UAW: Do or Die at DENSO?

Frank Williams
by Frank Williams
uaw do or die at denso

Desperate times call for desperate measures. Facing falling membership, the United Auto Workers (UAW) is rapidly expanding into non-automotive industries like education and health care. Meanwhile, the UAW continues its full-court press against Toyota and Honda's American factories. So far, the union's attempts to transplant unionism into the transplants' plants have been an abject failure. But try they must. And now there's a new object of their affections: Japanese parts maker DENSO.

Sean McAlinden, analyst for the Center for Automotive Research, outlines the target– and the stakes. "For the survival of the union, they have to start organizing the Toyota system in North America. Right at the head of the line is DENSO.''

DENSO is Japan's largest auto-parts company. Twenty-one percent of DENSO's total $31.1b annual sales come from North America. Stateside, DENSO has ten factories in six states employing over 6,800 [non-union] employees. DENSO supplies all three U.S. automakers and Toyota (which owns 23 percent of the company). In North America, 45 percent of their business lies with The Big 2.8. And here's where the plot thickens.

The Big 2.8 are currently negotiating their UAW contracts. One of their main goals: [s]dump[/s] transfer responsibility for retirees' health care onto the union via a union-administered Voluntary Employees' Beneficiary Association (VEBA) superfund. The union is fully aware that Wall Street is hot for the deal, which means the automakers want the VEBA more than anything else (save sales). The UAW is using this leverage to their full advantage.

U.S. labor laws allow employers to openly campaign against a union's attempts to organize their workers. UAW negotiators have threatened to oppose a VEBA unless the U.S. auto manufacturers pressure DENSO to "remain neutral" while the UAW tries to organize their workers.

According to Bloomberg, General Motors has indicated a willingness to [s]roll over [/s]do as the union asks. No surprise there: GM has the most to gain from a UAW-run VEBA (and the most to lose if they don't set one up). The jury's still out on Ford's and Chrysler's reaction. But let's face it: if a mobster was leaning on sports promoter to pressure a fighter into taking a dive, it would be called extortion. Apparently, when the union does the same sort of thing, it's called "negotiation."

No matter what you call, this does not bode well. If The Big 2.8 are doing business with DENSO, it's because DENSO can supply the best parts for the lowest price. Applying pressure to DENSO could triger a counter-strike (so to speak). While 45 percent of DENSO's North American business comes from Detroit, that's 45 percent of the 21 percent of the company's total business that's done in North America, or just over 10 percent of the total. If DENSO tells the UAW's Detroit puppets to go pound sand, the company retains 90 percent of their current business. Safe!

But not so safe for Detroit. How long do you think it would take GM and Friends to find other suppliers, and how many UAW production lines do you think they'd have to shut down in the interim?

Alternatively, DENSO could agree to step aside and allow the UAW to [s]plunder[/s] organize its workers. The cost of the parts they produce will rise accordingly. The Big 2.8 are complaining that union labor costs are driving them out of business. If Detroit's looking for ways to cut production costs and increase profits, forcing their suppliers into a situation where they'll have to charge more probably isn't a helpful strategy.

Hopefully, GM and the others will come to their senses and refuse to play the UAW's game. If they give on this one, they'll show the UAW how desperate they are. They'll signal the UAW that they're willing to be the union's bitch in other power struggles. But The Big 2.8 want that VEBA so bad it hurts. So is it damned if they do, damned if they don't? More like same old, same old. Once again, it's a question of short-term versus long-term thinking.

If there's one thing American automakers need to learn, it's how to say no to those forces that have steered them onto the edge of the abyss, and hold fast for a brighter future. While there's no doubt that GM, Ford and Chrysler need to rethink their own role in creating their current predicament, acquiescing to the union's ambitions at this critical stage of the game would be like cutting off their nose so they can smell better. Going along to get along didn't work then. It won't work now.

Comments
Join the conversation
2 of 30 comments
  • Ex-dtw Ex-dtw on Sep 13, 2007

    Well said Landcrusher, well said. As to the point that unions saved us from evil corporations, did they? Robber barons were simply insiders that used their power and influence to extract rents from the un-connected. Today we have laws and oversight (the fourth estate) to keep this from happening again. Is there really a need for unions in the modern era?

  • Madisdaddy Madisdaddy on Sep 08, 2009

    I am currently employed by Denso in Maryville Tn. I wish that we could get the UAW in but Denso is very good at using scare tactics to keep people under its thumb and I really doubt that Denso will ever be unionized because of fear. Production employees have not had a raise in two years now and our health insurance is about to go way up in January 2010. The only reason that Denso pays what it does is because of Alcoa which is unionized and has a pension as well as a 401k plan. Denso is using the current economic climate as an excuse to cut us back to 32 hours per week, raise our insurance premiums, and cancel our bonuses, as well as not giving us a raise. If it were not for the threat of a union I would hate to see where we would be today. I don't plan on staying at Denso long term but there aren't many decent paying jobs around here for anyone who doesn't have a college degree. Not everyone can afford to spend the money or time that it takes to get a degree these days. I do have a long term plan and I hope for the sake of my family that it works out okay. I would still like to see a strong union in place for all of the poor souls that will be there long after I'm gone but I guess if they don't want it for themselves then there's nothing that I can say or do about it.

  • Jim Bonham Thanks.
  • Luke42 I just bought a 3-row Tesla Model Y.If Toyota made a similar vehicle, I would have bought that instead. I'm former Prius owner, and would have bought a Prius-like EV if it were available.Toyota hasn't tried to compete with the Model Y. GM made the Bolt EUV, and Ford made the Mach-E. Tesla beat them all fair and square, but Toyota didn't even try.[Shrug]
  • RHD Toyota is trying to hedge their bets, and have something for everyone. They also may be farther behind in developing electric vehicles than they care to admit. Japanese corporations sometimes come up with cutting-edge products, such as the Sony Walkman. Large corporations (and not just Japanese corporations) tend to be like GM, though - too many voices just don't get heard, to the long-term detriment of the entity.
  • Randy in rocklin The Japanese can be so smart and yet so dumb. I'm America-Japanese and they really can be dumb sometimes like their masking paranoia.
  • Bunkie The Flying Flea has a fascinating story and served, inadvertently, to broaden the understanding of aircraft design. The crash described in the article is only part of the tale.
Next