The UAW Strikes Again

Union leeches don't know when to stop sucking.

Just after the Obama administration took over, his allies arranged a quick "bankruptcy" for GM and Chrysler.  The senior creditors, who were supposed to be paid first based on centuries of bankruptcy law, were summarily wiped out; the United Auto Workers health care trust ended up owning 42% of Chrysler and 17% of Government Motors.  This gift to the unions represented a decent return on the $200 million the unions had spent to help put Mr. Obama in the White House.

In return for the bailout, during which a large number of Republican-leaning car dealers were unilaterally forced out of business, the UAW promised to have their own union trust funds take responsibility for workers' health care.  Instead of being given cash, these trust funds were given GM and Chrysler stock which had been taken from the other investors.

The UAW also agreed to pay cuts for workers.  This made a difference: Chrysler's labor costs are about $49/hr, down from $76 in 2007.  GM's costs are $56/hr and Ford's are $58.  Ford's reward for not needing a public bailout was ending up with the highest labor costs in the domestic industry.

The pay cuts put the Big 3 on a rough par with the highest-cost foreign plants, but they're still at a significant disadvantage.  One of the reasons foreign cars often seem to offer greater value is that they do - the Big 3 have to reduce the value they put into their cars to make up for their higher labor costs.

The cost difference comes either out of product quality or out of profits.  Lower quality means lower sales, lower profits makes it more expensive to raise funds to develop new products.  Either way, higher labor costs are death in the long term.

During the negotiations, we taxpayers were promised that we'd get back all the money we put up to save all those UAW jobs.  President Obama later claimed credit for saving thousands of jobs in Detroit.  He made much of GM paying back part of what they'd been lent by the government.

Taxpayers won't live happily ever after, however.  In June, the White House conceded that taxpayers might lose as much as $14 billion on the bailout even if both Government Motors and Chrysler return to profitability.

As part of the agreement, the UAW promised not to strike either GM or Chrysler for four years, that is, until after the 2012 elections.  They're free to strike Ford, the only one of the Big Three that was in good enough shape not to need a government bailout.

Divine Right to High Wages

Having had their employers survive only because of a $55 billion dollar bail-out from the federal government, you might think that the UAW would have learned a bit about the benefits of keeping their employers' costs in line with their competitors.  You'd be wrong.

Despite all the federal help, despite having turned their members into welfare recipients who're supported at taxpayer expense, the UAW has returned to its traditional method of bargaining.

During the glory years, they'd pick the weakest of the Big 3, threaten a strike, and get what they could.  Then they'd impose that pattern on the other two.  They seem to feel that they have a divine right to high wages no matter what happens to their employers.

This time, Chrysler is the weakest, having continued to lose money since the bailout.  The UAW is smart enough to know they can't actually violate their agreement not to strike Chrysler, it would put them under for the third time.  The taxpayers are no mood for another bailout, so they'd never come back up.  Instead, they have gotten close to a deal with GM, which is in somewhat better shape but still not rude health.

One of the most contentions points at Chrysler is what to do about younger workers who're paid $14.65 per hour instead of the much higher rate of senior UAW members.  The industry's plan was for older, more expensive workers to retire and be replaced by younger, cheaper workers.  Over time, this would have made them more competitive.

12% of the Chrysler workers are lower-paid versus only 4% at GM.  Ford has essentially no lower-paid workers because, lacking the threat of bankruptcy, Ford was not able to get their UAW locals to accept the two-tier wage system.

Rubber Meets Road at Chrysler

Chrysler isn't making a profit despite having the lowest labor costs in the domestic industry.  Even though GM seems to have reached agreement with the UAW leadership, Chrysler has had to extend the negotiating deadline twice.  Chrysler workers are unhappy with what they've heard about the GM agreement.

Because they have the most low-paid workers working with them, the Chrysler UAW members are particularly tetchy about the two-tier wage system.  The Wall Street Journal quoted Brett Ward, an 18-year Chrysler veteran:

"They [the lower-paid workers] are being asked to work at wages that are less than what I was paid 18 years ago.  If it nears the GM contract, I will vote against it and try to do everything I can to get others to vote against it...

Mr. Ward objected that the GM agreement doesn't restore cost of living increases or holidays that were cut during the bailout, forgetting that cost-cutting was needed for his employer to stay in business at all.  Mr. Ward and his colleagues forget that his employer's situation was so desperate that Fiat wasn't required to put up any money in return for its share of Chrysler ownership - it wasn't considered worth anything at the time, compared to the potentially effective management that Fiat brought to the table.

Fiat would obviously love to turn Chrysler around.  They've invested a great deal of time and effort in trying to make that possible, but not much actual cash.  If the UAW doesn't go along with enough cost cutting to make Chrysler competitive, Fiat can walk away without much financial cost.

