Exactly! It's amazing how much saving/efficiency can be achieved when individual responsibilty is brought on line. It applies to both corporate bureacracy and union bureacracy (and above all, albeit a bit off-topic, government bureacracy).
Sure they did, because they put the idea on the table that workers should earn higher wages, not treated like a commodity,
Are you talking about the free market place or the labor union when you use the term "they"? Obviously, the labor union treats workers exactly like commodity: everyone paid exactly the same. Individual skill or initiative matters not one squat. Competitive market is where talent for production has a chance of getting rewarded.
and that diverting all surplus resources to owners and shareholders was an idea of the past.
Ah, gotta love that Marxian term "surplus value of labor" (as in the term was invented by Marx, Karl, not necessarily accusing you of being a communist). It's such an ancient idea. The great social experiments of the past century proved that the only enterprises worse than those harnessing "surplus value of labor" are those not producing any surplus value at all; a la those Soviet factories churning out Lada's that were literally worth less than the component costs that wen into them. Shareholder value creation is the primary reason why innovations and advances take place and why new productive enterprises are put together. If you treat enterprises as job creation devices, well, you need no enterprise at all; dividing your workers into two equal groups, having half them diggin a hole in the ground and the other half filling it back up will accomplish just as much. Or better yet, just send both groups to watch TV, and pay them boat loads of money; the economy will magically prosper as they spend their windfall, right?? Isn't that what the pipe dream Keynsian economics that the pro-Union camp are implying really boils down to?
In the big picture, when wages increase at the lower echelons, it trickles up the ladder.
Except unions do not help the lower echelons. The average UAW worker is paid $65k a year, plus a benefit package that is in excess of $140k (otherwise GM would not be making the offer). A household with $65k a year income alone is in the top 20% according to IRS data; a dual UAW family making $130k a year is approaching the top 5% for income in the US! Not bad for watching TV or turning out cars that people do not want. What a massive rip-off of families making far less money.
a smart manager knows that his workers need to be incentivized to work and to produce at optimal levels
Exactly! Finally we have something to agree on. Uniform pay mandated by union work rules removes any and all incentive to work hard.
If my calaculations are correct the UAW workers make $56,160 minus holiday pay which will still put them under $59,000. I guess your figuring a certain percentage of overtime ???? OTOH-there is no-way there benefits package adds up to $81,000 dollars a year, but you can believe what ya want brightness. :confuse:
this is not a "What's wrong with GM" topic. The topic is fairly specific and deals with the UAW and Domestic Automaker's.
Unfortunately, it has become a field of political rants about the alleged evils of organized labor, inspired by the constant PR-motivated recitations of this "legacy costs" argument, hence the need I see to discuss what the problems really are.
And ultimately, the numbers make it clear that it's largely a revenue problem. US automakers made money for decades with relatively costly labor, and their successful rivals don't exactly pay low wages.
So, how do higher UAW labor costs benefit GM?
At this stage of the game, this is the wrong business question, because the labor costs are what they are, and a change in costs will create certain results, good and bad. The question is what costs can be reduced without creating ill effects, and what costs, if any, might need to be increased in order to gain improvements.
The current plan of buying out workers, regardless of performance or potential, almost ensures that the quality of the workforce will deteriorate, because most of the best people will take the money and run. You won't achieve a turnaround by retaining the least beneficial workers, and losing the better ones.
It would be better to put labor to work, building products that consumers want and will buy at retail, while developing processes to make that production more efficient. Instead of speaking about labor as a problem, which only harms the productivity of those who remain, use that capacity to create desirable products that bring cash in the door.
The fact that the workers have devoted their energies building undesirable products is a decision that was made at the top, and you can fault the managers who ignored consumer needs for the outcome.
He also didn't have a opponent. Gettelfinger is a good president, and realizes he might have to give up a little now to gain later. Sure he's going to have members upset with him at first, but at the same token I believe most will realize change has to come now before it's to late.
Of course overtime pay counts; it's counted as income in the IRS data, for union or non-union workers. $140k benefit package is not per year. It's the buy-out offer from GM. Please read my post again. $140k is gross under-estimate of what the whole union package is worth. $81k a year would work out to be over $1 million in lump-sum at current interest rate. No wonder few are taking up the offer.
I've always have asked the question of why GM doesn't expand it's industry to beyond just making automobiles to diversify it's portfolio. Why couldn't GM make planes, military equipment, trains, guns, etc etc etc......????? Union Labor costs could be absorb making premium products like these and make the company money when autosales might be down.
Maybe it wasn't Singapore, but Indonesia ? It was one of those Pacific Island country's. I remember seeing a story around the time of the american getting caned incident.
Neways I'm not sure what the gross salary has to do with the buy-out package the UAW negotiated with GM ?
Well, GM does or did make many other products besides automobiles and trucks. The Electro-Motive Division made diesel-electric locomotives. Frigidaire made appliances. Hughes Aircraft built planes and avionics. Isn't AM General part of GM?
Boeing dominates the market for war planes. Trains and guns don't make much money in the missile age. GM did diversify into advanced military equipment making; e.g. Hughs and Flextronics. GM management ran those divisions quite profitably, and sold them for even more money at the top of the stock market bubble.
