Employment in steel, 1970-83, and projections, 1983-95.............................................. 31

8. Output per employee hour and related data, motor vehicles, 1970-83........................... 42

9. Employment in motor vehicles, 1970-83, and projections, 1983-95............................. 45

10. Projected changes in employment in motor vehicles by occupational

group, 1982-95............................................................................................................... 46

v

Chapter 1. Textiles

Summary

Diffusion of advanced technologies is revitalizing the 

textile industry (sic 22), enabling it to compete more effectively 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 expensive equipment.

Definitive measurements of textile industry productivity are not available, but output and hours data suggest that productivity growth during the period 1970-82 

was relatively high—about 3lA percent. This was largely 

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 improved the productivity and effective competitiveness of 

the industry. A larger share of these outlays was required 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 annual 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 advances for the industry as a whole, but with considerable variation among the industry’s sectors.

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 processing 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, laborintensive industry, although less so than 10 years ago. In 

the last decade, a strong shift toward greater capital intensity has occurred in a highly motivated effort to combat domestic and import competition, and to meet 

Federal cotton dust and noise standards.

In addition, the industry has contracted and consolidated as two major recessions resulted in the closure 

of less efficient plants. These changes will result in a 

smaller industry with improved productivity.

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 include 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, greatly 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 continuous 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 process. 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 unskilled and semiskilled labor compared to the conventional processes of opening, blending, picking, and card1 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

a continuous operation; eliminates

picker machines and associated

processes; output per hour increased

about 4 times.

Reduces unit labor for unskilled and

semiskilled workers in opening and

blending. Eliminates picker operator.

Conversion advancing relatively

rapidly.

Open-end spinning Integrates the conventional processes of roving, spinning, and winding.

Can produce filling yarn at 4 or

more times the output of conventional ring spinning.

Reduces unit requirements for semiskilled spinning, roving, and winding

operators, and associated unskilled

labor.

In use for 40 percent of the coarser

filling yarn output but is still a small

proportion of total yarn output.

Shuttleless-loom weaving Operates at speeds 3 times that of the

average shuttle loom, is quieter,

and needs fewer auxiliary operations. New shuttleless looms are

wider.

Reduces unit requirements for weaving operators; output per hour

averages 2Vi times that of shuttle

loom.

In use for 30 percent of fabric

output. Expected to be 40 percent

by 1990.

Electronic controls Sophisticated electronic process

controls for operating and maintaining machinery; computer-controlled

production in wrap preparation,

finishing, and carpet production;

robotic technology for materials

handling.

Reduces unit labor requirements for

laborers, operators, and maintenance

personnel. Increases need for electronic specialists.

Small electronic controls widely

used. More expensive sophisticated

computer controls in large plants

only, primarily in dyeing and finishing.

Production robots in very early stages

of development. Newest computercontrolled 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 being 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.

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 spinning produces about 40 to 50 percent of the coarser filling 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 countries. 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 spinning are manifold. It eliminates two processes of drawing, one of roving, and can produce 4 to 5 times the output per hour of the conventional spindle with less labor. 

It reduces space requirements, maintenance and cleaning 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 operations in the mill, the successful automation of this process 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 improved since its introduction in the mid-1960’s, will continue to replace ring spinning, but slowly. Now producing 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. Nevertheless, ring spinning will continue to be the major process.

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, Government 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 conventional fly shuttle, particularly for maintenance personnel and semiskilled operators and auxiliary workers. 

Shuttleless looms require less maintenance, and

2
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 propelling the filling (crosswise yarn) across the warp 

(lengthwise yarn) on high-pressure streams of air.

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 requirements for machine operators, maintenance personnel, 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 continuous operation, have been adopting these electronic 

technologies for some time. At least one manufacturer 

utilizes a computer-controlled system for carpet printing, 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 little 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 only a few mills have this newest technology, it is an indication 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.

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 recessions 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 output from 1970 to 1981: Cotton weaving (about -1 percent 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

2 Deflated value-of-shipments data (shipments data from the

Bureau of the Census) are used to represent output for total textile

mill products and the individual sectors of the industry.

3
(lndex,1977 = 100)

Chart 1. Output and employee hours, textiles, 1970-82

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 sectors 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 synthetics. 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 apparel, 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 textiles and apparel remains of prime importance in any 

evaluation of textile demand.

Imports

Imports continue to be a problem to the industry in

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, imports 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 nonapparel 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,

USITC 1539, June 1984.

4
productivity for the textile industry. However, the approximate trend in productivity growth can be estimated 

from available output (deflated value of shipments) and 

employee hour data. These data suggest that textile productivity 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 patterns 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 reduced hours in almost every major sector. Floor-covering 

mills and textile finishing mills had the largest productivity 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 nonwool 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 percent), while hours in hosiery moved down more sharply 

(-2.4 percent), responding to technological advances.

Investment

Capital expenditures

Large capital expenditures during the 1970’s improved 

productivity and the effective competitiveness of the

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 expenditures 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 Environmental 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 textile equipment was technologically outmoded in 1980, 

compared with 11 percent in 1978. No later data are 

available, but as newer machines improve their performance, and if labor and energy costs rise, the proportion of equipment considered obsolete will continue to 

increase.

Research and development

In general, research and development (R&D) in the textile 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 concentrate 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 manufacturing. Only the food industry was at this low a level.

* Bureau of Economic Analysis, U.S. Department of Commerce.

The data include outlays for replacement of existing equipment, for

expansion, and for major alterations, repairs, and improvements.

5 Brian Toyne, et al., The U.S. Textile Mill Products Industry:

Strategies for the 1980’s and Beyond (University of 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 of Technology

Assessment, March 1983, p. 103.

5
Employment and Occupational Outlook

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 considerably. 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 knitting 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 today.”6

The various sectors’ shares of total textile employment 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 accounted for 8 percent and included such diverse products 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 sectors. 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.

6 Douglas McKay III, South Carolina Statistics and Research Administrator, in Textile World, January 1983, p. 23.

7 BLS projections for employment in 1995 are based on three alternative versions of economic growth for the overall economy. The

alternative assumptions are described in the November 1983 issue of

the Monthly Labor Review.

The ratio of production workers to all employees has 

remained relatively high. This is associated with the difficulty 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 percent, and the narrow fabrics sector followed with 58 

percent.

Occupations

With mill modernization, greater demand has 

developed for more highly skilled workers. In some 

areas, skilled technicians and engineers are in short supply. 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 information 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 training 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 manufacturer. In contrast, retraining the fixer would take a couple 

of weeks. Training for computer operators and electronic technicians is often a joint venture of a vocational 

training school, the machine manufacturer, and the textile mill.

