UAW Strike at GM

[madurobob]

How is it that we have a Business sub-forum and no thread on unions (or did I miss it)?

So, here goes. The title is reference to the nationwide strike started yesterday out of the failed negotiations between the UAW and General Motors. But, I expect this to become a general discussion on labor unions.

Are unions still relevant? There was a time when unions were an absolute necessity. Workers in some industries were little more than slaves, they worked in squalid and unreasonably dangerous conditions and the government did nothing to help. In fact, IIRC, the only time the US military has (intentionally) dropped bombs on civilians in the US was during a coal miners strike in West Virginia in the 20's. Unions gave the workers negotiating power to force their employers to pay reasonable wages and make the jobs reasonably safe. Unions also gave their laborers a voice with the government.

Over the past several decades the US and other industrialized nations have enacted laws regulating work conditions and reasonable pay to the point that unions may have very little more to offer. In addition, companies can offshore manufacturing. So struggles with unions at home may simply help to push more jobs overseas. In the 50's a nationwide strike against General Motors would have been a national crisis. Today US auto manufacturers are multi-national and employ far fewer US union workers. A US strike is more of an annoyance than anything else for GM. GM stock is not suffering any major price crisis yet.

In fact, sales are down YtY and inventories are up at GM. So, this is probably a good time to stop production and draw down inventory. Surely the UAW knows this.

So, why is the UAW striking? I think its because union leadership is seeing the union as increasingly irrelevant and they feel a need to act tough to shore up support among members. The UAW of the 50's, despite its excesses, was an overall value-add for the average union laborer. Today, I think its about neutral and there will come a point where the UAW will be a liability.

So, what do you think? Should the UAW be striking?

 

[Francesca R]

No idea on the UAW.

Unions tend to work best (in the interest of their members) if joining them is compulsory. This is because of the free-rider problem.

Companies tend to work best (in the interest of shareholders) if joining unions is illegal, because it disallows the incentive to organise for collective action—something that can significantly increase labour's bargaining power.

Society can be served at either extreme, but in different ways.

I have long expected unions with voluntary membership to wither on the vine, though some have remained powerful. The one best known in my city is the RMT because of the regularity with which it stops the transport network, and the seemingly very high pay that tube train drivers have negotiated themselves over the years.

 

[DaChew]

Can I answer yes and no?
I worked in a Detroit auto plant as a contractor for 16 years. You've gone over a lot of territory.
I guess one of your main questions is: are unions still relevant? I think so. For the unskilled worker who is easily replaced, unions provide job security and job safety assurances. You've noted the disregard for individuals that companies had the luxury of holding in decades past that unions helped to solve. It's undeniable that workplace safety did not get to the point it is today without unions. The Ford Rouge facility south of Detroit at one time averaged a worker death every single day. Building cars used to be a very dangerous enterprise.

Along with improvements in safety came greater complexity of product so it requires greater skill among workers to produce what we call today a quality product. That's placed greater value on the individual. Replacement of that person is now a more expensive proposition for the company.

So, over the decades, as workplace safety has improved, the union has negotiated greater and greater benefits packages as well. So much so that you'll recall the HillaryCare proposal version 1 back in 94' was originally supported by the union and then rejected when they realized that they would be taking severe cuts (or taxes) in their already negotiated benefits. This led to the ironic situation of the Big Three supporting the proposal and the unions opposed.

Now look at the Toyota plants in the US. Their workforces have voted down the UAW several times. They obviously believe they are better off without paying a percentage of their wages for representation. Are they any less safe? They don't make as much and the workplace rules are written by Toyota. So, what is their motivation for not joining the UAW?

For GM the strike will not hurt anymore than their losses over the last decade. While their marketshare and profits are expanding around the world, the US is a stagnant market for them at best. I don't think a US strike will hurt them nearly as much as emerging out of a long strike without significant concessions from the UAW. I believe that GMs motivation is pay it now or pay alot over the long run.

I think GM workers need the union currently because of GM's huge over capacity. Without the negotiated retention rules, a lot of high seniority folks in US plants would lose their jobs. In any US plant, 20 years seniority doesn't really buy you much as far as what job you can retain or bump in to.