The fundamental problem is that GM can't sell its automaking business and become a different kind of company altogether like the next logic step to your suggestion would be because nobody wants the union liability . . . that's why it can only dabble in other industries and make as much money from them as it can, just to blow more wads down the sink hole that is unionized car making (SUV making is/was profitable).
GM has been in the military business, and I frankly doubt that that specifically offers an answer. But that being said, there's more than enough demand for vehicles that GM should find plenty of opportunity there without changing industries altogether.
The fact that all of these automakers aspire to create sales in the US market, and that many of them attempt to build capacity here, tells you that they think it is a lucrative market. The various Japanese, German and Korean makers are here because they see profit or profit potential, and the French and English who failed before them show us how tough it is. There is a lot of money to be made here, but you've got to earn it.
The US auto market has grown almost every year in the past few decades, yet GM hasn't participated in much of that growth. If you can't succeed in a growing market, you may very well be doing something wrong.
"Unfortunately, it has become a field of political rants..."
Then let's not respond to the 'political rants' as you see them. Instead, why not discuss the UAW and the Domestic Automakers?
"...constant PR-motivated recitations of this "legacy costs" argument..."
Regardless of the motivation behind the 'legacy costs' argument, either GM has 'legacy costs' due to the UAW contracts, or they don't. Let's boil it down and try to stay away from 'motivations' since that inevitably will lead us back to politics.
Does GM have 'legacy costs' due to UAW contracts which they would not have with non-Union labor? These 'legacy costs' should go down in the ledger as a 'debit'. What would be the corresponding asset which GM gained by dealing with Union labor?
"...hence the need I see to discuss what the problems really are."
Why? Either 'legacy costs' are a legitimate issue, or they are not. If they are NOT a legitimate issue, then why not show WHY they are not legitimate and we can move on. Instead, you've chosen to go off on a tangent regarding other problems GM has.
Fine. GM has many problems. Past management decisions and their current product lineup are problems. But I'm not here trying to SOLVE an overall 'What's wrong with GM' issue; I'm just trying to discuss the UAW.
"At this stage of the game, this is the wrong business question..."
I'm not trying to ask the RIGHT business question (as in "If I'm GM, how do I fix it"). I simply TRYING to determine how higher UAW labor costs benefit GM?
Yes or no? Is the UAW an asset or a liability?
"The current plan of buying out workers, regardless of performance or potential, almost ensures that the quality of the workforce will deteriorate...."
Yes. YES! Absolutely. So why would buying out workers regardless of performance or potential, be that different from setting wages/benefits under a collective contract regardless of performance or potential?
back in the 50's- 80's autoworkers weren't paid much more than the common factory worker.
I do not know where you are talking about but in the 70's and 80's here in Michigan they were the best place for anyone who wanted to make big money(w/o any kind of skills or education) worked. Once you were in you were set for life-whoops, not true anymore.
Max out 401's? I think they will still have the pension money that they have earned when they retire . Only it stops getting bigger now and any additional money comes from the 401k. this is what happended to the salaried. Nobody lost anything.
GM didn't switch industry's but rather why doesn't it diversify it's portfolio more. I understand and recognize the profit potential in the automobile industry, but isn't the point of owning a buisness is to go beyond the boundaries of just one sector such as just building cars ?
Toyota, and especially Honda, Mitsubishi, BMW, Suzuki, have very well diversified portfolio's beyond cars. GM used to and I bet they are regretting selling Hughes for example. The bottom line is I am one who believes that GM could use union labor to make military, planes, to diversify it's portfolio and add value to shareholders and provide even more jobs to americans.
The kid was caned for vandalizing cars. Don't we car nuts wish that could be the law here ;-)
In order for GM to make that offer of $140k, it has to be the case that GM has greater benefits liability on the account, no? In other words, the worker has accrued additional income during his tenure that is greater than the $140k buy-out offer.
If not for selling Hughes, GM would long have been bankrupt. GM had to hock the family heirloom, GMAC, to feed the union obligations.
GM already diversified, like many other posters mentioned. It's just that GM has a chronicly sick and uninsurable kid in the house; every time the cash burn accelearates, it has to hock more and more valuables to keep the kid alive. That is the death grip UAW has on GM's finances.
As in any investment portfolio, or diversification portfolio, you win some and you lose some. There is no guarantees in real life. The investments GM managedment made in the past have made far more money than they lost, when you tally them all up. A record has far surpassed the overwhelming majority of mutual funds.
"Gettelfinger is a good president, and realizes he might have to give up a little now to gain later."
To gain later? To gain later?
You mean 'later' as in when GM turns the ship away from the iceberg and becomes profitable? Why should the UAW gain later? Assuming that appropriate changes in management are made and GM produces vehicles to meet consumer demand (since those really is the CORE reason for GM's problems according to socala4), why should the UAW deserve anything 'later'?
So the $3-4 million dollar "suggestions" that my dad has made over the years doesn't count. My grandfather made many that saved the company tens of millions over his life time. These get forgotten about. So yes the arguement of UAW members being benefitual to the company could be argued. The people I know have given back, more than they have recieved.