Unskilled jobs have been greatly reduced in the 

modern plant. Mechanization of materials handling and 

transport and warehouse operations is now quite common. 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
Employees (thousands)

Chart 2. Employment in textiles, 1970-83, and projections, 1983-95

Employees (thousands)

1050

950

850

750

650

550

450

350

250

150

0

Knitting

\ 7 X

1050

950

850

750

650

550 V

Finishing

450

Spinning and weaving

350

250

150

A verage annual percent change 2

A 11 employees

Total

industry

Spinning

and

weaving

Finishing3 Knitting Floor

covering

Miscellaneous

textiles

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

1983-95

(projections). . . . ....... 0.8 to 1.2

i i i i i i i — L U i i i i 0

1970 1975 1980 1985 1990 1995

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
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 requirements. 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.

Adjustment of workers to technological change

Programs to protect the worker from the adverse 

effects of changes in machinery and methods may be incorporated into union contracts, or they may be informal 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. Contracts 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 requirements, and it is quite common for management to

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.’’8 A 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.

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 Pie,” Textile World, October

1982, pp. 37-38.

“Carolina Closings in ’82 ‘Devastative’,” Textile World, January 1983,

pp. 23, 27.

National Academy of Engineering. The Competitive Status o f the

U.S. Fibers, Textiles, and Apparel Complex: A Study of the

Influences o f Technology in Determining International Industrial

Competitive Advantage. Washington, National Academy Press,

1983.

National Science Foundation. National Patterns o f Science and

Technology Resources, 1982, NSF 82-319, 1982.

“ Rotor Spinning: Speeds Are Up, Labor Costs Down,” Textile

World, May 1983, p. 50.

Ruttenberg, Ruth. Compliance With the OSHA Cotton Dust Rule,

The Role o f Productivity Improving Technology. For Office of

Technology Assessment, Ruttenberg, Friedman, Kilgallon and

Associates, Inc., March 1983.

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

T62-T72.

Toyne, Brian, et al. The U.S. Textile Mill Products Industry:

Strategies for the I980’s and Beyond, University of South Carolina,

Center for Industry Policy and Strategy. University of South

Carolina Press, 1983.

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

Wage Survey: Textile Mills and Textile Dyeing and Finishing

Plants, August 1980, Bulletin 2122, (1982).

“ What’s New in Spinning Plus Top 15 Forecasts,” Textile World,

August 1983, pp. 63-68.

Zeisel, Rose N. “ Modernization and Manpower in Textile Mills,”

Monthly Labor Review, June 1973.

Zeisel, Rose N. Technology and Manpower in the Textile Industry of

the 1970’s, Bulletin 1578, U.S. Department of Labor, Bureau of

Labor Statistics, 1968.

8
Chapter 2. Pulp, Paper,

and Paperboard

Summary

The pulp, paper, and paperboard industry1 is highly 

mechanized, and innovations underway primarily involve improvements in speed and capacity of basic conventional 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 instrumentation, 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 environment 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 manufacturing costs through modernization of facilities. The industry also spends millions of dollars annually on 

research and development (R&D), although expenditures 

are relatively low when compared to other manufacturing 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

1 The pulp, paper, and paperboard industry covered by this report

includes the following Standard Industrial Classification (SIC) industries: 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.

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 installed high-speed papermaking machines and other improvements, and some high-cost facilities were closed 

down. Moreover, machine tenders and other operators 

increasingly monitor computer controlled and highly instrumented 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 projections 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.

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 papermaking machines and other conventional production 

equipment. The introduction of advanced computer control and instrumentation systems and major improvements 

in materials handling systems in finishing and shipping 

operations are among the most significant changes. Improvements 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 operations, widespread displacement of workers is not anticipated. However, training programs to provide workers 

with the skills required to operate and maintain advanced 

equipment will continue to be important.

Papermaking machines

The introduction of papermaking machines of greater 

speed and capacity is a major source of productivity

9
Table 2. Major technology changes in pulp, paper, and paperboard

Technology

Improved papermaking machines

Description

New machines are larger and faster and feature advanced computer control systems. Older machines, including smaller ones,

are also being modernized. Auxiliary equipment such as devices to

wind and slit paper rolls leaving

the machine are being automated.

Labor implications

T echnological im provements in

papermaking machines have resulted in productivity gains. One

mill with a new, high-capacity

papermaking machine produced

twice the volume of uncoated

white paper with about the same

size crew used on less advanced machines. Crew size generally

remains unchanged on existing

machines that are modernized but

duties are different.

Diffusion

Data on use of new, modernized

papermaking machines are not

available; outlook is for more

widespread adoption. New mills

are installing advanced model machines. New machines are expensive, and their introduction will

depend on market demand for paper and availability of funds for

modernization.

Some mills are getting more out of

their high-output machines as part of

an automation program that extends

capacity and improves efficiency.

Crews are being trained to monitor and maintain the advanced

process control and instrumenation

systems. These duties are markedly

different compared to less advanced

machines where crew members located at stations along the machine

make adjustments manually.

Improved pulping technology Improved methods increase yield,

quality, and control of pollution.

They include continuous digesters

that produce pulp in uninterrupted

flow rather than separate batches,

batch pulping systems with advanced

process control, and modification

of equipment used to process pulp.

Thermomechanical pulping systems,

which prepare mechanical pulp under high operating temperatures, are

being adopted more widely to produce groundwood pulp. Use of the

chemical anthraquinone (AQ) in certain pulping processes has increased

productivity and achieved other

benefits.

Labor impact has been minimal;

some modification of job duties associated with conversion to continuous

pulping and computer process control has resulted. Labor requirements per ton of pulp are lower

in new systems, but significant displacement of operators and other

crew members has not occurred.

Operators in continuous pulping

systems monitor operations from

central control centers, and the manual labor associated with tending and

loading separate batch cooking vessels is no longer required.

About 50 percent of kraft pulp

(the leading type) is prepared in

continuous digesters, which are

being installed in new plants and

some existing mills. The proportion

of pulp produced by continuous

methods is expected to increase.

Thermomechanical pulping systems

are forecast to account for 30 percent of mechanical pulping capacity

by 1985, up sharply from 2 percent

in 1975. The technology to wash,

bleach, and refine pulp will be modified, but radical departure from past

methods is not anticipated.

Computers and instrumentation

Materials handling and storage

Computers and advanced instrumentation are being introduced to control production throughout the cycle

of making pulp, paper, and paperboard. Latest systems incorporate

microelectronic devices that improve

performance and reliability.

Innovations in materials handling involve larger capacity conveyors and

related equipment, and integrated

control systems which mark a higher

level of automation. They incorporate

computer control, laser scanning devices, and other features which

achieve economies. Computerized

systems to transport and store products in warehouses also are increasing.

The impact of these changes on machine tenders and other operators

generally involves a modification of

job duties and training in new

skills. New job duties involve more

extensive monitoring from control

centers, and less manual tasks.

Displacement has been minimal, but

crew size has been cut back in some

installations.

