Friday, May 1, 2009

Has Obama Killed the UAW?

The United Auto Workers has made concessions on wages and benefits in order to receive controlling ownership in Chrysler. The proposed company that would reemerge would be owned as follows:

Company Creditors (Including the US Government) - 10%
Fiat - 35%
United Auto Workers - 55%

In agreeing to this situation, the UAW would be making a few concessions that seem to make sense. According to the Wall Street Journal
Among the cost-cutting measures that the UAW leaders have accepted are a suspension of cost-of-living-adjustments and new limits on overtime pay. Workers will only be paid for overtime after they have worked at least 40 hours in a week. Chrysler workers will also lose their Easter Monday holiday in 2010 and 2011, according to the union summary.
I think this gives us a pretty good insight into the overreaching that the union had been doing in terms of employee benefits. I'm fairly sure the actual definition of overtime is that point at which one exceeds 40 hours worked in a week. This makes me wonder just what the "overtime" structure had been all this time, not to mention just what other little goodies the UAW had leveraged out of the Big Three over the years, that has ultimately brought these once shining beacons of success to their knees.

The ownership in Chrysler has been referred to by many as Obama's payback to the UAW for the massive amount of support he received from them during the election. This would seem to fit with Obama's general stance on worker's rights and his overall anti-corporate attitude. On the surface this looks like a monstrous payback to the unions. But is it really?

Fearing a complete loss of their agreement altogether should Chrysler go to bankruptcy court, and a judge throw the agreement out, the UAW agreed to the aforementioned ownership structure. Ron Gettelfinger, and others before him, have lived out a mission to extract higher pay and greater benefits from these three companies each time a new labor agreement came around. The UAW under Gettelfinger has been particularly anti-corporate in its message, critical of companies for "the corporate global chase for the lowest wage which creates a race to the bottom that no workers, in any country, can win." This kind of fantasy statement may have been a great motivator for garnering support while things were sunshine and roses in the economy, but now this is no longer the case.

The UAW is now a potential owner in Chrysler, and has given up a great deal in its labor agreement with Chrysler to attain that role. As a matter of simple economics, this necessarily means that its other labor agreements with Ford and GM will be substantially weakened as well when renegotiation time rolls around with them. The ownership in Chrysler also necessarily removes one of the UAW's bargaining chips. No longer can the UAW use a good agreement from Chrysler to leverage one just a tad better out of Ford or GM. In the marketplace, any agreement the UAW now makes with Chrysler is essentially meaningless, since they will have shaken hands with themselves.

The general loss of leverage and subsequent loss of political and coercive power seems to me a major blow to the UAW. And I'm not the only one who thinks so. From the previously linked WSJ article:

"This is the eclipse of the UAW. It's going to be a shadow of what it once was, I'm afraid," predicted Gary Chaison, a professor of labor relations at Clark University in Worcester, Mass., who was interviewed prior to the disclosure of all details.


"This will make it more difficult to do the things that the union is known for: organizing, political action, bargaining and community development," said John Russo of the Center for Working-Class Studies at Youngstown University

In short, the mission now needs to change for the UAW. Ironically, it is now the UAW's job to become an evil, greedy corporation, searching for an ever lower wage. In order to maintain its own existence, the UAW is now required to generate a company level profit. It must now make decisions as an owner responsible for both its employees, and the health and welfare of the company, but always putting the company first, for without the company, there can be no employees.

The question is now, after a long history of extorting the Big Three, playing one contract agreement off another off another to generate ever higher payouts for ever lessening production, will the UAW be able to do it? Will an organization that has always fought ownership, be able to act as a responsible owner? If they can, then Obama's arrangement of this situation will indeed have been a gift in payback. If the UAW continues to be the UAW, however, history will look back on this as Obama's deathblow to the UAW.

Of course, all of this is to say that Chrysler is able to emerge from its bankruptcy reorganization, rather than, as seems possible, filing for Chapter 7 and going under altogether.

1 comment:

  1. Paul,
    I think the overtime structure that was probably negotiated before is overtime for everything over 8 hours in a day, rather than over 40 per week. I think the idea was that the company wouldn't try to keep people a little late every day and then send them home early on Friday. It it expensive for a company where employee flexibility is needed, but I don't really see a major benefit as an employee... to me it's ensuring you have to work all day for 5 days per week, rather than having the flexibility of 4-tens!

    My guess, by the way, is that no matter what the union leadership figures out, the actual members will be just as skeptical of their new bosses as of their old, and in spite of their ownership stake in the company, they will not be able to focus themselves on profit rather than salary.

    But I actually hope that I'm wrong. If they learn, and they make it, then while the way that we've gotten here is ignoble, it would be nice to finally have a model that can teach economics to capitalism's historical foes!