2008 December 13 Saturday
Associated Press Can't Recognize Absurd UAW Claim

Associated Press reporters Tom Krisher and Kimberly S. Johnson get used as tools of the United Auto Workers to uncritically relay a UAW claim that is obviously incorrect.

DETROIT (AP) -- Festering animosity between the United Auto Workers and Southern senators who torpedoed the auto industry bailout bill erupted into full-fledged name calling Friday as union officials accused the lawmakers of trying to break the union on behalf of foreign automakers.

What did Bob Corker and other Republican Senators propose that would help foreign automakers? Nothing. In fact, Corker and colleagues wanted to lower UAW salaries in order to make US automakers more competitive against foreign makers. The key Republican demand to make UAW wages competitive would hurt foreign makers by lowering the costs of US makers. US automakers are stuck in a death hug with the UAW. Corker wants to give them some relief from this death hug.

The irony here is that the Senators from states that have non-union foreign transplant factories are promoting a policy that would help the Michigan competitors of these southern factories. But the AP writers can't seem to notice that what the Republican Senators are saying is true.

The vitriol had been near the surface for weeks as senators from states that house the transplant automakers' factories criticized the Detroit Three for management miscues and bloated UAW labor costs that lawmakers said make them uncompetitive.

The AP writers do not think to question the reasonableness of the UAW President's absurd claim.

"They thought perhaps they could have a twofer here maybe: Pierce the heart of organized labor while representing the foreign brands," UAW President Ron Gettelfinger said at a Friday morning news conference in Detroit.

Corker wants a deal that results in low enough costs for the American makers that they can survive and thrive. That is a wise and prudent position to take. The companies need to get all their costs (and that includes union labor) down to a level that allows them to compete with foreign car makers.

"Our members wanted to know that the UAW was willing to be competitive," Corker said.

"I basically pleaded with them to give me some language by some date certain that they were competitive with these other companies," Corker said. "That's where it broke down."

You can listen to Corker's press conference after the deal fell thru where he explains what happened from his vantage point. What amazes me about the whole thing: The US automakers are effectively at death's door and yet the UAW refuses to make big concessions. The UAW wants the US taxpayer to start funding union wages and very high benefits for an indefinite period of time. The UAW wants its manual laborers to continue to get benefits that no other manual laborers in the United States get. They want to do this at taxpayer expense and they expect everyone else to solve their problems.

Share |      By Randall Parker at 2008 December 13 07:59 PM  Economics Transportation

Stephen said at December 13, 2008 9:15 PM:

Its revealing that the politicians were quite happy to give a boatload of money to the financial industry without first setting the wages of Joe the bank teller (or of Joe the CEO), but when it comes to the car industry they think its important to worry about the wages of Joe the production line worker.

Randall Parker said at December 13, 2008 10:10 PM:


Different industries, different problems.

The US auto industry has not been competitive for decades. Its problems include uncompetitive wages as compared to its foreign competitors. The investment banks aren't failing because their wages are too high. They are failing because they made bad lending and investment decisions.

Oh, and bank tellers in the US make a small fraction of what UAW members earn.

Wolf-Dog said at December 14, 2008 12:12 AM:

In addition to uncompetitive wages, they intentionally made very low quality cars that were not durable, in order to sell more.

Morever, a hidden but very significant portion of the auto "industry", consists of the dealers that regularly service and repair cars, which were intentionally design to break down piece by piece. These dealers, take away a significant chunk of your annual income every year, secretly increasing the price of your car. This was one of the reasons the auto "industry" is in a panic mode now, because closing the Big Three, will actually decimate these peripheral businesses that service cars that were designed to fall apart to make this sector of the auto "industry" profit. In fact, many of the American cars are already made abroad, the actual number of American auto workers (employed by Chrysler, GM and Ford), already diminished a lot since these companies were already manufacturing in other countries.

But on this occasion, the government should make a major shift and force these companies to innovate and concentrate all their efforts to design new electric cars. The government can do this by giving a lot more money for battery research. Compared to the funds wasted on useless things, battery research received VERY little money so far.

