Research demonstrates that firms tailor their ‘lean production’ systems to take advantage of local cultural, industrial and labour relations environments to enhance productivity and at specific worksites. This article analyses the human resource policies practised by General Motors (GM) and their suppliers in Silao, Mexico to identify two local innovations to the automaker's lean production system. First, GM achieved the labour stability necessary to implement lean production by meticulously selecting workers and by embracing a local labour union eager to work with the firm. Secondly, GM and its local suppliers co-ordinated a single industrial relations regime, dividing the local labour force between them and maintaining a pay hierarchy among the plants. Doing so increased their collective efficiency by matching each of the factory's production processes with a capable segment of the labour market while stifling wage inflation by reducing competition among them.
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