"..giviing up gains in contracts that they have won over the years to keep the ship afloat due to the failings of others." :confuse:
What I mean is the UAW so far is being punished because managements refusal to build quality cars across the board. They have and are going to absorb real cuts in pay and benefits. It's not the same as making $10 million one year and then making $6 million another yr. When your that wealthy what else can one buy ?
I do feel that finally they are "getting the message" from consumers, but have still canceled or delayed good product that would give a solid image for the healths of the brands.
In the past the UAW kept the ship afloat? In other words, if not for the UAW, the GM ship would have sunk a long time ago?
That's not exactly what I was saying. However GM with it's good pay and benefits could pick and choose who it wanted to hire both in management and labor. The UAW workers only can build the best products with the materials and machinery given to them. That is common sense. They have procedures to follow like most everyone else.
Okay, so that would be listed as a 'benefit' of having the UAW.
Longevity and experience of a UAW member is a benefit. He/She acquires enough experience and loyalty to offer money saving suggestions which include efficiency, safety, quality, in the process.
So.....how did having Union labor vs. non-Union labor keep GM's ship afloat?
I'm not saying that having union labor has kept GM afloat. OTOH- they aren't the primary reason why GM has failing grades on it's report card. I think any industry willing to pay it's workforce enough money will get very good help. Sure both union and non-union you have slackers. GM has paid it's upper management very well in the past and they have failed to leave the company better off then when they came in. Some are going to put 100% of the blame on the unions and for some reason in this society we give management excuses like blaming others for there decision makings.
Whether I'm right or wrong this is the way I see it.
Believe it or not, I think we're making progress....
"They have and are going to absorb real cuts in pay and benefits."
Yes. No argument there.
"However GM with it's good pay and benefits could pick and choose who it wanted to hire both in management and labor."
Yes. But doesn't ANY company (using Union labor or not) have the capacity to pick and choose, for both management and labor, if they have good pay and benefit? Umm, wouldn't that be a trait of a free labor market? Offer better pay, get your pick of applicants. Offer lower pay, get your pick of the dregs. Seems fair to me.
"The UAW workers only can build the best products with the materials and machinery given to them."
Yep. Same with non-union labor. I'd like to see the differences in the final product for otherwise IDENTICAL products built using both Union and non-union labor. If one could categorically prove that Union labor led to a better product, using the SAME materials and machinery, that would be a huge check in the 'Union as asset' column....
"Longevity and experience of a UAW member is a benefit. He/She acquires enough experience and loyalty to offer money saving suggestions which include efficiency, safety, quality, in the process."
Why do you think that only Union shops have loyal employees? I wonder what the turnover rates are in Toyota/Honda shops vs. UAW shops? (Although this is probably more of a style of management issue than a Union vs. non-Union issue). My point here is that loyalty to a company ISN'T due to the Union - it should be due to the style of management. Unless you define loyalty as "gee, I've got this cush Union job where I'm guaranteed a job for life; I'm NEVER leaving.....". But is that loyalty to the company or loyalty to the source of the cush job (the Union)?
"GM has paid it's upper management very well in the past..."
Yes, GM has paid upper management very well. Would things have been better if they paid upper management only twice what the average line worker made? Who knows - my point is that what they paid upper management is completely immaterial to this discussion. GM could produce as many as 5 million vehicles this year. A $10M benefits package equates to $2/vehicle. That kinda pales in comparison to some of the Union 'legacy costs' I've heard kicked around.
"...and they have failed to leave the company better off then when they came in."
How many changes in management has GM seen over the last 2+ decades? And yet things always seem to remain the same. How many changes in Union leadership has the UAW seen over the same period? Perhaps (just perhaps) this is one reason (ONE reason) why things always seem to remain the same...
"Some are going to put 100% of the blame on the unions..."
Yes, some will. Some folks will NEVER buy a car made in America (or Mexico for that matter) because their favorite 'whipping boy' is responsible for 100% of the problem.
I don't put all the blame on the UAW. GM management has made MANY boneheaded moves over the last few decades. Personally, I think Ford management has done a bit better job and DCX a MUCH better job despite all three using the UAW.
My point however has NOT been what is wrong with the Domestics. I'm simply trying to determine the benefit the UAW provides to the domestics in general. Earlier there was a discussion of the 'level playing field' regarding the transplants. Even if one assumed hypothetically that GM management was JUST AS GOOD AS the management of Toyota or Honda, they would still be at a competitive disadvantage due to higher labor costs.
They were indeed forgotton by the union work rules. Did your dad or grandfather get anything for their trouble? Did your dad or grandfather get anything more than their contemporary UAW workers who spent all their time watching TV and/or chronically not showing up at all? Nothing, nothing, and nothing at all. That's what happens under UAW work rules.
If one of my worker gives me a suggestion that saves $30k for me, never mind $3mil, I'd give him/her a bonus and I'd promote him/her to position where he/she can save me more money. That simply would not be allowed under UAW rules. Over time, productive workers leave UAW shops or cease to be on the look-out to be productive.