Stephen said at December 14, 2008 2:35 PM:

Randall said: The investment banks aren't failing because their wages are too high. They are failing because they made bad lending and investment decisions.

But the bad lending decisions were a direct result of the investment banker's remuneration system. The bankers lent money underpinned by dodgy assets because the lending staff received an upfront commission on sales - regardless of whether they thought the borrower was a good risk over the long term.

As regards taxpayer largess, the bankers still have exactly the same remuneration system that got them into trouble. Contrast that with the position in Detroit where last year the UAW and Detroit negotiated away the disparity with Southern-based manufacturers and agreed on a transfer of pension liability to the UAW.

Perhaps the truth is that southern based politicians found an excuse to destroy the deal because they don't want manufacturing in the north to survive?

Randall Parker said at December 14, 2008 3:05 PM:


You obviously aren't familiar with the details of those UAW contracts.

The lower wages are for new hires. One important detail: The car companies aren't going to hire new until enough UAW people retire. So this new contract only saves some money in 2010 in theory. In practice the savings will be somewhere between small and non-existant in 2010 2011 and savings increase slowly after that.

Transfer of pension liability: actually it is medical liability. But GM, Chrysler, and Ford must come up with the initial funding for the new VEBA (voluntary employee benefit association) accounts. One big problem: They do not have the tens of billions required to do this.

The UAW has given up very little so far. Meanwhile, they nixed the deal the Republicans proposed because they hope Obama and a more Democratic Congress will just loan the Big Three a lot of money without demanding any concessions from the UAW. This means the Big Three will still be on course for bankruptcy. It just won't happen in 2009. The UAW gets to suck out more from the comatose patient. The patient eventually dies more deeply in debt. The taxpayers pick up the bill.

Mia said at December 14, 2008 3:43 PM:

And what the U.S. Senators don't understand (or are not saying) is that the health care costs in the U.S. are significantly higher in the United States than for foreign carmakers in their own respective countries. Health care costs constitute a significant portion of benefit overhead in the U.S. , whereas the government subsidized these costs for foreign carmakers. This is likely how Toyota is able to give their employees $6,000 bonuses--the money they don't have to spend on health care costs in their own or foreign countries are used to give better wages in the U.S.

Therefore, unless U.S. health care costs are brought under control, NO company will be able to compete with foreign companies. The free market is obviously not working for health care costs. The health care industry needs its own bailout.

Stephen said at December 14, 2008 4:48 PM:

Randall, its almost 2009 now and this time next year it'll almost be 2010 - we're just talking 12 months before a long term plan starts to produce dividends that will increase every year. That's good long term planning - especially when you consider that the age distribution of current employees is skewed toward older employees.

Randall Parker said at December 14, 2008 7:46 PM:


GM and Chrysler are effectively bankrupt now. Their costs are way above their incomes now. They need a solution now. Small beginnings in cost cutting in 2010 are irrelevant.

Stephen said at December 15, 2008 2:51 AM:

To quote Randall when he was arguing that the insolvent banks should be given a shipload of tax payer money

I'm not going to totally shaft myself just to get even with Wall Street fat cats. A world wide bank panic would cost most of us our jobs. I think the stakes are really that high.

Same crisis, different jobs.

Ned said at December 15, 2008 5:48 AM:

Mia -

The health care argument is a smokescreen. Both Canada and the UK have socialized healt care systems. Yet the Big 3 are asking both the Canadian and American governments for bailouts. It seems the auto companies haven't been doing too well in Canada either. And look how the British auto industry has been thriving with the NHS.

The problem with health care costs in the UAW/Big 3 combine is the first-dollar-coverage health care plans that all the workers have. This gives them no out-of-pocket costs and no incentive to stay well. Nobody except the UAW gets health insurance like this any more - it's just too expensive. Eat too much, drink too much, smoke too much, don't worry, the union's got you covered. Until recently, the UAW defended the right of workers to smoke on the job!

