April21
(The following editorial is provided courtesy of George Reisman, author of the book Capitalism: A Treatise on Economics. See his blog here.) Where would General Motors be without the United Automobile Workers Union? This is a question that no one seems to be asking. And so I’ve asked it. And here, in essence, is what I think is the answer. (The answer, of course, applies to Ford and Chrysler, as well as to General Motors. I’ve singled out General Motors because it’s still the largest of the three and its problems are the most pronounced.)
First, the company would be without so-called Monday-morning automobiles. That is, automobiles poorly made for no other reason than because they happened to be made on a day when too few workers showed up, or too few showed up sober, to do the jobs they were paid to do. Without the UAW, General Motors would simply have fired such workers and replaced them with ones who would do the jobs they were paid to do. And so, without the UAW, GM would have produced more reliable, higher quality cars, had a better reputation for quality, and correspondingly greater sales volume to go with it. Why didn’t they do this? Because with the UAW, such action by GM would merely have provoked work stoppages and strikes, with no prospect that the UAW would be displaced or that anything would be better after the strikes. Federal Law, specifically, The National Labor Relations Act of 1935, long ago made it illegal for companies simply to get rid of unions.
Second, without the UAW, GM would have been free to produce in the most-efficient, lowest cost way and to introduce improvements in efficiency as rapidly as possible. Sometimes this would have meant simply having one or two workers on the spot do a variety of simple jobs that needed doing, without having to call in half a dozen different workers each belonging to a different union job classification and having to pay that much more to get the job done. At other times, it would have meant just going ahead and introducing an advance, such as the use of robots, without protracted negotiations with the UAW resulting in the need to create phony jobs for workers to do (and to be paid for doing) that were simply not necessary.
(Unbelievably, at its assembly plant in Oklahoma City, GM is actually obliged by its UAW contract to pay 2,300 workers full salary and benefits for doing absolutely nothing. As The New York Times describes it, “Each day, workers report for duty at the plant and pass their time reading, watching television, playing dominoes or chatting. Since G.M. shut down production there last month, these workers have entered the Jobs Bank, industry’s best form of job insurance. It pays idled workers a full salary and benefits even when there is no work for them to do.”)
Third, without the UAW, GM would have an average unit cost per automobile close to that of non-union Toyota. Toyota makes a profit of about $2,000 per vehicle, while GM suffers a loss of about $1,200 per vehicle, a difference of $3,200 per unit. And the far greater part of that difference is the result of nothing but GM’s being forced to deal with the UAW. (Over a year ago, The Cincinnati Enquirer reported that “the United Auto Workers contract costs GM $2,500 for each car sold.”)
Fourth, without the UAW, the cost of employing a GM factory worker, including wages and fringes, would not be in excess of $72 per hour, which is where it is today, according to The Post-Crescent newspaper of Appleton, Wisconsin.
Fifth, as a result of UAW coercion and extortion, GM has lost billions upon billions of dollars. For 2005 alone, it reported a loss in excess of $10 billion. Its bonds are now rated as “junk,” that is, below, investment grade. Without the UAW, GM would not have lost these billions.
Sixth, without the UAW, GM would not now be in process of attempting to pay a ransom to its UAW workers of up to $140,000 per man, just to get them to quit and take their hands out of its pockets. (It believes that $140,000 is less than what they will steal if they remain.)
Seventh, without the UAW, GM would not now have healthcare obligations that account for more than $1,600 of the cost of every vehicle it produces.
Eighth, without the UAW, GM would not now have pension obligations which, if entered on its balance sheet in accordance with the rule now being proposed by the Financial Accounting Standards Board, will leave it with a net worth of minus $16 billion.
What the UAW has done, on the foundation of coercive, interventionist labor legislation, is bring a once-great company to its knees. It has done this by a process of forcing one obligation after another upon the company, while at the same time, through its work rules, featherbedding practices, hostility to labor-saving advances, and outlandish pay scales, doing practically everything in its power to make it impossible for the company to meet those obligations.
Ninth, without the UAW tens of thousands of workers — its own members — would not now be faced with the loss of pension and healthcare benefits that it is impossible for GM or any of the other auto companies to provide, and never was possible for them to provide. The UAW, the whole labor-union movement, and the left-”liberal” intellectual establishment, which is their father and mother, are responsible for foisting on the public and on the average working man and woman a fantasy land of imaginary Demons (big business and the rich) and of saintly Good Fairies (politicians, government officials, and union leaders). In this fantasy-land, the Good Fairies supposedly have the power to wring unlimited free benefits from the Demons.
