UAW Reneges
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The UAW Reneges
INVESTOR'S BUSINESS DAILY
Posted 12/24/2008
Autos: The government gave the Big Three a $17.3 billion bailout based on the idea that both management and the unions would make concessions. Now the UAW says no thanks. Can we have our money back?
Last week's deal was supposed to hold both the managers' and unions' feet to the fire. In handing out the taxpayer money, the White House insisted the auto union cut worker pay roughly to the levels of their successful competitors, Toyota, Honda and Nissan.
For $17 billion in emergency bailout cash and possibly much more later, it was a reasonable request. As President Bush said, "The time to make the hard decisions to become viable is now — or the only option will be bankruptcy." He added that a deadline of March 31 for the industry to prove its "viability" and other limits "send a clear signal to everyone involved."
Well, if so, the United Auto Workers didn't get it.
Just days before Christmas, the UAW let it be known it'll fight any concessions on wages and benefits. "An undue tax on the workers" is how union boss Ron Gettelfinger described it as the UAW reneged on the deal almost before the ink was dry.
This will go down as one of the most cynical acts of political manipulation ever. The UAW agreed to one thing with President Bush, knowing full well President-elect Barack Obama and congressional Democrats were big recipients of union largesse and would let them slide. They read the situation correctly.
Democratic Rep. Barney Frank this week called union concessions an "unfair assault on working men and women" — a not-accidental echo of Gettelfinger's comments.
But the only real assault on "working men and women" here is the enormous cost this bailout will entail — a cost that all working taxpayers will have to bear and which some analysts think will ultimately total $75 billion to $125 billion.
And the UAW hopes you'll pony it up and give them a free ride.
U.S. automakers are in trouble for two reasons. One, they have massive legacy costs on their books to take care of retired workers, and two, their labor costs are much higher than their competition.
Recent estimates put average UAW worker compensation at $55 an hour to $73 an hour, vs. $45 for the transplant automakers. So at a minimum, UAW workers are $10 an hour more expensive to hire than the 114,000 workers who toil at transplant auto plants situated mostly in the non-union South.
Simply put, unless the UAW makes concessions, a bailout can't work. It will be a financial impossibility. The U.S. automakers' high labor costs, coupled with the 2,000-plus pages of work rules and union requirements under the most recent labor deal, will keep them from achieving the productivity they need to compete.
The U.S. automakers are bleeding $6 billion a month. Better to pull the plug now and force them into bankruptcy, where radical restructuring — including cuts in union pay and benefits — wouldn't be optional but mandatory. That's the industry's only hope.
UAW Reneges on the deal last week
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