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| Economy |
| New GM, Same Old Union? |
| 2010-10-06 |
| One of the most remarkable things I learned in writing about GM was that Ron Gettlefinger was totally blindsided by GM's financial collapse. The UAW had so often convinced itself that the company's dire warnings were simply strategic bargaining claims that it didn't understand how parlous the underlying finances were--and in fairness, in the past, management had often made exaggerated claims when it was bargaining. One former auto analyst I talked to said that the company would routinely claim that anything it didn't want to do was being blocked by the union--but when the rare equity researcher actually talked to the UAW, they'd often find that the union had never heard of the issue where it was allegedly the sole obstacle to change. That said, by the mid-1950s the Big Three had settled into a relatively stable relationship with the UAW. When contract time came around, the UAW picked off the company it perceived as the least able to survive a strike; used the threat of a strike to get a good contract; and then demanded the same from the other two. Those companies were now in a bad position, because if they risked a strike, their competitor, who already had a contract, would take all their customers. This relationship essentially meant that the Big Three simply didn't compete on labor cost, work processes, or any of the other labor-side innovations that have enhanced productivity over the last forty years. It's not that contracts didn't vary by company or plant, but the outlines were broadly similar across the industry. This was good for the UAW and good for the auto manufacturers, because arguably it actually helped cement their cosy oligopoly by removing one of the major competitive pressures. And in many ways, the voter base and political clout of the UAW was helpful to securing Detroit favors from Washington. During that period, union peace was very valuable, and management bought that union peace with concessions that seemed cheap at the time: tax-favored pension and health care benefits. In hindsight, this was stupid for many reasons. Automation made it possible to produce more cars with fewer workers. Meanwhile, competition cut into market share--the Big Three had about 90% of the US market at the end of World War II, versus about 45% today. And workers lived a lot longer than they were expected to. Those factors mean that the ratio between retirees and workforce became extremely lopsided; at the moment, GM has a little over 50,000 hourly employees--and about a half a million retirees. That left the pension badly underfunded, and meant that either the company or the workers were going to have to dramatically increase contributions. Meanwhile, soaring health care costs were making the health care benefits even more of a problem than the pensions. |
| Posted by:GolfBravoUSMC |
| #3 I say if we could have stripped the unions from this company, we would have 5 good automobile companies right now under normal bankruptcy procedure. Since this particular union held America hostage, I will never buy their product again. Anyone who buys stock in GM now is a fool. See how they treated their last shareholders. |
| Posted by: newc 2010-10-06 20:57 |
| #2 UAW members at Oldsmobile, Hudson, Nash, Studebaker, Willys, Packard, LaSalle, Crosley, Henry J, Oakland, Desoto, Edsel.....what say you? |
| Posted by: Besoeker 2010-10-06 11:58 |
| #1 The UAW had so often convinced itself that the company's dire warnings were simply strategic bargaining claims that it didn't understand how parlous the underlying finances were.... If they'd only showed up for work sober, lined up all the parts correctly, and torqued everything down to spec,.... |
| Posted by: Mike 2010-10-06 08:14 |