TrainTrac
Well-Known Member
I know, I know... Just what we needed was another "union debate thread". But these seem to be pretty relevent stories with all news about Ford and GM's troubles lately.
Fixed-cost labour killing domestic automakers
More than 12,000 UAW members paid not to work
David Booth, National Post
Friday, February 03, 2006
You would think that Ford closing 14 manufacturing plants and laying off between 25,000 and 30,000 employees would be the worst news the domestic automotive business could come up with this week. You'd think.
But, then, cross-town rivalries don't come any more entrenched than the long-standing Motown automaker feud, so General Motors just had to top Ford in the bad news department and report a whopping US$8.6-billion loss for 2005. Were it not for the gargantuan sum of US$23.5-billion GM lost in 1992 as a result of revised healthcare accounting, it would be The General's worst year ever.
To be fair to General Motors, US$2.3-billion of that figure is the after-tax accounting charge the company is assuming for its Delphi liabilities. The auto parts manufacturer, spun off from GM, is in the throes of bankruptcy and, according to the deal struck way back in 1999, GM will have to absorb some of the healthcare and pension costs Delphi manages to jettison as a result of Chapter 11 proceedings.
Though such legacy costs are a huge drag on the company's profitability, one of the truly nefarious costs holding General Motors (and all the other domestic manufacturers) back is the UAW's job banks. Created in the mid-1980s, the Job Opportunity Bank Security system pays eligible workers as much as 95% of their salary plus all health and pension benefits until they are eligible to retire. According to the Detroit Free Press, GM had 5,223 workers in those job banks at the end of last year. And, depending on your source, each and every one of those idled workers can cost The General as much as US$130,000. The nifty little dashboard calculator widget on my spanking new iBook says that adds up to US$679-million. That's what GM pays out every year to employees to do crossword puzzles (I'm not making this up; the Oct. 17, 2005, edition of The Detroit News had a wonderful story on how one job bank's recipient goes into work every day and does exactly that -- crossword puzzles).
But, wait, it gets worse. GM also noted it has to set aside a further US$835-million for workers who will be idled as a result of all the plant closings it has recently instituted. And Delphi, that noose around The General's neck, says it spent US$100-million on the same program in the last quarter of 2005. And, along with GM's 5,000-plus recipients and Delphi's 4,000, Ford has 1,275 employees in the job banks, while DaimlerChrysler has about 2,000. That is more than 12,000 people being paid top dollar not to work.
The plan is expensive on purpose. By making it so difficult to lay off workers, the UAW thought it would discourage the dreaded scourge of outsourcing. It hasn't worked. General Motors' union membership, for instance, is less than a third of what it once was. UAW autoworker membership is about half of what it was at its peak.
What it has done is force domestic manufacturers to keep producing cars even when there has been little demand for them. Deep discounting and rebates are the result. Or, as John Novak, a Morningstar analyst, said recently in the Chicago Tribune, "Essentially, what they are doing is making labour, which in most industries is a variable cost, into a fixed cost. In most businesses, when demand declines, you can downsize your workforce and your costs also shrink."
The union, with much justification, notes that if GM were designing cars consumers wanted, the job banks and layoffs would be a moot point. And there's the always contentious issue of GM's still-healthy dividend payments, which the union wants cut so that man