The latest news states that Chrysler and the UAW are still deadlocked over the cost of lower-paid workers and the cost of health care.  Talks at Ford remain contentious.

Death Sends a Message

Death is one of the best ways to send a truly important message.  Back before the first major Chinese dynasty got off the ground, Confucius pointed out that the Emperor's main job was to find underperforming government employees and chop heads to encourage virtue.

During the first Chrysler bailout, a Japanese friend told me that the Japanese government would have let Chrysler go - there were too many automobile factories in America anyway.  "Big businesses and labor are always asking for government help," he told me.  "The only way to be sure they really need help is to let someone go bust.  After a death in the family, everybody acts a lot more reasonable."

The Obama administration did the UAW a huge favor by bailing out GM and Chrysler at taxpayer expense.  Now that things look a tiny bit better, the UAW's trying to push labor costs back to the same level that brought GM and Chrysler low in the first place.

Wouldn't it have been better just to let Chrysler go last time?

Will Offensicht is a staff writer for and an internationally published author by a different name.  Read other articles by Will Offensicht or other articles on Business.
Reader Comments

I think it is time for the car companies to adapt union tactics. They cannot afford to pay more for less. The companies should enter the negotiations with a hard stance attitude. They should lay out on a table what their demands are, give the union one week to ratify it and if the contract is not ratified then close the plants for one month. When the next face-to-face occurs then repeat the demands only deduct what the union has caused the company by not agreeing to the company's demands. Repeat as often as necessary. After the second month start the dismantling of one plant with the intent on exporting the jobs abroad. There will be protests and all kinds of trouble but it is time for the unions to understand that they do not own the companies and it is time to learn about profits and losses. One good round of this will help our country more than any peace from a threatening union.

October 3, 2011 7:21 PM

Obama will threaten them personally if they threaten his union supporters.

That's why they can't do it. Also, they will destroy the plants.

October 3, 2011 7:28 PM

TWO years ago General Motors (GM) went bankrupt. High labour costs, short-sighted management and global economic turmoil forced what was once America’s mightiest firm to seek refuge from its creditors. Only a federal bail-out saved GM from the scrapheap. Now, after a dramatic restructuring, the company is in reasonable shape, but another recession could sideswipe it.

Small wonder the United Auto Workers union (UAW) is less truculent than before. On September 20th, as the UAW and GM unveiled a remarkably modest four-year pay agreement, union bosses stressed their commitment to helping GM prosper.

The deal allows GM to hire thousands of new “tier two” employees, who will get about half the pay of longer-serving blue-collar workers for the same work. It offers early-retirement buy-outs to thousands of costly tradesmen the firm no longer needs. It gives each of GM’s 48,500 production-line workers a $5,000 lump sum now and about $4,000 more spread over four years, plus a slightly higher share of profits. But GM has not had to concede any increase in basic pay (apart from a modest rise for the low-paid tier twos). The next contract talks, in 2015, will in effect start with pay reset at the levels of the early 2000s.

This is not the first time the union has had to make concessions. In 2007 it accepted the long-taboo two-tier wage structure. In 2009 it agreed to curbs on its ability to call strikes. Now that GM has lighter debts and a smaller, cheaper workforce, the firm is back in profit. Better models have won car-buyers back: in August GM had a 20.4% market share in America, up almost two percentage points in a year. But still, the union has to be realistic.

Two spectres make it shiver. One is the economy. The other is the continuing threat from the “transplants”—low-cost foreign-owned car factories in America, mostly in the union-unfriendly South. Until 2007, GM’s labour costs were far higher than the transplants’ (see chart). Now GM, like Ford and Chrysler, has slashed them so severely that they are only slightly higher. Analysts at Deutsche Bank reckon that the labour deal could narrow the cost gap by a few dollars more.

Some union members will complain loudly about the new deal. But the UAW’s leaders can boast of some achievements. After what seemed like endless rounds of job cuts, GM is now hiring again: of the 6,400 jobs it plans to add or retain in American plants as a result of the deal, many will involve work that would otherwise have been sent down Mexico way. Since all these jobs will be at unionised plants, the UAW will get some respite from the relentless decline in its membership, which has slumped from 1.5m at its peak in 1979 to less than 400,000.

The UAW is being reasonable partly because it wants to keep GM competitive, but also because it dreams of persuading workers at foreign transplants to unionise, says Harley Shaiken, a labour expert at the University of California, Berkeley. Mr Shaiken thinks this is fairly likely, so long as Ford and Chrysler reach similarly amicable deals with the UAW.