My beef is with UAW as an institution, not with individual workers. In fact, if your father and grandfather's contribution can indeed be verified, they'd be far better off without UAW.
The topic is UAW and domestic automakers. It's hard to see how a list of what UAW offers domestic automakers can be off-topic. On the other hand, if by "it's employer" you mean the political parties in question that employ UAW, instead of the workers' employer, that would indeed be off-topic.
They were indeed forgotton by the union work rules. Did your dad or grandfather get anything for their trouble? Did your dad or grandfather get anything more than their contemporary UAW workers who spent all their time watching TV and/or chronically not showing up at all? Nothing, nothing, and nothing at all. That's what happens under UAW work rules.
Grandfather, got checks ranging from $20-40K in the 70's and 80's for his suggestions. Dad's last million dollar suggestion was about 7 or 8 years ago and was a China made plastic flashlight that said "Delphi" on it.
brightness, it was the company not the UAW that cut the "suggestion program" payouts. You make it like the UAW like all unions prohibits one from promoting. Where do you think GM gets alot of there supervisors from ???? They still get a fair share from ex-UAW workers
BTW- I'm not sure where all this TV watching is going on at and not showing up to work talk is about ????? I think your living in the 70's and 80's during the recession years.
My father was in the jobs banks for a short-time in the 80's. That was back in the big recession. GM hired a few to many workers back then, but demand was pretty high when a reccession wasn't happening under Reagan and could see why they needed so many.
Nothing, nothing, and nothing at all. That's what happens under UAW work rules.
You get a flashlight or some other item from the Dollar Tree.
If one of my worker gives me a suggestion that saves $30k for me, never mind $3mil, I'd give him/her a bonus and I'd promote him/her to position where he/she can save me more money.
Your a small buiz that recognizes small achievements. GM is a huge corporation that Rick Wagoner doesn't know who his Division Managers names, let alone somebody like my father giving a million dollar savings. He doesn't have time for the small stuff.
You need to think outside your small buisness box.
That simply would not be allowed under UAW rules. Over time, productive workers leave UAW shops or cease to be on the look-out to be productive.
Sure some do leave but 90% of them stay because where else are they going to get good pay and benefits, especially today ?
Not everyone is blessed at having the perfect situation to make a small buisness succeed. It's not all about hard work, but also alot of luck and good fortune of having the desirable product or service. Many can't afford to risk the well being of there children on starting a buisness, unless they come from money. Some that came from money can explain to others how easy it is to start a buisness. I worked for a guy like that who inherited his.
My beef is with UAW as an institution, not with individual workers.
Well the UAW like all other unions are the only insitutions in this country that have faught for workers rights, and fair wages. You obviously disagree with that, and I won't go into it any further to start a political war.
In fact, if your father and grandfather's contribution can indeed be verified, they'd be far better off without UAW.
If it wasn't for the UAW, or some other unions raising the standard of living in the automobile sectors they would probably be making atleast $15 an hour less. Sure it's hard to judge what everyone would be making if Unions would be abolished.
My father and grandfathers along with all my other relatives would strongly disagree with you on them being better off without the UAW.
brightness, I am having a hard time understanding your logic that's all. "nothing personal pal."
I'm not sure just how that ends up benefiting the consumer thought since ultimately, it is the consumer who pays the UAW wages.
That is very true. Sure I could spew that they are more qualified, more experienced, more mechanically inclined, rough and tough blue collar workers, but honestly I don't want to get into that.
I guess from the "outside looking in" the ordinary consumer will say they (UAW) offer no benefit to them as a consumer. I strongly disagree with that though, because I know better and know the individuals like my father, my family and friends.
I also will say other american workers are just as passionate at Toyota or Honda.
Too bad he didn't suggest a union made, American-built plastic flashlight......has he no shame?
LOL rorr.
I was at home the night he recieved it. He said he was working on a machine and his boss came up to him and shook his hand and told him good job Rusty on your sugestion. They handed him a small black box and dad went back to work. Dad said when he got done fixing the machine and opened it up and said wow I get a plastic flashlight that says Delphi on it for a $1.3 million dollar suggestion. How could they be so generous. he said wow it's made in China :surprise:
Dad laughed it off. I know his boss was embarrassed to give him it since he thought alot of my father. Dad said J.T. Battenburg III made $11 million this year and I get a bleeping flashlight.
So like yeah if you believe they would be better off without the UAW, your fooling yourself.
Back from the UAW's convention in Las Vegas, where he was re-elected to a second four-year term, UAW President Ron Gettelfinger said Monday he's fired up and ready to tackle the critical issues facing the union.
One of the biggest: finding new members. Last week, delegates approved a proposal authorizing the UAW to spend up to $60 million on organizing new members and promoting union causes.
Over a 6:30 a.m. breakfast of an omelet and a cup of coffee at the UAW's Solidarity House cafeteria, Gettelfinger talked to the Free Press about recruiting new members, Delphi Corp. Chief Executive Steve Miller and changing the union's name.
QUESTION: Coming out of the convention, what's your focus going forward?
ANSWER: I think it was energizing for all of us, for the delegates as well as the leadership. It shows you that people do have a much better understanding of what's going on.