The UAW is between a rock and a hard place. They know they have to make concessions. I think that UAW leadership knows what kind of concessions they are going to have to make and they also know that the rank and file are going to be very unhappy with them if they make those concessions without appearing to look like they're fighting fiercely. Hence, a strike, the biggest weapon in their arsenal. So, in that sense I think you're right. The UAW leadership needs to be seen as acting tough by the membership. They also need to make the membership prepare to see their benefits, especially their healthcare, cut severely. Being out on strike with only the $200 strike pay per week will help.

 

[Segnosaur]

No idea on the UAW.

Unions tend to work best (in the interest of their members) if joining them is compulsory. This is because of the free-rider problem.

Actually, I'd want to modifiy that statement a little...

Unions work best (in the interest of their average to worse members if joining them is compulsory. However, in many cases, there are people who are at the 'top' of their field, who could probably earn a higher salary if they were able to negotiate their own salary without following the pay scales/rules of whatever union contract exists.

I used to work for the federal government of Canada in the I.T. field. We were covered under a union. (Technically, I wasn't a member of the union, and I had no interest in getting a union membership, but we still had union dues deducted and we still had our salaries determined through collective bargaining.) I was one of the more productive people there, and if it weren't for the unions I might have been able to get a higher salary. Unfortunately, because of the 'rules', my boss wasn't able to have me paid as well as I could have, and eventually left for a higher paying job elsewhere (earning more money, I might add.)

On a more general note:

Frankly, unions are something that makes activities that are illegal elsewhere totally legal... price fixing. In any other situation, if several companies/vendors/stores were caught working together to set prices, it would be considered collusion and would be illegal. Yet with unions, you have a group of suppliers getting together to fix prices of their labour (all done legally).

Unions are of little or no benefit to society today... in addition to elevating the mediocre at the benefit of the better producing (as I pointed out above), they do the following:
- They reduce the flexibility of companies to deal with changing business conditions (possibly contributing to job losses)
- They drive up the cost of completed products, making them less affordable (especially to minimum wage earners, etc.) Granted, labor is only one part that goes into the price of a product, but it is important
- Increased labor costs can also reduce profits. Now, you may think this is a good thing (after all, corporations are big evil entities, are they not?) However, many people (even those in the lower and middle classes, not just the 'rich') use stocks as part of their retirement plans. The union that tries to help its workers may end up helping to keep others from retiring early

 

[madurobob]

I have long expected unions with voluntary membership to wither on the vine, though some have remained powerful. The one best known in my city is the RMT because of the regularity with which it stops the transport network, and the seemingly very high pay that tube train drivers have negotiated themselves over the years.

The rail workers union is a bit different. Their product has no competition - or the competition is different enough (car, bicycle, etc..) that it almost doesn't count. Also, customers absolutely rely on the "product" being produced on a daily basis. So, a strike gets everyone's attention immediately and there is pressure for a quick resolution.

GM's products are different. There is heavy competition with similar products. So if GM's isn't available, there are plenty of viable substitutes. Interestingly, many of the competitor products are higher quality. I'm not sure wheer the blame rests for that - management or labor. I suspect both, but weighted more to management.

Your statement about "the regularity with which it stops the transport network" is also a key point. I think some labor union contracts are designed to drive this sort of brinksmanship as each side feels it can gain an advantage in public perception if they refuse to concede a point and force a strike. In the auto industry its no big deal. But in transportation it can have a significant impact on society in general. Do you think this is a good thing? Is it OK, for instance, for Air Traffic Controllers to go on strike?

 

[DaChew]

No idea on the UAW.

Unions tend to work best (in the interest of their members) if joining them is compulsory. This is because of the free-rider problem.

Companies tend to work best (in the interest of shareholders) if joining unions is illegal, because it disallows the incentive to organise for collective action—something that can significantly increase labour's bargaining power.

Society can be served at either extreme, but in different ways.

I have long expected unions with voluntary membership to wither on the vine, though some have remained powerful. The one best known in my city is the RMT because of the regularity with which it stops the transport network, and the seemingly very high pay that tube train drivers have negotiated themselves over the years.