However, Kristin Dziczek of the Centre for Automotive Research in Michigan is sceptical: workers usually join unions only when they feel mistreated, she says. Pay at the transplants may be lower than at the Big Three in Detroit, but it is above-average for the states where the foreign-owned plants are located. And most of the transplants are in “right-to-work” states, where closed-shop agreements, which force workers to join a union as a condition of employment, are banned.

In any case, the UAW may have its reasonableness tested in the coming talks with Ford and, in particular, Chrysler.


October 3, 2011 7:47 PM

FredF: You are right on both of your comments in all likelihood. However threats from a president are against the law as is destruction of property. It is time to draw a line in the sand.

October 3, 2011 8:26 PM

This goes out to you who want to put the blame on President Obama for the difficulties of American industry. Please WAKE UP AND SMELL YOUR OWN BULL. The problems existed long before Obama became President. Long before NAFTA. Once again the media prints a one sided argument. If you are going to talk, or print something, print the whole truth. The government could have helped to protect American industry many years ago by slapping the same tariffs on foreign products as the foreign countries slap on American products. For example, A Ford Taurus sold in America for about $35K-45K would cost almost double in Japan when they get done taxing it. In other words it wont sell because most wouldn't be able to afford it. It is the same with GM, and Chrysler models. When I see Asians here in America driving cars, it is usually cars from their home country. Isn't that the same country that benefits? Americans need to protect their economy, buy American. Stop sending your dollars overseas. Stop whining and pointing your finger at President Obama. Last time I remembered, we live in a democracy. This was set up so that one man doesn't have absolute power. Most of the blame goes to congress from years ago, some of them who are still in office because idiots keep re-electing them, then complain about the job they are not doing for the people. There are many things our government can do to help but one must think how many in congress won't because they only protect their own interest. Truth be told: American government has been failing far before President Obama. Here we go again. Same story different chapter. A person of color in America gets a position of authority after the previous President handed him a fixed deck, and prejudice Americans expect him to fix in 4 years what took 8 years to screw up. They said after 9/11 that America came together. Yes it did for about 10 min.

October 10, 2011 1:58 AM

I am one of those that you addressed your comment to so please allow me to respond.

Congress did indeed allow a one sided trade agreement and for that obama is not to blame.

obama did indeed inherit a bad economy and for that he is not to blame except where he voted against free market principles.

As for the person being blamed because of his color, that is an egregious and totally ignorant statement you issued that I take exception with. It is his economic policies that I abhor, not the color of his skin. Ask yourself, if bassboat will vote for Cain, how can it be said that bassboat does not like obama solely on the color of his skin? You Biz, are apparently a racist and a socialist, as you appear to condone obama's policies. I for one, will continue to point a finger and criticize obama whenever he issues socialist type statements and policies.

October 10, 2011 5:07 PM

I am one of those that you addressed your comment to so please allow me to respond.

Congress did indeed allow a one sided trade agreement and for that obama is not to blame.

obama did indeed inherit a bad economy and for that he is not to blame except where he voted against free market principles.

As for the person being blamed because of his color, that is an egregious and totally ignorant statement you issued that I take exception with. It is his economic policies that I abhor, not the color of his skin. Ask yourself, if bassboat will vote for Cain, how can it be said that bassboat does not like obama solely on the color of his skin? You Biz, are apparently a racist and a socialist, as you appear to condone obama's policies. I for one, will continue to point a finger and criticize obama whenever he issues socialist type statements and policies.

October 10, 2011 5:07 PM


I am sorry for making you think I am a racist. Nothing could be further from the truth. I was venting because I happen to be one of those auto workers they are talking about when they say the Unions are a Problem. The Unions only want a fair wage and A safe work place. When it comes to being greedy, our union took a wage freeze 7 years ago to help the company lower their cost. In addition, we gave up our cost of living, and Christmas bonuses. The company did the same at the Executive level but, as soon as the company turned a profit the executives got back everything they gave up. Is that fair? I agree that Obama shouldn't try to take away free market principles. As for my statement about the color of his skin. That is historically correct. I wouldn't expect you to understand. You have never had to deal with it. Its not racist, it's more like routine.
like what Jackie Robinson had to go through to play in the Major Leagues, and What Martin Luther King had to go through for Equal Rights. Like what the Tuskegee Airmen had to go through just to be allowed to fight for their country. You wouldn't understand because you are apparently not of color. That is why your response is that I am racist. Now I won't say you are a racist because I don't know you. I do however respect your opinion, and I Agree that I don't like some of Obama's policies, but I just can't stand it when every argument is one sided.

October 11, 2011 3:47 PM

@biz - your UAW friends get HUGE pay compared to other people. My friends who manufactured auto components for your employers got 15-25 per hour while you were getting $70 when all the bennies were included.

That made cars too expensive for lots of them to buy.

Sorry, no sympathy. You're still way overpaid.

