By on May 12, 2010

Yesterday, we greeted news that Detroit had reached wage parity with transplants by noting that it hardly makes the UAW look great in the eyes of its membership. Sure enough, UAW boss-in-waiting Bob King is firing back in today’s Detroit Free Press,  arguing that a return to a 16m unit market would yield “astronomical” profits to GM and Chrysler. As a result, he said,

There was equality of sacrifice, there’s got to be equality of gain. It’s our responsibility to make sure that in that turnaround, our members are treated fairly

Before becoming heir apparent to UAW President Ron Gettelfinger, King was the union’s chief negotiator with Ford. Recently, King filed a grievance against Ford for restoring benefits to salaried workers without reciprocating to union members. And despite the fact that the UAW went to bat (symbolically, of course) for Delphi’s salaried employees when they lost benefits, and the fact that GM still pays its white-collar employees more than the transplants, King is still hopping mad about it. He tells AFP:
I’m very upset with the situation (at Ford) where there were merit increases and 401K (retirement plan contributions). That’s wrong. None of that in my view of the contract should have happened without our membership, getting the same thing. Our membership made tremendous sacrifices. We had an understanding about equality of sacrifice. We’ve filed grievances on that and we’re close to resolving one piece of that.
Again, GM pays its average white collar worker over $50k more than its average hourly worker, while the differential at transplants is about $10k per year… but the union is OK with it because it owns 17.5 percent of that company. Ford, on the other hand, is the bad guy. You have to imagine there’s a little nostalgia for the “good old days” of pattern bargaining in Dearborn right about now.

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22 Comments on “UAW Fires Back On Wage Parity...”

  • avatar

    OK, before the union bashing starts,lets keep a couple of things in mind. First off, Mr King is a politicion,and like anybody in that buisness,you got to play to your voters.

    Now lets go back to the first paragraph.”a return to a 16M market” Its like telling your wife your ordering a 2CT diamond ring,as soon as you win the lottery.

    As former rank and file guy,if weeks or months go by and have not heard or read something from the union leadership,you think they have forgotten about you. Truth be known, thats exatly what they have done. This is where disent is born,and sucessfull union leaders are very aware of this fact.

  • avatar

    Maybe the federal Pay Czar will determine what GM and Chrysler employees earn. Community owned car companies run for the benefit of the community. The car co-op.

  • avatar

    I was at this conference and heard Mr King speak. Let me say I’m union agnostic – I try to understand the three sides to the story. Mr King was interesting to say the least. There were plenty of high points, but my favorite was when he didn’t want to name the company, but took to task the foreign automaker that closed its plant in California – putting UAWers out of work. I’m thinking, “weren’t there two companies involved in that JV?”. He also beat up said foreign automaker for announcing that it would reduce its production in NA to about 40% from close to 60%. Claimed it was environmentally irresponsible. So after a congressional grilling and a market that is doing 11mil units a year, you’re surprised they’re taking their ball and going elsewhere? Not saying it’s right, or moral, or responsible (it’s really not any of those things), but from a business perspective, it’s not surprising.

  • avatar

    Wages were not Detroit’s biggest problem.

    Let’s say it again: Wages were not Detroit’s biggest problem.

    Rick Wagoner really liked to harp on about cost, but in doing so he was really deflecting blame from the real problem: that the domestic marques couldn’t sell their cars for enough money to make a profit. GM’s costs were actually lower than Toyota’s, but their transaction price and, accordingly, revenues were lower still.

    But the union makes an easy scapegoat, especially when you can “be strongarmed” into “making concessions” every few years, instead of manning up and trying to figure out a way to get the public to buy your product.

    The unions, to their detriment, were terminally incapable of pointing this out. I suspect because the status quo worked for their leadership just as well as it did for the automakers’ management.

    • 0 avatar

      You keep saying this, but if–as has been reported here and there–GM really had a labor cost of $1500 (per vehicle) more than its competitors, how can you claim this isn’t a significant competitive disadvantage? When your competitors can (theoretically) sell an equivalent product for $1500 less, or put $1500 more of content into a product sold at the same price, of course you’ll have a hard time selling your product for enough money to make a profit.

    • 0 avatar

      This was exactly the point of the Dr Susan Helper of Case Western who spoke earlier in the program (after Sean McAlinden). She is obviously brilliant, but seemed to lose track of her slides and started to free associate her presentation. She was kind of all over the place after she made this point and I was somewhat disappointed that happened.

      Structural costs – not just labor costs were the issue. So why sink money into the half the portfolio that is doomed to lose money every unit you sell? Satisfy CAFE, build to the lowest cost possible and make it up on truck and luxury volume. Poor quality at the entry-level segments pushes 1st timers to the competition never to return.