That also brings in the distinction between private and public sector unions. I believe that public sector unions are going to be around for a lot longer than private sector unions. A strike by a public sector union isn't going to drive any government out of business like it can a private enterprise. Government revenues are not effected by a strike by one of their unions - taxes still get paid.

 

[Segnosaur]

It's undeniable that workplace safety did not get to the point it is today without unions.

Actually, I don't think there is any hard proof that unions were absolutely necessary in order to get better workplace safety. While unions may have been pushing for safer conditions, you also had:
- A government that would have been subject to political pressure to keep its voters from dying. (After all, look at the number of safety regulations in the building code; those weren't necessarily done at the request of unions, but done by the government to prevent deaths.)
- The labor pool also plays a part. When the economy is strong and there is a demand for workers (as there often is), companies may want to make a safer working environment as part of the attraction to new workers. (Look at Europe in the middle ages; the Plague ended up causing a labor shortage and lead to an improvement in worker conditions, all without the involvement of unions.)

Along with improvements in safety came greater complexity of product so it requires greater skill among workers to produce what we call today a quality product. That's placed greater value on the individual. Replacement of that person is now a more expensive proposition for the company.

It may also make companies less likely to hire new workers in the future... after all, why risk hiring someone if you're not 100% sure you'll need them in 2 years, knowing you'll be stuck with them for the rest of their lives?

Of course, this is assuming the company doesn't just start shipping its manufacturing jobs overseas to begin with.

 

[madurobob]

Can I answer yes and no?

Yup - I often do.

Now look at the Toyota plants in the US. Their workforces have voted down the UAW several times. They obviously believe they are better off without paying a percentage of their wages for representation. Are they any less safe? They don't make as much and the workplace rules are written by Toyota. So, what is their motivation for not joining the UAW?

Exactly. They may be paid less, but they apparently feel this is more than offset by the union dues and restrictions collective bargaining imposses.

I think GM workers need the union currently because of GM's huge over capacity. Without the negotiated retention rules, a lot of high seniority folks in US plants would lose their jobs. In any US plant, 20 years seniority doesn't really buy you much as far as what job you can retain or bump in to.

I think you are right.. but is it right? Should a company have to carry a lot of "dead weight" (over capacity) to protect workers? I find it interesting that in Japan there is very strong loyalty running both ways between management and labor and thus no need for a union. No general layoffs, either, but that may simply be because of regular growth rather than contraction.

 

[Fnord]

Just Say NO!



Any Questions?​

 

[madurobob]

Umm.. ok.

Well, before we get too deep into "all unions are all evil" how about this:

Over the past decade there have been a few large companies with pension plan problems. They either change the calculations and claim it is way over funded and raid the fund for cash, or they "correct" the calculations and claim they cannot fund it without going bankrupt. This is then used to goad the employees into accepting lower benefits without putting up a fight.

I don't think this has happened yet with a union (has it?). So, having the union then prevents the company from legally offloading its pension risks to society in general. In this regard, I think the union may play a very positive role. One that could be covered more efficiently with proper legislation, but not as of yet.

 

[DaChew]

Actually, I don't think there is any hard proof that unions were absolutely necessary in order to get better workplace safety. While unions may have been pushing for safer conditions, you also had:
- A government that would have been subject to political pressure to keep its voters from dying. (After all, look at the number of safety regulations in the building code; those weren't necessarily done at the request of unions, but done by the government to prevent deaths.)
- The labor pool also plays a part. When the economy is strong and there is a demand for workers (as there often is), companies may want to make a safer working environment as part of the attraction to new workers. (Look at Europe in the middle ages; the Plague ended up causing a labor shortage and lead to an improvement in worker conditions, all without the involvement of unions.)

Necessary? No, I suppose not except that OSHA was not created until 1970 while the unions have been around a lot longer. I know from personal experience that safety standards in UAW represented plants have long been more stringent than those in manufacturing facilities that simply meet OSHA requirements.

It may also make companies less likely to hire new workers in the future... after all, why risk hiring someone if you're not 100% sure you'll need them in 2 years, knowing you'll be stuck with them for the rest of their lives?

