Is the UAW At Fault for Detroit's Woes?

[ehaase]

Auto Snow: Not So Fast, Comrade Kuttner!

The shift lever falls readily to hand for one R. Kuttner, who road tests the Pontiac G6. He doesn't like the door-lock releases. Or the steering. Kuttner concludes the problem wiith GM isn't its workers--or unions--it's GM's incompetent designers and executives:

You might blame GM's woes on poor American workmanship or the cost of American labor. But Japanese total labor costs are comparable, even with Detroit's higher health insurance costs. Increasingly, Japanese cars are being assembled in the USA, and the quality holds up just fine.

So what's wrong with GM? The cars. GM is famous for being run by bean counters and ad men. Toyota is run by engineers.'

This is a common viewpoint, I've found, among my Democratic friends--Jon Alter, this means you!--who would never actually buy a Detroit product but who want to believe the UAW can't be blamed. The argument seems to be roughtly this: a) American cars are now reliable enough, having closed the gap with the Japanese brands, so b) the workers are doing their job; therefore c) if Detroit cars like the G6 are still obviously inferior--tacky and cheap, with mediocre handling--it must be because they're designed badly by white collar professionals, not because they're built badly by blue collar union members.

The trouble with this comforting liberal argument is labor costs. When Kuttner says "Japanese total labor costs are comparable, even with Detroit's higher health insurance costs," he is--as is so often the case--talking through his hat. Look at this chart. GM pays $31.35 an hour. Toyota pays $27 an hour. Not such a big difference. But--thanks in part to union work rules that prevent the thousands of little changes that boost productivity--it takes GM, on average, 34.3 hours to build a car, while it takes Toyota only 27.9 hours. ** Multiply those two numbers together and it comes out that GM spends 43% more on labor per car. And that's before health care costs (where GM has a $1,300/vehicle disadvantage).

If you're GM or Ford, how do you make up for a 43% disadvantage? Well, you concentrate on vehicle types where you don't have competition from Toyota--e.g. big SUVs in the 1980s and 1990s. Or you build cars that strike an iconic, patriotic chord--like pickup trucks, or the Mustang and Camaro. Or--and this is the most common technique--you skimp on the quality and expense of materials. Indeed, you have special teams that go over a design to "sweat" out the cost. Unfortunately, these cost-cutting measures (needed to make up for the UAW disadvantage) are all too apparent to buyers. Cost-cutting can even affect handling--does GM spend the extra money for this or that steel support to stabilize the steering, etc. As Robert Cumberford of Automobile magazine has noted, Detroit designers design great cars--but those aren't what gets built, after the cost-cutters are through with them.

Look at the big Ford Five Hundred--a beautiful car on the outside, based on the equally attractive Volvo S80. But thanks to Ford's cost-cutters it debuted with a tinny, depressing interior that would lose a comparison with a subcompact Toyota Scion. Ford wants $30,000 for the Five Hundred. Forget it!

Is it really an accident that all the UAW-organized auto companies are in deep trouble while all the non-union Japanese "transplants" building cars in America are doing fine? Detroit's designs are inferior for a reason, even when they're well built. And that reason probably as more to do with the impediments to productivity imposed by the UAW--or, rather, by legalistic, Wagner-Act unionism--than with slick and unhip Detroit corporate "culture."

P.S.: If Detroit can only be competititive when the UAW makes grudging concessions, isn't it likely the UAW will only concede enough to make GM and Ford survive, but never enough to let them actually beat the Japanese manufactures? I try to make this point here.

Update: But UAW President Ron Gettelfinger is right about Ford's botch of the Taurus. ...

**--Non-union Toyota's productivity, in terms of hours per car, has actually been growing faster than GM's, according to the Harbour report cited by NPR. So--thanks in part to Toyota's lack of work-rule bottlenecks?--GM is not catching up. It's falling further behind. 1:57 P.M. link

http://www.slate.com/id/2157272/kuttnerG6

[bowtie_dude]

GMs current problems can't be pinned on any single person or group, with the possible exception of the management responsible for POS after POS from the 70s till just a few years ago.

