National Seniority Protocol

[pilotyip]

Blackmail I tell you.

back to blaming the woes on unions.....

Why not they play a major part in the running of companies and communities with their blackmail imposed contracts.

 

[Rez O. Lewshun]

Why not they play a major part in the running of companies and communities with their blackmail imposed contracts.

want to try agian... (and again, and again..... )
Unions and Business

One of the themes of the GM debate goes like this. On the one hand, the UAW is the problem, because it’s the high cost of union labor (and in particular, union retiree health benefits) that is crippling U.S. automakers. On the other hand, the UAW negotiated for those benefits fair and square, giving up higher current wages as part of the bargain, so it’s the fault of management for making promises they couldn’t keep. On the third hand, the UAW should have realized that when you negotiate for retirement benefits from a private corporation, one of the risks you take is that that corporation might go bankrupt. (For one example of these arguments, see Room for Debate at the NYT.)
Instead of touching that question any more than I already have, I wanted to raise the larger issue of whether unions are bad for business – which is what you would assume, given the lengths many companies go to in order to prevent unions from gaining collective bargaining rights. In general, this is a hard question to answer empirically. While you can observe differences between companies with unions and companies without unions, there is a huge problem of selection bias: since companies with unions are unlike companies without unions in many ways, you can’t say whether any differences in outcomes are due to the effect of the unions themselves, or due to the effect of other factors that would be there regardless of the unions.
John DiNardo and David Lee have an elegant way of getting around this problem in a 2004 paper, “Economic Impacts of New Unionization on Private Sector Employers: 1984-2001.” (The real economists out there probably know this paper already.) Instead of comparing all companies with unions to all companies without unions, they focus on companies where the union certification vote either barely won or barely lost, since these two companies are very similar to each other except for the treatment effect (having collective bargaining rights). This isolates the effect of unionization from other characteristics of the companies in question. They find that unions that barely win an election are successful in obtaining a collective bargaining agreement. Otherwise, however, the effect of successful unionization is insignificant on the company: differences in wages, employment, productivity, and output are all insignificant.
The UAW, historically, is a special case which people can debate for as long as they want. But the evidence is that in recent decades unions are not dangerous to firm survival.
Update: I forgot to add a link to a shorter summary of the work.

 

[pilotyip]

want to try agian. On the other hand, the UAW negotiated for those benefits fair and square, giving up higher current wages as part of the bargain, so it’s the fault of management for making promises they couldn’t keep. On the third hand, the UAW should have realized that when you negotiate for retirement benefits from a private corporation, one of the risks you take is that that corporation might go bankrupt.

Especially when they drove them into BK.

 

[PCL_128]

Especially when they drove them into BK.

Such a simple little man. UAW pensions did not drive GM and Chrysler into bankruptcy. Horrible management that has produced hardly any cars that Americans are actually interested in buying for the past four decades did that. Perhaps you should put aside the knee-jerk labor-hating for a moment and actually look at the Big 3's business history for once. You would think that you would know something about it, since you've been carrying their parts all over the country for so long, but apparently you never stopped to see what their business model actually was.

 

[pilotyip]

Such a simple little man. UAW pensions did not drive GM and Chrysler into bankruptcy. Horrible management that has produced hardly any cars that Americans are actually interested in buying for the past four decades did that. Perhaps you should put aside the knee-jerk labor-hating for a moment and actually look at the Big 3's business history for once. You would think that you would know something about it, since you've been carrying their parts all over the country for so long, but apparently you never stopped to see what their business model actually was.

Only know what I read in the WSJ. He said GM managemnt failed to confront the UAW.
Joseph B. White
Senior Editor, The Wall Street Journal
How Detroit's Automakers Went from Kings of the Road to Roadkill
JOSEPH B. WHITE is a senior editor in the Washington, D.C., bureau of The Wall Street Journal. A graduate of Harvard University, he has worked for the Journal since 1987, and for most of that time he covered the auto industry, serving as Detroit bureau chief from 1998-2007. He writes a weekly column on the car business and the regulatory and social issues that surround it for the Journal's online and print editions, and contributes new-car reviews to SmartMoney magazine. Mr. White is co-author (with Paul Ingrassia) of Comeback: The Fall and Rise of the American Automobile Industry, and won the Pulitzer Prize for reporting in 1993.