Of course, this is assuming the company doesn't just start shipping its manufacturing jobs overseas to begin with.

I agree. The calculations that a company has to do in hiring people and/or moving work is greater these days. The cost is higher but if the complexity is greater it may make more sense to stay and pay more. That's a calculation the union needs to consider as well prior to going into negotiations. It used to be automation of jobs leading to fewer workers now, in addition to that, they have the possibility of offshoring the work to contend with.

 

[Segnosaur]

Over the past decade there have been a few large companies with pension plan problems. They either change the calculations and claim it is way over funded and raid the fund for cash, or they "correct" the calculations and claim they cannot fund it without going bankrupt. This is then used to goad the employees into accepting lower benefits without putting up a fight.

First of all, why exactly are you assuming the employer in this case is wrong? I am aware of a few cases like that, but I'm not an accountant so I can't really say who is to blame. But it IS quite possible that the costs of certain benefits HAVE become more than a company can handle. (Yes, there are companies that are dishonest, but there are also companies that DO struggle to get by.)

And if a company has put certain benefits into a written contract, they're bound by law to honor that contract. If they haven't put exact details in, then its up to the employees to decide whether the new benefits package is fair, or whether they have the skills to command better salary/benefits elsewhere.

 

[DaChew]

Exactly. They may be paid less, but they apparently feel this is more than offset by the union dues and restrictions collective bargaining imposses.

As you point out below, it's Toyota's culture (and good business sense) that keeps the UAW at bay. They provide very good jobs at premium wages that allows them just enough advantage competitively in the marketplace to continue to grow. It's a very long term strategy (and it may not be strategy. It may be just the way they do things - culture) that is clearly working well for them.

I think you are right.. but is it right? Should a company have to carry a lot of "dead weight" (over capacity) to protect workers?

In a word: yes. Simply put: They made their bed...
I don't fault the UAW for negotiating the best they could for whatever GM would give them. At the time all of these phenominal benefits were being agreed to, GM's strategy was to simply get the cars built and get them sold. They didn't want any part of a strike. Their calculations told them that the best way forward was to move product. That's what they thought would keep them competitive, keep the shareholders happy and keep them profitable. And they were right. For a while. Now, not so much.

I find it interesting that in Japan there is very strong loyalty running both ways between management and labor and thus no need for a union. No general layoffs, either, but that may simply be because of regular growth rather than contraction.

Yes that culture is well suited to the industry. On the flip side though, a job in a Japanese auto plant is very difficult to get. They are premium jobs.

 

[Segnosaur]

Necessary? No, I suppose not except that OSHA was not created until 1970 while the unions have been around a lot longer. I know from personal experience that safety standards in UAW represented plants have long been more stringent than those in manufacturing facilities that simply meet OSHA requirements.

Forgive me, I'm not from the U.S. so I'm not familiar with all the details of the OSHA.. but I just did a little search on it and have a few comments:
- Yes, the OSHA has only been around since 1970, but that doesn't mean that there weren't other laws governing workplace conditions, nor does it mean other factors I mentioned (offering safer workplace conditions as an incentive to workers, etc.) weren't also in effect
- It looks like when OSHA came into effect, companies had to improve their working conditions further. This implies that unions alone were not successful in bringing all required safety reforms in place.

 

[DaChew]

Forgive me, I'm not from the U.S. so I'm not familiar with all the details of the OSHA.. but I just did a little search on it and have a few comments:
- Yes, the OSHA has only been around since 1970, but that doesn't mean that there weren't other laws governing workplace conditions, nor does it mean other factors I mentioned (offering safer workplace conditions as an incentive to workers, etc.) weren't also in effect

That's correct. My point is that unions were negotiating with companies to improve safety long before our government applied itself in a focused fashion. Look up the Triangle Shirtwaste fire of 1911. There became a very stark difference in workplace safety between union represented companies and non union.

- It looks like when OSHA came into effect, companies had to improve their working conditions further. This implies that unions alone were not successful in bringing all required safety reforms in place.