Advanced materials handling systems lower labor requirements of

equipment operators and materials

handlers. New technology modifies

job requirements to include a greater

degree of equipment monitoring from

a central control station, and less

manual handling of products and manipulation of control devices. One

firm which introduced a state-of-theart system to automate warehouse

tasks eliminated 20 jobs and achieved other efficiencies.

The industry is a major user of

process control equipment, and their

purchases account for about 10 percent of the U.S. market.

Computer control is used most widely

on papermaking machines and on

digesters. Programmable controllers

and other types of instrumentation

are being extended to more manufacturing operations.

Outlook is for continued application

of advanced control technology;

some experts predict that millwide

process control networks ultimately

will tie together separate processes.

Automation of sheet cutting and

packaging is broadly diffused in paper mills, but advanced paper roll

handling and wrapping systems

which feature computer control and

laser scanning technology are less

widely used. Automated warehouse

operations are in limited use.

gains. Plants which are modernizing facilities are introducing the latest model Fourdrinier and twin-wire 

machines. One large mill reportedly is spending $200 

million to install a new papermaking machine which will

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 in10
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 structure of occupations generally remain unchanged on the 

smaller machines

Pulpmaking

Innovations are underway in the three basic methods 

used to prepare pulp: Chemical, mechanical, and 

semichemical. These include the limited use of new processes and modifications to the basic equipment to produce pulp, and in auxiliary equipment where the pulp is 

further treated prior to being transported to the papermaking 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 commonly used. Continuous digesters with automatic controls 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 supplier 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 increased production, improved quality, steam savings 

per ton of over 50 percent, and higher yield.

Batch pulping systems incorporating advanced pro2 E. Richard Woodard, “ Smaller Papermaking Machines: Improving Preformance Via Modern Technology,” Pulp and Paper,

April 1983, pp. 86-88.

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 used 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 papermaking 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 

(API).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

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 control 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

3 Jacques Bastien and Gilles Marquis, “ Soucy’s Six Years’ Experience with 100 °7o TMP Furnish for Newsprint,” Pulp and Paper,

June 1983, pp. 78-80.

4 U.S. Industrial Outlook, 1982 (U.S. Department of Commerce,

Bureau of 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 Journal, Feb. 28, 1982, p. 3.

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.13

Productivity

Productivity in the pulp, paper, and paperboard industry (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.

average annual rate of 2.7 percent during the period 

1970-83. The productivity gain reflected an output increase 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 percent from 1975 to 1976 when output rose by over 16 percent 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.

12
employed on papermaking machines and on large steel 

vessels called digesters where pulp is prepared by cooking action. Computer control also is being extended to 

other pulping operations. However, programmable controllers and other types of instrumentation extend to a 

broader scope of manufacturing operations.

New technology to improve process control is achieving significant operating savings. At one mill undergoing 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 savings 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 controller.9 The outlook is for diffusion of millwide process 

control systems that tie together separate processes to 

provide a broader scope of control and information 

gathering.10

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 intensive, 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 production 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

Journal, May 15, 1982, p. 13.

9 Michael K. Savelyev, ‘‘PC Regulates Mixing of Pulp Batches at

Georgia-Pacific’s Lyons Falls Mill,” Paper Trade Journal, June 15,

1982, pp. 32-35.

,0 W. L. Adams, ‘‘Significant Process-Automation Changes Expected in the Next Decade,” Pulp and Paper, February 1982, p. 118.

and package sheets which have eliminated several positions. Large portal-type gantry cranes are achieving savings in a few woodyards where high volume, layout of 

the woodyard, and log dimensions justify their introduction.

Computers and laser beam scanners are key components 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 transit, 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.11

Computerized systems to handle warehousing operations also are beginning to be adopted by the paper industry. An integrated system to store and handle paper 

products at one large firm consists of a laser beam scanner, 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.12

Output and Productivity Trends

Output

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 consumption of paper and paperboard, with about 50 percent 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 increased at an annual rate of 4.8 percent and slowed appreciably 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

11 K. Griffiths, ‘‘Automated Roll Packaging Systems Reduce

Costs, Manpower,” Pulp and Paper, March 1983, pp. 120-21.

12 Eugene Kittel, ‘‘Automatic Warehousing System Answers James

River Mill Needs,” Pulp and Paper, October 1983, pp. 79-81.

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
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 expected to close down additional older, high-cost 

facilities, which should contribute to productivity improvements.

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 constant 1972 dollars, however, with total spending over 

this period amounting to $16.4 billion, or an average of 

$1.4 billion annually.14 Funds for plant and equipment 

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 equipment accelerated beginning in the late 1970’s as firms 

sought to increase efficiency to compete more effectively 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 expensive—one large firm is well along in a $ 1.5-billion companywide 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.15

The manufacture of pulp, paper, and paperboard involves 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.16 Over this 

period, expenditures related to water quality accounted

14 U.S. Department of Commerce, Bureau of Industrial

Economics, Office of Research, Analysis, and Statistics.

15 Jeremiah E. Flynn, “ Mead’s ‘Chief’—On Stream at Chillicothe

Mill,” 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.

for 49 percent of the total; air quality, 46 percent; and 

solid waste disposal, 5 percent.

The highest levels of capital spending for environmental protection were during the years 1974-77, 

and these outlays, as a percent of total capital expenditures, declined over the period 1970-82. In addition to 

the volume of capital spending discussed above, the industry 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.

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.17 However, after adjusting for price increases, growth in r &d spending over 

this period was only 55 percent.

The paper industry ranks relatively low in r &d spending 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 industry, compared to an average of 29 for all U.S. industry, 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 industry has risen markedly since 1970, when the National Science Foundation reported only 8 per 1,000 

employees.

Although funds allocated to r &d and the relative importance of scientists and engineers in total employment 

have been increasing, r&d useful to the industry will 

continue to be undertaken by equipment suppliers, industry 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 production 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

17 National Science Foundation, National Patterns o f Science and

Technology Resources—1982 and 1984 (forthcoming).

15
300

280

260

240

220

200

180

160

1

2

300

280

260

240

220

200

180

160

Employment in pulp, paper, and paperboard, 1970-83, and projections, 1983-95

es (thousands) Employees (thou

%

\

\

r

\

\

\

V

"i Production workers i

i

\

v

A verage annual percent change 2

All employees

1970-83..................................................... -0.6

1970-73................................................. -1.7

1973-78................................................. -0.4

1978-83................................................. -1.2

1983-95 (projections)..............................0.0 to

0.4

Production workers

1970-83 ..................................................... -0.9

1970-73................................................. -1.3

1973-78................................................. -0.9

1978-83................................................. -1.4

1970 1975 1980 1985 1990 1995

ie text footnote 18.

;ast squares trends for methods of historical data; compound interest method for projections.

JRCE: Bureau of Labor Statistics.

16
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 demand 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.18 The 

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 in18 BLS projections for industry employment in 1995 are based on

three alternative versions of 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.

