Peter Valdes-Dapena, senior writer for CNN Money, details some of the requirements of the Bush administration’s bailout targeted at the UAW that he thinks are off the mark.
Competitive wages by 2010
The Administration seems to want to make the UAW get their total labor costs on par with the foreign automakers by 2010. First, that’s not much time. Second, as mentioned earlier, the domestic automakers have far higher costs related to retirees – getting total labor costs on par with the foreign companies will mean sharply slashing pay for current workers and/or reducing retiree benefits. The UAW already came quite far in creating trusts to take much of these liabilities off the hands of the auto companies – although the automakers haven’t been able to fully fund the VEBA (health care trust).
Competitive work rules
It’s commonly thought that domestic automakers’ plants are far less efficient than those of the foreign automakers, usually due to strict work rules. The Administration wants the UAW to make their rules comparable to the foreign automakers.
It was true as recently as 10 years ago that the unions had strict and sometimes nonsensical work rules. However, at present, the rules that remain mostly deal with legitimate safety concerns, such as only having union electricians work on electrical problems.
Ron Harbour, an auto manufacturing consultant and analyst, puts out an annual report that ranks auto factories by their efficiency. 9 of the 10 plants he thinks are most efficient are unionized domestic plants.
Eliminate the jobs bank
The legend we’ve heard about the jobs bank is that workers sit around collecting 80% of their pay if they’re laid off. The Administration wants the jobs bank eliminated.
The domestic automakers offer a sub-pay period, where they supplement the unemployment insurance that all workers are eligible for (unemployment insurance is funded through states’ payroll taxes). The foreign automakers don’t do this, but they actually offer similar benefits otherwise. Toyota has a “no layoff” policy, and offers their employees full wages while they are retrained or reassigned.
Additionally, because auto industry jobs are training-intensive, it’s in the industry’s interest to keep workers on through the bad times, or as factories are retooled. Without some way to support themselves, they would have to look for new jobs. As the economy improved and the automakers needed more work, they would have to recruit and train new employees, which is expensive. The auto industry is highly cyclical, which means there are lots of bad (and good) times – and if they didn’t have such programs, they would incur high costs training new hires.
While the UAW definitely needs to make major concessions, one has to ask about the motivation of the Republicans who tried to attach conditions to the failed bailout bill. One has to ask if the Republicans are deliberately trying to destroy organized labor.