Since the late 30's, the UAW and America's home-grown automakers have been locked in a balance of terror. The arrangement has kept the peace- at a price. Which was pretty much anything the UAW wanted. No-cost life-long health care? A "jobs bank" for superfluous workers? Sure! The Mutually Assured Destruction principle worked as long as the automakers could afford it. But now they can't, and the question is no longer who will blink first, but how much the UAW is willing to surrender to survive.
Going into this year's contract negotiations, GM, Ford and Chrysler have all made it abundantly clear that they expect the UAW to make concessions on health care, wages and working conditions. Of course, the UAW's leadership bared their teeth and growled; workers at several plants voted to strike if necessary. The saber-rattling worked in previous years, so why not try it again?
For one thing, the UAW is a pale shadow of its former self. In 1969, the organization counted 1.53m members. Today, the union can claim no more than 180k dues-paying autoworkers. The days when union bosses could summon powerful politicians with a single Vito Corleone-esque phone call are over. Less contentiously, Dana Johnson, chief economist of Comerica Inc., says the unions are no longer "the pacesetters of the overall economy."
Equally important, the union's employers are not what they once were, either. Setting aside the fact that all of them are mortgaged up to their eyeballs, staring down the barrel of bankruptcy, The Big 2.8 are no longer land-locked enterprises with distant relatives.
Ford and GM have established production facilities in China, India, Thailand, Brazil, Mexico and other low-labor-cost countries. What's more, U.S. car brands have "gone native," mixing their DNA with foreign-made vehicles. GM sells German Opels as Saturns, Korean Daewoos as Chevrolets, and Australian Holdens as Pontiacs. It's only a matter of time before Chinese Buicks hit the scene.
Chrysler also sells "hecho en Mexico" vehicles, and recently signed up with a Chinese partner. Ford's moving as quickly as it can towards "globalization." In short, while The Big 2.8 still need their UAW-staffed U.S. production facilities, they don't rely on them to the extent that they did merely a decade ago. The threat of out-sourcing looms large over many a UAW factory, tipping the balance of power in the automakers' direction.
At the same time, the UAW must now deal with the end of pattern bargaining, where all three domestics signed identical union contracts. While the union itself signaled this change by refusing to offer DaimlerChrysler the same "health care giveback" afforded GM, Chrysler's transfer to private equity group Cerberus guaranteed the end of Detroit's "all for one and one for all" arrangement.
For example, Ford and GM will most likely offer to establish a multi-billion dollar union-controlled health care fund to ditch their endlessly escalating health care costs once and for all- eventually. As befits an equity fund, Cerberus is more interested in a short term solution. And no wonder: they had enough trouble raising the funds to buy Chrysler in the first place, and the credit markets have contracted since. A gigantic lump sum payment is simply out of the question.
For the UAW, two- (or even three-) track negotiations are an enormous headache. If the union tries to hang onto pattern bargaining, one or more of the automakers could choose the nuclear option. If the UAW allows different contract terms for different companies, they're bound to piss off part (or all) of their membership.
In the face of this diminution of their bargaining power, the UAW has tried to open a fourth front: Toyota. This morning, members of [a UAW invention called] the Kentucky Workers' Rights Board submitted a list of "recommendations" for improving working conditions at ToMoCo's KY factory. Needless to say, company executives refused to meet with them. Toyota spokesman Rick Hesterberg stated, "If they have recommendations or proposals for us, they can leave them here for us to review."
The UAW doesn't stand a chance. If the union looks set to organize their plants, Toyota's bound to retaliate by closing their only UAW facility: the NUMMI plant in California. If it escalates from there, Toyota's top dogs could pull part of their U.S. production back to Japan. And last but not least, Toyota builds Camrys in China; if anyone can export vehicles to the American market from China, it's got to be Toyota.
The UAW's effort to glom onto Toyota is a quixotic campaign that only serves to remind industry observers how the mighty have fallen. In truth, the UAW's hold over domestic automakers is weak, and getting weaker. While none of The Big 2.8 are bound to do anything that looks like union-busting, they're methodically positioning themselves to operate without any UAW members. But even that may not be enough to guarantee their survival. Mutually assured extinction?
For the record, I believe that the UAW has played a healthy part in getting a fairer deal for the working person. It’s little wonder that the UAW are very mistrusting of management (especially of GM) after Roger Smith’s escapade of asking the UAW for concessions, then handing out bonuses to GM management! So, as long as the UAW defend the working person, I have no problems. The inflexibility and so called militantcy has been borne out of management trying to screw the working person, so one can hardly blame the UAW for staying steadfast in their view of “no concessions”.
However, there are things which the UAW could do to help management whilst keeping everyone employed (i.e “You’ve finished working the line? Sweep up for the last half hour before you shoot off”) Flexibility of this nature will benefit the company and the UAW long term. The danger of not finding the balance between a healthy UAW-management relationship is a continual shift of power until we get to the point where the UAW would rather the company go under, rather than give in to the management. A good example of a healthy relationship of this nature is when Carlos Ghosn was trying to turn Nissan around and the union told him to make what cuts were necessary to save Nissan. In turn, when Nissan was back on its feet, Ghosn hired most of the employees back. Thus, a basis of trust was borne.
Detroit’s management have no-one but themselves to blame for the UAW’s militancy. One only has to look at Delphi where management are still playing themselves bonuses whilst Delphi is going through a turnaround.
