Lincoln * Institute

Ralph R. Reiland

Ralph R. Reiland

The B. Kenneth Simon Professor of Free Enterprise at Robert Morris University

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Reflections

UAW Unionized Insecurity

by Ralph R. Reiland
 

General Motors lost $10.6 billion in 2006. The company lost another $38.7 billion in 2007, the largest annual loss in automotive history. Through the third quarter of 2008, GM lost another $21.2 billion.

On Sept. 24, 2007, a year during which GM lost an average of $3.2 billion per month, the United Auto Workers launched a national strike against the company, ordering the shutdown of 80 GM plants in the United States. More than 73,000 UAW-represented factory workers walked off the job and hit the picket lines.

The UAW said that GM had failed to address job security issues during negotiations.

"No one wants to see GM go down the tubes," said picketing Jim Brown. "But we have to keep our standard of living, and GM is going to have to cooperate."

GM's labor cost for a factory worker at the time was $71 per hour, with $27 per hour going to current workers and the remainder made up of costs for pensions and health care for retirees.

If archaic work rules and other contract mandates reduced productivity at GM's

plants by half, the company's real labor costs were $142 per hour of work, counting retiree costs, and $54 per hour for current labor.

On Feb. 26, 2008, a UAW strike at five American Axle plants, a key GM supplier and the sole axle supplier for the Chevrolet Tahoe and GMC Yukon, stopped or slowed production at 30 of GM's North American factories and crippled GM's pickup truck and SUV production throughout the United States.

"The American Axle strike cost GM $800 million in the first three months of the year and 100,000 vehicles of lost production, which GM said was mostly felt in fleet sales to commercial customers," reported the Detroit News on May 12, 2008. "The automaker on Thursday pledged up to $200 million to American Axle to help end the dispute. The money would be used to pay for buyouts, early retirement and cash incentives to get workers who stay to accept lower wages."

That's a billion dollars, extracted out of GM to buy labor peace at a plant they didn't even own.

Seven weeks later, on April 17, a UAW-ordered work stoppage over a work rule dispute at GM's Lansing Delta plant in Michigan halted production of the Saturn Outlook, GMC Acadia and Buick Enclave.

Less than three weeks later, on May 5, 2008, workers walked off the job at GM's

Kansas City plant over work rules and seniority disputes. "The United Auto Workers union struck -- literally -- General Motors where it hurt the most, at the automaker's Kansas City factory that builds the fast-selling Chevrolet Malibu, already in tight supply," reported Edmunds AutoObserver.

With the Kansas City plant handling the bulk of Malibu production, the UAW strike was called four months after Malibu won the North American Car of the Year award at the North American International Auto Show.

As one of GM's few success stories in recent decades, the 2008 sales of Malibu in January, February and March were 110 percent greater than in the same quarter in 2007, with Malibu cutting into the market shares of Honda Accord and Toyota Camry.

General Motors, in short, had finally produced a car that the public really wanted and the UAW walked out.

Stopping production of a hot-selling, profitable model at a time of declining auto sales and rising levels of red ink is "stupidity of the highest order" on the part of the UAW, said David Cole, chairman of the Center for Automotive Research.

On July 16, 2008, the UAW called a strike against a Johnson Controls plant in

Tennessee that supplies GM with consoles and seats for the Chevrolet Traverse

crossover vehicle. "The strike has the potential to disrupt production of the

Traverse, one of the new vehicles GM is counting on to offset declining sales of its full-size trucks and SUVs," explained Reuters reporter Kevin Krolicki.

"We want a flawless launch for this vehicle," UAW Local 1853 President Mike O'Rourke told Reuters, "but it's going to be with union seats and union consoles."

The result? At last count, GM has lost $70 billion since 2004, the number of UAW members has been cut in half since 2004 at GM, Chrysler and Ford, from 300,000 to 150,000, and now the rest of us are stuck with the tab for the rescue.

And Barack Obama thinks the elimination of the secret ballot in unionizing elections is the way to create jobs?

___

Ralph R. Reiland is an associate professor of economics at Robert Morris University

in Pittsburgh.

Ralph R. Reiland

Phone: 412-884-4541

E-mail: rrreiland@aol.com