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Do not blame the UAW for Detroit’s ills
November 19, 2008
Further to Felix Salmon and Jim Surowiecki’s comments on the myth that Detroit auto workers cost $73 per hour to employ - that includes the healthcare and pension benefits of former employees - it seems unfair to me to blame the United Autoworkers union for Detroit’s plight.
Of course a union tries to get high wages and benefits for its members - that is what unions are for. The fault for Detroit’s relatively high labour costs ultimately lies with the managements of these companies, or to be more exact the former managements, for taking on liabilities that they could not afford.
The story of how Detroit - particularly General Motors - was persuaded by the UAW to create a private welfare state for workers is recounted in Roger Lowenstein’s book on the pensions crisis, While America Aged, which I reviewed for the FT in July. It is worth reading for the story of Walter Reuther, the UAW leader who built healthcare and pensions benefits into employment conditions.
GM and others did not spot at the time that, if their companies started to shrink at any point, they would be trapped by a growing burden of indirect costs for former employees. In the past few years, that has turned into one of their most pressing problems compared with foreign-owned car companies.
The relevant question is how co-operative the UAW has been in helping to correct the problems of the past. There too, it has shown some vision in striking deals to get retiree benefits off the balance sheets of the big three. So I think the UAW has a decent story to tell, despite Detroit’s woes.
i am outraged the way the u.a.w. is being treated in washington, d.c. does the public know how much the u.a.w. has given up over the years?
the pensions have been bargined for. they are not company assets. they are to be paid. they need to be put in a union trust or the guaranteed pension plan.
there needs to be new financing of cars and they need to be reworked to be more fuel efficeint.
Posted by: sharon | November 20th, 2008 at 2:52 am | Report this commentpeople cannot buy cars if they do not have a job.
I’m eager to see the UAW recipe to make the US auto industry profitable in spite of the fact that US auto makers have 30% higher labor costs than non-US manufacturers. One suggestion: make it illegal in the US to buy a non US manufactured car.
Posted by: Gary | November 20th, 2008 at 5:28 am | Report this commentI “ONLY ONE IS TO BLAME”
You and I are not amoeba, Mr Gapper–we have enough brain cells necessary to process the idea that cause-thus-responsibility-thus-blame can lie in more places than one.
THINK: What, apart from top management, enables Japanese car manufacturers–with factories in, and materials sourced from, the same countries–sell enough cars to be profitable in the American market?
II TAKING WITHOUT GIVING AND EVERY MAN FOR HIMSELF
> Of course a union tries to get high wages and benefits for its members
> - that is what unions are for.
So goes the conventional wisdom which killed the goose that lays the golden eggs.
If you do not produce the quality which leads your fellow-Americans to buy what you make–especially when your fellow car industry workers in rival companies do much better–then you have no business demanding to be rewarded during employment and after retirement. You do not even deserve employment.
III NOT EVERYONE IS AS BLINDED BY GREED
The unions at Japan’s ANA were enlightened enough to do more than ‘try to get high wages and benefits for its members’–they sat down with management, contributed ideas, and policed their own ranks to ensure quality.
Which enabled ANA to overtake JAL–just as Toyota, Nissan, et al have overtaken GM, Ford and Chrysler.
Posted by: J Michael AJP Llamas, ex-private banker, 39 | November 20th, 2008 at 6:04 am | Report this commentDo not blame the UAW for Detroit’s ills
Not blaming them, but they sure didn’t help the situation! Hope they’ve been saving up over the years cuz they’ll need that money for a rainy day and it’s raining!
Posted by: mike | November 20th, 2008 at 4:29 pm | Report this commentTop management for decades at the USA automakers is completely to blame. As Sharon notes, management made agreements with labor based on its (management’s) strategy and view on the marketplace and on expectations about the future. That is management’s responsibility and management knows it.
Even if current top management has done the best that could have been done (unlikely), it has been at the helm during the demise of its companies. No escaping that and no blaming of the financial turmoil the last few months for decades of poor decision-making and destruction of hundreds of billions of dollars of shareholder value and wasted capital investment.