The constant threat of the UAW unionising Toyota’s plants is what keeps Toyota giving the workers fair (sometimes generous) wages and pay structures. Now that the UAW are trying to unionise their plants Toyota must do what they can to retain an iron grip on their plants. If Toyota lose control of their plants the only loser will be the United States. Toyota will ship work back to Japan (where a Yen to Dollar ratio favours the Japanese) and sell their cars from Japan (or even China?). In fact, one could argue that the reliability could improve, but that’s not the point of this ill thought out opinion! :O) The point is, whilst Toyota give out good pay to workers why screw up a good thing? However, if Toyota start screwing their workers over, then, the UAW MUST unionise their workers to help them. Remember, it’s the THREAT of unionisation which keep Toyota’s management in check. If the unionisation goes ahead, then Toyota will use their poison pill and that’s when the real massacre will happen……
The unions certainly played an important part in labor reform, and certainly a more creative one than “Krazy Karl” Marx’s inevitable bloody revolution.
However, I wonder if part of the problem wasn’t that the Gummit failed to see that unions were companies selling a service to the employees and therefore should not have been allowed to have a monopoly with in an industry.
Just a thought.
Bunter
I used to wonder what it would take for the Big 3 (at least back then) to be free of the UAW after speaking with the union relations guys on having to rehire people who were fired for drinking or drug possession. Or after observing the number of people just standing around.
I would think, “How would I do it?” and “Why don’t the exec’s have the cajones?” Big reward = big risk kind of stuff.
To my amazement, I might actually see this come to pass in my lifetime.
One can only hope.
I misread “Mutually Assured Destruction” as Mulally Assured Destruction”.
Kurt B :
I misread “Mutually Assured Destruction” as Mulally Assured Destruction”.
As did I ;-)
It is high time to stop playing the game of Whos Fault Is It. The current problems facing the USA auot industry can’t be layed solely at the feet of Management or Labor because both are equal culpable in this mess.
Both the UAW and the Big3 knew that they were building inferior autos since the 1970s. Both sides watch marketshare continuously decline. Both sides watch apathetically as Toyota and company ate their lunch. Please tell me exactly how many contracts have be inked since that time? Neither the UAW leadership or Big3 management could careless during this period because the money was still there to make both sides happy in the short term.
A better way to look at it is this situation is the fault of our American culture. While GM and Ford might serve as the poster children for bad business practices a very large portion of the US economy is in the same sorry shape.
Both labor and management lost sight of what the purpose of the auto industry was, and that was to make cars that generate a profit. Once the profit was made it could be shared. The US auto industry became just a big organization devoted to transfering money. Nevermind that the product made needed to be relevent in the marketplace. As long as revenues were generated each year everything was OK for both sides. Management made money for shareholders and the UAW brought home the bacon for its members. So what if the cars being produced slipped further and further into irrelevence behind the competition.
So now the party is over and the money has dried up. The competition is build better products and the customers are shopping elsewhere.
This story plays itself out on a daily basis in the world of the small business owners in this country. Those that snooze, lose! Plain and simple.
Instead of investing in their own livilihood both management and the UAW simple took the profits and ran. The really sad part of all of this is that most of that money was wasted, not invested in anything of any importance in America but likely swandered away on the silly trapping of our American lifestyle.
BUT FOLKS WANT TO CRY ABOUT IT!
Let me think on this simple level. Unions helped get millions out of low income into middle income. Middle income families are an important part of how well the USA economy as a whole worked. Better lives for a larger number of people. It did take companies making good use of labor for this to happen. Once they had to pay more for labor, making good use of it only made good sense.
Now union jobs are way down. The size of the middle class is declining. The spread between richest and poorest is widening. For those still in middle or higher income levels things are okay. For those in the other part things are not really getting better anymore.
While not the whole story, I do believe unionized workforces at large companies played an important role in enlarging the middle class. As unions loose clout and members, things do appear to be swinging the other way. I think unions are not nearly appreciated enough by the public currently.
While there are and were excesses, they pale in comparision to excesses of big companies. Big companies are finally getting it back like they had it before unions. Much of modern prosperity rests on the backs of low paid labor that doesn’t benefit very much from their work. Big companies love low paid labor that circumvents union problems.
I think those of you wishing to see unions disappear have very little thought or compassion for your fellow humans. Unions aren’t able to do as much in many of these low cost labor countries because there isn’t enough freedom to allow workers to unite. Unions aren’t going to happen in China, a round about way to ensure they will be poorly compensated. The rest of the world, and big companies benefit at the expense of low paid non-union workers.
I think the UAW will survive, and they will do their best to organize Toyota. The reason why is simple: Hillary Clinton. The pit bull with lipstick is going to be our next president. Her and the lap dog congress will turn us into a quasi-communist/socialist state, and they will make it difficult or impossible for Toyota to leave the USA.
Since I make $60,000 a year, I guess I’ll be labeled as the evil rich.
Vast new industries with high paying jobs have sprung up without a union in sight. Why are the people of Microsoft, Google and a host of smaller technology companies among the highest paid groups in the US? I don’t think it is because of the threat of unionization.
Unions have long held back productivity by any available means, which is in the long run a bad idea. If unions had focused on keeping a good share of the rewards of increasing productivity for the workers then it might not have all gone so bad, but the many anti-productivity work rules are in the long run counter-productive. Protecting drug users and other clearly bad employees is also highly counter productive for the enterprise and thus for all of it’s stakeholders.
” It is high time to stop playing the game of Whos Fault Is It. The current problems facing the USA auot industry can’t be layed solely at the feet of Management or Labor because both are equal culpable in this mess.”
It’s not even close to being equal. At an absolute minimum management is responsible for 85% of the problem.
