The UAW Didnt Learn From General Motors Bankruptcy – Forbes

Members of the United Auto Workers (UAW) who are employed at the General Motors Co. Flint Assembly plant in Flint, Michigan, picket outside of the plant as they strike on September 16, 2019. - The United Auto Workers union began a nationwide strike

A decade ago, the United Auto Workers were forced to negotiate a new labor contract that more or less accomplished what Senator Bob Corker (R-Tenn.) demanded as a concession for his support of a government bailout. Without reversing the practices forced upon automakers in contract negotiations since the 1980s, Corker understood that a bailout would be meaningless, leaving the Detroit 3 vulnerable to the next recession or economic crisis. The UAW fared better under the 363 bankruptcy than it would in Chapter 7 or 11, but it had to acquiesce to demands that restored labor to a variable cost and removed the gold-plated health care obligations that retirees enjoyed off the balance sheet. Work rules and job classifications were streamlined at the factory level, and the onerous and ridiculous Jobs Bank paid laid-off workers more than 90 percent of their normal wages while doing nothing.

I have always held these companys managements responsible for putting short-term objectives ahead of facing down the Union and its ever-greater demands that brought the domestic automakers to this crisis. The tool the Union used is the same as we see today select a target and threaten to strike while allowing domestic rivals to capture market share during the shut-down period. Detroits myopia was so ingrained that it failed to understand the financial consequences of what the target company agreed to. The target auto company executives often misguidedly saw it as an opportunity to negotiate favorable terms for itself while punishing domestic rivals. That shortsighted behavior usually included the assumption that in due course the transplant factories in the south would be unionized, which, of course, has not happened, nor will it. Todays strike only reinforces to the transplant workers that they are protected by working for financially strong companies and not by a contract.

At the end of one negotiation, I sipped wine past midnight in Hyatt Regency Dearborns bar while commiserating with Don Ephlin, then the head of the GM branch of the UAW. The negotiations were done, and Don, his assistant and I talked about the impact of the contract terms GM agreed to. Don understood more than other UAW leaders that the Union was doing itself and its members long-term harm. He asked me how I thought Roger Smith, the CEO of GM at the time, would present the contract to investors the next day, and I replied, Like he has in the past. Hell say that the additional cost will be spread over the volume as GM gains share, and hell skirt the issue that national and local contracts aimed at creating jobs will add fixed costs to already-struggling companies. Don probably understood the threat that the U.S. auto industry was under better than some of the executives in the auto companies. He participated with me and representatives of all major international auto companies in MITs decade-long study of manufacturing practices, which revealed Japans competitive advantage. Don understood that the only way the UAW would grow was by representing workers in financially strong companies, something UAW leadership in the 1990s and 2000s (until the bankruptcy) never learned.

The current contract talks are trying to claw back what was given up in the 2009 bankruptcy negotiations. Now that GM is financially sound, the Union wants to protect jobs by converting temporary workers into permanent ones. They want cost of living raises, forgetting that GM paid the average worker a $14,000 profit sharing bonus last year. The Union wants the Lordstown, Ohio plant reopened; a path to give temporary workers full-time status; and wants to eliminate two-tier compensation for new hires, no doubt raising all salaries to the wages and benefits of legacy workers. No doubt, when local contracts are negotiated, there will be demands for more Union representatives in the factories paid by the companies and restored work rules that reduce productivity and increase costs. All the while, the UAW sees more members. The once 700,000-member Union now has fewer than half that number.

I give Mary Barra high marks for announcing the closure of eight plants, including three assembly plants last November, since the company was able to take logical restructuring actions without the impediment of potential job protection claw backs in a new contract. GM made the final (hopefully) move to right size its assembly footprint and production cost structure.

GMs current leadership has been responding to the unprecedented uncertainties surrounding the future of the auto industry. While I highly doubt that we will see autonomous electric vehicles in fleets or my garage for many years, competition in the global auto industry has never been more intense. The Chinese auto industry is ascending, having learned much from the technology transferred by foreign automakers partnered with major Chinese players. Global supply chains are under threat, and costs associated with tech-heavy vehicles have raised the price to consumers, pushing new cars outside their budgets. Mergers and collaboration among automakers has never been more intense and is also reshaping competition. The UAW should understand that if it returns to its past practices, it will put the Detroit 3 on the path toward lower profitability and risk becoming unable to field a competitive product portfolio. Chrysler continues to search for a partner, and Ford bonds are now rated Ba1 (junk) after five of the best years the industry has seen in a long time.

Lest I be seen as anti-union in my comments, my father was a Union member his entire working life and a Union leader in his factory, and my sister was a unionized teacher for more than 30 years, I understand the importance of representation that levels the playing field between the institution and the individual. But I also understand that it's the Union, akin to fate, which plays a key role for each job, factory and as a whole. Putting short-term objectives at the forefront without understanding the environment in which institutions operate got us where we are today.

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The UAW Didnt Learn From General Motors Bankruptcy - Forbes