In Unions There Is Strength - For A While

When unions fight management, both lose.

I was born in December 1940, in Pittsburgh, Pennsylvania, Steel Town USA.  Standing at the confluence of the Monongahela and Allegheny rivers which form the Ohio river and glancing along each river, one saw only the steel industry lining both shores as far as the eye could see.

Today, that same view yields prime real estate that looks more like barren wasteland.  What can't be seen are the thousands of management and labor jobs that once were.

Gone are the bloated management and their mistakes.  Gone are the thousands of workers, all unionized and supportive of make-work rules, high wages, and unsustainable benefit packages.  Gone!  An entire industry became as dead as a toe-tagged corpse in the morgue!  WHY?

My uncles on my mother's side were blue-collar union members working in the steel mills.  My father was white-collar and had his own business as a supplier to the steel industry in western Pennsylvania.

My dad was very successful but made no distinction between himself and our relatives, nor did they.  We all were true friends.  The family was close and everyone gathered together each Friday and Saturday evening.

About 1950 when I began to grasp the conversations around various dinner tables, a pattern began to emerge: the difference between white-collar management and blue-collar labor.

On one side of the pattern was management that understood the relationship between product and payroll, between customers and cash flow.  On the other was the union that came to think payroll drops from heaven, unaware they have to sell a product at a profit to get it.

Union people think they work for the union; management knows everybody works for the customer.  Management understands it is their responsibility to collect the money so all benefit.  Management knows the need to adapt to changing technology and changing customer needs, but may not actually be able do it.

The union wanted to keep things the same, add restrictive work rules at every opportunity and promote within the rank & file the attitude of us versus them, workers versus management.  Some union guys think they've lost a battle when product ships - they hate to see management get anything they want!

In 1952 my dad had had it with his big-spending business partner and started his own company.  He kept his clients and ran the business out of home.  That consisted of 2 additional phone lines for which he had to pay the phone company to string new wire almost 2 miles, a desk in our small den, and a Cadillac.  His ex-partner continued running what was now his business by buying a bigger building and hiring more staff.  This approach to the future is why dad sold out.

After 6 years this business was broke and out of business.  In that same 6 years our family moved into what was to be our very comfortable life long home.  The mortgage was paid off in 3 years.  It was completely furnished with new furniture before we moved in and the bill was paid in full in less than 90 days.

What happened to my dad's former company?  Why was dad even more successful after selling his half of that enterprise?

Management and labor.  That was the difference.  Management ego bigger than the company could afford vs. egoless management.

Top heavy management and labor cost vs. lean management not only of administration but also not having unnecessary bloated labor costs.  Very obvious and very simple to see after it happened.  Dad's ex-partner went broke during the best of times in the steel industry from too much overhead in a big building and too many workers.

The answer to this basic premise lies in the following example.

Jones & Laughlin Steel Corp. 2nd Avenue plant eventually couldn't make a coil of rolled steel and sit it on their dock for pickup and delivery 3 miles by road and bridge across the Mongehela river to their long standing customer MacIntosh Hempfield, at the same price as a Japanese steel company could make the same product in high-cost, crowded Japan, ship it across the Pacific Ocean, across the US by rail and trucked from the local rail depot to the receiving dock of MacIntosh Hempfield.  J & L Steel lost not only one large customer, but too many large customers the same way.  Ditto US Steel, Bethlehem Steel and others.

The demise of the entire steel industry is a well-known fact today. Nobody wanted to change; customers needed the steel companies to change and walked away to suppliers who'd sell them what they needed at a price they could pay.

Some of it was management, some was labor. Pittsburgh could have been saved.  There are many steel makers in America today, but they're all non union.  They pay well, but without the union, they have the flexibility to change to meet customers' needs.

Now cometh the auto industry, with high-paid union labor, a set of work rules as thick as the phone book, and high-paid "bonus baby" managers coming hat in hand to the politicians.  What is wrong with this picture?

