When Will the Unions be Fired?

Word just came out that the Obama Administration has ordered that GM’s chairman and CEO, Rick Wagoner, quit.  Because  General Motors took government monies to continue operations, Wagoner obviously had no choice in the matter.  After more than 30 years with the company, he is gone.  Considering how GM has been doing financially for the past several years, a new leader is probably a good idea but if Wagoner is taking the fall for GM’s dismal performance when will the head of the UAW quit, too?

The high cost of the UAW on the Big 3

The UAW is living off of contracts negotiated during the golden age of American automotive dominance even though their shrinking market share no longer allows the Big 3 to be so generous.  In fact:

The UAW has been heavily criticized for its role in driving the Detroit automakers to the brink of bankruptcy, mostly for the $70 an hour that active workers earn in wages and benefits. Active and retiree health benefits alone add $1,200 to the cost of each vehicle GM produces.

This added cost places the Big 3 at huge disadvantage when compared to their Japanese competition:

The typical UAW worker at the Big Three earned between $71 and $76 an hour in 2006. This amount is triple the earnings of the typical worker in the private sector and $25 to $30 an hour more than American workers at Japanese auto plants. The average unionized worker at the Big Three earns over $130,000 a year in wages and benefits.

It is not only the people who make the cars that are so well paid… it is even people who don’t make any cars that still collect their salaries:

One such burden the media have ignored are “jobs banks” which companies like Ford and GM created in the mid-80s as a concession to the United Auto Workers. The Detroit Free Press reports that Ford pays out about $140 million per year from Ford’s job bank, Guaranteed Employment Numbers (GEN), to some 1,100 presently-unemployed workers.

So not only are the Big 3 having to pay inflated wages to people making cars, support people who aren’t making cars, but they also have to pay retirement benefits to people who made cars.  No wonder they are losing so much money every year!

It is very true that the Big 3 spent very little money on building compelling cars in the United States… relying on pick-up trucks and SUVs far longer than they should have but products can be changed as we have seen with cars like the Chevy Cobalt, Ford Taurus, and the Cadillac CTS.  Union legacy contracts, on the other hand, cannot be so easily changed, especially when the Democratic party is in the pocket of unions.

It’s not like Rick Wagoner did a bad job… GM is a massive company with more red tape and departments than the Kremin had during the Soviet Union. Wagoner closed Oldsmobile, brought new cars into the Pontiac division, tried to help Buick become relevant, and led a successful rise in the sales of Cadillac.  According to an article today by the Associated Press:

By all accounts, Wagoner made progress in fixing GM. While CEO, he cut its U.S. work force from 177,000 to roughly 92,000 today.

Wagoner also closed factories; shed the unprofitable Oldsmobile brand; globalized GM’s engineering, manufacturing and design to save billions; and led a resurgence in quality and performance of its long-neglected cars. In 2007, the company reached a landmark agreement with the United Auto Workers that shifted massive retiree health care costs to a union-run trust and ushered in a $14-per-hour wage for new hires, about half that of a current laborer.

One problem with having a government ask the head of a private company to step down is that the shareholders, employees, and the public will never know how much of the change was politically motivated.  It is troubling to say the least.

Will the Democrats, who pushed for Card Check to benefit the unions, pander to that group during elections, and created a task force on the American automotive industry (though only one member owns an American car), know what they are doing?

And will any of them get tough on the unions… the biggest reason why the Big 3 are in the red?  Common sense says the answer will be a resounding “no” although I certainly hope that I am wrong.

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1. Union Yes (or Else!)