Bambi
With word that the United Auto Workers Union has reached a tentative settlement with each of the Big Three on a package of concessions, we also learn what really matters to American autoworkers.
As negotiations came down to the wire, two separate sources tell TheDetroitBureau.com, a critical issue on the table concerned contractual time off. The UAW had already agreed to relinquish one of its many vacation days, but which one: the Monday following Easter, or the opening day of Michigan hunting season? If you can’t figure out which the union opted to keep, you obviously don’t own an orange vest, camouflage gear – or a gun.
The loss of the Monday vacation day was just one of many givebacks in the revised contracts (plural, because each of the Big Three has its own, separate agreement, with subtle, and occasionally significant differences between them).
Another revision puts a cap on the SUB program. Over the last month, the UAW agreed to abandon its Jobs Bank program, in which thousands of workers, displaced by efficiency measures, continued to collect most of their pay and benefits, often for a number of years. But now that the banks are closed, those workers will join thousands and thousands of other idled hourly employees collecting unemployment benefits. That includes not only the regular state UE pay, but also SUB, or Supplemental Unemployment Benefits, paid by, yep, the automakers. And all that adds up to as much as 95 percent of on-the-job pay. The new agreement strictly limits the amount of SUB laid-off workers will collect, basing the new system on strict seniority rules.
The new agreements will provide a number of productivity enhancement measures, something the automakers have been desperate for in a bid to bring their labor costs in line with those of their import rivals, primarily at the so-called “transplant” assembly lines operated in North America by Toyota, Nissan, Hyundai and other Asian competitors.
Union sources said the new agreements included the elimination of lump-sum, or productivity, bonuses that workers were supposed to receive in 2009 and 2010 instead of wage increases, and cost-of-living allowances, or COLA, increases have also been deleted. In another significant change, the company and union also agreed to adjust the way overtime pay is computed, sources said. Instead of collecting overtime after eight hours each day, workers won’t collect overtime until they have worked a full 40 hours in a single week.
These enhance other givebacks agreed to, by the UAW, in 2007, such as health care reform and a two-tier wage structure. Before the current industry crisis, GM’s soon-to-retire Vice Chairman Bob Lutz told TheDetroitBureau.com that the ’07 agreement would close about two-thirds of the cost gap between GM and rivals such as Toyota.
Of course, it all depends on how you’re doing the counting. There’s been a lot of media coverage citing the $73 Big Three line workers “earn.” That’s not take-home pay, and doesn’t even include the hefty package of benefits the UAW has negotiated, over the years. The figure includes the carmakers’ so-called legacy costs. Take the pension and health care costs for retirees, then divide by the number of active union workers, then divide again by the number of hours each puts in every year and you’re pumping up hourly costs by a huge amount.
Ironically, even the math-challenged can see, the fewer active workers you have, the more the figure goes up. And so, with GM and Ford and Chrysler planning to cut thousands more jobs, legacy costs per worker might actually rise.
Significantly, the UAW did not agree to any cuts in retiree benefits. Equally significant, the union has not agreed to take money from a health care fund, known as a VEBA, and invest that cash in the Big Three. Talks on that key demand will continue.
The union announced it had agreed to the various contract revisions just as General Motors and Chrysler revealed the broad outline of their new “viability” plans, which they were required to submit to the White House, yesterday. These agreements will still have to go to the rank-and-file for ratification. There are more than a few disgruntled employees ready to challenge the industry by voting “no,” but industry insiders expect that, in the end, the risk of forcing GM and Chrysler into bankruptcy will convince the majority of members to approve the changes.
And if the naysayers were to win? There’s a good chance the Obama Administration’s new automotive politburo would reject the Chrysler and GM plans, forcing the makers into bankruptcy. In such a situation, the courts would almost certainly approve even stiffer concessions.
A final note: though Ford Motor Co. opted not to seek federal assistance, the automaker has been reaping some of the benefits. The union actually reached settlement with that automaker first, according to a senior UAW official. With its history of working well with labor, the UAW thought it had a better opportunity of setting an acceptable pattern with Ford, which it then bicycled over to GM and Chrysler.