Obviously times are tough, and everybody's not happy. But they understand also that solutions are hard to find.
Q: Doesn't that put you in a very difficult position as a union leader? Fighting the NLRB, courts, states ...
A: It's a different battleground today, there's no question.
Many companies would prefer to move from the bargaining table to the courtroom, as we are witnessing more and more.
But it doesn't always work their way, as you can see with the Delphi struggle. It's not nearly resolved yet. From Oct. 7 (the day before Delphi filed bankruptcy) to today, we're still hanging in there, fighting the good fight.
Q: Is there a risk that more will go the Delphi route in the future?
A: I wouldn't say there's a risk. I would say responsible employers won't take the same approach that Delphi did.
Q: Does the membership get it now, the difficult position the union is in?
A: I think the membership is a lot more informed today than the average person gives them credit for.
They see what happens in Greenville, Mich., with Electrolux. You've got productive workers, you've got a quality product, you've got a plant that's making a profit. And they watch the doors close, they see it go to Mexico.
Q: So the message from the convention is you have to fight at the ballot box?
A: Unions have always come out of struggle. It was a struggle forming the union.
People ... painted Walter Reuther a communist. That was their method to try to hold down organizing efforts.
But now, a lot of the businesses today are doing business with a communist regime in China.
Q: With approval of the $60 million, are you placing a big emphasis on organizing?
A: Absolutely, we're placing a big emphasis on it.
That's a pretty good chunk of change.
I think our union understands ... that we need to be successful in organizing if they're going to be able to hold on and maintain the lifestyle that they've become accustomed to.
Q: Is there a great opportunity to organize more in the service industry?
A: We've got a lot of organizing efforts going on. And I do think it's important that we continue to work in all areas, but also continue to work in our own backyard.
There's literally hundreds of thousands of parts suppliers that haven't been organized. I don't know how many workers we've got in foreign nameplate operations that haven't been organized, but it's well over 60,000.
Q: It sounds like there's going to be a big organizing drive in the next four years.
A: There's been a big drive in the past four years.
The thing is, people want to join a union, but they should be free to do so without coercion against them.
Let's be honest. If a company's out here and they want to kill a drive, what can they do? They can fire you for no reason. And it sends a signal to everybody else.
Q: Quite a few of the locals have depleted membership. Are we going to see more of the locals close?
A: No, I don't think so. Obviously we can't control a company like Electrolux closing down, then you're going to see that local close.
Q: Delphi CEO Steve Miller wasn't the most popular figure at the convention. Is he someone you can work with?
A: I don't know. Only time will tell.
Q: With the attrition package, you could have only a few thousand workers at Delphi. Will that make it easier to work out a compromise?
A: I wouldn't dare speculate on the outcome or whether it will be easier or harder.
I would have thought when we put the first attrition agreement in place that that would be a progressive move, that would have helped us to try to find a compromise. But then the company saw fit to go into court to file an 1113/1114 (trying to void labor contracts and some retiree benefits).
Q: There were some rumors before the convention that the UAW could change its name.
A: We are the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW.
The last thing on people's mind at that convention was changing the name.
People are proud to be able to say 'I'm UAW.' Does that say that we will never change the name? No it doesn't. But by the same token, there was certainly no need for it at this convention.
Q: Is the UAW bogged down by the name, seen as a Midwest organization, or hurt by its association with the auto industry?
A: I don't think so. I think we've worked hard on our public image.
We recognize that there are those who want to hold workers down. They don't want them to join unions and they can go out and paint us with a pretty wide brush if they want.
It is a fact that the quality of workmanship went down the tubes as the unions grew in power. Mechanics in union shops raised hourly repair costs as the quality took a dive. Toyota entered without unions and vehicles started lasting 300K instead of being junkyard fodder at 100K. Pretty soon you had Chevette quality competing with Corollas. Don't whine about the competition if all you worry about is what you can do for ME.
I simply TRYING to determine how higher UAW labor costs benefit GM?
I'd say that they're, on the whole, fairly irrelevant in that eliminating them would still not accomplish what GM actually needs to accomplish: increasing revenues per vehicle and increasing retail market share.
The price of GM products is not affected by legacy costs, they are determined by the market, so the consumer isn't really impacted by these. And the marketplace is actually paying less for GM products than it does for comparable products from rivals, because the products and branding are inferior to the alternatives.
GM would still be in serious trouble without the legacy costs, and if it was properly managed, the legacy costs would be covered by the extra revenues. You could get rid of the legacy costs tomorrow, yet GM would be in the same position that it is in now, except the negative number would be just a bit smaller.
Either 'legacy costs' are a legitimate issue, or they are not. If they are NOT a legitimate issue, then why not show WHY they are not legitimate and we can move on.
It's not a legitimate issue, because this implies that if it weren't for the legacy costs that GM would be allocating the assets more effectively and earning a profit. But GM management has proven to be such efficient abusers of resources that any cost savings would likely be misallocated somewhere else instead.
Let's consider what would ikely happen if GM wasn't paying the workers with that money, what else would it do with it?