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.

Occupational trends

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

Percent of

Occupational group industry

employment,

1982

Professional, technical, and related workers 6.6

Managers, officials, and proprietors 4.5

Sales workers .9

Clerical workers 8.0

Craft and related workers 26.7

Operatives 37.9

Service workers 1.8

Laborers, except farm 13.6

Percent change to 19951

-10 -5 0 5 10

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

1 Based on the moderate level of employment projected for 1995. bls projects three levels of industry employment for 1995 based on alternative versions 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 occupational 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 illustrate trends anticipated as the industry further 

modernizes.

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.19 The United Paperworkers International Union (AFL-CIO) is the predominant 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 (independent).

Some collective bargaining contracts that cover 

workers in the industry contain specific provisions to 

facilitate worker adjustment to new technology. According to b l s , 40 percent of the production workers are 

covered by agreements that provide severance pay to

19 Bureau of 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.

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 considerably 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 providing 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’ advance notice and other consideration.20

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 being retrained by the company and the equipment supplier. 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, conversion to multicraft maintenance was undertaken in connection with a program to improve overall plant efficiency. 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 program, 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.21 

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 improvement, health and safety issues, and a wide range of 

related topics.22

20 “ Plant Closing Epidemic Prompts Need for Legislative Protection,” The Paperworker (United Paperworker International Union,

AFL-CIO, June 1983).

21 “Mill Training Programs Change With the Times,” Paper Trade

Journal, Apr. 30, 1983, p. 44.

22 Resource Guide to Labor-Management Cooperation (U.S.

Department of Labor, Labor-Management Services Administration,

October 1983).

18
SELECTED REFERENCES

Adams, W. L. “Significant Process-Automation Changes Expected in

Next Decade, ” Pulp and Paper, February 1982, pp. 118-22.

Bastien, Jacques and Gilles Marquis. “ Soucy’s Six Years’ Experience

With 100% TMP Furnish for Newsprint,” Pulp and Paper, June

1983, pp. 78-80.

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 Productivity at Mill,” 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

Mill,” 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.

Griffiths, K. ‘‘Automated Roll Packaging Systems Reduce Operating

Costs, Manpower,” Pulp and Paper, March 1983, pp. 120-21.

Karojarvi, Risto and Hannu Salakari. ‘‘Pressure Groundwood Status

Report: Ten Mills Now Using the Process,” Pulp and Paper, June

1983, pp. 138-41.

Kittel, Eugene. “ Automatic Warehousing System Answers James

River Mill Needs,” Pulp and Paper, October 1983, pp. 79-81.

Kramer, J.D. “Pulping Technology; Yesterday, Today, and

Tomorrow, ” Tappi Journal, Vol. 64, No. 7, October 1981.

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 of 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.

Trapp, Phillip R. “ Millwide MIS—Is It an Idea Whose Time Has

Come?” Paper Trade Journal, June 15, 1984, pp. 32-34.

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

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 improve product quality. These include both radical innovations, which fundamentally alter the basic ironmaking 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 industry to deal with shrinking markets and high import 

penetration. The major steel companies are substantially 

reducing their capacity and consolidating their remaining 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 continue 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, productivity 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 accelerated 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 industry employed 343,100 workers, less than half its

postwar peak and the lowest level since the 1930’s. 

While the outlook is unclear, most employment projections suggest that a large proportion of recent job losses 

could be permanent.

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 producers—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, decentralized industry.

The steel industry is composed of three relatively 

distinct sectors: Integrated, minimill, and specialty 

steel. Companies in the integrated sector are directly involved 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 sector, accounting for more than 80 percent of domestic 

shipments in 1981. The second group, the minimill sector, accounts for about 16 percent of shipments. It produces 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 integrated 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 furnaces, 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 unavailability 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 products 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 production (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 increasingly specialized, concentrating on those markets where 

they remain competitive, such as sheet, heavy structural, seamless pipe, and plate. They have largely abandoned 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 processing 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 diffused 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 diffusion 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 furnace, 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 temperature. 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 Description Labor implications Diffusion

Direct reduction (DR) DR converts iron ore into highly

concentrated iron pellets. In the most

common processes, natural gas burns

away oxygen from iron ore, producing sponge iron, which can be used as

a substitute for scrap in electric

arc furnaces.

Employee hours required to produce

a ton of direct reduced iron are

comparable to requirements for pig

iron in a blast furnace. Most workers are semiskilled and can be easily

trained to operate equipment. Plant

and process engineers require extensive technical training.

High cost of direct reduced iron

relative to scrap has hindered

diffusion and caused the temporary

shutdown of existing plants. Production unlikely to increase in the next

few years.

Electric arc furnace (EAF) Steelmaking process in which an enclosed vessel with charge is heated

by an electric arc. Uses scrap and/

or direct reduced iron as charge.

Unit labor requirements for EAF process are lower than for alternative

basic oxygen process (BOP), taking

preliminary steps into account. Skill

levels are comparable to BOP

requirements.

Accounted for 32 percent of production in 1983. Expected to be as high

as 40 percent in 1990, assuming

no serious problem of scrap availability.

Basic oxygen process (BOP) Steelmaking process used by integrated mills in which a jet of pure

oxygen is blown onto vessels

containing molten iron. Process takes

about 45 minutes, compared with 5 to

8 hours for older open hearth process

(OHP).

Reduces unit labor requirements by

almost half that of the older OHP.

BOP accounts for approximately 60

percent of total steel production;

greater diffusion unlikely during

1980’s, in view of electric furnace

expansion.

Ladle refining Molten steel is brought to final specifications in a ladle instead of inside

the melting furnace.

Overall productivity effect uncertain.

Productivity gains associated with reducing the time needed to make steel

in melting furnace are at least partly

offset by additional time required to

refine steel in ladle. Process requires

a skilled operator and helper.

Use increasing. Widespread diffusion

expected due to expanded use of

EAF and continuous casting.

Continuous casting Molten steel is poured directly into

caster, from which it emerges in

semifinished form. At least 5 hours

saved in production time compared

with ingot method which it replaces,

and up to 50-percent energy savings.

Increases yields by 10 to 20 percent.

Reduces unit labor requirements by

as much as 50 percent when compared to older ingot process. Skill

levels generally higher than for older

method.

Accounted for 31 percent of total

steel production in 1983; expected

to rise as high as 50 percent by

1990. Widely used in minimill and

specialty steel sectors; use expanding in integrated mills.

Computer process control Installed to automatically control

operations. Results in increased

yield, improved quality, and energy

conservation.

Generally results in change of job

responsibilities rather than any net

change in total employment. Skill

level for new positions is generally

higher.

Greatest diffusion is in hot strip

rolling mills and blast furnaces. Many

first-generation systems are being replaced by newer computers.