      The cost disadvantage wasn’t labor costs, it was legacy costs – pension and healthcare. Maybe it’s splitting hairs, but now that most of those obligations are removed from the company, they can claim labor cost parity. That $1500/vehicle disadvantage is gone, and vehicles can be priced more firmly.

    • 0 avatar

      Bravo, Psar you finally said something that I agree with, well put.

    • 0 avatar

      If you looked at GM financial statements before bankruptcy, they had operational costs lower than Toyota’s. Which is good.

      They also had revenues much, much lower than Toyota’s. That’s bad.

      Legacy costs were a part of this this, but when your product selling for less than your competitors largely because you’re dropping three times the incentives on average ($1000 vs $3000), and five to ten times the incentives on your high-margin goods, that legacy cost figure is not your problem. That they had incentivized leasing well beyond sustainable levels was only icing on the cake.

      GM could have gotten legacy costs at or below it’s competition, but until it can convince people to pay what Honda or Toyota buyers pay, it is still looking at a $2000 on average per car.

    • 0 avatar

      That the domestics could not sell their product ‘for enough money’ tells you that they were not selling an equivalent product to the imports in the eyes of the consumer.

      Therefore, the people creating that lesser product (design, mgmt and labor) should be earning less so that the product price can be lowered further to attract sales.

      Otherwise, it’s akin to bemoaning that a 2 star restaurant can’t sell their food for the same price as a 4 star place when both have similar costs of labor.

      An inferior product has trouble pulling sales.

    • 0 avatar

      That the domestics could not sell their product ‘for enough money’ tells you that they were not selling an equivalent product to the imports in the eyes of the consumer.

      Exactly. And that particular conundrum owes very little to labour and just about everything to management.

      Your restaurant analogy is a good one. Let’s say we have a four-star restaurant that starts making crappy food because it’s cheaper to do so. They keep making crappy food for years. Eventually, they have to lower their prices to get people to eat their crappy food, and they’re still not making money because they have to have blow-out specials and all-you-can-eat deals.

      Blaming the high wages of the busboys and dishwashers is not the reason the food sucks, or why the restaurant is not making money.

      ETA: I can stretch the restaurant analogy really far: let’s say that the restaurant owners never experience the crappy food, because the cooks make sure that the owners get specially-prepared meals. Now, let’s also assume that none of the cooks or the owners can make the ego-leap to admitting that the food isn’t good, because that would mean accepting responsibility. Let’s also assume that all the cooks who work there never work anywhere else.

      But it’s easy to make offhand comments about the busboy’s wages, especially when, in a fit of insanity, the ownership decided to give him pretty good benefits so that they wouldn’t have to actually take a stand.

    • 0 avatar

      Looking at GM’s operations costs just before bankruptcy doesn’t prove that higher labor costs weren’t a problem. At best, it just proves that GM did get a handle on this problem, but, by then, it was too late.

      Saying that higher labor costs shouldn’t be a problem anymore because GM finally got the costs under control say, four years ago, is like saying that someone who weighed 400 pounds and smoked two packs day should be able to run a marathon now because he went on a diet last month and finally quit smoking.

      If labor costs WERE a problem from, say 1970 to 2001, then GM had lots of time to build inferior products that damaged its reputation. Even if it did get those costs in line by 2002, it still had to design and build new cars that reflected the more competitive cost structure, and then allow those cars to slowly erase decades of negative perception. It takes at least two model cycles to really get a manufacturer’s reputation back on track.

  • avatar
    blue adidas

    Of course Ford isn’t going to restore benefits to union labor. Throughout the ups and downs of the economy during the past fifty years, the UAW has shown that once they get get get, they never give back until it’s too late. With salaried non-union labor, they can modify their pay and benefits much easier to match the health of the company.

    Also, it’s not a $50k gap between “White collar” workers and “Blue collar” workers. There are plenty of white collar workers who don’t earn as much as the blues. The real earnings gap is where we have “skilled and unskilled” labor. Which is customary at any well-run company. And it’s okay with me.

  • avatar

    I seriously doubt that the American auto market is going to return to 16 million units even within 5-7 years. We had an auto bubble, just as we had a housing bubble.

    The effect of wages on the final product – in this case, a car – is the classic chicken-and-egg question. During the early stages of the import invasion, and well into the 1990s, Detroit WAS at at cost disadvantage with the Japanese. No question about it. That cost disadvantage meant that either corners had to be cut with the final product to make it cost competitive with the foreign competition, or its price had to be higher. Given that Americans have historically refused to pay a premium for small cars, the first choice was the usual one.