October 11, 2011 6:57 PM

Fred F,

First off I appreciate your comment because I appreciate different views. I will offer one of my own. Since I am not UAW officer, I don't know what is said in the negotiations, nor whether the Company offered the wage/benefits package, or if the UAW negotiated it. All I know is they agreed to it. I am one who agrees that the cars and trucks are way too expensive for many to buy. I am not looking for sympathy, I only wanted people to see the other side of this topic. I don't believe that if we now only got paid 15-25 per hour that it wont make the cars and trucks much cheaper. It will only make the corporate executives richer from the much larger bonuses they would get.
While the public is only focused on what the workers make, they should focus on what the executives make, and there are a lot of chiefs making 7 and 8 figures.

October 12, 2011 11:06 PM

@biz - I understand your point of view, I, too, would like to be paid more. But i do not see how anyone can justify costing the company $70 per hour for assembly-line jobs. Putting in dipsticks is worth $70/hr? Installing flywheels, particularly when the machine does all the bolting?

I understand your concern about management costs, but think about the numbers. I had a long chat with a NWA flight attendant who was griping about the boss bonus. She finally admitted that there were maybe 35,000 flight attendants. Giving each of them $1000 per year would cost 35,000,000, which was 35 times the boss' then bonus.

Waitresses get 15% of the GROSS as someone observed on scragged. Why shouldn't a boss who helps the company make a buck get part of the profit?

October 13, 2011 7:01 PM

You have the salary of the FCA Chairman Sergio Marchionne. making $55.5 million. You have the chairperson of GM, Mary Barra`s salary $14.4 million — but just $1.6 million as a direct salary. You have CEO Ford Motor Co. Mark Fields earned $18.6 million in 2014 $1.7 million, plus $3.2 million in cash bonus and the rest in long-term stock options, performance equity awards and yet, We want to direct our attention to that person building that car or truck on the line and cut or limit his or her`s pay to what he or she deserves. I`ve been on that line for almost a 3rd of my life and I can tell you it is not easy. And for someone misdirecting their anger towards the working person on the line, needs to look at the very top of the ladder and direct your attention to see who benefiting from the work that is exalted every day when those cars and trucks are rolled off the assembly line. You don`t see them (the Big Three Executives) on the line building these vehicles made every day but you sure see them in the private and corporate jets and nice homes and income that they have. But again, We want to focus our attention on that person making $19 and hour. It is time to redirect your attention to where the money is really going and stop using the wages of the working person on that line as an excuse.

September 30, 2015 4:56 AM


I understand your ire, but you have to understand the scale on which these businesses operate. GM has hundreds of thousands of employees. Divide the boss' salary by that, it is a few bucks per employee. On the other hand, a smallish raise for all the rank and file costs HUGE bucks.

I am not saying that the salaries of the top players are not out of line, I believe they are. I am saying that these sums are not significant on the scale at which GM and Fiat operate.

September 30, 2015 5:58 PM

For those of you that have sympathy for these car companies here's some numbers for you. Ford in the first 2 quarters 2.9 billion dollars. That's after overhead was paid for the year. I am sorry that the job you chose didn't make that much but I am sick and tired of ppl saying auto makers make too much. You take your vehicle to a mechanic shop and just Ford looking at it it runs about $75.00 tacked on with that the labor cost, parts, disposable fees, etc. You willing pay it. It's cheaper to do it yourself. Now try building a vehicle for bare metal in less then 2 shifts and tell me we make too much. You have no clue as to what we go through in these plants across America. As for the person that made the statement that machines do the work for us you got life as an Auto Worker messed up. I have never had a machine do my work. We are hard workers and proud of it. People have died on the lines doing their jobs just to make ends meet. I have a big problem with outsiders making comments on issues that they have no clue about. I don't respect your opinion at all some might but I don't keep it to yourself or vent to your friends. We all are victims of corporate greed let's keep it real. UAW FOR LIFE!

October 10, 2015 3:21 AM

You won't believe me if I do the math, so I suggest you work out the following:

1) How many UAW members work at Ford?
2) How many hours did all of them put together work during the first 2 quarters when Ford made $2.9 billion?
3) How many non-union workers do they have?

Now divide the number of worked hours into the $2.9 billion. If the UAW got all of the profit, how much of a boost per hour would that be?

Of course, if they did that, there'd be no profit to invest in new factories and the company would wither away as their products were no longer up with the times.

An engine plant costs about a billion dollars and the work in process also costs a billion. That profit would just about pay for ONE engine plant.

And you want to take more money out of the firm?

October 10, 2015 5:31 PM

Love the comment that the Japanese would have let them go bankrupt. Worked for a global credit rating agency. Japan has seen like 20-25 corporate bankruptcies a decade at most...

March 18, 2016 9:34 AM
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