Tenth, Without the UAW and its fantasy-land mentality, autoworkers would have been motivated to save out of wages actually paid to them, and to provide for their future by means of by and large reasonable investments of those savings — investments with some measure of diversification. Instead, like small children, lured by the prospect of free candy from a stranger, they have been led to a very bad end. They thought they would receive endless free golden eggs from a goose they were doing everything possible to maim and finally kill, and now they’re about to learn that the eggs just aren’t there.
It’s very sad to watch an innocent human being suffer. It’s dreadful to contemplate anyone’s life being ruined. It’s dreadful to contemplate even an imbecile’s falling off a cliff or down a well. But the union members, their union leaders, the politicians who catered to them, the journalists, the writers, and the professors who provided the intellectual and cultural environment in which this calamity could take place — none of them were imbeciles. They all could have and should have known better.
What is happening is cruel justice, imposed by a reality that willfully ignorant people thought they could choose to ignore as long as it suited them: the reality that prosperity comes from the making of goods, not the making of work; that it comes from the doing of work, not from the shirking of it; that it comes from machines and methods of production that save labor, not the combating of those machines and methods; that it comes from the earning and reinvestment of profits not from seizure of those profits for the benefit of idlers, who do all they can to prevent the profits from being earned in the first place.
In sum, without the UAW, General Motors would not be faced with extinction. Instead, it would almost certainly be a vastly larger, far more prosperous company, producing more and better motor vehicles than ever before, at far lower costs of production and prices than it does today, and providing employment to hundreds of thousands more workers than it does today.
Few things are more obvious than that the role of the UAW in relation to General Motors has been that of a swarm of bloodsucking leeches, a swarm that will not stop until its prey exists no more.
It is difficult to believe that people who have been neither lobotomized nor castrated would not rise up and demand that these leeches finally be pulled off!
Perhaps the American people do not rise up because they have never seen General Motors, or any other major American business, rise up and dare to assert the philosophical principle of private property rights and individual freedom and proceed to pull the leeches off in the name of that principle.
It is easy to say, and also largely true, that General Motors and American business in general have not behaved in this way for several generations because they no longer have any principles. Indeed, they would project contempt at the very thought of acting on any kind of moral or political principle.
One of the ugliest consequences of the loss of economic freedom and respect for property rights is that it makes such spinelessness and gutlessness on the part of businessmen — such amorality — a requirement of succeeding in business. Business today is conducted in the face of all pervasive government economic intervention. There is rampant arbitrary and often unintelligible legislation. There are dozens of regulatory agencies that combine the functions of judge, jury, and prosecutor in the enforcement of more than 75,000 pages of Federal regulations alone. The tax code is arbitrary and frequently unintelligible. Judicial protection of economic freedom has not existed since 1937, when the Supreme Court abandoned it, out of fear of being enlarged by Congress with new members sufficient to give a majority to the New Deal on all issues. (Try to project the effect of a loss of judicial protection of the freedoms of press and speech on the nature of what would be published and spoken.)
Any business firm today that tried to make a principled stand on such a matter as throwing out a legally recognized labor union would have to do so in the knowledge that its action was a futile gesture that would serve only to cost it dearly. And a corporation that did this would undoubtedly also be embroiled in endless lawsuits by many of its stockholders blaming it for the losses the government imposed on it.
But none of this should stop anyone else from speaking up and making known his outrage at what the UAW has done to General Motors.
Blame the unions. Of course it is their fault. Not the fact that bean counters and boardrooms have designed inferior cars.
One can argue that the reason the bean counters have designed their cars in the past is out of necessity. In a way, their hand was forced because they had to divert money away from things like interiors in to the pockets of the union members.
The union isn’t solely responsible for GM’s current position, but no one can reasonably argue that they done GM any good recently.
Yes, but if GM built cars with both quality and passion, car that were actually desireable, then they wouldn’t have to offer HUGE discounts to “coerce” the public into buying their inferior products.
AMEN, Brother!
Ksmith has a point…GM had to actually design cars around the Union work rules in order to most efficiently produce them, which in turn led to very poor designs and the advent of poor product differentiation between the brands.
Also, everyone says “why didn’t the bean counters build better quality cars?” uhhh…last I checked UAW pigs were screwing them together…and even poor designs can be built well if the builder puts forth the effort. But, what can you ask for $50 per hr?
well if gm could concentrate more of it funding on the development of the cars we would have much higher quility cars, so yes it is the unions fault. Its every union member who has a broke mentality thinking that they only need to do the minimum to keep their job. That why the quility isn’t there, because the people building them are not accountable to build quility, if they were they would all be fired.