The legacy cost per worker metric has always puzzled me. Loading the earned — and once promised — benefits of previous workers onto a pseudo-wage rate for current workers is a grossly distorting way to look at the situation. Whoever came up with it, perhaps unwittingly, creates a skewed, anti-wage-earner view of a situation that is an inevitable result of productivity, competition and globalization, which management otherwise thinks are good things.
If GM, Ford, and Chrysler don’t like the fact that they are having to pay both the legacy cost for retirees as well as health insurance benefits for current workers, they shouldn’t complain too much since they have no one to blame but their own corporate forbearers.
Back in the fifties (or was it the forties?), Walter Reuther of the UAW went to GM head Charlie Wilson and tried to enlist him to go together to lobby the government to shoulder these costs. Wilson turned Reuther down on strictly ideological grounds – he didn’t want government to have any influence over business.
If Wilson had been less rigid in his laissez faire outlook, America wouldn’t be facing the same competitive disadvantage in manufacturing that it is today. And as far as governmental non-interference in business? Detroit and Wall Street are singing a very different tune now that it’s time to pay the piper for their wrong headed free market, deregulatory religion and catastrophic management.
They just don’t want the government to limit executive pay or bonuses.
I find it interesting that somehow we think that loading earned benefits on the current work force is different from what the federal government has been doing since the beginning of social security. Wow–so should I not actually be able to take advantage of something I paid into for 20 years when I took lower salary than I could make elsewhere because of that benefit? (Don’t get me wrong, I’m well compensated, but have recently turned down positions for more salary but no retirement funds.) Retirement funds are not all provided by the auto companies–some are actually provided by the employees; it is called “contributory retirement.”
Our wages, at the salaried levels, are actually reflective of the fact that we could make more (well, in a normal economy) in salary elsewhere, but not necessarily more based on the benefit structure. It’s also one of the few ways we to try to keep our costs of turnover lower. We keep more employees longer–the Gen Y generation can’t sit still and newer employees DON’T have the same retirement benefits–they have very little other than their 401K’S.
And as much as people want to complain, the automotive CEO’s are well compensated, but not nearly as well as banking, investment services, telecom, electronics and even some universities–and lest we forget what our fabulous athletic coaches make–even for losing teams! How hard would you work for $1? Do you think the best talent (CEO/CFO) is going to come to work for a struggling company for $1? I don’t think so….that would be like asking the Steelers to come to work for Millen as a coach of a new team, for free. Keep dreaming.
If we could actually get our employees to show up for work, we could reduce the hourly work force by 25%, but the attendance issue still hasn’t been addressed–some are still more worried about their stupid “hunting” day than actually doing the work.
Last I checked, it’s also the legislative branch of the federal government that sets the rules for what a union can and can’t do and what management can and can’t do with them. Whether you like it or not, the federal government has been involved in our business for a very, very long time and reaped the benefits of our corporate taxes, income taxes and contributions to this country’s GDP since 1903!
Fair arguments, folks. I won’t use this comment to get into the merits, plus or minus, just make the simple point that the added legacy costs are weighing down Detroit’s makers. Whether deserved or not, they are a huge added cost and a reason for a lack of competitiveness. Now, we can debate the whys and whatfors all we want, but at this point, with the companies failing, the real debates are these:
– How do you deal with these costs and still make Detroit competitive?
-If Detroit goes down, how are these costs covered?
Paul A. Eisenstein
Bureau Chief, TheDetroitBureau.com
– How do you deal with these costs and still make Detroit competitive?
Instituting, even at this late date, a single payer national health insurance model would lower the total cost of healthcare for the nation as a whole, provide for tens of millions of people who are currently un- or under-insured, stimulate consumer spending by giving people a little sense of hope and security for once, and immediately remove a major competitive disadvantage that Detroit and other American companies are burdened with in relation to their European and Asian rivals. Basically Medicare for everyone.
Eventually, pension and 401K type plans could be moved into a more expansive Social Security system to generate similar benefits in terms of retirement. I mean, it’s not I like I hear even the most rabid Republicans clamoring to privatize Social Security lately. I wonder why that is?
– If Detroit goes down, how are these costs covered?
Basically, an emergency government bailout that wouldn’t be nearly as well thought out or efficient as the above solution if it was instituted on a careful and timely basis.