Auto Unions: A loss or a win

There's a wolf under that bonnet: I suppose I should gloat that the UAW pretend strike only lasted two days. Unfortunately, these guys are pretty slippery. From a few interview comments, it sounds like the UAW might try to spin this defeat into a victory, with the following message: "we are a less militant, more cooperative union... and that's a good thing".

The UAW has failed to unionize the US-based Japanese factories. Those workers have seen what has happened to Detroit. They know that the UAW is bad for them. Unions are pushing to do away with secret ballots, in the hope of using intimidation. While they're still trying that "stick" approach, they now want to spin their GM defeat into a "carrot".

Health Care Fund: GM will put money and some of its stock into a fund. The fund will take on all future health-care cost. Moving the money from one legal entity to another cannot increase it. Why did GM want to pay it out now? Because chances were that the liability would keep increasing. In a sense, the workers get less this way; but, GM going belly up would have been far worse. The fund puts a firm number on the liability, caps it, and cuts it off from GM.

Here's another twist: A while back, Wagoner, GM's CEO, suggested that the government should pick up part of the tab. Ten years from now, if there isn't a National Health Service, and if the fund is falling short, it will be a 100,000 person union asking the government for help.

The UAW pretends to strike

Today, the UAW began a nationwide strike against GM, for the first time in decades. Yet, it gets nothing more than a big yawn, because everyone believes it's a "pretend" strike.

In the year leading up to these contract-renewal talks, GM has done a good job showing that they expect much better terms than the older contracts. They shed quite a few worker via "buy-outs". They even tackled their biggest headache, their health-care liabilities, by proposing to hand over a lump sum of money to the union, and washing their hands of it.

Everyone expects the unions to give in. GM's stock traded higher as contract talks begun, and hardly moved when the strike was announced. The truly left-wing elements of the union have been trying to make a noise about being sold out, but the union bosses and most of the rank and file seem to understand that they need GM more than GM needs them. Many heads of locals, interviewed today, were hoping that the strike was a short one; hardly any militant talk.

Paradoxically, the strike is the union's face-saving way of pretending that they put up a fight. Workers who are straggling, will feel a little different after a week without pay, and mortgage payments to be met. [UAW has an $800 million strike fund, but nevertheless an actual strike helps to concretize the abstract notion of unemployment.] Workers won't need much convincing: over the last few years auto-workers have realized that their jobs are really at risk this time around.

There's always a remote chance of miscalculation, but it's slim. GM should be a stronger company, come 2008. I'm glad to report that the decline of unionism continues unabated.

[Links: Two earlier posts about GM and UAW. Here is a somewhat rambling, but informative article, written by someone who used to work on a GM assembly-line.]

Unions: Card-check

A recent post at SparkASynapse got me writing about unions. Though unions have declined in the U.S., they are still a serious and on-going threat: airline unions, autos, and the union I really despise: the public-teachers union (NEA) . (Every time someone tries to introduce even a small measure like "Charter schools", the NEA launches a strong campaign to retain the status quo.)

A while ago, Gus van Horn blogged about auto-unions. He quoted an article that said "GM pays $31.35 an hour. Toyota pays $27 an hour. Not such a big difference. But--thanks in part to union work rules that prevent the thousands of little changes that boost productivity--it takes GM, on average, 34.3 hours to build a car, while it takes Toyota only 27.9 hours."

Actually, the hourly wage is not all that GM pays. Past union contracts have them paying much more in terms of benefits, pensions and retirement health-care. According to another article, "The wages and benefits package for U.S. hourly workers at Ford equaled $70.50 in 2006, up from $64.90 in 2005. More than half of the labor cost is related to benefit expenses, including health care. " The bottom line here is that a worker costs Ford about $140,000 a year, while a worker in a U.S. plant run by Toyota, costs the latter $100,000 each year. Throw in restrictive union-rules and the really amazing thing is how the US "big-three" auto companies aren't already in bankruptcy.