Pathetic. GM, the world’s biggest and richest company for what, 50, 60 years or more, was coerced by the unions. You’ve got to be kidding me.
Secondly, in terms of the whole health care issue that GM is always crying about, management created this. They’ve actively worked against universal health care for decades.
Meaning they wouldn’t be paying the huge costs for employer-sponsored hc if they had just gotten out of the way. Or better, supported a more sane system.
You think Toyota doesn’t INDIRECTLY pay for health care in Japan? Get real. It’s just that it’s delivered a whole lot more efficiently.
Blame the executives that made these lame-ass deals with the union when times were fat. Back when Detroit had mucho market share, EVERYONE thought the gravy-train would last forever. Unionized autoworkers made WAY more than unionize labor performing similar work in other industries.
Example:
Lincoln interiors are some of the nicest in the industry IMO. Among the domestics, I’d say they are the nicest. Materials are good, build quality is spot on, ergonomics are excellent.
Now take a look at Cadillac for comparison. Especially the CTS and SRX. Heck even the STS and DTS are nothing special.
OK, swap the workers out of each factory for a couple of weeks. Does anyone TRUELY believe that anyone would notice a change in workforce? Doubt it. My point is I wouldn’t put the full blame on the Union for the garbage that comes out of the General. They just put together what comes down the line…
All of you speak well; #7, Tom is the most correct. As a full-on Union Hater I have virtually nothing good to say about them. This book is a diatribe however; which may be appropo for a few sentences to make a point (I like to do that..) but I expect more than some right wing Brown Shirt propaganda piece in hardback. It might get to #35,000 on Amazon.. (Betcha more people will have read it here than buy it..)
It’s those guys on the 14th Floor who shoveled out the goodies to themselves and their workers. They got the government too add almost $1500 to a car made in Japan - because the Japanese were ‘unfair’. Detroit deserves to become the next Pittsburg - for almost exactly the same reasons.
j i m
The commies will trash this article and call it B.S. But there’s no escaping reality.
Commies eh? What era are you from? The idea of “commies” ruining things or being a threat is laughable.
GM *does* design cars people want. That is why they sell over a million more vehicles than any other car manufacture in the world. They have no problem selling cars (though the number is declining and they still need to work on turning that around).
What they do have a problem with is their entire profit margin on the vehicles they sell be approriated by the union for their obscene benefit and pay structure.
If GM could rid itself of the union it could not only funnel that money into better designs and quality materials but might actually have a little left over to show a profit for once.
This opinionated “story” is not what this site should be about. While I’m sure there is some proof to back up parts of this arguement, the opinionated way in which it’s written makes you lose all credibility with anyone in your audience with a mental age of greater than 15.
Way to write a balanced piece of journalism.
Yeah unions have made it tough for companies. Unions served there purpose at one time and now seem to be a living dinosaur. However, the Aztec is a good figurehead for GM’s other problem that started more than a decade or 2 ago.
…and they’ll pretend they were defeated when the Soviet Union fell.
GM and the UAW are both to blame. However, the UAW has become so powerful it’s become in-charge and is now harming both parties. It’s the same reasoning the airlines are dying - unions.
-J. You are seriously hilarious. Better put on the tinfoil hat so the “commies” can’t read your thoughts. The “commies” are comming to get us!!! Seriouly, this is 2006, not 1956.
Unions do have there faults, many of them, however, to sit back and blame the union for all of the big threes woes is narrow minded and a big cop out on the part of management. I am pretty sure that the designers who have done nothing but draw up a bunch of ass cars that nobody wanted to buy and the management who did not have the forcite to plan for the future even though they had well over 50% market share should share the blame. Add to that shareholders who required increased dividends even though the manufatures couldn’t generate positive cash flows from their operations.
Lastly, management were the people who signed all of these really rich deals for all of their unionized employees. If they knew those contracts were so detremental, why would they sign them?
If managements sits on their hands and only blames the unions, the big three woes are far from over.
Well this does explain why my 2000 Bonneville SSEI has no problems what so ever compared to the same car built in the US. It was built in Ontario Canada in the Oshawa plant, where they have the far less powerful CAW in place as a union.
Unions suck. They always have, and they always will. They should make laws to eliminate them , just as they made laws long ago to keep them. The time for Unions has come and gone. If we, as Americans, are to SERIOUSLY attempt to compete on the world market for ANYTHING in this day and age, Unions need to GO AWAY FAST.
