Blame It On the Unions

I’ve seen that some people are blaming the fix the American automobile companies are in on the unions. This comment is fairly typical:

The real issue here is the unions. Leaving aside for the moment, the issue of the companies falling, which most Democrats won’t mind much… after all corporate America is something to be diminished… the bailout is both caused by union excess, and to reinforce it.

I don’t see things quite this way and to understand why you’ve got to consider the different responsibilities that unions and corporate officers have.

The responsibility of the unions is to secure the best possible deal for their members. If they’re successful in doing that, why fault them?

The responsibility of corporate officers is to maximize shareholder value. They have manifestly not done that.

In my view union officials have done their jobs while managers haven’t done theirs.

For example, take a look at Stephen Bainbridge’s cataloguing of the problems at General Motors:

  1. An incredibly inefficient bureaucracy.
  2. An excessive number of brands.
  3. Over-reliance on larger vehicles.
  4. An antiquated distribution system.
  5. Punishing union contracts.
  6. Massive pension and health costs for retired workers.

These are primarily the result of bad management not evil unions. Management elected to knuckle under to union demands. They could have refused but the costs of doing that were more than they chose to bear and, as a consequence, management has taken in enormous compensation. It turns out to have been a poor decision.

Consequently, in my view the blame for the problems that our domestic car companies have belongs to

  • Corporate management
  • Government
  • Unions

In that order.

4 comments… add one
  • PD Shaw Link

    I probably agree on the technical point that managment has more of a duty to negotiate the long-term health of the company than the union. But unions are not serving themselves either. As of 2002, out of the 777,730 UAW members, only 38.9% are actively working, 47.5% are retired and 13.6% are deceased and survived by a spouse. Doesn’t a union also have the duty to see to its survival? (or is that what the government is for?)

  • Note how neatly your tabulation of UAW membership tallies with my point about declining Big 3 hourly payrolls. The fact is that the UAW is on twilight cruise. Its membership numbers will continue to decline as retired workers die and as automobile companies’ hourly payrolls wane. They’re never coming back to their old strength.

    As I wrote above, a union’s responsibility is to get the best deal for its members. It has no responsibility to future workers if any.

  • In addition, workers in Europe’s auto industry are not more poorly compensated in total than their American counterparts. Health benefits are a killing problem but even that’s not quite as detrimental a comparison as American’s paint it to be. In Germany, auto workers and the company each pay half of the cost of health care premiums, just as it’s done in the US. The difference is with the overall cost, higher in the US, and the services purchased for the money, more in Germany.

    Pensions and retirement health care are the unique features of the US system. In Europe, those costs are then born by the social security system, not by the car maker.

    But none of these problems is due to the Union. Instead, they are problems related to this country’s health care and retirement systems.

    As Dave points out, the rest of the mess, bad product lines, bloated bureaucracy etc. is due to poor management, not poor worker effort.

  • The difference is with the overall cost, higher in the US, and the services purchased for the money, more in Germany.

    That, BTW, is the reason that any plan to fix the U. S. healthcare system that doesn’t begin by lowering costs is doomed to failure. Healthcare insurance is expensive here because healthcare is expensive here. We spend three times as much per capita as do the French or Germans. Coincidentally, physicians make three times here what they do in France or Germany.

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