However, the UAW isn't helping matters by being stubborn.

[ellives]

P.S.: If Detroit can only be competititive when the UAW makes grudging concessions, isn't it likely the UAW will only concede enough to make GM and Ford survive, but never enough to let them actually beat the Japanese manufactures? I try to make this point here.

This fact alone, above all else, is why the UAW must die.

[haypops]

This fact alone, above all else, is why the UAW must die.

It is not really a fact, but the opinion of the article's author; an author who chooses not to address the fact that Toyota produces better quality cars at its UAW plant than it's non union plant. Likewise the author chooses not to discuss GM's lack of profitability at its Springhill plant where the union "bottleneck" rules were only recently implemented.

[chevelle454]

"Look at the big Ford Five Hundred--a beautiful car on the outside"

What is he smoking?

Another garbage article.

[WCCPSGM]

A better example would be the Charger, which looks great, but has a super cheap interior. The point he was making was that the 500 appeas to be a great car, until you get in and realize its cost cutting measures ruin it.

Look, for the most part, he's right. American cars are about as good as the Japanese. Definatly as good or better than Nissan and Mitsubishi, and closing on Tolyota and Honda. However, there is a part for several groups to play, the union is just the biggest offender. It was Detriot cooperate culture, not the UAW, that declared SUV's the new sedans in 1990, in otherwords, you had to buy one. This continued a 50 year old habit of Detriot telling America what it wanted. SUV's sold well and made a lot of profit, I'm not knocking that at all, but SEDAN buyers got tired of being ignored or "encouraged" on the lot to buy an SUV, and went to the JApanese and Koreans. Now that SUV drivers are dumping their gas guzzlers in favor of sedans, and ask there sedan driving friends aht they recomend, of course its a Japanese car. I go to church with a guy who swears by Honda and Toyota. But the last American car he owned was an 88 Caravan, adn he has had exactly 2 Toyota trucks, and a Honda Pilot SUV, so why would a thinking person believe he has a good grasp on the quality of the Toyota and Honda lineup? But we often don't think when we ask a freind's opinion.

I would trust anything GM puts on the road over an equivilant Nissan right now, but who has the rep for quality? Years of crappy quality have RUINED Detriot's image. Who would've thought Hyundai would be considered higher quality than GM?

Finally the bean counters are still at work. Japanese cars get stability control and side airbags standard. Detriot had to be forced by the Japanese and Koreans into beginig to offer these types of things. It's stupid. If people want it, put it on the freaking car already! Saving a few bucks on construction don't mean Jack if the cars never leave the dealers lots! That means the dealer doesn't order any cars and you stop shipping them. Idel factories have never made money.

[A Horse With No Name]

I used to live next door to a labor negotiator who worked for Chevrolet. LOTS of problems the domestics face are due to unions. The U.A.W. is going to have to face reality or die.

Chris

[ShadowDog]

I'm not going to say with absolute certainty that the UAW is responsible for the current state of the financial troubles within the North American auto industry; however, when a company loses profit for every vehicle sold, and attached to those loses is high legacy costs for pensions and healthcare with the American auto industry driving a very high labor rate for vehicle production, there certainly should be some eyeballs reviewing the numbers to see where these cost-cutting measures can be made.

Certainly, an auto-maker must be responsible enough to understand that a union still has its place. Nobody can tell me that, without a union, on a regular bases, management won't decide to lay-off senior-level employees in favor of hiring younger, lower-paid labor. Without basic groundrules set out by a union, treatment like that is likely to happen to employees.

The UAW could probably do well in the face of the political aspect to understand that their costs represent a huge amount of savings for an auto-maker to compete. I suppose I'll just say that, in my opinion, the unions represent one of many hurdles in the path of a company that slows them down while other companies race alongside and pass them by with fewer of these challenges to deal with.