We need to once again take pride in ourselves and our work, and get off our fat asses (yes I too have one!) and actually do a GREAT job to prove to the world that we can. Unions are only going to continue to make things more expensive here, and other countries and companies will be able to forever undercut us on price and quality. We are doomed if we do nothing and continue on our current course. We are leaving nothing for our children, and we are NOT teaching them the proper way.
You think our auto union is bad…you should look into the German auto unions…
The UAW certainly carries a large part of the blame, but don’t underestimate the stupidity of GM’s bloated management and the uninspired product development teams either. The Fiat fiasco is a good example of GM’s management throwing billions into a derelict company only to pull out of the deal and have to settle for billions more. And do you remember that guy, Ron Zarella(?) who thought that selling cars was less about the product and more about marketing it the way you would market tooth paste and laundry detergent? Maybe that’s why GM numerous brands have become largely irrevalent to younger generations of buyers. Even if their products improve now, it will be very hard to make their brands relevant to kids my age (mid-twenties) whose grew up with parents driving Accords/Camrys/Lexus/Acura etc. and who identify more with import brands.
Although GM/UAW is a marriage of two idiots, GM management and product design have improved. Yet it doesn’t seem like the UAW has awaken to the reality that the world has changed and that their existence is at stake if one of the big 3 falters. GM has made huge strides in product quality and design, although ultimately they are targeting the Japanese, who continue to make similar strides. Honda/Toyota/Nissan are fast moving companies, and I sadly don’t see GM or to a lesser extent Ford and Chrysler moving fast enough to catch up to these moving targets. Future market share for the big 3 will likely continue to dwindle and the companies will have to face the reality that they need to shrink and accept lower market share to stay afloat. I wonder how long it will take for the UAW to realize this as well and how much further their wrangling will harm GM?
This guy kills me! He’s probably never worked in an auto plant and probably hasn’t worked an honest day’s work in his life and has the balls to criticize the UAW? Please, this guy is just a suck hole shill for the corporate robber barons who enrich themselves with untold millions even though at the same time the companies are losing billions of dollars!
To answer the original question of the whole article, GM would be in a better position.
I agree with all those who say its both the UAW and the management’s fault. BUt I lean more against the UAW - about 60/40. I also have to agree with Saud - GM would be better off if they didn’t have to deal with the union. I just don’t see why some schmo with a GED should have the best health care and get paid $50/hr for sitting in a chair and punching buttons while a robot does all the work. Hell, I have a PhD in chemistry and I don’t even get paid that much.
what the..
heh..i bet they didn’t come up with that by themselves
scrapbooking at http://www.scra55pbo55oki8ng101.org/
Hey, number30…. GET THE F&#*$ OFF THIS BLOG with your AD BULL****
Union bashing at its lowest.
Wow I wished I make $50 an hour. I do work at GM and make $45K a year without overtime. I hate this they make $50-75 an hour it isn’t true. Also 10mm tolerence WTF!!! Not at the Moraine Assmebly plant we keep it 3mm. But of course we aren’t UAW we are IUE-CWA but heck we did just agreed on our contract that allows in a 3rd teir wages.
But if the Bean Counters would of use a 6 cent part except for the 5 cent part that they OK’ed. Then Maybe GM didn’t have to fix that 5 cent part with the 6 cent part in a recall.
If GM wasn’t loosing market share like they are. If GM sold 1 million more vehicles a year. You wouldn’t hear any of this trouble that GM is having. You wouldn’t have this Job bank problem, Yes we would still have the Legacy costs. But the Unions as a whole understand the issues at hand and that is why we agreed to the changes 2 to 1.
Talk about out of date wanker rambling. While UAW behavior has done no one any favors, they were not management - management made the final decisions, and the blame rests at their feet. Do you really think the hostility between the Unions and management in Detroit was one sided? The Japanese and Germans face workforce and labor rules as well, yet they have managed to have much more civil and productive relationships. If the big three had not spent so much time being hostile to the unions (remember Fords skull cracking squad) the UAW culture would likely be a lot more sympathetic to the problems these companies face. As recently as a decade ago GM was making billions, but they wasted all that money on an endless series of poor management decisions (and you know the managers involved never once had their million dollar retirement packages threatened). This is a company that recently launched 3 new minivans that are not only not competitive on ANY level, but whose launch and design budgets swallowed millions that could have been used elsewhere. That they ever received production approval is a clear reminder of the myopia that infects Detroit’s automotive management. And how exactly is this the UAW’s fault? Its always amusing to read union bashing rambling when we live in a country where corporate welfare and absurd executive compensation, regardless of performance, are taken as part of “normal” market forces.