September 23, 2003

DEINDUSTRIALIZATION NATION:

Signs of Wisdom at UAW (Paul S. Kersey and Kent Davis, September 22, 2003, Mackinac Center for Public Policy)

Much remains to be learned about the deals the United Auto Workers (UAW) reached with Daimler/Chrysler, Ford and General Motors. But early indications are that UAW President Ron Gettelfinger has, at least for the time being, abandoned the usual procedure of negotiating with one company first, then forcing the other two to accept similar terms.

This was, no doubt, a difficult decision to make. But it was probably the right one for the long-term health of the UAW, as well as for all three of Detroit’s automakers. By simultaneously negotiating with all three companies, Gettelfinger demonstrated the sort of economic savvy the union movement desperately needs to develop if it is to regain its influence in American workplaces.

The old method of "pattern bargaining" evolved at a time when Detroit, for all intents and purposes, "owned" the domestic automobile market. Representing virtually every blue-collar worker in the entire American automobile industry, the UAW was in a position to protect those workers from competitive pressure by negotiating similar contracts with all automakers.

But new competitors have become a permanent part of the American automotive marketplace. These "foreign" competitors — BMW, Toyota, and Mazda — have in effect become domestic automakers now, producing cars in factories throughout the American South. Employees of these "transplant" facilities have declined UAW representation so far, and all signs are that this is unlikely to change. UAW officials are entitled to question the wisdom of workers who have shown little enthusiasm for union membership, but the loss of their near monopoly in automobile labor is a reality with which they must deal. As a result, workers at the Big Three have non-union competitors they did not have back in Detroit’s glory days in the 1950s, 60s and 70s.

Failure to anticipate the impact of new competitors led to costly contract terms that put the Big Three at a disadvantage. On average, labor costs are $1,000 per vehicle higher for the Big Three than their transplant competitors. By abandoning the usual bargaining procedure, Ron Gettelfinger gave himself and the companies whose labor forces he represents room to address each automaker’s individual weaknesses and narrow the labor-cost gap.


This can hardly be more than a holding action. The combination of technology removing the skill from manufacturing jobs and globalization making jobs mobile means that it makes no sense for developed nations to have a manufacturing sector, where essentially unskilled employees get paid far more than competing workforces in Third World countries demand just to assemble parts.

Posted by Orrin Judd at September 23, 2003 3:49 PM
Comments

No need for a manufacturing sector? That's like saying that during the Industrial Revolution the US never needed an agricultural sector afterwards.

Posted by: Chris Durnell at September 23, 2003 4:43 PM

Actually, the need is straightforward: In the event of total war, you really don't want to be outsourcing war production.

Posted by: Chris at September 23, 2003 5:25 PM

It's very good the UAW is acting sensibly and viewing the automakers as their partners rather than their opponents. As for Third World competition, the UAW just has to earn their pay premium by being more productive. That's easier than you seem to think.

Posted by: pj at September 23, 2003 5:58 PM

Chris D:

If we have free trade some sectors of the agricultue business will indeed disappear because others can make the stuff cheaper. Big deal?

Chris:

Defense is a government program more than an industry, but nkes have insured there'll never be another total war.

pj:

Ever read Rivethead?

Posted by: oj at September 23, 2003 6:34 PM

Rivethead shows that it was easy to improve autoworker productivity. They've come a long way since the 70's/80's, but it's still easy.

Posted by: pj at September 23, 2003 7:53 PM

You think you couldn't hire Indian or Korean or whatever workers who are just as competent for a fraction of the cost? And given the unemployment in such places and the lack of union rules you've always got a hammer to wield over them.

Posted by: oj at September 23, 2003 8:03 PM

Non union transplant factories in the south take about 36 hours to produce a car.

Their union counterparts take 45.

(Per the Detroit Free Press)

PJ is right, there is a lot productivity to yet to be had.

Posted by: Jeff Guinn at September 23, 2003 8:20 PM

I'm sorry, I must have misunderstood. If the argument is that be deunionizing industry and reducing wages we could maintain competitiveness, I agree.

Posted by: oj at September 23, 2003 8:26 PM

Mr. Judd;

I'm surprised that you didn't point out the silliness of the statement:

UAW officials are entitled to question the wisdom of works who have shown little enthusiasm for union membership
Shouldn't the UAW question its own policies / structure if new workers don't want to be part of it? Should the UAW ask "why do they hate us?".

Posted by: Annoying Old Guy at September 24, 2003 11:00 AM

Orrin, obviously you have never worked in nor had a good tour of a manufacturing facility. Even assembly requires considerable skill, and setting up the line to allow assembly efficiently requires the best skills of engineers.

The problem with US autoworkers is that they cannot compete with Japanese, not that they cannot compete with Indians.

Ever heard of the Yugo?

Posted by: Harry Eagar at September 24, 2003 3:32 PM

Harry:

That's very much the point: Let our engineers set up the plant and then hire whatever group of semi-educated third worlders push the buttons and your SUV will cost what a Yugo did.

Engineering jobs will remain ours. Assembly jobs won't.

Posted by: oj at September 24, 2003 3:44 PM

They will, like farmers.

With far fewer manufacturing jobs now (about 12% of the work force, I think), we produce far more than when those manufacturing jobs represented 30% of the workforce.

Also, the reduction in manufacturing jobs is in part a quirk of statistics. When Ford did all its accounting in house, those were manufacturing jobs because Ford is a manufacturing concern.

Outsourced to an accouting company, those same jobs are now classified as services.

Posted by: Jeff Guinn at September 24, 2003 9:37 PM

Still wrong, Orrin. Real manufacturing is not like Willy Wonka's chocolate factory.

If you were right, the engineers would set up robots and there would not be any manufacturing jobs anywhere.

We were promised that in the 1980s, but it couldn't be delivered. Machines are temperamental things.

Posted by: Harry Eagar at September 24, 2003 9:44 PM

I recall saying you needed some workers, just not Americans. Were you right the manufacturing jobs would not be heading abroad to begin with.

Posted by: oj at September 24, 2003 9:48 PM

Manufacturing is more complicated than you imagine, Orrin.

I like the story a consultant tells about the same machine delivered to a Japanese and an American plant.

The manufacturer says it will make 5K parts/min.

"The Japanese machine will be spotless, and it will be cleaned every day, maybe even every hour.
And if it won't make 5 thousand parts a minute, the operator will bug his supervisor for help until it does.

"After a few days, the American machine will be filthy and look like it has been there for 20 years. But the operator will be playing it like a video game, and he'll have it up to 8,000 parts a minute."

One of my brothers-in-law, who was a mechanic in a battery factory, used to tinker with the production mmachinery, which was German. The German engineers visited the factory once a year and they would scold him for messing with their designs. But his worked better.

Posted by: Harry Eagar at September 26, 2003 4:09 PM

Hey, you're the one who thinks Japanese cars are so great.

Posted by: oj at September 26, 2003 4:11 PM
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