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.
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.
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.
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.
What do you think?
Most of my knowledge on the subject is rhetorical.
My gut instinct is that labor unions have become bad. This stems in part from a friend of mine who was working to be an electrician and he was complaining to me that he literally COULD NOT WORK legally if he didn’t join some union. I don’t remember all the details but I just remember feeling outraged. One way or another it seems like the union has simply replaced one corporate evil for another.
I think unions were vital in a time when legislation was limited and oversight was non-existent, but in this era of hyper litigous (no offense brian 😉 ) society coupled with increased gov’t regulation, where most workers are probably on camera half the time anyway, I think unions have outlived their usefulness, at least in their current form. I think they know this and have negotiated deals in a way that enforces their existence. I don’t recall the numbers but when I read what some peoples union dues were, what you were required to do as a union member, and what the union execs were making, I thought it seemed like a pretty raw deal.
All that being said, I’m a big supporter of “collective bargaining power” in its natural state, but I think unions have bastardized this concept to such an extent that the “union” is now a discrete 3rd party that needs to be fed even above and beyond “labor” and “management”.
Regarding your point on quality. I agree with about everything you said, but I think you forgot to mention one part. The size of the business can drastically effect quality. I read something (probably last Spring) that said that as Toyota grows, their quality gets worse. I can’t remember all of the details, but it definitely makes sense.
On a different note, it’s not just the money UAW employees make that disgusts me. Plenty of people from my high school took a job working on the line after graduation. You wouldn’t believe how much paid time they get off. Seriously, when they’re slow they only have to work every other week, but still get full pay. When they’re busy, they make double their original salary. They also have all kinds of plant shut down time where they are paid. Oh and almost forgot that a large percentage of workers go and smoke weed and drink 40’s on their lunch break. And nobody can do a thing about it. These guys are invincible.
“One thing that I think goes in one ear and out the other in this whole situation is that it is a drastic drop in auto sales which is causing everything.”
The reason I think that is the case is because GM is failing and Toyota isn’t. You’re right, GM isn’t losing sales (at least not any more than it ever has) to Toyota. But GM is so upside down financially that they can’t weather this storm. That’s the problem.
Much like the housing industry, if things had continued on as they had in the past, GM would be ok right now. But they didn’t. Housing values stopped growing faster than they should. People stopped buying as many new cars. If your success is predicated on an inflated growth market, you better keep a good grip on your hat. Basically, GM’s inertia overcame their momentum. Yes, I understand the contradiction, but I think you know what I mean. I think we can all agree that it’s not unexpected. The financial crisis simply shortened the time frame.
That’s why I have to laugh when I hear the executives and GM asking for money under the auspices of “but we were getting our act together.” “we had everything under control if not for this really bad luck”. No. I don’t think they did. Maybe if the Chevy Volt were rolling off the production line THIS year, I would buy that story.