Select Page

I’m not really sure what to say about the whole GM/auto industry mess. I’m working on some thoughts but I’m not sure it’ll amount to much. In the mean time, I thought I’d post a few random thoughts and facts. Some things to help you frame your opinion.

  • UAW membership has fallen to 576,000 active members from a 1979 high of 1.5 million. The UAW also has about 500,000 retired members.
  • GM borrowed $18 billion in 2003 to help fund its pension.
  • There is a lot of misinformation being spread about how much UAW autoworkers make. Specifically, you’ve probably seen charts showing the Big Three line workers costing $73 an hour and workers at foreign shops earning about $44.

    The UAW responds that senior UAW workers at the Big Three make about $28 an hour before benefits.

    Who’s right? What accounts for the different numbers? Retirees. The companies lump all labor costs in together when they give you the figure. The UAW separates it out so that you’re only hearing what an active worker makes.

    The UAW and GM cut a big labor deal in 2007 which was designed to reduce labor costs for GM in the future. For the first time, the UAW allowed for a two-tier wage structure at the Big Three. Wages could be as low as $15 an hour, but the new wage structure would apply to new hires, not current workers, and won’t be in effect until 2010 or later as more current workers retire.

    With much of the Big Three’s workforce retiring over the next few years, they have essentially agreed to let future generations have lower wages without any wage reductions for themselves.

  • Healthcare is the other big bugaboo that the Big Three and the UAW hammered out in the last labor deal. Here at least, current workers and retirees made some sort of concessions.

    For the first time, makes the UAW responsible for the health-care benefits of the 340,000 GM retirees (or surviving spouses). More accurately, for the first time, the union and not GM will assume the risk that future health care benefits are not properly funded.

    GM was to provide funding equal to more than 60% of its health care retiree liabilities. GM was supposed to contribute about $34 billion to the VEBA which would then assume $47 billion worth of health care liabilities. Ford is supposed to pay $13.6 billion out of $23.7 billion in health care liabilities; Chrysler will pay $9.8 billion.

    The current crisis has prevented the Big Three from funding the VEBAs.

  • Quality control problems are not independent of wage issues. If the car that you design and manufacture needs to be sold within a certain price range in order to compete, every dollar that goes towards wages is a dollar that can’t go towards quality.

    If it costs Ford two thousand dollars more in wages to build a Taurus than it does Honda to build an Accord, Ford has a problem. It can (a) price the Taurus $2,000 higher than the Accord, (b) cut $2,000 in amenities (lesser quality seats, tires, etc.) (c) or be less profitable. Ultimately it does some combination of the three.

  • Whip sawing to this point: While the UAW represents all auto workers, it has a history of only striking one company at a time. A practice known as whip-sawing. Since whatever they got at one company they would ultimately get at all three, this practice was highly effective. Ford could not afford to be hobbled while Chrysler and GM were still producing cars. Eventually it would cave. All the while the UAW’s strike fund was being filled from workers at the other two companies.
  • What do you think?