Thursday, January 26, 2012

Guest Post: Stupid Union Tricks:  The UAW's Grievance Against Ford

Stupid Union Tricks:  The UAW's Grievance Against Ford
By Anthony McCourt
​Old habits die hard. The United Auto Workers union is pressing a grievance against Ford Motor Co., arguing this month in continued arbitration proceedings that assembly workers are owed some money.  It seems that in 2010--Ford's second profitable year after losing almost $30 billion in the three prior years combined--the automaker reinstated raises, tuition assistance and 401(K) matches for white-collar workers. Since the company didn't give back concessions made by the union during the lean years, the UAW filed an "equity of sacrifice" grievance. The union is complaining that they didn't get any of the spoils of Ford's recovery until the new labor contract was ratified this past September.

​After three years of finally acting like they were living in a crisis, the union is sending exactly the wrong message. Last fall, UAW workers at Ford got the best four-year labor deal in Detroit. Each union worker will get about $10,000 in bonuses and profit sharing this year. Workers at GM will get about $9,000 over the life of the four-year labor deal. Chrysler workers get considerably less. Ford also promised to hire 12,000 more UAW workers and they raised entry level workers pay by between $2 and $3 an hour to get them above $16 for new hires. That's pretty good considering today's unemployment rate. Oh, let's not forget that the UAW represents about one-quarter the 1.5 million workers it had in its ranks in 1979.

​Let's hope that this isn't a return to the senselessness of years past for the union. To be fair, there was plenty of stupidity that led to Detroit's demise, and it can't be all laid at the feet of labor. Executives invested money and resources in non-automotive business at all of the Big Three. Then they sold those other businesses years later and uses the cash to buyout workers as they downsized the car business that they were ignoring. They let quality slip and fell behind in technology. The list of sins is long.

​The union demanded unsustainable benefits like indefinite paid layoffs which made labor a fixed cost. That made managing a cyclical business like making and selling cars almost impossible. They got to retire after 30 years, sending a generation of 50-somethings on the pension rolls with free healthcare for life. Those retiree costs were a loadstone on Detroit balance sheets for years and a nasty hit to the income statement. Retiree benefits played a big role in sending GM and Chrysler into bankruptcy.

​Over the past few years, the UAW has come to its senses. A healthcare deal in 2007 unloaded healthcare costs into a Voluntary Employee Benefits Association that pays medical costs the way pension funds pay retiree benefits. That stripped the costs off the income statement. GM used to pay some $1,600 a car in healthcare costs. That's all gone.

​New hires on the assembly line start in about $16 an hour. That was a big concession by the UAW. The starting pay was $14 an hour until the new labor contract was ratified. In inflation adjusted dollars, that $14 an hour the same as Henry Ford's $5 a day. Talk about America moving in reverse. With that concession in 2007, the UAW set manufacturing wages by a century.

That's where the union needs to focus. Forget about duking it out in arbitration just to get a check for veteran workers who already make $28 an hour, which is almost all of Ford's union workforce. Those workers will still retire after 30 years with a defined benefit pension and a better medical plan than most people have. It's the new laborers, the ones starting at $16 an hour with much weaker benefits that the union can help. If they are at loggerheads with management over another check for the well-aid old guard of union workers, the UAW will have wasted political capital that could have been spent giving a new generation of factory workers a hand up.



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