Based upon past performance, I'd say that they'd probably blow it. They may have well used it to prop up losing operations that should have been cut long ago (for example, they may have kept Oldsmobile, which had deserved to get axed or consolidated long ago). They would have likely thrown even more good money after bad at losing deals such as FIAT. Perhaps they would pay more to lobbyists to protect them from CAFE, while letting a more competitive company such as Toyota take advantage of a push for fuel economy by building cars that could profit from them. They might have released a badge-engineered Pontiac G5 (Cobalt) even sooner than they have.
In other words, they'd have more cash to spew away on yet even more mistakes. Giving them that extra cash would have been akin to giving money to a junkie -- you know that the addict is just going to use it to get another fix, and not use the cash to clean up and change his ways. There's no need to debate the virtues of giving cash to someone like that, it's doomed to be wasted, regardless.
So the legacy costs argument is just a coverup for what really ails the company, and disguises the core issues that must be addressed to return the company to profitability. The amounts of the losses might be somewhat smaller, but the same fundamental problems that created losses would still be there.
Unfortunately, the downside of the legacy costs discussion is that the GM spin machine can use it to buy a bit of time by pretending that outsourcing is going to be its next great salvation. I'll submit to you that the Daewoo Chevys will fail soon enough against its rivals from Japan and Korea, and it will become increasingly obvious that the lower labor costs will not have changed a single thing.
Even if GM could get people to work for free, the cars and branding would still be inferior, and the company would still be hitting the wall. The best thing for GM would be for this year's losses to be even worse, which would allow the company to hit bottom, causing a shareholder revolt and a shakeout, and force in a new management team that could reinvent the business.
Socala, my god you really do understand what is going on. I'm not convinced on getting rid of Rick Wagoner, yet. Bob Lutz just needs to realize that cost cutting on vehicles isn't good. (I'm using the concept vs. production unit) philosophy. Ya know the seats only need 2 inches of padding :surprise: or this rear center console doesn't need to se production, or these rear seat tabels don't need to see production either so we can meet our price point.
Socala, What ever happen to take a little less upfront, but gain alot more not just in respect, but also in sales ???? Honyota seems to understand. You and I understand, maybe we should run the company.
"I'd say that they're, on the whole, fairly irrelevant in that eliminating them would still not accomplish what GM actually needs to accomplish: increasing revenues per vehicle and increasing retail market share."
Legacy costs are irrelevant? So, I suppose GM might as well just double the wages/benefits they currently shower UAW employees with, since these costs are irrelevant?
"The price of GM products is not affected by legacy costs, they are determined by the market, so the consumer isn't really impacted by these."
Final cost is not affected? ALL costs are ultimately borne by the consumer. Who pays corporate taxes? The consumer, in the guise of higher cost of goods and services. Who pays for increased manufacturering/transportation costs due to higher energy prices? The consumer, in the guise of higher cost of goods and services. Who pays for increased business insurance or lawsuit abuse? The consumer, in the guise of higher cost of goods and services.
ALL business costs are ultimately borne by the consumer. GM MUST get the money from SOMEWHERE to pay legacy costs. Where do YOU think they get that money from?
"And the marketplace is actually paying less for GM products than it does for comparable products from rivals, because the products and branding are inferior to the alternatives."
Yes! They DO pay less for GM products! Absolutely, 100% correct. But let's play a little game:
A new Camry LE V6 with minimal options has an invoice cost of a bit over $21k. A comparable Malibu LT V6 has an invoice of a bit over $20k. Now, I have no idea how much profit for the manufacturer is built into those invoice prices but let's assume that both Toyota and GM want to make 10% profit to cover R&D, plant improvements/expansion, etc. So the cost to Toyota to build that Camry (in my example) is about $19k and the cost for GM to build that Malibu is about $18.2k.
So, Toyota has $19k to devote to materials, parts, and labor. GM has $18.2k to devote to the same, BUT their labor/legacy costs are $1500 per unit more. So they REALLY have only $16.7k to devote to materials, parts and labor.
How do they make up the difference? Design? Management? They'd better be burning some SERIOUS midnight oil to get competitive with the Camry when Toyota (no slouch in the design/management department) has $19k to throw at the car while GM has less than $17k. And you WONDER that the cars are inferior?
Please don't try to tell me that legacy cost are irrelevant; it insults my intelligence. Designers are constantly looking for ways to save nickels and dimes out of each of the thousands of parts that go into a car; and you're telling me that legacy costs are irrelevant.
"Let's consider what would ikely happen if GM wasn't paying the workers with that money, what else would it do with it?"
You want a what-if game? What if GM management was EXACTLY as efficient, wise, and intelligent as Toyota? What if they designed cars that the consumers REALLY wanted to buy (like a Camry or Corolla). In short, what would Toyota have to charge for the Camry/Corolla IF THEY HAD GM'S LEGACY COST?
Does GM have other problems besides the UAW? YES.
Does GM have BIGGER problems than the UAW? YES. Absolutely.
BUT, don't try to pretend that the UAW is simply NOT a problem in any shape, form, or fashion.
An analogy: over in the Ethanol forum, you've apparently taken the tact that solving our energy dependency on foreign oil can't rely on JUST ethanol or biodiesel or additional drilling in the US. Any overall solution will be a conglomerate of several different approaches. I think you've even said there's no single 'silver bullet'. If I've misread your thrust in that thread, I apologize.