Continuous annealing of sheet Coils of sheet are continuously

passed through a series of heating,

soaking, and cooling steps in an

annealer, replacing conventional

methods in which sheet is subjected

to temperature treatment over an extended period of time. Produces high

quality sheet used in automobiles.

Substantial time savings reduce unit

labor requirements. Only 8 to 10

hours are required to produce 20

coils of sheet with new method, compared to 7 days with conventional

line.

Two continuous annealing lines have

been built. Construction of additional

lines has been planned but deferred.

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, construction of new superfurnaces, and the closing of the 

smaller and least efficient furnaces have caused a 

significant decline in the number of employee hours required 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

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 better blowing techniques, better heating of air, the use of 

higher pressures, and improved “ burden” (charge) control. 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 substantially reduced when existing furnaces are upgraded with

22
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 between $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 requirements.

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 affect productivity and cost.

Direct reduction o f iron. In contrast to the blast furnace 

process, a number of iron-producing processes, collectively 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 replacement 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 alternative to scrap during the 1970’s, when scrap prices 

were rising and shortages were expected to develop. 

However, due to changed economic conditions, diffusion of the d r processes has been quite limited in this 

country. The rapidly escalating price of domestically

5 J.W. Clark, “ Integrated Steelmaking Based on Coal Gasification

and Direct Ore Reduction,” Westinghouse R&D Center, Dec. 8, 1979.

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 remains stable.

Steel production

After the molten iron is smelted in the blast furnace, 

it is converted to steel by decreasing the silicon and carbon 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 capacity 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.

Electric arc furnace. While the electric arc furnace (EAF)

is not a new development, recent technological advances 

have made it an increasingly efficient steelmaking process 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 expanding minimill sector, virtually all plants are being equipped 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.

23
“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 installing 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 fluctuating demand for scrap, its prices are volatile. For example, 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, including scrap handling operations, average about 0.75 

to 1.2 employee hours per ton. By contrast, the bof, including coke oven-blast furnace operations, requires 

about 2.5 employee hours per ton of steel produced.

Also contributing to the expansion of eaf usage during the 1970’s and early 1980’s were substantial improvements 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.10 Moreover, these technologies 

have enabled the development of large-capacity furnaces 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

9 Ibid., p. 18.

10 Kenneth E. Caine, “ A Review of New Electric Arc Furnace

Technologies,” Iron and Steel Engineer, October 1983, p. 47.

estimated that the eaf could account for between 36 and 

40 percent of total raw steel production by 1990.11 

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.

Basic oxygen furnace. The basic oxygen furnace is the 

most widely diffused steelmaking process, accounting 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 competition from the electric arc furnace.

In the basic oxygen process, a high-speed jet of oxygen 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 combines 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 processes 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 process 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 re11 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 carbon 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 installing 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 ribbon 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 continuous casting since it does not require the many processing 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 conventional 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 continuous caster in this country, compared to 86 percent in 

Japan and a 61-percent average in Europe.12

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.13 It has been 

easier for the minimills to adopt continuous casting 

because new plants do not have the problem of coordinating new casters with existing obsolete equipment, 

which has posed major technological difficulties for integrated 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.

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 retrofitted with computer process controls. According to one 

1981 survey, these accounted for between 50 and 85 percent of installations at that time.14 And because of the 

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 hot12 Merrill Lynch, Steel Industry Quarterly, October 1984.

13 Joel Hirshhom, Continuing Success for United States Mini-Mills,

p. B-3.

14 Based on a survey of membership of the International Iron and

Steel Institute conducted for David H. Clark, Republic Steel Corp.

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 contrast, 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 example, 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 noncomputerized 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 personnel, 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 account for the rapid adoption of computer process 

technology. Energy savings can be substantial. For example, 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 expected to be significant. New applications are anticipated, and extensive retrofitting of older plants will 

likely continue.

Continuous annealing of sheet

After sheet steel has been cold-rolled, it must be processed through an annealing furnace to make it more 

formable. In the last decade, a continuous annealing 

process was developed in Japan to replace the conventional batch-type process, and two such lines began 

operating in this country in 1983. While not new conceptually, continuous annealing applications previously 

had been limited to tinplate and specialty steels.

In this process, coils of sheet are unwound and continuously 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. Productivity 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

26
on the old, although workers on the older line may be 

responsible for other furnaces. Because the new equipment 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 sufficiently offset by lower production costs.

Output and Productivity Trends

Output

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 products and rising imports are principally responsible for 

the sharp reduction in output (chart 6).

Sharply reduced demand for steel in two of its principal 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.15

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 

1982.16 Motor vehicle imports increased by 300,000, or 7 

percent, during that time.

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 I960.17 A third factor reducing demand for

15 American Iron and Steel Institute, Annual, p. 34.

16 Data from Motor Vehicle Manufacturers Association.

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 structural changes in the overall economy. Rapidly growing 

service industries, such as finance, health, and communications, 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 consumption, have been growing less rapidly.

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 demand is uncertain. A mid-1982 forecast by the Office of 

Technology Assessment projected that U.S. steel demand 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.

Imports

While domestic production has been declining, imports 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 imports represented a then record 22 percent of apparent 

consumption (domestic shipments plus imports less exports), 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 penetration jumped to 25 percent.

17 U.S. Congress, Office of 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

1 0 0

90

80

70

60

50

120

110

100

90

80

70

60

50

SOURCE: Bureau of Labor Statistics.

28
A recently completed study by the Steel Advisory 

Committee to the Cabinet Council on Commerce and 

Trade, chaired by the Secretaries of Labor and Commerce, concluded that the major reason for rising import penetration was the low level of import prices 

relative to domestic prices, attributable to such factors 

as the appreciation of the dollar, unfair trading practices, 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 198119) and reinforcing 

bar (with a 75-percent minimill share in 1981). For instance, 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.

Productivity

Output per employee hour in the steel industry edged 

upwards at an average annual rate of 1.1 percent between 1970 and 1983 (chart 6). This was less than half the 

rate for all durable goods manufacturing registered during 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 annually). The strongest productivity growth was concentrated 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 percent 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 increase in the degree of obsolescence of plant and equipment. 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

18 “The State of the Steel Industry,” prepared by the Subcommittee of the State of the Industry of the Steel Advisory Committee.

19 Donald F. Barnett, Steel: Upheaval in a Basic Industry, p. 88.

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 advantage 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 improved flexibility of the work force.

Investment

Real capital expenditures22 for steel plant and equipment 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 during 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 imports, and little prospect for adequate return on investment have contributed to the decline in capital expenditures 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 income 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

20 Barnett, Steel, pp. 119, 135-36.

21 Business Week, Oct. 12, 1981, p. 86.

22 U.S. Department of Commerce, Bureau of Industrial

Economics, Office of Research, Analysis, and Statistics.

29
financing. The industry has maintained that inadequate 

depreciation allowances have prevented it from recovering 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 companies 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 1975.23

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 equipment 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 double the return of the integrated companies.24 However, 

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 fraction 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 control 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.25 This figure, which also includes outlays to

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 of an existing 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.