    And I’m suspicious of claims that GM’s costs were lower than Toyota. Maybe for actual wages and benefits of active employees, but those calculations usually ignore these crucial factors:

    1. the domestics pay much more for retiree health care and benefits than the transplants do, and those costs still affect how much “content” they can put into a car;
    2. the daily absentee rate at the domestic plants has been historically much higher than at the transplants (10-12 percent versus 1-2 percent); and
    3. more restrictive work rules at the UAW plants that keep employment levels inflated (according to Micheline Maynard, who is anything but a union basher, Toyota could build the same number of vehicles as GM with 1/3 the number of employees that GM uses).

    Now, TODAY, several or all of those disadvantages have been eliminated, but they were in effect until very recently, and it will take several years to overcome those effects.

    I agree that laying the entire blame for the collapse of GM and Chrysler, and near-collapse of Ford, at the feet of the union is silly. The UAW was but ONE factor in Detroit’s decline. But completely absolving the union of any blame in this mess is equally wrong.

  • avatar

    That’s a weird picture. It looks like Donald Rumsfeld became a faith-healer.

  • avatar

    Hypocrisy much, King?

    Just another union goon talking out of both sides of his mouth. Want to take the moral high ground, King? Argue for a pay for performance structure for the hourly folks you supposedly represent. Also, require the culling of the bottom 2-3% of performers every year.

    But since the union is all about egalitarianism, I won’t hold my breath. Better to keep the poor performers employed than incentivizing the top performers.

    Good move.

  • avatar
    Rod Panhard

    I’ve got friends who work as union organizers and managers. I understand their perspective is a combination of workers’ rights and human rights.

    The part of the UAW I don’t understand is that they’re are a union focused on workers rights and human rights, too. Yet, they seem to be focused on workers rights and human rights in the U.S. Aren’t workers in other factories in other countries humans too? If auto manufacturers are sending their work overseas, why doesn’t the UAW follow the jobs?

  • avatar

    What they fail to understand is that without the concessions, they wouldn’t have jobs. Soaking a profitable company in a (future) growth market will only restart the downward pressure on wages.

    Then the automakers will go under for the last time and the UAW can declare victory.

  • avatar

    Of course, UAW executives have (probably) given up NO concessions for their own salaries and benefits.

  • avatar

    HAH on reviewing the books!!!
    -I would expect all of GM’s books to be well and thoroughly Cooked.

    For example, didn’t they journal a lot of their own losses out to Saab and Opel; essentially pulling something like an Enron or Global Crossing??

    Concessions? -Unless every UAW guy takes a goodbye package, they isolate and lose the legacy health-care borg, the 20lb rulebook, the anti-productivity, the entire UAW and start working for fair-market wage/401k/health, and sprinting their a**es off to become as productive as they possibly can, all the jobs are going to disappear. These guys (+in fairness: ALL of them) are in desperate need of a Gordon Ramsay’s Kitchen Nightmares moment.
    -“Concessions” are a picnic compared to what’s going to happen in future if the bolt-tighteners don’t Get Real. -Push Will come to shove. India and China, baby.

    ++ I’d imagine any costs spent on labor here were about 3x more overstaffed and 1/3 less productive than at Japanese companies. ROI

    And LOVE the fact that everyone’s still finger-pointing and nobody in the whole mess has the guts to Man-Up and announce responsibility for themselves and their own actions.

  • avatar
    Gardiner Westbound

    Time to strike! The only good car company is a bankrupt one.

  • avatar

    okay everyone. if you think UAW autoworkers are overpaid, then post your earnings here and we can decide if you are overpaid as well. I am sure we can find some benefits that we think you aren’t justified in making.
    Without anyone posting, the first thing i would do is cut everyone’s pay to minimum wage. you need to sacrifice for the good of your company. I don’t care if you work for some wonderful company that is magically making money right now. Someday they won’t make money and that’s your fault because you are overpaid right now. Also, no more paid days off. That’s an easy one. No more health care; another easy one.
    All of you are a bunch of hypocrites. You sit here and bitch about how those rotten workers screwed the company and that their pay should be cut. But when it comes to your own pay, you cry and cry about how you don’t want your pay cut.

    • 0 avatar

      All else being equal, a company that has greater expenses relative to its competitors–be they cost of materials, labor, overhead, etc.–is going to have a harder time remaining competitive. Do you disagree? And if the company fails to bring those costs in line, its problems are likely to multiply over time. Do you disagree?

      I’m self-employed. My rate is set directly by the market–and yes, in “lean” times, that means a pay cut, or sometimes no work at all–which means I don’t get paid. And if someone else comes along and offers to do the same work at a lower rate, I either get a pay cut or have to demonstrate that I provide higher value somehow. The wage I earn isn’t some sort of birthright: If my skills become commoditized, then I should damned well expect my wages to reflect that.

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