After digesting all of the articles written on the new agreement and listening to talking heads talking about the deal for the past 24 hours, I come away with the real impression that GM has pulled a fast one on the UAW. Healthcare has been a real albatross around GM's neck during the past decade and the UAW has steadfastly fought to maintain full benefits for its rank & file workers and retirees.
In a way, GM used a bit of reverse psychology and gave the union the right to manage its own healthcare costs for its members through a VEBA (voluntary employees' beneficiary association) that GM will contribute $0.70 on the dollar to cover these obligations. With spiraling healthcare costs, people living a lot longer and union membership shrinking, the UAW may have taken on this huge burden without thinking through the "real" long-term cost implications. Not to mention setting the Canadian Auto Workers (CAW) up for failure in next years negotiations. With Canada's national healthcare program, GM does not have the healthcare burden it did in the U.S. and the CAW has managed to negotiate higher wage levels due to this fact. Kiss those higher wages goodbye.
The UAW also agreed to a two-tier wage system that is sure to come back to haunt them in 5-10 years. With GM "strongly encouraging" older union members to retire, only to be replaced with cheaper alternatives, the UAW has retained control over these new hires albeit at 40-50% less wages that current members.
In effect the UAW has made its current members more secure (with small signing bonuses to boot) while sacrificing future member's earning power. Then again, they did save the mystical jobs-bank. Who said paying workers not to work was bad fiscal policy?
Thursday, September 27, 2007
Tuesday, September 25, 2007
UAW vs. GM = No Winners
I am visiting several clients in Detroit this week as the United Auto Workers strike against General Motors. The local news coverage is very pro-UAW and shows video clips of workers picketing local assembly plants and railing against the proposed healthcare concessions that GM is demanding at the negotiation table. So who is to blame in this clash of union vs. management?
If you ask me, both the company and the UAW share an equal share of the blame. UAW workers are among the hardest working workforce in the world. They are also among the highest paid. GM has only recently understood the impact of its enormous legacy healthcare and retirement costs. About twenty years too late.
The stark reality is that GM must fundamentally change its cost structure including vehicle assembly costs in order to be competitive with Japanese, Korean and soon-to-come China-made cars. It isn't a negotiation bluff by GM. With healthcare and benefit costs, GM pays its UAW workers an average of $35-40 per hour. Toyota, Honda and Nissan pay its non-union workers $12-17 per hour including benefits. Continuing with the status quo or even half of the status quo isn't an option.
Obviously, the UAW disagrees with these assumptions. Providing job security and continuation of current compensation levels are paramount to their position. Unfortunately, current market conditions are forcing GM to dig in hard and challenge the UAW on the percentage of healthcare obligations that they are willing to cover. I predict that the strike will come to an end in the coming weeks as both sides would be severely damaged by a prolonged labor strike.
Personally, I have several close relatives that are lifelong UAW members. They work extremely hard and strongly believe that management should shoulder their fair share of these increasing costs. Large white collar bonuses and salaries, company cars and other executive perks don't go over very well with these blue collar men and women. That being said, they are very frustrated with the UAW itself. Its protection of non-productive workers, drug addicts and alcoholics has dampened their rock-solid pro-union stance.
Twenty years ago, I was a union member and walked the picket line for two weeks as a 19-year old grocery store clerk (United Food & Commercial Workers Local 876). I paid $8.06 a week in union dues. Did I mention that I made $3.35 per hour? So it took me 2 1/2 hours of working part-time just to pay my dues each week. At the conclusion of our strike, a two-tier wage system was adopted -- full-time workers got $15/hour and part-time workers capped out at $8/hour. In hindsight, it was necessary for the grocery store chain to survive but as a 19-year old employee, I was not pleased and angry with the result.
Makes you wonder if this situation will eventually go the direction of a two-tier wage system.
If you ask me, both the company and the UAW share an equal share of the blame. UAW workers are among the hardest working workforce in the world. They are also among the highest paid. GM has only recently understood the impact of its enormous legacy healthcare and retirement costs. About twenty years too late.
The stark reality is that GM must fundamentally change its cost structure including vehicle assembly costs in order to be competitive with Japanese, Korean and soon-to-come China-made cars. It isn't a negotiation bluff by GM. With healthcare and benefit costs, GM pays its UAW workers an average of $35-40 per hour. Toyota, Honda and Nissan pay its non-union workers $12-17 per hour including benefits. Continuing with the status quo or even half of the status quo isn't an option.
Obviously, the UAW disagrees with these assumptions. Providing job security and continuation of current compensation levels are paramount to their position. Unfortunately, current market conditions are forcing GM to dig in hard and challenge the UAW on the percentage of healthcare obligations that they are willing to cover. I predict that the strike will come to an end in the coming weeks as both sides would be severely damaged by a prolonged labor strike.
Personally, I have several close relatives that are lifelong UAW members. They work extremely hard and strongly believe that management should shoulder their fair share of these increasing costs. Large white collar bonuses and salaries, company cars and other executive perks don't go over very well with these blue collar men and women. That being said, they are very frustrated with the UAW itself. Its protection of non-productive workers, drug addicts and alcoholics has dampened their rock-solid pro-union stance.
Twenty years ago, I was a union member and walked the picket line for two weeks as a 19-year old grocery store clerk (United Food & Commercial Workers Local 876). I paid $8.06 a week in union dues. Did I mention that I made $3.35 per hour? So it took me 2 1/2 hours of working part-time just to pay my dues each week. At the conclusion of our strike, a two-tier wage system was adopted -- full-time workers got $15/hour and part-time workers capped out at $8/hour. In hindsight, it was necessary for the grocery store chain to survive but as a 19-year old employee, I was not pleased and angry with the result.
Makes you wonder if this situation will eventually go the direction of a two-tier wage system.
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