But why wouldn't the same apply to the problems with GM? Not ALL of the problems can be laid at the feet of management. There is no 'silver bullet' to solving GM's problems. Yes, there've been some boneheaded moves on their part. Yes, multiple divisions with little brand differentiation is a problem. But why should you simply IGNORE the UAW and pretend that it is not PART of the problem?
Is it the whole problem? No. But, once again, we shouldn't be in here trying to solve ALL of GM's problems. Just discussing the UAW. Afterall, the UAW is the topic of this thread.
They irrelevant in explaining what is wrong with the company. Legacy costs are a symptom of the problem (poor management that didn't have the foresight to find cost effective ways to deliver benefits that would be sufficient to secure a workforce), not a problem in and of itself.
If GM was paying too much to get steel delivered to its factories, you wouldn't blame the steel, you'd blame the dumb manager who poorly negotiated the contract. Same rule of logic should apply here -- you blame the leadership for failing to lead.
Final cost is not affected?
For the consumer, it isn't. GM simply could not tack on $1,500 on the price of every car, there's no way for them to get away with that because of the free market.
And you know that they aren't because of the prices of the cars. GM cars are actually cheaper than those of the competition, because consumers won't pay as much for them. GM's problem isn't that the cars are too expensive, it's that they deliver poor value for money within the price range that consumers are willing to pay for these cars.
It's a common misunderstanding of economics that companies simply pass on costs to their customers. In reality, the market picks the price, and manufacturers end up with a certain amount of revenue that they get to keep. If that amount isn't sufficient for them to keep making products at Price X for whatever reason, they eventually go out of business after they've run out of money. Costs that are unique to one particular company cannot be passed onto the consumer, competition ensures that such costs must be absorbed by the seller.
But why wouldn't the same apply to the problems with GM? Not ALL of the problems can be laid at the feet of management.
Because managers make the decisions that create the results. Every company faces competition and constraints of some sort, and its up to managers to deal with both.
You want a what-if game? What if GM management was EXACTLY as efficient, wise, and intelligent as Toyota?
To me, it's pretty obvious -- GM would be the largest, most successful automaker on the planet. The cars would be better, the branding would be better, there would be fewer nameplates, the relationship with workers would be more harmonious, and nobody would care less about this "legacy costs" distraction because GM would be making too much money to care. An insightful manager with an eye for long-term planning would find ways to satisfy the needs of its workforce with a cost structure that could be managed over time.
Notice that I'm not saying that legacy costs aren't expensive and that GM shouldn't try to reduce those costs. If I was in GM management, I would absolutely look to do something about them (although I wouldn't be using the rhetoric that they are now using while doing it -- another example of bad management to attack the workers who they need to build the products that will turn the company.)
But when trying to determine the underlying question of the thread -- the role played by the UAW play in all of these headlines we see today about the near-bankrupt GM and troubled FoMoCo -- the answer is that the union is a symptom of the management problem, not the problem itself, per se.
The nature of the union relationship vis-a-vis comes from decades of poor management, and was alluded to earlier by GRBeck, myself and others, Ford and DCX have obtained flexible work rules, Saturn got them (not that much of GM management actually supported them), etc. when they were wanted.
At this point, it's just the latest in a long line of excuses. If it wasn't this, it would be something else.
"If GM was paying too much to get steel delivered to its factories, you wouldn't blame the steel, you'd blame the dumb manager who poorly negotiated the contract. Same rule of logic should apply here -- you blame the leadership for failing to lead."
Excellent analogy. But I'm not blaming the steel (labor); I'm blaming the steel SUPPLIER (UAW). I'm telling the steel SUPPLIER (UAW), "either get competitive with other suppliers (non-Union labor) or I'll get my steel (labor) elsewhere".
Oh, I forgot; I've got a contract to buy that steel (labor) at an inflated price. Then I guess the steel (labor) is simply NOT A PROBLEM anymore (since it's really the fault of the bonehead who negotiated the contract in the first place) so I'll just SOMEHOW 'absorb' those costs. How? I dunno, magic I guess. SOMEHOW, I'll just make my cars just as good as the competition in extremely price-conscious segments despite the higher cost of steel (labor).
"Costs that are unique to one particular company cannot be passed onto the consumer, competition ensures that such costs must be absorbed by the seller."
That's naive. The costs are in there and they are reflected by a myriad of cost cutting measures; hence the slightly cheaper materials; hence the brow-beating of suppliers; hence the lack of profit necessary for future R&D or plant improvements. Yes, there is no 'line-item' on the factory invoice for labor. But to state that the consumer DOESN'T ultimately pay for those costs, in some fashion, is wrong.
What you are asking is for GM to design and build cars with the same desireability as Honda/Toyota, but which can't COST the consumer any more money, yet do it with higher steel (labor costs)......and still increase their revenues.
Excellent analogy. But I'm not blaming the steel (labor); I'm blaming the steel SUPPLIER (UAW). I'm telling the steel SUPPLIER (UAW)
Why would you do that? If the buyer negotiates a poor deal, that's the buyer's fault.