What's the answer? Short of starting from scratch, there really isn't one, clear answer. It's going to take strategy and planning between management and the employee unions to realize a path for success. Certainly, it's pretty much been up to the companies to deal with cost-cutting measures that have affected a great deal of the work-force for the worst. My only question would be if the employee union had taken a few concessions earlier on, would all the work-force previously laid off still have jobs right now?

[ellives]

I'm not going to say with absolute certainty that the UAW is responsible for the current state of the financial troubles within the North American auto industry; however, when a company loses profit for every vehicle sold, and attached to those loses is high legacy costs for pensions and healthcare with the American auto industry driving a very high labor rate for vehicle production, there certainly should be some eyeballs reviewing the numbers to see where these cost-cutting measures can be made.

Certainly, an auto-maker must be responsible enough to understand that a union still has its place. Nobody can tell me that, without a union, on a regular bases, management won't decide to lay-off senior-level employees in favor of hiring younger, lower-paid labor. Without basic groundrules set out by a union, treatment like that is likely to happen to employees.

The UAW could probably do well in the face of the political aspect to understand that their costs represent a huge amount of savings for an auto-maker to compete. I suppose I'll just say that, in my opinion, the unions represent one of many hurdles in the path of a company that slows them down while other companies race alongside and pass them by with fewer of these challenges to deal with.

What's the answer? Short of starting from scratch, there really isn't one, clear answer. It's going to take strategy and planning between management and the employee unions to realize a path for success. Certainly, it's pretty much been up to the companies to deal with cost-cutting measures that have affected a great deal of the work-force for the worst. My only question would be if the employee union had taken a few concessions earlier on, would all the work-force previously laid off still have jobs right now?

Shoulda, Coulda, Woulda. They just need to fix it before it's over. September is the deadline.

[drew770]

Some Wallstreet anaylsts said "that if GM can just sell an additional 1,000,000 vehicles, then there would be no Japanesse advantage".

Well who in there right mind thinks that GM can sell an additional 200,000 let alone 1,000,000 more cars!!

This is not a UAW problem but a "Union" problem. Union numbers are falling and alot of union jobs are shifting overseas to avoid the high labor costs.

Now more than ever the unions are being seen as part of the problem and not the solution. Is there any other reason why 99% of foreign automakers are union free in their American plants.

This is not faulting the unions but union heavy industries are now defunct or in decline!! Union heavy textiles are non-existant and big steel is now on the verge of forgeign ownership (rumor of US Steel being brought out by a Russian steel firm).

With all of this happening are there any other reasons why new workers don't want the union representation. And with the GM and Ford problems being highly publized then the union is of course seen as part of the problem.

If the union what to still be a viable entity in the future I think it is time for the union to man up and help the U.S. auto industry erase any advantage that the foreigners have. Does that mean taking a pay cut or having some of their benefits reduced? Yes. Will it be easy? no but if the union want to save jobs and its union members lifestyles then some sacrfice is warranted.

Now GM's management need to get in high gear to look at additonal ways to saving cost such as getting rid of any executive perks such as private jets or any other money eating mess.

Management can't ask the unions to sacrifice if they are still riding in corporate jets and chilling on the corporate credit card.

[The O.C.]

Two words....

"Jobs Bank"

Tells you ALL you need to know about U.A.W. culpability in GM's current financial woes.....

[turbo200]

I don't know about his opinion on beauty, but it was an excellent read.

[SS427]

Its hard to tell what is going on in slates head I have been reading him off and on for a while now and one moment he is acting like a liberal and the next a conservative, I guess he just writes what ever he thinks will piss off the most people this time it is the UAW, next it will probably be GM.

Edited January 17, 2007 by SS427

[evok]

I am currently rereading Maryann Keller's book about GM in the 1980s "Rude Awakening" which was published in 1989.

She cites a 1980 Report to the President by the DOT on the state of the US Automobile Industry.

"The report spared neither management nor labor in its criticism. Management was accused of tolerating production inefficiencies, poor quality, and shortsighted product development. Labor was cited for expecting pay increases, regardless of the competitive consequences of high wages and the impediments thrown in the way of higher productivity. Even the government was criticized for imposing environmental and other regulations on the industry without regard for the cumulative impact on the automakers."