Health care costs are just another issue that US industries have to deal with. And the foreign-owned auto makers have been doing it pretty successfully. The Big 3 have dealt with the problem in their time-honored fashion - by giving everything away to the UAW and then whining when the costs get out of hand.

I live in Michigan, and I follow the auto industry closely. I know lots of auto folks, both workers and executives. These companies need to go bankrupt. This will allow them to convert their debt to equity in the new company and probaly drop ther UAW contracts and costs. Maybe they will shift more production to non-union southern states. Nothing but bankruptcy will allow them to do this. GM alone has $186 billion in debt! How is a $15 billion bailout going to fix that? The proposed bailouts are just a foot in the door to allow these mismanaged companies to get even more federal money down the road. If our political leadership had any integrity, they wouldn't permit it.

Randall Parker said at December 15, 2008 6:04 PM:


But the US Congress could save the domestic auto industry in a way that makes it viable in the long term. Just lending them a stack of money won't do that. Why not prevent a huge increase in unemployment, supplier bankruptcies, and lender bankruptcies while also making the car companies viable in the long term?

As long as the Big (and still shrinking) Three have labor costs far above their rivals they can't survive in the long term.

Do you deny this?

Jingle Bells said at December 15, 2008 6:20 PM:

UAW fat cats could care less about anyone else. Power, power, power. Obama is all about keeping the ponzi scheme going until he gets out of office. Have you seen the slums Obama helped Rezko build? Not fit for rats to live in.

Darren said at April 28, 2009 1:52 AM:

If I got a job and held it for 30+ years with the agreement that I was to (in return for those 30+ years of my life) receive certain retirement benefits - you can be damn sure I'm going to get them. The union and the company agreed upon these contractual terms. It is an agreement. No one seems to get that. The union represents is members, and the company its shareholders. It seems the UAW, in this case, is doing its job of winning certain rights and benefits for its members. GM, on the other hand, has done a poor job of protecting its shareholders. If the company were a bit more realistic in its projections and negotiations, perhaps it wouldn't be in the position it's in. I've seen management and executives display a lack of realism in their understanding of what's happening on the ground floor - operations - and of what the company's position is in the marketplace time and time again. And so the company suffers. But at the base of it, they made an agreement. Handshake, anyone? This is just another case of a CEO with his nose in the books while reality occurs all around him - and when that reality crashes all around him he wants out of the agreement. Own it.
The shareholders are probably not so much at fault - other than the fact that they didn't keep the captains of the corporation under a tighter reign. And who can possibly fault, and even want to bring down the hammer of punishment upon, the people who worked in these factories for half their lives? (I believe the answer to that question is this: Only someone who hasn't worked a factory job under union protection for 30 years.) Try me. I grew up in a union family - UAW, Ford, Dearborn - and know that union members have their beef with the UAW at times. It's not perfect. But why else would anyone do that kind of work for decades unless there was something to look forward to at the end of it? Not ot mention putting food on the table and sending their kids to college so they can look forward to a better life than factory work (thereby improving the lot of all of society). And doesn't it benefit a company to have a loyal, experienced workforce making the factory hum? Let me hear any retired union member with a pension say he or she wants to see the union, let alone the company, go down. More likely, you'll have someone who thinks they know what's happening on the ground floor spout off about what they think is wrong with the current scenario - and it's not them or anyone like them. It's the union. Any proponent of dissolving unions has no sense of the labor history of this country and doesn't give a damn about a shared citizenry. Fact of the matter is, today GM announced more US labor cuts and factory closings - but how many overseas?
Anyone who works an 8 hour workday, has weekends off, gets overtime, holiday pay, worker's compensation - is a hypocrite to want unions to fail. Like I say, they're not perfect. But the absolute absence of them - particularly the UAW - would mean many more people out of work or being severely underpaid and without health benefits...but, then, that's what's been happening with the precipitous drop in union membership in this country since the 70's, hasn't it? No wonder we're in the shape we're in.
The union stays. The company owns it's missteps. Production lines are adjusted to heed the call of reality and face the competition (efficiency, economy, quality and durability). Health care is reformed.
Again, who of the anti-union crowd could actually even work in a factory for 30 years for the (often overstated) wage a factory worker makes? And why don't you? If you answer those simple questions truthfully and remain anti-union, I suspect you would either have to just hold your tongue or let it flail about awkwardly until it coaxed you, once again, back into your happy, fuzzy womb of self-righteousness.