The UAW is dead meat. Membership is declining, the negotiated cutbacks are further reducing their numbers, and American manufacturing is rapidly offshoring, so their future is grim.
Still, this just doesn’t matter. The ineptitude of Detroit management is so substantial and the culture of management failure so overwhelming that they could employ worker bees for free, and they’d still manage to blow it. Even without the union, this incompetence would remain at the forefront of management’s failures.
It’s very simple. Until Detroit produces outstanding products that satisfy customer needs, and can do that long enough to win some conquest sales and earn back the trust of the American consumer, they are doomed. Consumers don’t care if the cars are built by robots or flying monkeys, they just want a great product that they like and trust. The union is wholly irrelevant to this equation.
For that to happen, the Detroit 3 need to first recognize that most of their products suck and that their reputations are in need of serious redemption. That means making some super products, then apologizing to the American consumer for their past mistakes, and backing those products up with the intent of never screwing up that badly ever again. This process is much like what an addict must do to recover: Admit the problem, apologize to those you have wronged, and be ever vigilant in never repeating your past mistakes.
Unfortunately, Detroit managers spend far too much time blaming everything but themselves, so nothing truly gets fixed. The only lights at the end of their tunnel seem to be the taillights of Toyotas.
I agree with those who say blame should be split between labor and management. labor fights to be less productive, and management pats themselves on the back for sebrings and azteks.
a HUGE part of the problem with unions are labor laws. workers should have the right to organize in any way they see fit. however, should workers fail to work, say…go on strike in protest of having drug abusers terminated, the company should have the right to hire replacements. giving the workers control of someone else’s (the shareholders’) factory is quite dangerous. eliminate the backed-up-by-gov’t-guns junk labor laws, and see how many union workers will stick their necks out for the scum. the system will have no choice but to equilibrate.
i’m not going to comment further on management because i haven’t the slightest idea how to reign in incompetence on that scale.
I agree with those who say blame should be split between labor and management.
I see no reason to play a game of “splitting the difference” here. Dynamic 88 is absolutely right — this is almost entirely the fault of management. It is management that approved the crappy product concepts, oversaw the awful designs, managed the horrendous quality control and screwed the suppliers to the point that cheap parts were being installed in these horribly designed third-rate hulks of metal.
The UAW plant in Fremont builds some of the most reliable vehicles that you’ll find on American highways. Under GM’s “management”, it produced unreliable, undesirable garbage; within a short period, Toyota turned it into a viable, successful operation with a rapidly reduced absentee rate and products that consumers wanted to buy.
Blaming the worker is a copout. The manager manages the worker; the coach is to blame for the failures of the team. It’s this bass-ackwards way of thinking, that values the avoidance of responsibility, that gives birth to these problems in the first place. Until the “leadership” learns to lead, absolutely nothing will change and it won’t matter who works in the rank and file, the output will still be unsatisfactory.
I have scant sympathy for the UAW, but have to agree, management bears much of the blame. Probably not one UAW member had a hand in designing, for example, the Chrysler Sebring…or the infamous revised Taurus… or the upsidedown bathtub Caprice…
People who make $15/hr can’t afford cars made by those who make $30/hr.
No hard-charging/competent Executive wants to deal with unionized industries. Incompetent management is the *result* of unionization.
Gov’t-gun-backed Labor Laws that violate free-association and earned property-rights will always lead to failure whether it the Soviet Union or 2.801. It is free-market capitalism or die in this global economy…Choose only one…And gov’t-forced protectionism (aka, Theft)will not help (See Soviet Union).
Yes, UAW members weren’t responsible for disasters like the awful ’96 Taurus or the Aztek. But the outsized wage and benefit packages are a significant reason for forced decisions to use inferior parts, postpone product improvements, and turn to Mexican and Asian plants.
Unions should remember the old saying, “every person sells at wholesale.” And obviously, wholesale has to be an affordable fraction of retail. The UAW, like their adversaries across the bargaining table, is a high-cost producer that has lost pricing power. Union wages, worker and retiree benefits, and work rule inefficiencies were affordable back when an oligopolistic industry could just pass on higher expenses. But not now. Detroit now has to undercut Toyota, Honda, Hyundai, etc., pricing for big-volume cars (and eventually will for pickups), and that doesn’t permit Detroit to make a profit on vehicles built in the US and Canada.
By definition, an intolerable situation won’t be tolerated forever. So the question is how long the status quo can be preserved.
There is definitely blame to go around to all parties. My wife worked for a UAW controlled organization and I have seen the corruption first hand. I have also dealt with the Big three and see their problems too. As one poster said, people making $15/hr cannot buy cars built by people making over $30/hr. So there is reason enough for the cheaper imports
If the UAW plays hardball with Toyota, Nummi is going down. If they think otherwise, then they are doomed to fail and lose even more jobs. I think they will try to throw their weight around and go down. Toyota is not about to follow the stuipidity of the domestics and turn the management of their company over to the unions. I think that this speaks alot as to why our country is in trouble. We think we can throw our weight around [just like the UAW] and get away with it. History is proving otherwise.
Unions and government are reservations for useless dead wood.
Like mentioned above, if the witch from hell somehow gets in, it’s time to become an ex pat.
A great editorial,and some excellent comments We in the Oshawa GM operation are begining to feel the effects of shrinking market share.In the last year we gave up our sweepers/cleaners to outside contract =1000+jobs gone
We,the CAW traded the sweepers for the Camaro.Time will tell if it was worth it{Camaro production Feb 09}
On Dec 1 07 plant 1 Impala 3 shifts shuts down for 30+ days as does plant 2 Grand Prix and Lacrosse/Allure 2 shift.
