By on May 19, 2010

When the music finally stopped at Old GM, the UAW’s VEBA fund was left holding a lot of IOUs. On those merits, the union’s benefit trust was given about 17.5 percent of the equity in the bailed-out and re-organized New GM. UAW leadership has always maintained that having its membership’s benefits staked on the company’s financial performance would not change its mission, and that VEBA’s representative on GM’s board, Steve Girsky, would operate free from union influence. And one hopes he would, considering he’s being paid well to advise CEO Ed Whitacre. But the tension between GM’s IPO sprint and the UAW’s non-VEBA interests never goes away, and the Wall Street Journal [sub] is reporting that the latest spat is over the old hobbyhorse of buyouts.

The UAW apparently thinks its 2006 again, and is “pressing” GM to bring back buyouts. These cash-for-quitting offers were the preferred method of getting rid of workers who had become too senior to afford, under such great GM CEOs as Rick Wagoner. And the union’s argument is rife with the attitudes of the bad, old days. Let’s not sully the subtleties of the WSJ’s take:

If GM doesn’t thin its ranks, scores of veteran factory workers in the next few years will find themselves without jobs or unemployment benefits.Laid-off factory workers once could remain on GM’s payroll for years receiving almost full pay and benefits, but now they can remain on the rolls no longer than two years before their company-paid unemployement benefits run out.

See? Before, laid-off workers could receive full pay and benefits for years, and now laid-off workers only receive benefits for years. And now, having cut costs all over, GM isn’t interested in paying experienced workers to learn. With production steadily expanding, GM has “restored or created 9,100 jobs” since bankruptcy, and under two-tier wage structures those new workers are being paid competitively. So the old guys who are making nearly twice as much should get their own private bailouts, at the expense of GM’s financial health (on which the larger union’s benefits depend)? Time Magazine knows what’s up, and chronicles the toxic effects of two-tier wages on the union, complete with quotes like “It destroys solidarity.”

But GM doesn’t want to go back to 2006, when it paid $3.8b to buyout 34,000 workers (do the math). With today’s announcement it has essentially ruled out any further buyouts. Now it’s up to the UAW to balance its own competing interests and do the right thing.

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6 Comments on “GM To UAW: Take This Job And Keep It...”


  • avatar
    ihatetrees

    With production steadily expanding, GM has “restored or created 9,100 jobs” since bankruptcy, and under two-tier wage structures those new workers are being paid competitively.

    IIRC, the Journal piece implied that, given the number of UAW old-timers on layoff that have priority for “new” jobs, few low-tier UAW workers have been hired.

    But GM doesn’t want to go back to 2006, when it paid $3.8b to buyout 34,000 workers (do the math).

    Imagine how much better the ‘effen Cobalt could have been if just 1/3 of that amount were spent on small car engineering/design instead of a labor kickback….

    Simply put, unions do have adverse effects on firms’ products/behavior/culture that are deep and problematic toward long term health and profitability.

    • 0 avatar
      pgcooldad

      So how would you explain Ford as of late? It still has UAW old timers making the same money.

      What about the disparity between salaried Domestics vs Transplants that was reported here less than 10 days ago?

      “Salaried workers at the Detroit automakers made $122,963; at foreign competitors, they made $81,506.”
      http://www.thetruthaboutcars.com/center-for-automotive-research-detroit-beating-the-wage-gap/

      I would argue that management has control of a firm’s products/behavior/culture.

    • 0 avatar
      geeber

      pgcooldad: So how would you explain Ford as of late? It still has UAW old timers making the same money.

      Several key models – the Fusion, Milan, MKZ and Fiesta – are produced in Mexico, where labor costs are lower, thus enabling Ford to offer more content at competitive prices in critical market sectors.

      Ford also has a fair amount of debt that it used to pay for its turnaround. That’s the part that people ignore. Instead of going to the government for help, it went to the private sector and borrowed heavily to finance a revamp of the company and the introduction of several key new models.

      At this point, it has been able to manage that debt, but if Ford had gone through a quasi-bankruptcy, too, it would be in even better shape.

      pgcooldad: What about the disparity between salaried Domestics vs Transplants that was reported here less than 10 days ago?

      Not really relevant to the discussion at hand. Focusing on salaries only gives a small portion of the total cost picture. You also have to focus on benefits – which can’t be unilaterally cut for union members and retirees because of the contract. Meanwhile, white-collar employees and retirees have witnessed a reduction in benefits imposed by the company over the last 4-5 years.

      Also note that white-collar employees never had a Jobs Bank. If they were fired, it was unemployment and whatever severance pay they received.

  • avatar
    Doc

    It seems insane to me that any company would pay employees 6 figures (in some cases) to leave. When I have lost jobs, I got a letter of recommendation and that is it. This is what unemployment compensation is for.

  • avatar
    Greg Locock

    Those redundacy payements were negotiated in good faith by adults on both sides. They traded off higher immediate pay rises for long term benefits. With 20/20 hindsight, perhaps one side or the other miscalculated.

    If in your wage negotiations you never had to consider the long term implications of your contract that merely demosntrates your misunderstanding of the situation.

  • avatar
    boyphenom666

    Somebody needs to get it through the union’s head that the old days are over. The customer comes first and if the customer isn’t getting the best car for his money, he is going to go somewhere where he can. You would think that riding market share from 50% down to 20% (and even less in passenger cars) would have been enough to teach them this lesson, but apparently they haven’t learned.

    The same customer-first mentality is also applicable to shareholders. Shareholders are also your customers and if shareholders can’t get an adequate return on their investment, the stock price is going to go nowhere. The UAW may not care, but what about all those shares of GM and Ford stock that are going to be in the 401K plans of employees?


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