UAW Holds Out for Utopia and Kills a Fair Deal

Another Unconstitutional Bailout may have been sunk by the intended beneficiary’s greed.

On Wednesday the House of Representatives passed a bill to bail out GM and Chrysler with some $14 Billion.  Thursday night, after feverish negotiations, the Senate rejected a bailout because the UAW refused to agree to the terms Senators proposed.

Friday morning United Auto Workers Union (UAW)  President Gettelfinger held a news conference and petulantly blamed Republicans and other auto company stakeholders for scuttling the bailout.  He said in part:

The demand by the Senate GOP caucus would have no question treated workers differently from every other stakeholder instead of leaving it to the auto czar to work out the timetable and the mechanism for implementing sacrifices by all of the stakeholders.

…we were prepared to make further sacrifices…But we could not accept the effort by the Senate GOP caucus to single out workers and retirees for different treatment and to make them shoulder the entire burden of restructuring.

Yep.  The UAW members would have been treated better than the bond holders who were to give up 70% of the debt they were owed in exchange for stock of dubious value.  Share holders would have suffered a  loss in value because the number of shares outstanding would increase by the number given to the bond holders.  Suppliers and dealers were to make concessions.  The only thing asked of the UAW was that they give up some of their most lavish and expensive benefits and settle for a compensation package that approximated market value for factory workers.

Gettelfigner excoriated Senators who insisted that the UAW agree to wages and compensation that were “competitive” with those paid American workers in American plants owned by foreign auto makers including Toyota.  He claimed to have  research showing Toyota employees at a plant in Kentucky making, with bonuses, $30 per hour, compared to $28.12 per hour paid to UAW workers at the Detroit automakers. One wonders: if members are actually paid less than non-union Toyota workers, why do they need the UAW?

Mr. Gettelfinger  forgot to mention the vast difference in the cost of benefits plus continuing support of some 700,000 retirees.  GM-Ford-Chrysler are supporting more than twice as many retirees as active workers.

Toyota, having learned from the Detroit’s follies has a strategy of paying bonuses when business is good, rather than repeat the GM-Ford-Chrysler mistake of agreeing to permanent increases in compensation, that cannot be reduced when times are bad.

There would have been little Congressional support in a bailout, were it not for the UAW.  The Democratic party owes the UAW a lot and the union presented its bill in the form of demands for bailout cash to keep the Detroit Auto Companies from embarking on a Chapter 11 bankruptcy restructuring that would have nullified the union’s contracts.

The Detroit auto companies would not have come so desperately close to insolvency were it not for their long history with the UAW.  At the end World War II, with the industrial infrastructures of Europe and Japan  reduced to rubble, American auto companies, especially General Motors, enjoyed an almost mythical age of uninterrupted prosperity, generating unprecedented profits by producing exuberantly styled cars of opulent size, and ever more powerful engines, guzzling cheap gas.

During this euphoric era the UAW established a pattern of demanding new contracts every two or three years with ever increasing wages and ever more expensive benefits, including extravagant health insurance and retirement packages.  Management gave in because sales and profits continued to grow anyway.

All was well until a series of challenges weakened the goose that was laying the golden eggs.

• Foreign competition
• Sudden increases in gasoline prices
• Onerous new government regulations

Management’s disastrous response, during the Seventies and Eighties, was to downgrade product quality, and diminish the differences between low, medium, and high priced brands.  In the meantime the union continued to win increasingly expensive compensation packages, including the Jobs Bank, a program that kept laid off workers on the payroll indefinitely, earning almost full wages and benefits.

Since the early Nineties, the companies have steadily improved quality, innovation and technology and are now building world class cars.  But the so-called “legacy costs” of seven decades of submitting to union demands still dog them, preventing them from becoming profitable.

Even though the companies are at the very brink of collapse there are still thousands of employees being paid for no work at all, through the Jobs Bank program.  This article in today’s Detroit Free Press mentions a 47 year old man who hasn’t worked in a plant for four years but is still collecting 95% of regular wages and benefits from Chrysler through the Jobs Bank program. He wanted readers to be impressed with the hardship he endures:

…most people don’t understand that he had received overtime pay for several years straight before he went into the jobs bank. The jobs bank pay is based on 40 hours without any overtime and represents a significant pay cut from those days.

He said he’s taking home about $600 a week now after taxes and other deductions [and] he’s stayed in the jobs bank because he’d like to retire after 30 years at Chrysler.

“I have eight years to go,” he said. “And the way things are going right now, it’s not looking too good.”

Just to make sure there’s no misunderstanding, this individual worked in a Chrysler plant for eighteen years, until he was laid off.  He has been paid for not working for four years so far, and before the financial crisis he expected to continue to be paid for no work for eight more years, and then to “retire” at age 55, on a full pension, that would likely pay him for 25 – 30 more years.  And he wants you to feel sorry that his Jobs Bank pay, for not working, doesn’t include the overtime he used to earn!

To save the jobs bank and other extravagancies, the UAW demanded that government fund the Detroit companies with some $15 Billion, extracted from millions of taxpayers whose own jobs or businesses are risk, few of whom enjoy the fabulous benefits of UAW members.  Nobody believes the $15B would last more than a few months.  Everyone believes the government would have to continue giving the auto makers cash transfusions for many years.

Late in the Day the Bush Administration indicated it might cut the auto makers a check out of the $700 Billion Financial Institiution Bailout Congress passed in October.  No word yet on whether the UAW would be required to join the rest of us in the real world.