5/10/08

Jerry Flint: Auto Worker unions not winning

I am starting to wonder whether Detroit - General Motors, Ford Motor and Chrysler - would be better off today without the auto workers union. The same goes for the current members of the UAW. The foreign-owned part of the U.S. industry, Toyota Motor, Honda Motor, Nissan, Mercedes, BMW and Hyundai, run non-union plants and are prospering. The public does not seem to care. Americans are buying more cars made by foreigners and non-union U.S. workers than vehicles built by UAW cardholders. General Motors and a key parts maker, American Axle & Manufacturing Holdings, are taking strikes, where in the past they would have quickly given in to union demands.

The unions are not winning. I am not saying that our Detroit auto companies will try to break the UAW and run non-union like the foreign companies. It will not happen now. But in some future year, as the number of union workers shrink, it is a possibility.

First, understand that the UAW is not to blame for the domestic industry’s troubles. The contracts are costly, but Detroit’s biggest problem is that American buyers like the foreign brands better--and that’s largely the fault of management, not the union. Nevertheless, all signs indicate that the public does not admire unions as it once did, and that union power is fading.

American Axle has 3,600 people on strike since the last week of February. GM created this company 15 years ago by the spin-off of its axle and forging plants; its former subsidiary is a key supplier of components for its pickup trucks and big SUVs.

American Axle has been stuck with GM-type labor costs, but now wants to cut pay--from $28 an hour to as low as half that amount. It may be a matter of survival. The UAW previously made big concessions to Dana, a competitor that was in serious trouble. American Axle is not in trouble now, but demanded concessions like the union gave Dana in order to keep its costs competitive.

General Motors is giving American Axle up to $200 million to settle the strike. But considering the potential of similar problems--General Motors is spending billions of dollars trying to help its former parts maker, Delphi (other-otc: DPHI - news - people ), which went bankrupt--and the ever-shrinking GM horde of cash, it’s a dangerous policy.

GM said the strike cost it $800 million in the first quarter, but sales of those big GM trucks are down and inventories are high. Frankly, it is hard to see how GM lost money because of the strike. It cut production at some plants, but that was inevitable, given the slowdown in the market. Plus American Axle has kept supplies flowing from Mexico.

The strike could be settled soon, but the talk is that two striking plants, in Detroit and New York State, might shut permanently. The workers will do fairly well when it ends. Some will be retired with buyouts, maybe as high as six figures. Others will get payments to accept lower wages. This is what American Axle will likely do with the $200 million from General Motors.

The way I see it, the union is losing this strike because in the end more plants may be closed permanently or more jobs lost or shifted to Mexico or elsewhere. These jobs will not be here for anyone’s children.

There are two strikes at GM assembly plants. One factory, outside Lansing, Mich., has been down three weeks and makes new crossover sport utility vehicles--the Buick Enclave, Saturn Outlook and GMC Acadia. Then on Monday, May 5, the union struck the Kansas City plant that makes the new Chevy Malibu sedan.

These two strikes are local disputes, over local contract matters, but they do not occur unless union headquarters approve. The vehicles at these plants are among the few really popular models GM makes. Most GM plants have not settled their local contracts, but the union targeted only these two. Why?

Some think that the UAW authorized these two local strikes to try to pressure GM to force a settlement in the strike at American Axle. The other option is that it is a show of union muscle and that the union figured that GM would surrender anything rather than lose production of some of its hottest models.

In either case, the union, in effect, is saying it does not care how badly it hurts GM in its time of peril - just when the company needs any help it could get.

GM likes to pretend that the company and the union are partners, on a team, and the UAW did make concessions in last year’s negotiations. These two local strikes tell me that teamwork does not exist. This kind of antagonistic attitude also helps explain why the non-union plants of the foreign companies are not likely to join the UAW as long as there are free secret elections. The workers, mostly in Southern plants, are doing quite well and do not pay union dues.

Unless the foreign manufacturers start laying off workers because of poor sales, I doubt that the union will find much support from these workers. Instead, executives of Detroit automakers might weigh the risks of a fight to break a strike, as new workers replace the old union loyalists at their plants. That day is still way off, but it is closer than it was

- Jerry Flint

(forbes.com)

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