The auto unions have seen the writing on the wall. They know they have to give in now, while the entity they feed off still has life. For instance, they have started to sign deals that allow different wage rates for newer employees. There is also some speculation that they might agree to certain cuts in retirement health-care. I've blogged about this before; so, let's leave the auto-unions be.

A more important question is: have we learned from all this, and are we moving away from unions? Unions have been on the decline. The primary cause of this decline is that workers no longer want them. If 50% of Walmart workers vote for a union, they will get one; but, they do not vote that way. Obviously, at least to this extent, the workers have the correct politics. That's the good news.

The bad news is that some legislators want to change the voting rules. They want to remove the requirement for a secret ballot. They want to replace this with some type of public "vote". This is referred to as "card check". Under a card-check system, a union organizer can go around and get the signatures of employees who want a union. If organizers collect signatures of over 50% of the workers, they will get the union -- no secret ballot required.

Ever met a union thug organizer?

Yes, workers should be able to stand up for what they think is right. However, if that argument holds water, why do we have secret ballots for anything?

What's the main reason offered by politicians who are for this bill? They say that when some workers start to spread the word about unions, companies fire them, and are able to get away with it, since they aren't unionized yet. In truth, this is not the norm, but even if it were, any Objectivist would see why it's important to keep the current system in place.

The real reason unions want to abolish secret ballots is that they know that while many workers are against unions, those workers do not have the philosophical arguments for their stand. When encountered by a persistent union organizer, spewing socialist theory at them, they often nod, express sympathy for the cause, and and go on with their life. Later, in the secrecy of the voting booth, they go with their real view and keep the unions out. Unions want the bully session to end with some type of signature that can be used just like a vote.

Write to your congressman and tell him to uphold secret ballots for unions. [The bill passed the house and was rejected 51-48 by the senate. Tell your congressman not to try again.]

An interesting year for Detroit

2007 will be an interesting year for the "big three" U.S. auto companies, and thus for Michigan. In 2006 and the first few months of this year:

• GM fought off an attempted take over by Nissan, but only because they are the strongest of the three and improving
• Ford finally fired it's useless namesake CEO
• Daimler has given up on Chrysler and walked away from its $35 billion investment, even paying an extra half-billion to be rid of it!
  

Also, in 2006, all three companies had large lay-off programs.

The essential problem of the U.S. automobile industry has been the evasion of reality in the past. Unionization is primarily responsible for the problems. Of course, management has been less than stellar, but management's major mistakes of the past have been to go along with union demands -- taking the easy (and short-term) way out.

When the Japanese auto companies came to the U.S. they ought to have been moving some large parts of their operations into the Detroit area, for the same reason software companies locate in Silicon Valley. They also ought to have been buying up some U.S. auto-firms. This was politically impossible for a single reason: unions. Those who live in the Detroit area would have seen Union halls with "no foreign cars" signs in their parking lots. Well, the chickens have come home to roost!

While the U.S. auto industry is at rock bottom, all is not lost. They could go under, but there is also a large likelihood that 2007 will be the turning point. The most important change is that auto-workers, down to the rank and file, now understand that evasion cannot go on much longer.... and 2007 is the year when the new union contract is negotiated.

One big liability weighing on the U.S. auto companies is their retiree health-care costs. They're huge, but that's not the worst of it: they're also unpredictable and growing as the cost of health care continues to outpace others costs in the U.S. So, 2007 may be the year that the U.S. auto industry finally fixes this problem. The most likely solution is actually very simple in its elegance: let the union run the system.

Imagine how tempting it is to a union boss to say he gets to run a multi-billion health-care fund. In a sense, the workers would be lambs being delivered to their union bosses, but their trust in the union system is what got them here in the first place, so I would cheer for this approach. The automakers will set up a health-care fund that caps their liability, and the union will run it. This has been tried at Goodyear.

If the 2007 union contract can cap the health-care liabilities, and also close loss-making plants and cut superfluous labor, the automakers may have seen bottom. This would have been too much to expect even 5 years ago, but the mood among workers appears ready for it now.

So, I'm optimistic that it's up from here, and that in 2010, Michigan will no longer be near the bottom of the states in economic metrics.