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 investment will come anywhere near the amount required, due 

to existing low utilization and continuing financial 

losses of the major companies.

Employment and Occupational Outlook

Employment

The long-term decline in steel employment accelerated 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 consolidating 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 productivity 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 production 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 industry 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 proportion 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,26 but this figure is 22 percent lower than the 

1979 level. Employment in the minimill sector is projected to nearly double from its 1981 level to about 

50,000 by 1990.27

26 BLS projections for industry employment in 1995 are based on

three alternative versions of 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.

30
700

600

500

400

300

200

100

0

700

600

500

400

300

200

100

0

. Employment in steel, 1970-83, and projections, 1983-95

ees (thousands) Employees (thou

A verage annual percent change 2

All employees

1970-83....................................................... -3.1

1970-73................................................... -1.2

1973-78................................................... -1.9

1978-83................................................... -9.7

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

Production workers

1970-83....................................................... -3.5

1970-73................................................... -0.9

1973-78................................................... -2.3

1978-83................................................... -10.8

j........( |M i I I I i I ! I i I I I I I i I I | J i [ I | i

1970 1975 1980 1985 1990 1995

See text footnote 26.

.east squares trends method for historical data, compound interest for projections.

HJRCE: Bureau of Labor Statistics.

31
Occupations

Diffusion of new technology and the severe economic 

problems confronting the steel industry are having a 

major effect on job content and occupational requirements. 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 instead of relying on a cleanup force.28 In a second plant, 

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 improve 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.29

During the 1983 contract negotiations, the major 

union, the United Steelworkers of America (USWA), for 

the first time authorized its locals to allow combining a 

limited number of craft jobs. Consolidation of crafts increases the flexibility of the work force and reduces unit 

labor requirements. For instance, at two large integrated 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, occupations 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.30

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 of Labor Statistics, 1980), p. 14; and Industry

Wage Survey: Basic Iron and Steel, August 1983, BLS Bulletin 2221

(Bureau of Labor Statistics, 1984), p. 11.

However, the net effect of the adoption of continuous 

casting to replace ingot-pouring and associated processes 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 process 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 personnel 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.

Adjustment of workers to technological change

Programs to protect employees from the adverse 

effect of advanced technology and methods of production 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 contract 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 closings. 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 proportion of workers are not union members.

The u s w a is concerned with technological displacement 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,

31 Industry Wage Survey: Basic Iron and Steel, August 1983, bls

Bulletin 2221, p. 3.

32
including technological change.32 Affected employees 

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.’’33 The 

plan provides additional compensation based on hours 

worked during a quarter if earnings fall below 85 percent of hourly earnings during a previous base period.

Strengthening supplementary unemployment benefits 

(SUB) was a major goal of the union in contract negotiations which were concluded in the spring of 1983. While 

a major proportion of workers are eligible for s u b

payments,34 s u b funds have been drained due to the 

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 companies’ 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 patterns 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.

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 contribute 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 establishment 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 consisting of two to three supervisors and 10 to 15 workers, 

had been established in 13 plants belonging to 5 large integrated 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.35 Output 

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.

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

SELECTED REFERENCES

American Iron and Steel Institute. Steel at the Crossroads: The

American Steel Industry in the 1980’s, January 1980.

“ A New Challenge Takes Shape in Rolling Mills,” Iron Age, Sept. 6,

1982, pp. MP-3 through MP-36.

“A Work Revolution in U.S. Industry,” Business Week, May 16,

1983, pp. 100-10.

Barnett, Donald F. Steel: Upheaval in a Basic Industry. Cambridge,

Massachusetts, Ballinger Publishing Co., 1983.

Clark, David H. Computer Process Control in the Steel Industry.

Address at International Iron and Steel Institute Meeting,

October 1981.

“Concessionary Bargaining—Will the New Cooperation Last?”

Business Week, June 14, 1982, pp. 66-81.

Crandall, Robert. The U.S. Steel Industry in Recurrent Crisis.

Washington, D.C., Brookings Institution, 1981.

“ Electric Furnace Succeeds in Technology and Profit,” Iron Age,

Feb. 4, 1980, pp. MP-7 and following.

“ Givebacks or Layoffs? Pick One or the Other, Steelmakers Tell

USW,” Wall Street Journal, July 30, 1982, p. 1.

Hirshhorn, Joel E. Continuing Success for United States Mini-Mills.

Address at Metal Bulletin’s Second International Mini-Mills

Conference, March 1981.

“ Incentive Programs at Nucor Corporation Boost Productivity,”

Personnel Administrator, August 1981, pp. 33 and following.

“ Korf, Voest-Alpine Ready To Hit U.S. With a New Process for

Minimills,” Iron Age, Oct. 4, 1982, pp. MP-23-24.

“ Steel Gets a Respite From the Wage Spiral,” Iron Age, Mar. 16,

1983, pp. 33 and following.

“ Steel Jacks Up Its Productivity,” Business Week, Oct. 12, 1981,

pp. 84 and following.

33
“ 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. Congress, House of Representatives, Committee on Energy and

Commerce. Crisis in the Steel Industry: An Introduction and The

Steel Industry in Transition, March 1982.

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

Wage Survey: Basic Iron and Steel, 1978-79, Bulletin 2064, May

1980.

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

Wage Survey: Basic Iron and Steel, August 1983, Bulletin 2221,

November 1984.

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

Technological Change and Manpower Trends in Five Industries,

Bulletin 1856, 1975, pp. 21-33.

“ Work Rule Changes Quietly Spread as Firms Try To Raise Productivity,” Wall Street Journal, Jan. 25, 1983, p. 35.

34
Chapter 4. Motor Vehicles

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 manufacture 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 monitoring; industrial robots for welding, materials handling, 

painting, assembly, and inspection; programmable controllers; and a wide range of improvements in basic production 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 production. 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 productivity change was uneven over this period, with output 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 productivity 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.

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. Between 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 producers intensified. The Great Lakes region, where a major 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, electricians, 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.

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 applications 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. Programmable controllers also are being used more extensively to regulate production processes more efficiently. 

Basic metal-cutting and metal-forming machines are being improved, and transfer lines are becoming more 

highly automated. The widely employed unit-body construction method facilitates automatic welding.

The major technologies, their labor impact, and diffusion are summarized in table 4.

35
Table 4. Major technology changes in motor vehicles

Technology Description Labor implications Diffusion

Computers Computer-aided design and manufacturing (CAD/CAM) systems assist in

design of mechanical and structural

components used in motor vehicles.

Computer simulation of physical data

used to test vehicle components

and production line operations.

Computer systems also used to control manufacturing processes and

manage plant energy systems

through direct control of individual

machines or entire production lines.