A strong, huge, and well-paying US industry whittled down to the kneeling position by a bunch of pipsqueak foreign companies and crippling government regulations.  And the savior is supposed to be a government stuffed with politicians who are plainly incompetent at management and whose only mechanism to survive is to win more votes.

Our auto industry is the victim of drowning in its own success.  When times were good and they ruled the roost, their large egos allowed them not to see the need to contain costs, manage labor better, and wholeheartedly invest in the future.  The same companies are shackled by immoderate union leaders who refuse to relinquish power.

How much power will they have when the whole US strongly unionized auto industry drives itself off the same cliff as the US steel industry?  But management's and labor's bone-headed business blunders only brought them down on one knee.

What will finish them off is the government and its bloated and incompetent policy makers whose only need is to get re-elected.  Their job requirement never included the need to generate revenue without stealing it or to make a profit through appropriate management skills organized to serve customers as opposed to ripping off taxpayers.  They pass laws and write rules which boost costs and destroy value; they never created a dime of value in their life!

There is no legitimate proof of government success other than the military.  Of course we have Viet Nam to illustrate the incompetence of the government when they micro-manage the military.

Whatever the public sees as worthy government accomplishment is and always has been done by private enterprise.  Building the Hoover Dam, the interstate highway system, NASA and our accomplishments in space, just to name a few - the money came from government, but worthy private companies did the work.

The folly of politicians' management skills can't be illustrated more clearly than Congress debating a bill to erect the "bridge to nowhere" as a bridge on the interstate collapses in Minnesota.  And now these same egocentric and self-serving morons are going to do the right things to save our auto industry?

They want to demand that GM and Chrysler build electric cars that no one wants to buy because the technology is not yet matured enough to make a profit.  T. Boone Pickens has all but abandoned his wind-farm project because of the nonsense rules the government via the EPA has given us which won't let him build a wire to get the electricity from the wind farm to the cities where it's needed.

The picture-perfect description of a Ponzi scheme called Social Security Administration is what the politicians call successful?  Ponzi was successful too, until it came time to pay off too many people.  Government management?  Give me a break!

Try this on for size.  I am a life long General Motors fan.  I won't buy a foreign car.  I have owned 2 Fords and did not like them.

However, the government wants me to pay more taxes not to make GM and Chrysler profitable again but to bow to the ridiculous and arrogant demands of the auto workers union.  Then I can go out and buy a new GM or Chrysler car and pay again for the auto workers wages.  A company that can survive on its own is a company worth supporting, not bloodsuckers who cheat by getting government to steal from you on their behalf.

Is GM, Chrysler or their dealer going to give me a rebate equal to my increased tax burden?  Not on your life.  Not with the industry now down on both knees and no reason to spend the effort to try to rise so long as government bails them out.

The bailout is being promoted because they say it is better for you and me.  The problem is obvious and the solution is simple.  The answer is not bailout; the foreign companies make plenty of high-mileage cars, we don't need to have more factories making more small cars.

Politicians pandering to gain more votes is not my idea of worthy management.  They are so stupid they honestly believe gaining all the autoworkers' votes will not be offset by voters that are not as dumb or greedy as they are?  Talk about having your head stuck in the sand!

I believe in voting with your feet and your wallet.  I have been to two FORD dealers this week.  I think I like them.

This article was reprinted from a different site. Commentary may be added.  Read other articles by Guest Editorial or other articles on Economics.
Reader Comments
As the Bible states, "Seest thou a man wise in his own conceit? there is more hope of a fool than of him." (Proverbs 26:12) There is no stopping the foolishness of union bosses and politicians, because they actually believe they are smarter than the rest of us. Those Fords ARE looking much better all the time.
February 5, 2009 8:47 PM
Maybe other people are coming around to this point of view. Ford has lost fewer sales than expected, GM and Chrysler lost more.

Wonder if this is the start of blowback from the bailout...
July 1, 2009 4:32 PM
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