Detroit’s Downturn: It’s The Productivity, Stupid

Union work rules make it almost impossible for the Big Three to keep up with foreign competitors.

There has been a lot of finger-pointing about who has put the American auto industry in a ditch, sending it hat in hand to the taxpayers’ ostensible representatives in Washington. There seems to be a broad consensus that Detroit’s problems were caused by inept and arrogant management, unimaginative car design, poor quality — though this has improved somewhat over the past couple of decades — and overpaid union workers. While there is less agreement on how much to weigh each of these factors, only the latter is attributed to the UAW. There also seems to be some dispute over what their compensation actually is, but most agree that it’s uncompetitive with the foreign transplants, largely in the south, though Honda builds cars in Ohio. Of course, the fact that the non-union companies are in the south has resulted in predictable accusations that southern Republicans are playing politics and trying to destroy the union to the benefit of their home-state companies — ignoring the fact that General Motors has a plant in Tennessee, the home state of the most prominent bailout opponent, Senator Bob Corker.

The UAW is seen to have been the winner of the current round because, while the Senate Republicans held up the Congressional bailout to them (though it should be noted that their votes weren’t necessary to pass it — only to provide political cover to the Democrats, who had sufficient Republican votes to push it through), the White House capitulated and seems on the brink of offering them the money anyway.

But almost all of the discussion, when it comes to UAW culpability, has been on wages. The even larger issue, though, is the elephant in the room that seemingly no one discusses, even when given a political opportunity. For instance, I saw a “debate” on Fox News recently in which the Democrat defending the union said that it was partly management’s fault because of the poor quality of the cars, and the Republican failed to respond. And it’s not like people are unaware of it, at least people familiar with the industry. The issue isn’t wages — though those are a problem — so much as work rules. UAW work rules, which have evolved over the many decades since the passage of the Wagner Act, are the biggest reason that General Motors is uncompetitive with its non-union American counterparts.

What are work rules? They are agreements negotiated in the contract between management and the union covering how the employees are to be classified, how many breaks they get, how much time off they get, who can do which jobs, how discipline is to be enforced, etc. The goal of the rules is not to enhance productivity or production quality. It is to provide opportunities for featherbedding, increase numbers of (overpaid) jobs for union workers, and minimize how much they have to actually work. This is important because it’s at least in theory possible that the industry could be making money even at current wages, if they could be provided with the flexibility to increase worker productivity. When you blame management for the quality and cost problems in the auto industry, first consider stories like this:

As a former supervisor of UAW workers at a GM facility, I will say that poor management and union malpractice made the Detroit Three uncompetitive long before the government sent in their arsonists.

To put it bluntly, the UAW takes the hard-earned money of the best workers and spends it defending the very worst workers while tying up the industry with thousands of pages of work rules that make it impossible to be competitive. And the spineless management often makes short-sighted decisions to satisfy the union and maximize immediate benefits over long-term sustainability.

The strength of the union and the weakness of management made it impossible to conduct business properly at any level. …

Read the rest..

[Does this sound familiar?  --Editor]