In Jan 08 plant 2 picks up Impala and Buick 3 shifts?Plant 1 start a long conversion to flex plant to run the Camaro then Plant 2 will be phased out
About 1500 to 2000 more jobs lost.
In Canada there isn’t job banks. Between our previosly lower dollar in 2004 1.56$ Cdn bought you a US buck That and our socialized medicine give us higher wages and job security,that the UAW could only dream about.
In the last 3 or 4 contracts,we got whatever we wanted.72k a year full benifits and 10 weeks vacation.
Buzz Hargrove could of got elected king.
Fast forward to late summer 07, thousands of jobs gone thousands more going The UAW is in intense talks,and thier gonna look after thier own.as they should.
With the dollar at 1.05$ and our health cost skyrocketing{nothing is for free}The company vs union situation is some what different.Yes indeed the tables have turned.Stay tuned folks the shows only started.
one must admit, the UAW is the last bastion to stand,
A cemented wall between the greed of masters,and desperation of working class in this holy land.
A leash of hellbent dogs to reign,
a shot to gluttony of CEOs strain.
The UAWs are the collisseum for the sheep,
On a pulpit they can declare
their rights to paychecks, benefits to reap.
And only their numbers have power to speak,
for each member is too wild and contemted
and considered uneducated and hopelesssly weak.
While there are plenty of hard-working union people putting forth honest effort, there are plenty that are not. I once saw 2 union men move an office chair from one floor to another. It took 3 hours. Why? They indignantly said they were allowed some rest breaks, according to union rules.
I think most of us who are born post-WWII grew up with a sense of achievement that we would be rewarded for good work. I honestly don’t understand the culture of entitlement that pervades unions. On a basic ethical level, why should a worker get rewarded and stay employed if they are doing a poor job?
And they choose their union leaders to negotiate for them. Perhaps the crazy attitudes of union (and management for that matter) are only a symptom of a larger problem in Detriot.
As some had said, there once was a need for the unions. Management was abusive to their workers and the unions had more than enough ammunition to get into the plants. Unfortunately, once they had the power, they turned into the very same type of people that they fought so hard against.
I know lots of hourly UAW workers who do good work, but I also knew the same number of workers that made it their goal in life to make their supervisors’ lives a living hell. They would take a new supervisor, with their loftly goals and great attitude, and make bets as to how long it would take to break them. And break them they did. And then they blame the supervisor and management for the business climate they have to work in. With the kind of power that the union forces onto the supervisors and management (and how they both agree to the terms of those powers), they all are getting what they deserve.
If those in the union had remembered how their workers used to be treated, they would not have done it to their supervisors. Considering how the average hourly worker feels about anyone who does not belong to a union, it is no wonder that there is no sympathy for them among the working class (those who make comparable pay that they do, but are not in a union).
When you are required, by contract, to wait for an hour and a half for two electricians to show up and plug in a computer into the wall (and then walk away, that was all they had to do), abuses on the side of management (for allowing these types of work rules) and the workers (for the distain they have for their own company that they work for) are what is only part of the problem that they have to overcome.
I have asked some hourly people why they put up with their jobs when they show how much they hate it and they say they are there for the money. Hookers are only in it for the money. You don’t have to be on your back to prostitute yourself.
Unions “once” had a place, but the socialistic nanny-state has essentially taken over the role of protecting the workers (as well as shyster lawyers, who’ll sue at the drop of a hat for any real or perceived slight, under any circumstances).
So, essentially, the UAW is nothing more than a massive, rotting, stinking stumbling block to profitability for the last US owned auto companies, and the UAW and 2.8 are in a symbiotic hate filled wrestling match to the detriment of both – and both will die as a result. Neither side is smart enough to walk away from the fight (the UAW won’t, because to walk away means death).
But yes, the state of the auto industry in the US is down to the fact that greed on the side of car manufacturers, and unconcern for workers during the 1920’s and 1930’s, allowed the unions a toe hold – and socialist government entities (i.e. the Roosevelt administration) put workers right AHEAD of owner’s, which was just as wrong and evil.
Put another way, when flying an airplane, you want to keep things on an even keel – wings level, airplane level. Banking too hard in EITHER DIRECTION means a spin to earth (crash), climbing TOO QUICKLY means a stall and drop (possibly to earth and crash), and DIVING too quickly often results in a crash.
That’s how it is with life, and work, and how employees and employers SHOULD treat one another.
Toyota has figured THIS out pretty well, obviously, or they clearly would not have the current success they do with keeping the union at bay.
That’s my sad, but real, assessment.
YEAH ! Jolo, I asked myself 35 yrs ago,why the hell am I doing this?The answer never changes $.I guess the hookers got a make a living to eh!
I see the usual argument over blame is going on, and the usual characters tilting the blame towards management. You know who you are :)
It seems agreed that unions came about due to outrageously exploitive management. But wasn’t Henry Ford famous for how well he paid his workers? Did the auto companies really ever treat labor that badly? I am not that familiar with the subject, not trying to make a case on it.
Lastly, it comes to mind that being a manager at a UAW controlled business has got to be frustrating. I have made this point before, and it seems to get ignored, but I will try again.
The top managers at the big 3 are the ones that had skills dealing with unions and rising in large organizations, NOT the ones best at building cars or anything else. How many of the people who could have saved Detroit chose to follow other careers in order to avoid the poisonous union mess in the auto business and Michigan itself?
I may not be a management genius, but I guarantee I couldn’t work in that environment.