How does a juggernaut like this become the basket case that we see before us today? I will oversimplify matters and touch on five factors that contributed to the current crisis—a crisis that has been more than 30 years in the making.
First, Detroit underestimated the competition—in more ways than one.
Second, GM mismanaged its relationship with the United Auto Workers, and the UAW in its turn did nothing to encourage GM (or Ford or Chrysler) to defuse the demographic time bomb that has now blown up their collective future.
Third, GM, Ford, and Chrysler handled failure better than success. When they made money, they tended to squander it on ill-conceived diversification schemes. It was when they were in trouble that they often did their most innovative work—the first minivans at Chrysler, the first Ford Taurus, and more recently the Chevy Volt were ideas born out of crisis.
Fourth, GM (and Ford and Chrysler) relied too heavily on a few, gas-hungry truck and SUV lines for all their profits—plus the money they needed to cover losses on many of their car lines. They did this for a good reason: When gas was cheap, big gas-guzzling trucks were exactly what their customers wanted—until they were not. The high margins on these cars allowed them to fund legacy costs.
Fifth, GM refused to accept that to survive it could not remain what it was in the 1950s and 1960s—with multiple brands and a dominant market share. Instead, it used short-term strategies such as zero percent financing to avoid reckoning with the consequences of globalization and its own mistakes.
GM and the UAW
This brings me to the relationship between Detroit management and the UAW. It is likely that if no Japanese or European manufacturers had built plants in the U.S.—in other words if imports were still really imports—the Detroit carmakers would not be in their current straits, although we as consumers would probably be paying more for cars and have fewer choices than we do. The fact is that the Detroit Three's post-World War II business strategies were doomed from the day in 1982 when the first Honda Accord rolled off a non-union assembly line in Ohio. After that it soon became clear that the Japanese automakers—and others—could build cars in the U.S. with relatively young, non-union labor forces that quickly learned how to thrive in the efficient production systems those companies operated.
Being new has enormous advantages in a capital-intensive, technology-intensive business like automaking. Honda, Toyota, Nissan, and later BMW, Mercedes, and Hyundai, had new factories, often subsidized by the host state, that were designed to use the latest manufacturing processes and technology. And they had new work forces. This was an advantage not because they paid them less per hour—generally non-union autoworkers receive about what UAW men and women earn in GM assembly plants—but because the new, non-union companies didn't have to bear additional costs for health care and pensions for hundreds of thousands of retirees.
Moreover, the new American manufacturers didn't have to compensate workers for the change from the old mass production methods to the new lean production approach. GM did—which is why GM created the Jobs Bank. The idea was that if UAW workers believed they wouldn't be fired if GM got more efficient, then they might embrace the new methods. Of course, we know how that turned out. The Jobs Bank became little more than a welfare system for people who had nothing more to contribute because GM's dropping market share had made their jobs superfluous.
Health care is a similar story. GM's leaders—and the UAW's—knew by the early 1990s that the combination of rising health care costs and the longevity of GM's retired workers threatened the company. But GM management backed away from a confrontation with the UAW over health care in 1993, and in every national contract cycle afterwards until 2005—when the company's nearness to collapse finally became clear to everyone. In testimony before Congress this December, GM's CEO Rick Wagoner said that GM has spent $103 billion during the past 15 years funding its pension and retiree health-care obligations. That is nearly $7 billion a year—more than GM's capital spending budget for new models this year. Why wasn't Rick Wagoner making this point in 1998, or 1999, or even 2003? Even now, GM doesn't seem willing to treat the situation like the emergency it is. Under the current contract, the UAW will pay for retiree health-care costs using a fund negotiated in last year's contract—but that won't start until 2010. GM is on the hook to contribute $20 billion to that fund over the next several years—unless it can renegotiate that deal under federal supervision.
Since all of you are now part owners of this enterprise, I would urge all of you to pay close attention, since what's about to unfold has no clear precedent in our nation's economic history. The closest parallels I can see are Renault in France, Volkswagen in Germany, and the various state-controlled Chinese automakers. But none of these companies is as large as GM, and none of these companies is exactly a model for what GM should want to become.
As I have tried to suggest, it's hard enough for professional managers and technicians—who have a clear profit motive—to run an enterprise as complex as a global car company. What will be the fate of a quasi-nationalized enterprise whose "board of directors" will now include 535 members of Congress, plus various agencies of the Executive Branch? As a property owner in suburban Detroit, I can only hope for the best.

 

[PCL_128]

Only know what I read in the WSJ.

Why does that not surprise me?

 

[pilotyip]

Actually a lot more than that

Why does that not surprise me?

I read a lot of other things also, it just happens the WSJ hit the buttom on the union problems at GM. Care to comment on the article?

 

[PCL_128]

I read a lot of other things also, it just happens the WSJ hit the buttom on the union problems at GM. Care to comment on the article?