That report was released almost 27 years ago. Has the situation changed significantly in that time?

[z28luvr01]

I would say that most, if not all of those deficiencies you mention are remedied or are in the process of being remedied. Quality is obviously on the increase. As for production inefficiencies, GM now has some of the most advanced, efficient plants of any manufacturer. The current regime is successfully tackling the "shortsighted product development" problem - look to the cooperation between Holden, GMNA, GME, and GMDAT for evidence of that. GM is working towards being a lean, efficient, global company capable of producing cars for all markets regardless of the point of manufacture.

[evok]

I would say that most, if not all of those deficiencies you mention are remedied or are in the process of being remedied. Quality is obviously on the increase. As for production inefficiencies, GM now has some of the most advanced, efficient plants of any manufacturer. The current regime is successfully tackling the "shortsighted product development" problem - look to the cooperation between Holden, GMNA, GME, and GMDAT for evidence of that. GM is working towards being a lean, efficient, global company capable of producing cars for all markets regardless of the point of manufacture.

Unless I have been living under a rock these past few years - I would have to surmise that the state of the Big 2.5 US manufacturers are probably at their nadir. Those observations in the DOT report were made almost 30 years ago and observation number 1 and 2 still hold true today and number 3 only to a less degree.

Toyota has already surpassed the Chrysler Group in US sales and on the verge of taking the number 2 spot from Ford and the global number 1 from GM. With the 4thQ financials due over the next couple weeks, I suspect the red ink will continue to flow from all three in NA.

To varying degrees the Big 2.5 still have not righted themselves and the 1980 observations very relevant today.

Edited January 22, 2007 by evok

[hyperv6]

Much of what has gone on in the auto industy is not much different than what we have seen in in the rubber industry here in Akron.

We have seen Greenmail buy corperate raders in Sir John Goldsmith in his raiding of Goodyear.

We have had buy outs of Firestone [Japan] BFG [French] and General [Germans].

We had poor product the Firestone 500 and 721 problems and the latest with their off road tires. The others have had their own problems too.

We have and to a lesser degree Union problems but they now realize they are now competing with a world work force. In the latest strike with Goodyear they USW talked big and finally caved when they were running out of money and had to start paying their own health care. The URW is dead due to the lack of membership and are now covered by the Steel [or steal] workers union.

We had over capacity of production and old unprofitable lines.

We had companies that core business was tires but they were building oil pipe lines. They failed to address the core product and keep it updated.

We had companies making OE tires that paid very litte if anything [the rubber industries version of fleet sales in the auto industry]

Here in Akron labor was offered new plants if they would go to a 8 hour day. Tire builders went to a 6 hour day in the depression. The companies employed 4 shifts of 6 hours to help with unemployment. In the 70 the workers were still doing 6 hour days and getting 8 hours of wages. They turned down the offer and the plants moved to non union plant that were built. The UAW closed due to the lack of members. Some today will claim the offer was never made, well it was and it set the future of the rubber industry only followed with mismanagment and poor planning by some of the later CEO's and managers.

I can go on.

My point is what has happened to the Auto indutry is not much different than in many other industries. We have had greed on both sides of the ball and got away with it and inefficent production on poor quality products. When we just had to compete with our selves it was not an issue but now we have overseas vcompanies that can do things much cheaper and to acceptable levels of quality that meets or beats our best in many areas.

The overseas companies have many advantages for various reasons but one they have we don't is paying for a aging retired work force in this country. Toyota is here because it is cheaper for them to build here and can because they have no retired workers.

As for the goverment it has and still is controled by many who get what they pay for. With the number of people lobbying in DC you can about buy what you want and the Automakers are not paying as much as other are now. Money comes in from legitimate US concerns but is funneled in from other countries and other people who want to beat us and take our hold of the MFG good we still have.

Well anyhow this is only a small part of what is going on but it all comes down to greed by buisness and the work force. Eveyone wants to be a Multi millionaire but no one wants to pay for it. In time the companies from the far east will fall victim to the same things we have just we may nat be in any shape to take advantage of it by then.