CAD typically reduces by 50 percent

the time required to design vehicle components and reduces requirements for drafting personnel. CAM

and other forms of computer control

are expected to reduce demand for

equipment operators, will increase

demand for maintenance and technical workers.

Data on extent of use are not available. However, computers are in general use for business and production

applications, and CAD systems also

are broadly deployed. Although already in place, continuous improvements in computers and CAD systems have increased their capability.

CAM and computer-controlled plant

data networks are less widely used

and located primarily in new and redesigned plants.

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 application; robot welding fits very well

with unit-body construction of passsenger cars and light trucks.

Materials handling is second most important application, including the

transfer of parts from one place to

another, and loading or unloading

machines.

Robots useful in painting where potentially hazardous conditions exist

for human painters.

Each robot performs the functions

of about Wi workers per shift for

spot welding. In materials handling,

the relationship may be more like one

to one. Estimates of dislocation are

more difficult to make in other

applications.

Robots require maintenance and repair services, which provide jobs for

skilled craft workers—especially

electricians, as most problems involve the electrical control panels

that direct a robot’s operations.

Approximately one-third of the estimated 13,000 robots used in the United

States in early 1985 were in motor vehicle manufacturing plants. One estimate is for 31,350 robots by 1990.

About half of all robots currently are

used for spot welding. Number of robots is expected to grow in all applications by 1990, with growth rates

lowest for welding operations (where

already widely used) and highest for

assembly tasks, where the largest

number of workers are employed.

A wide range of assembly and inspection operations are potentially available for robots when their capability

improves and costs are lower.

Unit-body construction Vehicle bodies constructed from

sheet-metal panels welded together

to form a strong, rigid box. There

is no separate frame onto which the

body is mounted.

Method involves a substantial amount of welding, increasingly carried out by industrial robots and

automatic methods displacing welders.

Most passenger cars and some light

trucks are built from the unit-body

concept.

Programmable controllers (PC’s) Solid-state electronic controls used

to regulate machines and production

lines. PC control functions can be

easily changed to meet new manufacturing needs. Also, PC’s are

reliable and use logic symbols familiar to engineers, electricians, and

other technicians.

PC’s reduce time required for engineers

and electricians to change control

functions. Maintenance and repair

requirements are also much lower, due

to inherent reliability and electronic

diagnostic capability available to

electricians.

Data on number in use are not

available. However, programmable

controllers are diffused fairly extensively in modern plants. The auto

industry worldwide reportedly accounts for about 40 percent of the

total market for programmable controllers.

Changes in basic production

machines

Improvements include higher operating speeds, automatic controls,

coated edges on cutting tools, and

faster die changing capability for

stamping presses.

Labor requirements for machine operators are reduced. A modern

quick die change (QDC) press,

for example, can be operated by 1

operator at a master control panel

compared to the 6 to 12 workers for

conventional presses.

QDC presses are in limited use, but

automatic controls, faster speeds,

and improved cutting tools are more

broadly used.

Improved transfer lines Highly mechanized machine lines

that manufacture or assemble automobile components. Improvements

include greater use of automated

equipment, including numerical and

computer control; programmable

controllers; industrial robots; and

more automatic testing and inspection

stations.

Decrease in number of semiskilled

machine operators, assemblers, and

inspectors. Some increase in craft

and technical workers who program

repair, and maintain equipment.

Most new manufacturing and assembly lines incorporate some of these

improvements.

36
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 simulation, 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 component have been computerized, the information can be 

stored and used to operate machine tools, programmable 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,” Automotive Industries, December 1982, p. 29.

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.

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 communications networks, including statistical programs to 

assess the quality of components received from suppliers, 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.

2 Lester V. Ottinger, “ Robots and Other Technologies in the

Automated Factory,” Industrial Engineering, September 1982, p. 28.

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

37
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 incorporate 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 industry 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 functions of at least one worker per shift. However, additional labor is required to maintain and repair robot installations. 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 applications are described in the following paragraphs.

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 operations pioneered in this plant have become fairly standard 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 dif3 John McElroy, “ Robots Take Detroit,” Automotive Industries,

January 1982, p. 28.

ficult to make, and even the most simple welding operations 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.

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 manner 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.

* 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.

38
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 inhaling the hazardous solvents. Robots, however, can 

survive in an unventilated environment, and the higher 

temperature that can be used in unmanned, robot installations 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 programmed, 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 inspection 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 installation 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: Installing piston rings, assembling engine oil pumps, inserting light bulbs into instrument panels and tail light 

assemblies, and installing wheel-and-tire assemblies onto autos and starting the wheel nuts. Robots can be used 

to put together “ sub-assemblies” of door panels, instrument clusters, etc., that are carried by conveyor to major 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

could have a significant impact because assembly operations are labor intensive. Thousands of semiskilled 

“ small parts” assemblers are employed in the auto industry. 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 inspection 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 expensive than other types of robots and are capable of accurate and finely tuned arm movements, should increase 

the opportunities for inspection applications.

Developments are underway to create a sense of “vision” 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.

Programmable controllers

Programmable controllers (PC’s) are replacing electromechanical 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 implementing 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 connection 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 conventional 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, production downtime has been reduced significantly by the 

installation of PC’s in place of conventional electromechanical 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 

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 application, 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 transaxle housings. In another application, a single p c controls 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 camshafts 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 increased 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 continue 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.10

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.

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 suspension 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 applications. As an example, at an assembly plant visited 

by b l s staff in the early 1970’s, automatic welding accounted 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.

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 production machines such as metal-cutting and metalforming machines. The design of many of these 

machines is 20 to 50 years old; and, while some improvements 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 percent 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 stamping dies must be changed frequently.

40
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 performance 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 inspection technology, contribute to making assembly 

tolerances so close that transmission band adjustment is 

eliminated. Completed transmissions are tested on 

computer-controlled test stands.11

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.12

Engine, transmission, and other mechanical component assembly plants have been highly automated for 

many years. But the degree of automation—automatic 

control and automatic assembly operations—is increasing. This trend is expected to further reduce labor requirements for semiskilled operatives. There will probably 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

Output

Output in the motor vehicle industry varied 

significantly during the period 1970-83. (Chart 8). The 

dramatic swings in production that occurred over this

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 annual 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— annual rate of 5.9 percent. During these years, gasoline 

prices rose significantly, and imported cars captured an 

increased share of the domestic market. However, demand 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 recession—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 (subcompacts and compacts, domestic and imported) accounted 

for 47 percent of all new car sales in 1978 but increased 

to 63 percent in 1981.13

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.

11 John McElroy, “ Making Production Pay O ff,” Automotive Industries, August 1979, p. 48.

12 Ibid., p. 54.

13 1983 U.S. Industrial Outlook (U.S. Department of Commerce,

Bureau of Industrial Economics, 1982), pp. 30-34.