Bankruptcy will only enrich lawyers and accountants and will do nothing to enhance the automakers future viability. Top management is correct that keeping a going business going has value that should not be disrupted. Aside from that I find the testimony before Congress to be completely unconvincing.
Some arrangement for interim financing from the federal government and some other group of management to perform the restructuring are needed. I am sure there are many excellent former and current executives available who know the industry, the problems and have the competence to restructure the industry. Typical executive perquisites will have to fall by the wayside however.
Needless to say labor has to be involved, has to be told the truth and has to be convinced that management is reducing its own perquisites on a par with the reductions (probably already in place) that labor does and will experience.
Simply throwing more tax-payer funds away will do nothing but waste more capital. Doing nothing at all as the Bush Administration is intent on doing is just as bad.
Posted by: Wendell Murray | November 20th, 2008 at 4:53 pm | Report this commentIt is UAW’s fault. GM line workers make in total $78 an hour where at Toyota the same employee would make $35 an hour. Why is this? GM’s shops are union and Toyota’s are not. Toyota seems to be doing much better than GM these days.
Posted by: Drew | November 20th, 2008 at 4:58 pm | Report this comment$70 an hour for people who can’t even make a reliable truck is ridiculous. I own a 2004 GMC truck that I’ve had nothing but problems with, quality problems. Steering gear box changed after 10000 miles, steer column shaft cover changed twice, screws under dash coming loose. It’s (dash) been taken off twice but different screws keep coming loose. Speakers in door now going in and out. Only 43000 miles on it. I’ll never buy a GM vehicle again. I call it my fridau afternoon truck. Everyone was in a hurry to go home ’cause it was friday.
Posted by: Brian | November 20th, 2008 at 6:51 pm | Report this commentIn my previous job I got to visit GM Truck assembly plants and what I saw shocked me. I saw employees that would get there specific task completed on the vehicles and then sit down with the newspaper until the next vehicle came down the line to there station. I dont know the hourly wage these people were getting but I would bet its outragous. So its about time these companies and unions get back to common sense levels. Both management and unions are at fault.
Posted by: Scott | November 20th, 2008 at 6:55 pm | Report this commentI praise the Unions for how they have represented the American worker (and now,other countries as well). Without their efforts over the years, the middle class would be very small.
Posted by: H.Cuddy | November 20th, 2008 at 7:18 pm | Report this commentDo you really want them to be where the rest of this country and the world wants to put laborers
if it was not for the Unions?
They could easily go back to the age of no unions at all and a much tougher lifestyle.
All companies should have a Union that fights for fairness, wages, benefits and safety.
Would you rather pay for all of that out of $8-$10.00 per hour or have the government pay?
Certainly a complex problem that we can all agree has not been managed successfully. In retrospect GM would have benefited from a CAO - a chief actuarial officer - with the political clout within the organization to account for the costs being incurred by their contracts. An actuary would have enlightened the organization to the full impact of full benefits at early retirement, health benefits for retirees, double benefits for disability, supplemental benefits for idled workers. These contracts were viewed within the organizations as expressions of intent - funding was strictly optional and never to required levels. Catching up has been painful - GM has funded pensions to the tune of four times profits over the past decade and a half. We know who GM is working for, and it isn’t the shareholder! And that is reflected in the demand for their stock (virtually none). How the UAW could allow this to progress to this stage is truly unimaginable. The collapse of Studebaker, Packard and others as far back as the ’50s were the unheeded warning. The UAW was complicit, and reckless (does that translate into fault?) in allowing the amortization of pensions that provided the auto makers the illusion that current obligations could be pawned off on future (often illusive) profits.
It will be interesting to see how the bankruptcy judge (does anyone doubt reorganization under bankruptcy) manages the competing interests. Will he put the “warranty holders” and “suppliers” above the pensioners? Will they simply offload the pensions to PBGC as I believe is required by law? Would the UAW be better off independent managing their own pension funds? I’m sure the actuaries are busy at work on that problem!
Posted by: B. Adams | November 21st, 2008 at 5:28 pm | Report this comment