When I was selling on Michigan, I had a union representative sit in on an IT meeting. I asked why he could possibly care. His answer was that he was making sure they were not wasting money on things that would be better spent on things the workers cared more about. Needless to say, most of the meeting went over his head. He tried to object when he could, but from my point of view, he was not representing the workers well at all.
He objected every time a feature was brought up that allowed the workers more independence and control over their time (one of the main benefits of the product and one that got almost universal acceptance outside of union shops).
Backing these idiots with the “Gummint guns” (good one btw!) is just a recipe for disaster.
The top managers at the big 3 are the ones that had skills dealing with unions and rising in large organizations, NOT the ones best at building cars or anything else.
I’m sorry, but that’s pretty far off the mark.
The schism between management and labor is substantial in these organizations. Managers are not particularly rewarded based upon what the rank and file think of them. They are massive bureaucracies, and as is the case in most massive bureaucracies, the fast climbers tend to be those who can schmooze and politic their ways up the ladder by brownnosing those above them, not below them.
In that sense, they are no different than any other large bumbling enterprise. As is true with many old-line American businesses, they are failing largely because they grew to be so large that they assumed that their size was a result of their genius, when it largely was the result of Hitler and then the Allies literally bombing the hell of their potential competitors.
The economy has been rapidly globalizing in the last 35 years, and Detroit is just one sector of old-school American industry that has been unable to cope with this. Study the steel industry and how the mini-mills helped to divide and conquer the massive US steel behemoths, and you see a prototype for what is happening today: Big American companies assume that they are number one, but are eventually undermined by their inability to compete against more spry and creative foreign competitors, who beat them on quality and efficiency. Their massive size and penchant for resting on their laurels blinds them to the changes happening all around them. Same old stuff, different industry.
Unions create some burdens and raise costs, but the inability to compete is largely the result of poor product planning, archaic inventory management and outdated assembly processes. American companies from the days of old are about as well suited to modern life as are dinosaurs to living in Manhattan. It doesn’t matter who builds it, a Chevy Cobalt is still a Chevy Cobalt.
The argument for who is to blame for the death of the Big 3 in North America long after the corpse is in the ground, and the participants will be sitting around having a beer in their respective drinking spots saying I told you so. Face it niether side had the brains to stand back look at the situation forget history and ego’s and say we are in this together, lets start fresh.
In my city in Ontario I look around and see all of the empty factories that people thought were too big to fall. Three old shoe factories have become boutiques, and junk outlets selling mostly Chineses made goods. The two home appliance factorys are fallen, the television manufacturing plant has been a parking lot so long most probably don’t remember. The refrigeration compressor plant now stores old files for banks, Northern Telecom, Bendix, Webster Manufacturing, Westinghouse are all parking lots. I don’t know how the guys from the local Ford Plant can see this in their face everyday and be so certain it can’t happen to them. I don’t think it is far fetched at all to think that in the next 10 years there will not be one unionized Big 3 auto assembly plant left.
Both management and the UAW are responsilble for the adversarial relationship that existed between both parties.
When to parties are at odds with each other but working to achive the same goal there will be problems. Both the UAW and the management at the Big3 lost sight of the fact that they were in business to make CARS to sell in a COMPETITIVE marketplace. This simple fact exists above any shareholder compensation or employee benefit package.
The business model of the big3 made them uncompetitive in todays market. The UAW is part and parcel of this business model and continuiously gave its endorsement to the business as usually practices of Detroit that have lead to this mess.
Face it, when a union extorts a more generous contract from a company that is in decline and losing marketshare that are just accelarating the rush to bankruptcy. When UAW members get paid a wage that is totally out of line with the rest of the industry it is a given that the product they produce will suffer, the sales will not be made, and JOBS will be lost!
Isn’t it ironic that unions grew out of the same roots as communist socialism and that it is now communist China which is cleaning the clock of unionized industrial labor?
jthorner: Isn’t it ironic that unions grew out of the same roots as communist socialism and that it is now communist China which is cleaning the clock of unionized industrial labor?
In the case of the UAW, it isn’t China “cleaning their clock.” They are being beaten by transplant factories operating here in the United States.
In retrospect, the fate of the old way of doing business by the Big Three and the UAW was sealed the day the Honda Marysville plant began turning out Accords. That was over 20 years ago.
Both labor and management have had plenty of warning, but preferred to pretend that it was still 1965, while waiting for some sort of savior – SUV market, protectionist legislation, an upsurge in nationalism among car buyers.
Now it’s 2007, and no one is riding to the rescue.
Nothing shows you how the rank-and-file still doesn’t get it, when you drive in Michigan and see their bumper stickers:
“Out of a job yet? Keep buying foreign!”
They’re still partying like it’s 1975…
If GM built the Camry and Toyota built Cobalts then none of this would be an issue. Union wages haven’t killed the US auto industry, inferior products have. The free market that makes America great is also the one that is ignoring lackluster products being produced at home. Looks like America has fallen on it’s double edged sword.
Thanks, daro31, for the poignant description of industrial decline in Ontario. It and mikey’s postings remind us of the human dimension of this topic.
About seven years ago I drove across Michigan. I saw little of Detroit–the expressway is in a ditch–but in the small towns along the highway I was struck by how unimpressive the buildings were. My general impression was a lack of vitality and prosperity. That was surprising, because here in the southwest our perception of Michigan is that it is a wealthy state with a population that has long enjoyed well above average incomes. One might wonder, “where did all the money go?” (Gross Pointe, I hear, got a bunch of it.)