That's correct as well. The greatest changes in safety came among those companies who were either not unionized or who had weak unions. Textiles and coal miners come to mind mostly. Plus, many people had viewed meddling in the workplace relationship between company and worker as not a legitimate role of government.

The government has definitely improved workplace safety, that's undeniable as well but it has unfortunately been primarily in response to public pressure resulting from tragedy. Unions have been able to improve workplace safety through pressure from the rank and file who can see tragedies coming before they happen.

 

[madurobob]

First of all, why exactly are you assuming the employer in this case is wrong? I am aware of a few cases like that, but I'm not an accountant so I can't really say who is to blame. But it IS quite possible that the costs of certain benefits HAVE become more than a company can handle. (Yes, there are companies that are dishonest, but there are also companies that DO struggle to get by.)

Hell, I'm a CPA and I cannot say who is to blame. But, I can say that regardless of where blame lies, the result is an offloading of retirement risk to society in general. If a company scales back its pension plan employees have to look elsewhere for retirement. That "elsewhere" is going to include, in the US, taxpayer funded Social Security (they hope).

I've watched this happen at a few US companies. They don't want to fund their "defined benefit"plans, so they change them to a "defined contribution" plan that is more affordable from an annual cash flow basis. Most employees have no say in the matter. IBM recently won a lawsuit for just this.

 

[balrog666]

From my observations, unions exist to enrich the union managers and protect the jobs of mediocre workers. Their time is long past.

With respect to defined benefits or pension plans, those are withering away in favor of 401K's and the like, i.e., known costs without future liability look so much better on one's balance sheet.

As for GM, they have to bite the bullet some time to make up for past mistakes.
They may have $30 billion in the bank, but they have more than $200 billion in liabilities. If they can't shed the UAW monster, they're toast. If the UAW doesn't settle, GM will eventually go with only non-UAW plants and overseas operations anyway.

Or they will go with the biggest bankruptcy in US history and drop those union obligations, pension plans, and retiree medical benefits like a duck sheds water.

 

[Fnord]

From my observations, unions exist to enrich the union managers and protect the jobs of mediocre workers. Their time is long past.

With respect to defined benefits or pension plans, those are withering away in favor of 401K's and the like, i.e., known costs without future liability look so much better on one's balance sheet.

As for GM, they have to bite the bullet some time to make up for past mistakes.
They may have $30 billion in the bank, but they have more than $200 billion in liabilities. If they can't shed the UAW monster, they're toast. If the UAW doesn't settle, GM will eventually go with only non-UAW plants and overseas operations anyway.

Or they will go with the biggest bankruptcy in US history and drop those union obligations, pension plans, and retiree medical benefits like a duck sheds water.

HEAR! HEAR!

 

[DaChew]

If they can't shed the UAW monster, they're toast. If the UAW doesn't settle, GM will eventually go with only non-UAW plants and overseas operations anyway.

Or they will go with the biggest bankruptcy in US history and drop those union obligations, pension plans, and retiree medical benefits like a duck sheds water.

I see the UAW's future as a transformation to a workforce agency. They will contract with manufacturers to provide auto line technicians. They will handle all of the personnel admin. - Pay, benefits, hiring etc. The companies will provide a per person hourly rate to the UAW. That's it. US manufacturers get to shed 90% of their personnel departments and HR functions along with the administration of health benefits in return for paying one flat rate per person. Only thing left to negotiate is hourly rate.

 

[balrog666]

I see the UAW's future as a transformation to a workforce agency. They will contract with manufacturers to provide auto line technicians. They will handle all of the personnel admin. - Pay, benefits, hiring etc. The companies will provide a per person hourly rate to the UAW. That's it. US manufacturers get to shed 90% of their personnel departments and HR functions along with the administration of health benefits in return for paying one flat rate per person. Only thing left to negotiate is hourly rate.

Employee outsourcing is a big trend - mainly as a reaction to the ridiculous rates of Unemployment Compensation "Insurance" that get levied on smaller businesses. Not having to file the tax forms or conduct the admin functions is just gravy.

GM is effectively paying $85/hour now for UAW workers, how much will the union want to provide the same functions while becoming the members' new punching bag?

I don't see it working.