Anyway we have one company here that was on the brink but is now moving back to profits again. Goodyear is the only one of the Akron base companies that is American owned. They now have a CEO that has taken some hits for making some tough choices. Now that things are working he is looking much better to share holders. Many of the workers yet are not happy but many will have jobs because of what he is doing today that would not have had a company in a few years without change.

GM is looking at the latest agreement with Goodyear and the USW. If they can work a similar agreement on health care and retirment benifits it will save GM Billions and provide capital to make changes faster and help save the company.

Everone complains why it take so long to make new models and lines. Well GM has to find the money and pay for it. This will provide capital in a much safer way than Ford. Ford is betting the house with their 18 Billion in collateral on thier loans with company assets. If they fail to make winning cars the Ford compay will be owned by someone other than a Ford and be a much different company.

GM has a ways to go but are progressing and have gained more in the last couple years vs the last 30. Just be greatful they are not Ford and down to their last chip as the odds are not good if they fail with new product.

I like to think I have a somewhat balanced view of the rubber industry problems since I have family on both sides in managment and labor. I have seen a great need for the union to return to it's roots and protect the worker fairly but not get greedy. I also see a need for companies to be managed well and make the core product a priority with up to date technology, efficency and quality. If they both can work together they can deliver a quality product at a fair price.

It is easy to see what is wrong and know how to fix it vs getting all parties to work together for the common good. If someone can find this solution, they will have something that would rate right with a cure for cancer.

Edited January 23, 2007 by hyperv6

[gm4life]

Fact is that years and years ago people were treated very poorly at there jobs and not paid hardly anything. Right?

The idea behind the Union is good, but seriously you can take a good idea and take it WAY to far. In this day and age Unions aren't needed like they were 50 years ago or more. The UAW is a group of people that keep "raping" GM for everything they have. GM therefore needs workers to build cars so they agree to outragous pay increases to the employees. It is a total mess 50 year ago giving somebody a full retirement and paying them to not work was the norm. Now it is costing GM big time. The Union isn't helping GM only hendering there growth. I say get rid of the Union *don't care how hard* and pay a fair wage. I know that wouldn't be easy but then GM could put more money into product developement etc. The Union is not the only reason GM was down the $h!er it was GM failed to realize in the 70's and 80's that people wanted fuel efficent cars and taking a 455 big-block V8 and lowing the compression made no sence they need to downsize there motor and product. (After all a 455ci low or high compression is still a huge motor.) *(oh but it was great)* GM also cranked out many a car that was build together to fast and didn't take enough time nor testing for quality. All of this plus the sucess and quality of Toyota and Honda have put GM where they are today. Through the good and I bad I still buy GM, and vote for conservatives. That is just my way of life...

Anymore the quality difference of GM and Toyota, there is none GM keeps uping the game and Toyota going down now they have met each other. As long as GM keeps going up then there fine. As long as they get out good products that people want and desire to drive, there fine. As long as GM keeps the Union under-control and pays fair wages for the work they do there fine. But without one part of that equation GM might not be fine, it all needs to pan out! Not just good products and Rick & Bob CAN'T save them alone...

GO GET 'EM...

Toyota just might get... You never know... Who would have thought the new Malibu would look that good or Buick to come out possibly the best looking luxury SUV ever the Enclave? Or Pontiac Solstice outselling Miata MX5 not to mention in GXP form handily out powering it. In this day and age anything is possible. At GM if there is a group of people that can keep this positive momentum going it is the current team... I am excited for what is in-store for GM in the next few years! Now how about that Buick GNX when they get building the GTO?

I can hear a twin turbo 3.6L DOHC VVT direct injection V6 roaring right now backed to a 6L80E H-D with manumatic shift mode... Oh yeah and pearl black exterior with a ebony leather interior. I think offering it in white and silver would be nice also... Enough dreaming but uhh that would give the next US bound Skyline a run for its money. (So long as it is under 45Kish)

Edited January 23, 2007 by gm4life