Across the river from Pittsburgh is a small park that has an outdoor museum about the great steel industry that once thrived there. Now, all the mills are gone. Change, it has been said, is the only constant.
“I see the usual argument over blame is going on, and the usual characters tilting the blame towards management. You know who you are :)”
We only mention it because it’s true, and vitally important to understand. Detroit isn’t getting beat on price, they’re getting beat on quality. Corollas cost more than Cobalts, but people pay the premium.
50merc
About seven years ago I drove across Michigan. I saw little of Detroit–the expressway is in a ditch–but in the small towns along the highway I was struck by how unimpressive the buildings were. My general impression was a lack of vitality and prosperity. That was surprising, because here in the southwest our perception of Michigan is that it is a wealthy state with a population that has long enjoyed well above average incomes.
My folks lived in Owosso (Flint bedroom community) in the late ’90s. What a rathole that place was! The general impression I got was “we know we are stuck in the ’50s, and we likes it!” Decaying, abandoned downtown. Few new sources of revenue.
Geesh! I thought the southwestern MI burg I grew up in was bad. Gotta hand it to the hometown, however – they redid a hideous ’70s “renovation” gone way wrong, and really made the downtown area a nice place to visit.
Owosso – We likes it. Aint nuttin wrong.
Sort of captures the union and “buy ‘merikin”.
Bruce
Freezin: You’re half right. Hillary Clinton will be the next President of the United States, whether or not you (or I, for that matter) likes this. However, she’s as much of a socialist or communist as Warren Buffett is.
Pch and Dynamic! It’s always fun.
So, Pch, you half agree with me, but think that the leaders have no particular skills dealing with unions. I have to disagree. First, by staying in Detroit, they have some skill with dealing with them that I do not. I couldn’t stay in that environment and stay sane.
Mostly I agree with all you say until you get to the end:
“Unions create some burdens and raise costs, but the inability to compete is largely the result of poor product planning, archaic inventory management and outdated assembly processes.”
Where we disagree is how limiting the union situation is to management. I think its like a death of a few good slashes.
First, many managers just refuse to be there. These would be the ones who are change agents and cannot stand the idea that their initiatives will be challenged and defeated by a union for no apparent reason other than contrariness.
Second, managers can’t just deal with the uniqueness of their people because all must meet the general union work rules. Even many of the workers are in fear of the union on these things.
Third, managers can’t change the “assembly processes” without it endangering union jobs and thus incurring the wrath of the unions. This means that the designers leave because their new designs get murdered by same processes. At the same time, no need for new parts or inventory management because there are no new parts and you can’t reduce the labor part of the equation anyway.
Lastly, Morale. The union workers have none unless the union gets a big victory at the expense of everyone else. Management doesn’t have any, ever. How could they when every success just means that the union will demand more?
What you have left is likely a bunch of guys running things who put up a good show about working with the unions and making things better while just trying to get to the top of the money/power, zero sum pyramid. Who else would play? That’s what I mean about skills dealing with the unions, not that they some how motivate union workers. That’s not likely doable short of some serious leadership skills that no one in this country is still developing in people.
So, Pch, you half agree with me, but think that the leaders have no particular skills dealing with unions.
I don’t believe that the managers have skills in effective car design, understanding customer needs, or properly managing inventories. In fact, I know this to be true because the cars are generally crap, their sales are dismal in comparison to the competitors and because their average inventories are much higher than the inventory management leaders such as Toyota and Honda.
The UAW is not the most agreeable or pleasant group of people (just in case you thought that I like these unions, think again), but they are pussycats compared to the unions in Germany, France and South Korea. The Japanese automakers have unions in their domestic market. Many of us are driving union-built cars that were built in Munich, Ingolstadt, Stuttgart and Toyota City. And so it goes.
The poster Rallybred hit the nail on the head: If GM built the Camry and Toyota built Cobalts then none of this would be an issue. The truth of this couldn’t be clearer — if the thing in the driveway is not desirable, it will be replaced by something better.
The UAW builds Corollas that Americans buy quite happily. They used to buy Saturns, manufactured under flexible work rules, back when the cars were decent, and stopped when they couldn’t progress at the rate of their transplanted rivals. The UAW agreed to flexible work rules at the Chrysler Belvedere plant, it’s just too bad that it builds Calibers that are below caliber. You can’t blame the grunt on the assembly line for a car whose best feature is a drink cooler.
The days of selling schlock to the American consumer are just about over. This time, the K-car won’t be good enough to lead a turnaround, they will need to do better.
Can you imagine being in charge of an industry where your manufacturing is controlled by a union, and your sales and retail distribution is controlled by franchise dealers. And you have little to no control over either.
Sounds like a recipe for disaster!
When I was an engineering student in college 20+ years ago I can’t recall a single one of my fellow students who wanted anything to do with the auto industry or any other highly unionized industry. There may be something to the argument that the really talented young engineers and managers simply stayed away from these dinosaurs.
Recently my alma matter had a blurb in the alumni newsletter about the large number of recent graduates who have gone to work in Toyota’s expanding US R&D facilities. That makes sense because Toyota is a highly respected company in the US today with a reputation for treating it’s white and blue collar workers well. GM, Ford, Chrysler … not so much!
Winners like to be on winning teams. I can hardly imagine what kind of people are attracted to R&D jobs at the 2.8 these days. Talent is like fruit, you have to keep bringing new stuff in.
Dynamic88: Detroit isn’t getting beat on price, they’re getting beat on quality. Corollas cost more than Cobalts, but people pay the premium.
