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A comprehensive examination of the United Auto Workers (UAW)

A Comeback for the UAW?

As strikes go, Chrysler's wasn't all that impressive. When Chrysler's unionized workers nationwide left their assembly line positions in early October 2007 to protest the holdup in securing a new four-year labor contract, the media reported "the second major UAW walkout in a month"-but it seemed more like a long lunch with picketing during dessert. By nightfall the parties had come to an agreement, and the next morning the newspapers chorused such headlines as "It's a New Day in Detroit" and "Detroit's 3 Finally on Track." Really? It seems to me we've read those headlines a hundred times in the past 25 years. And each time they're wrong. Many observers seem to believe that the Big Three's woes are all tied to union wages and the benefits its bluecollar workforce receives. But those are not their biggest problems. While the new agreements with the UAW could help, cutting labor costs won't cure what ails Detroit.

In fact, just the opposite could happen. General Motors has cried loudest about the "unfair" wage advantage the Japanese automakers enjoy. It has bemoaned what it sees as a $1,500 to $1,900 price disadvantage (owing to active and retiree health care costs) on every product it sells. Detroit spends approximately $78 an hour in blue-collar wages and benefits, while Toyota Motor spends less than $50. But a plant's productivity may be more important than actual wages paid there. Auto executives know real labor costs aren't framed just by the per-hour pay but are measured by how many vehicles the fewest workers can build in one shift. And consider Ford's last minivan attempt. No matter what Ford spent to develop or build a new minivan, it was DOA at Ford and Lincoln-Mercury dealerships. When a new vehicle comes to market and fails, the manufacturer loses hundreds of millions-if not billions-no matter what its labor costs are. Much has been made of the fact that Detroit already spent much more than Japanese automakers in the United States for health insurance. Yet GM admitted something important after the union contracts were signed: Fully 56,000 of its remaining 74,500 blue-collar workers will be eligible for retirement by 2011. So the average age of GM's factory workers will be coming down rapidly in the near future. Theoretically this would lower costs associated with health care per employee. At first glance, this looks to be a huge financial win for General Motors, and in the near term it is. However, it could all too easily bring the United Auto Workers roaring back to life. Here's how it is likely to backfire. First, retired autoworkers don't get to vote on new contracts. Second, up to 56,000 of GM's 74,500 workers might be replaced either by the time of the next union negotiations or by the 2015 negotiations at the latest. Do you think the new and younger workers, paid less and getting fewer benefits, will fight to keep the retirees' benefits? A younger worker might well feel cheated and resentful.

This time around, the UAW could sign up the American workforce of foreign car companies for the same reason. The Detroit News reported that a secret internal Toyota report written by Seiichi Sudo, president of Toyota Engineering & Manufacturing for America, suggests that Toyota needs to get its labor costs down to whatever the prevailing wages are in the region where the factories are located. If Toyota can move more quickly to cut its labor costs because its $25 hourly wage is high compared to GM's possible $14 in some positions, then GM is putting downward pressure on japanese wages. So the japanese could use GM's lower wages to put downward pressure on some of their employees-and those earning Japanese wages might start to think that union representation isn't a bad idea.

SOURCE: Excerpted from Ed Wallace, "A Comeback for the UAW?"
BusinessWeek, November 6,2007, downloaded from General Reference
Center Gold, http://find.galegroup.com.

Questions

1. Why does this business writer believe union membership might become more attractive to workers at auto companies in the future? Do you agree? Why or why not?
2. Besides compensation costs, what HRM challenges do auto companies face? Which of these challenges involve labor relations?
3. Suppose GM or Toyota (choose one) hired you to advise the company about its strategy for working with or fighting the UAW. What issues would you advise the company to emphasize? What tactics would you recommend?

Solution Preview

1. Why does this business writer believe union membership might become more attractive to workers at auto companies in the future?

In this article, the author, Ed Wallace, explores the future of the "Big 3" American auto plants and their futures. According to Wallace, the auto companies were laying heavy blame for their inability to compete with the Japanese auto manufactures on the shoulders of the Union workers and their wages and benefits (Wallace, 2007).

After researching this more in depth, Wallace explains that after the 2007 contracts were negotiated to help reduce labor costs, GM admitted that a major percentage of their workforce would be retiring by 2015, before the next labor contracts come due. Therefore, the author cites the loss of these employees and the hiring of new employees into the plants as a potential trigger for an uproar and comeback for the United Auto Workers Union. Wallace's theory is that the younger workforce will be angry at the lack of benefits they receive compared to the retired workers they replaced and this will move them toward a stronger union that demands better wages (Wallace, 2007).

Wallace also takes notice of the Japanese companies lowering of wages to compete with GM's now lower wages which by his estimation might drive the American workers in foreign plants toward Union representation to help restore their top wages (Wallace, 2007).

Do you agree? Why or why not?

I tend to agree with the ...

Solution Summary

Therefore, the author cites the loss of these employees and the hiring of new employees into the plants as a potential trigger for an uproar and comeback for the United Auto Workers Union. Wallace's theory is that the younger workforce will be angry at the lack of benefits they receive compared to the retired workers they replaced and this will move them toward a stronger union that demands better wages (Wallace, 2007).

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