It's actually not a horrible article. He lists many, many problems at GM. The only complaint I have is that he focuses almost singularly on the labor issues after listing five other problems that are far more dire. Nothing is more important than building cars that consumers want to buy, and that is where GM has failed most of all over the past four decades.

As for the labor issues related to retiree benefits, I believe the only solution is a government assumption of the obligations contingent upon the UAW agreeing that no new workers will receive those benefits. Protect the workers that worked under those terms while eliminating the costs for future workers. Sadly, I don't think anyone in Congress has the balls to propose it, so we'll probably end up with many more years of labor strife before GM finally liquidates after continuing their horrible business model.

 

[livin'thesim]

What would be an interesting number to know is that average labor cost component of a typical UAW-produced car and the typical labor cost component of a non-UAW produced car. Probably, you would need to analyze a large sample of makes and models to come up with a meaningful analysis.

If the labor cost component of a UAW-produced car was sufficiently large compared to non-UAW, then clearly the non-UAW produced car would have a cost advantage.

The total cost of the car is based on the cost of its materials and labor, plus the overhead that the company operates with (corporate debt load, managerial overhead, tax implications, currency exchange rates, etc). All other things being equal, labor is like any other cost. If one company pays more for it, they have a price disadvantage.

The problem is that we don't know what is equal and what isn't equal. To assume that all car companies operate in an identical environment with labor costs being the sole exception is not a very sophisticated view.

I would also argue that labor unions are not necessarily an example of non-free market principles. The argument I would make is that at any time, workers could decertify their union and attempt to strike individual deals with management. There is no law preventing this.

When we talk about free markets, it is generally meant that it is not government regulated. If congress passed a law that said all airlines must unionize or may not unionize, then you have something that is not free market. Labor unions are a choice that is made collectively by participants in the labor market.

Collective bargaining agreements represent a change in the flow of a free market, just as if you put a bunch of rocks in the river. The water still flows, just differently.

If the managers of GM can't run the company, they should lose their jobs. If the UAW strikes a bad deal for its workers, they will elect new leadership. If the UAW strike a bad enough deal, then the workers may decertify. If no profit can be made, the company should cease operations and thusly create an opening for a competitive operation to take its place.


The charged political atmosphere will probably not allow us to know the whole truth for years to come about the downfall of GM, since both sides will see any potential cause as a potential political token for the opposition.

That said, there is little discussion here that touches on the mathematics of the issue. I think everyone would agree that a $5,000 per year pension after working 30 years is too little, and a $500,000 per year pension after working 10 years is not possible, nor justifiable.

So what is the appropriate level of compensation and pension provision?

Should retired workers get 100% of their salary for life? 80%? 50%?

Is there a 'morally correct' answer, or is it just as simple as whatever you can negotiate?

Who should be in charge of investing the pension's funds? Who should bear the cost of any miscalculations? The company? Management? If the union is in charge of managing the money should they take the hit? If the fund runs low, should new employees get less? Should the pain be spread evenly? I would suggest that the average person has not spent much time debating these question.

Without a look at the actual numbers, any attempt accuse or acquit the union with regard to GM's failure is just speculation.

 

[livin'thesim]

As for the labor issues related to retiree benefits, I believe the only solution is a government assumption of the obligations contingent upon the UAW agreeing that no new workers will receive those benefits. Protect the workers that worked under those terms while eliminating the costs for future workers. Sadly, I don't think anyone in Congress has the balls to propose it, so we'll probably end up with many more years of labor strife before GM finally liquidates after continuing their horrible business model.

This would be a very good idea if the government had been running large surpluses for decades and was a net creditor globally. As it is, we are a net debtor by a very worrisome margin.

In that instance, taxes paid in over the years would have been saved up, and the government would release that money to make good on those pension obligations.

The problem is that the Treasury has been issuing bonds like crazy, including very long-term debt. This means that agreements between retirees and management that were forged years ago will be made good by interest and principal payments made by people who are today in grade school.

What essentially occurs then is that private individuals, labor and management, enter a contract that for various reasons cannot be met financially.

There is always the PBGC money, which is there for that reason, but they are terribly underfunded. Bailing out the PBGC would be the same as just giving the money directly to the retirees, so the net effect is the same, making someone else pay for it.

But I fail to see why the failed financial contract between two contemporary parties should be financed with 30-year debt paid for by future generations that:

1) Had no say in the process that created the problem
2) Have no say in the decision to financially obligate them
3) Will never enjoy the benefits of the contract that they will pay for
4) Were without fault in causing the problem

Each generation should pay its own way and accept the outcome of life as it is. The people currently retiring from GM did not enter the workforce under crushing debt obligations, so it is unfair for them to place others under that obligation.