When the Corolla sets the ceiling on price in that segment, and GM has higher labor costs than Toyota, simply building a car that matches the Corolla – let alone exceeds it – becomes virtually impossible.
I think we all agree that if Toyota built the Cobalt and Impala, it would be in trouble, too. Toyota won’t build a Cobalt or Impala, however, and a big reason is that it has a cost structure that allows it to move beyond those vehicles, and therefore pack more – quality, features, etc. – into the vehicle and still turn a profit, all the while still charging a price people can afford.
Toyota won’t build a Cobalt or Impala, however, and a big reason is that it has a cost structure that allows it to move beyond those vehicles, and therefore pack more – quality, features, etc. – into the vehicle and still turn a profit, all the while still charging a price people can afford.
Folks — Corollas built in the US are already built in a UAW plant in Fremont, California. This “nightmare scenario” is already underway, yet strangely, the cars are just fine and sales are unaffected. Toyota took one of the worst plants in the GM “family” and in short order eliminated the absentee and quality control problems that had plagued it under Detroit’s “manage”ment.
Clearly, the revenue gap between the Toyota product and the GM rivals is attributable to the fact that GM rivals aren’t deemed to be worthy of the premium. The marketplace ultimately chooses the prices, and will ultimately demand a lower price for a product that it finds less worthy. Toyota and Honda are the gold standard in this class because they offer a desirable product, not because of who builds it.
When Toyota generates excess profits, it channels those funds into R&D that led to the Prius, Camry and other successful products that build their brand and establish their leadership. When GM generates profits, it squanders them on bad acquisitions such as Rick Wagoner’s failed FIAT deal ($4 billion lost for really nothing in return), the acquisition of SAAB, etc., etc, instead of creating some competitive products that would have allowed it to build its brands and improve its reputation. The result: More losses, more bad brands to support, more liabilities hanging over their heads, while the old brands go withering on the vine.
These mistakes are at the management level, pure and simple. Wagoner could have taken that $4 billion he blew on FIAT, and used it to fast track the development of an outstanding family sedan and the creation of a competitive four-cylinder motor that would desirable to own, and then paid for more marketing than anyone could have wanted to promote it, leaving cash to spare…but he didn’t. It’s a lack of business management skills that led to such a poor series of choices, not the workers.
Reading this:
“Both the UAW and the Big3 knew that they were building inferior autos since the 1970s. Both sides watch marketshare continuously decline. Both sides watch apathetically as Toyota and company ate their lunch. Please tell me exactly how many contracts have be inked since that time? Neither the UAW leadership or Big3 management could careless during this period because the money was still there to make both sides happy in the short term.
A better way to look at it is this situation is the fault of our American culture. While GM and Ford might serve as the poster children for bad business practices a very large portion of the US economy is in the same sorry shape.
Both labor and management lost sight of what the purpose of the auto industry was, and that was to make cars that generate a profit. Once the profit was made it could be shared. The US auto industry became just a big organization devoted to transfering money. Nevermind that the product made needed to be relevent in the marketplace. As long as revenues were generated each year everything was OK for both sides. Management made money for shareholders and the UAW brought home the bacon for its members. So what if the cars being produced slipped further and further into irrelevence behind the competition.
So now the party is over and the money has dried up. The competition is build better products and the customers are shopping elsewhere.
Instead of investing in their own livilihood both management and the UAW simple took the profits and ran. The really sad part of all of this is that most of that money was wasted, not invested in anything of any importance in America but likely swandered away on the silly trapping of our American lifestyle. ”
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It struck me this could be a description of our current society. Social Security. Health Care. Financing a war with a deficit. Goverment spending money they don’t have to enrich special interests, and pad their own pockets. It’s all virtual money, spend it however you want! Pork! Pork! Pork!
All of these we problems we lay at the feet of our kids and grandkids, while we continue to live high on the hog like the Automakers did (union & management). And there will come a day when the bill has to be paid, and our kids will curse what Brockaw labelled “the greatest generation”.
The automakers (union & management) aren’t any different than the rest of us. We all are capable of making decisions in the short term for personal benefit rather than long term planning. The decline of Rome. We’ll see how long it takes.
Not all Corollas come from the NUMMI plant. North American Corollas are also produced at the Cambridge, Ontario, plant, which is not unionized by the Canadian Auto Workers (CAW). The CAW was still trying to organize the plant in 2005.
The Cobalt is built at one plant – the unionized Lordstown plant in Ohio.
So that’s not quite an apples-to-apples comparison.
The NUMMI workforce agreed to those changes because it was going to be closed by GM in the early 1980s. The UAW’s back was against the wall – it was either a new way of doing business, or no business, period.
Also note, as shown by recent headlines, that Toyota hasn’t exactly been welcoming the UAW with open arms at its big Kentucky plant (or the CAW at the Ontario plant).
If a unionized workforce were no big deal, I would imagine that Toyota, which tends to be very sensitive to any adverse publicity, would simply recognize the union to dissolve any potential controversy.
No one denies that Toyota (and Honda) products are able to command a higher premium on the market than GM products do. That is the free market at work.
But Toyota and Honda products also set a cap on prices for vehicles on each particular segment. And when faced with higher labor costs – as GM, Ford and Chrysler are when compared to the transplants – it is extremely difficult to make a better vehicle, keep the price competitive and still make an adequate profit.
Has GM management made bad decisions? Sure! But, quite frankly, one bad decision has been to give in too easily to UAW demands, and not demand enough real changes in work rules. Which, if anything, probably stems from the old GM arrogance – the new products “just around the corner” will solve everything.
