Tuesday, July 26, 2011

Will The UAW Never Learn?

Yesterday's Wall Street Journal carried this headline for its Marketplace section's lead article,

For UAW, Jobs Trump Pay

Will this union never learn?

The article begins with comments from a Flat Rock, Michigan Ford employee who asserts,

"We know that we need more product in the contract because that will mean more jobs and job protection for the rest of us."

Job protection. What a quaint notion, eh? Especially in a company in a sector, which had to be rescued by the federal government, so badly was it mismanaged due to management's ineptitude in dealing with the UAW's egregious demands.

The article goes on to list some comparative hourly wage rates:

$58 for Ford
$58 for GM
$49 for Chrysler
$27 @ Volkswagen in Chattanooga, TN & Hyundai in Montgomery, AL

Those Ford and GM numbers equate to a rough gross annual cash compensation of $111,360. Chrysler is paying about $94K/year. Obviously, the right-to-work Tennessee and Alabama compensations are about half that, or just under $52K.

Meanwhile, the UAW is pushing hard, with German labor officials, to unionize Volkswagen's Tennessee operation. Interviews reported in the Journal with employees at the plant aren't particularly enthused and, at best, are open to hearing why they should join the UAW.

Not so promising for the union guys, is it?

Let's consider what's really going on here. Foreign auto makers locate their plants in Southern, right-to-work US states so they can be competitive with cars and trucks which they hope to sell to Americans.

Unfortunately for GM, Ford and Chrysler, their legacy plants leave them stuck in closed shop states in which they are forced to pay about twice as much per employee. Those cars and trucks, too, are destined for US consumers. With Boeing's recent attempt to open a second Dreamliner assembly plant in South Carolina under union attack, the Big 3 can't ever hope to simply move production south of the Mason-Dixon Line.

I'm guessing Ford, GM and Chrysler build as few vehicles as possible in Michigan and other northern plants. In an ideal world, they'd shut them and locate near their competitors' plants in the South. But that's obviously impossible.

From that perspective, what could the UAW possibly offer to get any of those assemblers to commit to more jobs, in a contract, at those sky-high wage rates? No wonder Ford, GM and Chrysler all want to move to more profit-sharing for union workers, and, I'm sure, in time, health care premiums more in line with their white-collar workers.

Is it really possible that rank and file UAW workers at Ford, GM or Chrysler, having witnessed the carnage in their sector in the past three years, really believe any of those managements can offer 'more jobs,' let alone 'job protection?' Hell, they're lucky that the Democratic administration repaid the UAW's election efforts by stiffing legitimate bondholders, short-circuiting a conventional Chapter 11 bankruptcy for GM and Chrysler, and handing over significant chunks of the companies to the UAW.

If a reorganization had put the profitable parts of those two companies up for bid, it's not even clear any of the buyers would have retained the Michigan plants. They may have just bought machinery, licenses to IP and various trademarks and patents, and re-opened production somewhere in the South.

It's truly comical that UAW members think that, global trade and competition notwithstanding, they should earn north of $100K/year for fastening subassemblies together for commodity cars and trucks selling in a hotly-competitive US market.

When will they learn?

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