Randall Parker said at April 28, 2009 6:22 PM:


The formerly Big Three had no choice but to sign up for ridiculous retirement benefits and worker benefits. The Wagner Act and the government in Washington put them in a position where they had to sign suicidal union contracts.

It is just plain bullshit to pretend that the UAW didn't contribute in a really big way to the decline of the US auto industry. I know too many people in it and retired from it to buy the innocent "you signed a contract" argument. I know a Ford UAW retiree that told me in the 1980s he could fulfill his daily quota of seat covering in 3 hours and then go home. I know people who've had to deal with ridiculous loafer UAW guys in hallways making it difficult for engineers to get their jobs done. I know too many other engineers whose dealings with the UAW's work rules infuriating them due to the inefficiency the UAW caused. So spare me the b.s.

Contracts: Lots of companies and people sign contracts and the other side turns up unwilling or unable to fulfill the terms. Part of the responsibility that comes with signing contracts is looking at the other side and asking whether the other side can live up to their side of the bargain. Sitting inside a Big Three company in the 1980s I knew lots of managers who believed the path of the Big Three was going to bankruptcy. It was clear to us then. The UAW didn't want to hear it.

Factory worker wages: Most workers in most factories make far less than UAW workers and yet work at it for decades. The UAW people are prima donnas.

Darren said at May 14, 2009 2:13 AM:

"The UAW people are prima donnas."

That's why this discussion isn't a discussion at all, and just won't work. The UAW people are life-long factory workers. Idiocy. Why do you espouse it? Making money writing words on a laptop that are critical to the American factory worker while driving a foreign car is all good and well...but your supposed connections or references to any UAW member are suspect. You mention "too many people," "people," and "engineers." But only one "Ford UAW retiree" that could fulfill a 3 hr. quota - and was most likely paid for only those 3 hrs. What's wrong with that? If I work 3 hrs. you can be damn sure I'm going to get paid for them. If I need hours, and there are 3, I will work them and hang on until more open up - and, hopefully, one day retire. (And why were engineers trying to get their jobs done in hallways, anyway? And sorry for the engineers' frustration in dealing with unquantifiable human matters as opposed to absolute mathematical quantities. So hard.)
A contract is a contract. Of course the union wanted - and expected - the business to adjust to market pressures and to remain viable. But that's not the union's job. It's the company's. If the company agrees to offer its workers rights and benefits that are unrealistic and unsustainable when taking into account the financial projections of the business - what do you call it? Poor negotiation. Being unfaithful to the shareholders. Being unfair to the engineers. Delusion. To blame the UAW for signing a contract when GM couldn't fulfill the outlined requirements of that contract is disingenuous. It's the corporation's responsibility (and usual strategy) to put forth any possible financial limitations that illustrate the need to make cuts in labor and/or the benefits provided to it. Perhaps that's why Ford alone is not on the verge of bankruptcy - a more realistic (or at least timely, or forward-thinking) restructuring began earlier in the game.
Furthermore, please name any instance wherein the union did not fulfill any terms of any contract they signed with any of the Big Three. And then tell me all the instances wherein the Big Three wanted to renegotiate the contracts it had signed with the union.
As far as the Wagner Act is concerned, am I to believe you are opposed to the minimum wage or right of workers to organize that it had established?
And finally, "Most workers in most factories...work at it for decades." As do UAW members. And why wouldn't they? They are assured certain benefits through union/corporate contractual agreements...unless the corporation wants to reopen the contract to offer buyouts to its employees in favor of opening plants in foreign nations where a cheaper labor force with less to no labor protections exist.

"The UAW people (unlike online pundits) are prima donnas," apparently, because they don't work for free.

...still no word from any retired union members with pensions who wish the UAW (with all its flaws) or the company to go down...

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