Ironically, the union, which benefits in the short term from the status quo, also benefits from this attitude. Because the new way of doing business allows car companies to produce more with less – and the “less” includes fewer workers, who won’t be paying union dues.
But Toyota and Honda products also set a cap on prices for vehicles on each particular segment.
No, they don’t. The marketplace determines the value of a product. If the marketplace decides that a Cobalt is not as worthy of one’s money as is a Civic or Corolla, that speaks to the combination of product, service and brand that is included in the price.
The price is a symptom of the problem, not the problem in and of itself. It’s quite simple: Improve the Cobalt and the company that brands it, and its value will go up. Unfortunately, the company has spent the last 35 years making products that have resulted in negative brand equity, so the bowtie on the front lowers the value by default. That’s the price of hubris in today’s marketplace.
I doubt that there is a company on the planet that is excited about a unionized workforce. But that does not bar them from making products that consumers want.
The Big 2.8 have done a poor job of reinvesting their profits when they made them. Instead of building their brands and making better products, they acquired second-rate companies and created more bloat to carry on their books.
That’s why GM has over 70 nameplates in the US market, while Toyota has fewer than 30. It’s the sheer stupidity of the leadership that lead to these disastrous mistakes such as the FIAT deal, when that money could have been better spent somewhere else. I wouldn’t care if the Malibu was built without any labor costs by a volunteer workforce, I’m still not going to buy one. And you probably wouldn’t, either, because at the end of the day, it’s still a Malibu.
Improving the Cobalt – under GM’s current cost structure – to the point where it is as good as the Corolla and Civic will require the company to charge more for it than those two competitors. Which is not possible in today’s market.
Telling GM to “improve the product” without addressing the cost handicaps – including labor costs – is like telling a cancer patient to get better without providing any medical treatment.
Improving the Cobalt – under GM’s current cost structure – to the point where it is as good as the Corolla and Civic will require the company to charge more for it than those two competitors.
You seem to ignore the fact that much of GM’s cost structure is self-inflicted and has nothing to do with labor.
Why does it carry almost three times more nameplates than Toyota? Why does it buy failed brands instead of improving its own? Why does it heavily weight itself in vulnerable segments such as trucks, instead of diversifying into segments that generate consistent sales such as mid-sized sedans?
Incidentally, the cost structure for the Korean-built Aveo is lower than that than is for the Japanese-built Yaris, yet GM can’t even come close to commanding the same price. Even when GM uses cheaper labor in Asia and Mexico, it still can’t measure up.
The costs are just an excuse, but an examination of the facts show that the costs aren’t the problem. GM generates lower revenues because the products aren’t as good. If it could raise its prices to normal market levels, we wouldn’t be having this discussion, but the products are not good enough to allow for such price increases.
jthorner : When I was an engineering student in college 20+ years ago I can’t recall a single one of my fellow students who wanted anything to do with the auto industry or any other highly unionized industry.
I just graduated with an engineering degree and the story is the same today, at least with respect to the US auto companies. I know a bunch of people who would jump at the chance to work at Toyota, or (the hold grail) a German company.
Pch, we aren’t in much disagreement it seems. Mostly we see different things as being more important. I don’t know all the ins and outs of the NUMI deal, so I can’t really discuss it. However, many of us here agree that the management has problems that include attracting talent. I just believe that the UAW relationship is a large contributor to that.
Since the UAW has a total monopoly on the auto business in the U.S., the automakers have had no choice but to give them whatever they demanded through their “pattern” bargaining. This worked OK until off shore, non-UAW competition came into the market. While it is un-deniable that the union has driven up the standard of living for their members, that becomes irrelevant if the makers go bankrupt and all the jobs and retirement benefits disappear. The bottom line for any business in a capitalist system is it has to “compete to eat”. With the huge legacy costs associated with past generous contracts, the industry is severely disadvantaged. Without adequate product development capital, new products can not keep up with the competition. The UAW’s continous demand for higher compensation and evident disregard for the necessary corresponding productivity increase is like a “rubber band” being stretched to the breaking point. Either there will be a roll back of the labor cost structure, or the “rubber band” will break- the companies will go bankrupt. It may not be today or next year, but the past trend is unsustainable.
Pch101 interesting you bring up the Yaris- The automotive press expressed it clearly “It is too bad Toyota did not produce a quality car like the Cobalt, Civic & their own Corolla”. The Cobalt is absolutely competitive with the best small cars. GM sells trucks because they can make some money on them despite the huge legacy costs. They dominate the large SUV segment (~80%), and their new crossovers are the best in the world, bar none. In case you have’t noticed Toyota laid their best cards on the table with the new Tundra, but the Silverado still won truck of the year, and is gaining share of that segment. The Saturn Aura and upcoming Malibu are so good, the dealers will have Camry’s and Accord’s on site for comparison. The JD Power Survey of 3 year old vehicles shows, guess what, Buick tied with Lexus for first, followed by Cadillac. The General is producing better and better vehicles, despite the cost disadvantage.
Doctor Olds
“Without adequate product development capital, new products can not keep up with the competition.”
Just one example suffices to show that there was no lack of development capital – merely a lack of intelligence on the part of management.
In ’89 Ford paid something in the neighborhood of $2.5 Billion for Jag. Since then, Ford has lost roughly $10 billion on Jag. Are you seriously saying that $10 billion dollars isn’t enough money to develop at least one car line?
We could continue on with other stupid purchases by Ford, or move on to stupid purchases by GM.
Sorry, but the realities just don’t dovetail with the Econ 101 analysis.