41
I I f

latio s<

20

10 ■

00 ■

90 ■

80 ■

70 ■

60 ■

50 ■

20 r

10 ■

00 ■

90 ■

80 ■

70 ■

60 ■

50 -

20 r

10 -

00 ■

90 -

80 ■

70 ■

60 -

50 ■

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

>0)

Output per employee hour

Output

Employee hours

....I .. . I I I I I, I , , J ........ 1 . 1 I I I

1970 1972 1974 1976 1978 1980 1982

urce: Bureau of Labor Statistics.

42
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 acceptable to consumers who prefer larger passenger cars.

Productivity

Output per employee hour in the motor vehicle industry increased at an average annual rate of of 2.5 percent 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 output. Over this period of relatively strong productivity 

growth, gains in output per employee hour were particularly large in 1971—up by 16.2 percent—when output turned up sharply following the strike in 1970. The 

two periods of decline in output per employee hour during 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 increased 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 contrasts, 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 percent from 1979 and 80, when both output and employee 

hours fell sharply—by 27.2 percent and 22.2 percent, 

respectively.

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 productivity 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 substantially exceeded the fall in output.

When auto sales jumped upward in 1983, productivity 

increased dramatically. Output increased by 30.6 percent over 1982, and employee hours grew by a 

significantly lower 14.3 percent. The result was an increase 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 utilization, which determine productivity change. The announced plans to spend billions of dollars for modernized 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.

Investment

Capital expenditures

Motor vehicle manufacturers are investing a considerable amount of money in new plants and production 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.14

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 manufacturing 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.15

Capital expenditures per production worker (in constant 1972 dollars) nearly doubled between 1972 and 

1981. In 1972, expenditures averaged $3,096 per production worker, reaching a level of $6,081 per production worker in 1981.

Capital expenditures should continue to be high 

through 1990. Domestic auto manufacturers plan to introduce a number of new, generally small-to-medium14 U.S. Department of Commerce, Bureau of Industrial

Economics, Office of Research, Analysis, and Statistics.

15 “ Detroit’s Merry-Go-Round,” Business Week, Sept. 12, 1983,

p. 72.

43
sized autos during the 1980’s. This will require stripping 

and refitting a number of older plants. To be competitive, 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 1985.16

The domestic auto industry has generally raised its investment 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 indebtedness and sales of assets including unused plants 

and subsidiary companies.

Employment and Occupational Outlook

Employment

The number of employees in the motor vehicle industry 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.17

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 particularly strong employment growth, with the work 

force increasing at an average annual rate of 6.5 percent. 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 beginning 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 efficient plants were closed. By 1982, the number of 

workers had fallen to 704,800, the lowest level in two 

decades. The employment situation subsequently improved, however, and in 1983, total employment was increased to 772,700, up by almost 68,000 workers, or 9.6

16 1983 U.S. Industrial Outlook (U.S. Department of Commerce,

Industry and Trade Administration, 1982), pp. 30-35.

17 In evaluating these rates of 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 of an industrywide strike.

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. Productivity 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 1995.18

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 projected 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 considerably. 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

18 bls projections for industry employment in 1995 are based on

three alternative versions of 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
Employees (thousands)

Chart 9. Employment in motor vehicles, 1970-83, and projections, 1983-95

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
Chart 10. Projected changes in em ploym ent in motor vehicles and equipm ent by occupational

group, 1982-95

Occupational group Percent of

industry

employment,

1982

Professional, technical, and related workers

Managers, officials, and proprietors

Sales workers

Clerical workers

Craft and related workers

Operatives

Service workers

Laborers, except farm

Percent change to 19951

0 -10 20 30 40 50 60 70

1 Based on the moderate level of employment projected for 1995. BLS projects three levels of industry employment for 1995 based on alternative versions 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.

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

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 mechanization, assemblers will continue to be the largest occupational 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 electricians—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

46
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, retirement, 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 contain 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

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 programmable 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 industries. 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 program 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 concerning 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 accomplishments.

47
SELECTED REFERENCES

“ Detroit’s Merry-Go-Round,” Business Week, Sept. 12, 1983,

pp. 72-76.

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

291 pp.

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

Automotive Industries, March 1980, pp. 54-55.

Loomis, Russell M. “ PC’s Boost Quality Management Control and

Productivity; Minimize Downtime,” Industrial Engineering,

September 1982, pp. 34-35.

McElroy, John. “ Robots Take Detroit,” Automotive Industries,

January 1982, pp. 28-29.

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

“Methodical Robots Work Line at GM,” Automotive Industries, February

1979, p. 95.

Ottinger, Lester V. “ Robots and Other Technologies in the

Automated Factory,” Industrial Engineering, September 1982,

pp. 26-32.

Sibthorp, Robert J. “ Hybrid of Microcomputer and PC Is Control

Solution,” Industrial Engineering, September 1982, pp. 55-56.

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

Resource Guide to Labor-Management Cooperation, U.S. Department of Labor, October 1983, pp. 35, 57, 63-68.

48
Other BLS Publications

on Technological Change

Bulletins still in print may be purchased from the Superintendent of Documents, Washington, D.C. 20402, 

or from regional offices of the Bureau of Labor Statistics 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 libraries. Publications marked with an asterisk (*) also 

are available on microfiche and in paper copy from the 

National Technical Information Service, U.S. Department of Commerce, 5285 Port Royal Road, Springfield, 

Va. 22161.

Technological Change and Its Labor Impact in Four Industries (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 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 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.

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

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

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 current and potential impact on productivity and 

occupations.

Technological Change and Its Labor Impact in Five Energy 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 Five Industries* (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.

Technological Change and Manpower Trends in Five Industries* (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 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 requirements, and labor-management adjustments.

49

*U.S. GOVERNMENT PRINTING OFFICE : 1985 0-461-087/20007
Bureau of Labor Statistics

Regional Offices

Region I

John F. Kennedy Federal Building 

Government Center 

Boston, Mass. 02203 

Phone: (617) 223-6761

Region II

Suite 3400 

1515 Broadway 

New York, N.Y. 10036 

Phone: (212) 944-3121

Region III

3535 Market Street 

P.O. Box 13309 

Philadelphia, Pa. 19101 

Phone: (215) 596-1154

Region IV

1371 Peachtree Street, N.E. 

Atlanta, Ga. 30367 

Phone: (404) 881-4418

Region V

9th Floor

Federal Office Building 

230 S. Dearborn Street 

Chicago, III. 60604 

Phone: (312) 353-1880

Region VI

U.S. Department of Labor 

Bureau of Labor Statistics 

Federal Building 

525 Griffin St., Rm. 221 

Dallas, Tex. 75202 

Phone: (214) 767-6971

Regions VII and VIII

911 Walnut Street 

Kansas City, Mo. 64106 

Phone: (816) 374-2481

Regions IX and X

450 Golden Gate Avenue 

Box 36017

San Francisco, Calif. 94102 

Phone: (415) 556-4678