GM management negotiated contracts that created "legacy costs." Obviously, they didn't possess the foresight to see where this would lead, or else just didn't care. Either way, they screwed up.
But to state that the consumer DOESN'T ultimately pay for those costs, in some fashion, is wrong.
No, it's absolutely right. That's how the free market works -- only a monopoly can pass unique costs onto the customer.
A company that competes can't get away with it, that company will generate lower profits because the price that it can earn has to service higher expenses.
What you are asking is for GM to design and build cars with the same desireability as Honda/Toyota, but which can't COST the consumer any more money, yet do it with higher steel (labor costs)......and still increase their revenues.
I've already shown you the numbers on this. Per unit, GM spends a few hundred dollars less than Toyota to build a car, and sells them for about $5,000 less. Think about that: GM already has lower costs, the problem is in the revenue gap.
Let's suppose that GM needed to put another $1,500 worth of materials, marketing, etc. into a car in order to command similar prices to those of TMC. Based upon numbers in the last annual report, that would result in GMNA's costs in being about $1,200 per unit above those of Toyota (rough estimate from memory, but close enough), while revenues would increase by well over $4,000 per unit. It would be a profitable company, albeit less profitable than Toyota.
It would be good business to spend the $1,500 if you could get the $4,000+ in revenues as a result. But GM would seemingly prefer to repeat the saga of the Vega -- create an notoriously unreliable motor with a design inspired by the goal of saving $8 per car. (Yes, that's $8 per car.) Another pennywise, pound foolish example of GM's lack of forward thinking.
You want a what-if game? What if GM management was EXACTLY as efficient, wise, and intelligent as Toyota?
To me, it's pretty obvious -- GM would be the largest, most successful automaker on the planet. The cars would be better, the branding would be better, there would be fewer nameplates, the relationship with workers would be more harmonious, and nobody would care less about this "legacy costs" distraction because GM would be making too much money to care. An insightful manager with an eye for long-term planning would find ways to satisfy the needs of its workforce with a cost structure that could be managed over time.
Nice try, Socala. If GM was as smart as Toyota, there wouldn't be any legacy costs. They wouldn't have cornered themselves with the union contracts the way they did 30 years ago.
If GM was as smart as Toyota, there wouldn't be any legacy costs. They wouldn't have cornered themselves with the union contracts the way they did 30 years ago.
Actually, I agree with that. A better working relationship with the employees and better planning would have avoided that mistake.
But even if they had the legacy costs, GM led by a better management team would still be making money. The revenue gap per unit between GM and Toyota dwarfs these "legacy costs" by a long shot, and would easily cover those expenses, and a good management team would have created cars capable of delivering those revenues.
General Motors 70 years ago had "the money" to fund pension plans like General Electric. I believe in the 1930's GE set aside a seperate pension fund that they could never touch that the IUE negotiated with them. Now that fund has grown over the years to nearly $30 Billion dollars in it and generates it's own revenue, costing GE Zilch in pensions liability's today
Now that is foresight !!!
Socala, What is the "legacy costs" of those union workers in Japan and Germany ???? A good number of the Japanese vehicles are still assembled in Japan and Europe and was wondering how much those vehicles labor cost's stack up against UAW labor.
Is GM, Ford, Chrysler, really at a labor cost disadvantage, since it does build a fair number of vehicles in foreign county's and import them back here in the states ?????? The Japanese seem to be building there cars in high labor market places both in Japan or U.S. and I'm not sold that the union costs are putting the domestics at such a disadvantage IMO when you factor the cheap labor it's recieving from foreign plants. Is there enough of them to eat up that $1500 per car number ?
Comments
Are you talking about the free market place or the labor union when you use the term "they"? Obviously, the labor union treats workers exactly like commodity: everyone paid exactly the same. Individual skill or initiative matters not one squat. Competitive market is where talent for production has a chance of getting rewarded.
and that diverting all surplus resources to owners and shareholders was an idea of the past.
Ah, gotta love that Marxian term "surplus value of labor" (as in the term was invented by Marx, Karl, not necessarily accusing you of being a communist). It's such an ancient idea. The great social experiments of the past century proved that the only enterprises worse than those harnessing "surplus value of labor" are those not producing any surplus value at all; a la those Soviet factories churning out Lada's that were literally worth less than the component costs that wen into them. Shareholder value creation is the primary reason why innovations and advances take place and why new productive enterprises are put together. If you treat enterprises as job creation devices, well, you need no enterprise at all; dividing your workers into two equal groups, having half them diggin a hole in the ground and the other half filling it back up will accomplish just as much. Or better yet, just send both groups to watch TV, and pay them boat loads of money; the economy will magically prosper as they spend their windfall, right?? Isn't that what the pipe dream Keynsian economics that the pro-Union camp are implying really boils down to?
In the big picture, when wages increase at the lower echelons, it trickles up the ladder.
Except unions do not help the lower echelons. The average UAW worker is paid $65k a year, plus a benefit package that is in excess of $140k (otherwise GM would not be making the offer). A household with $65k a year income alone is in the top 20% according to IRS data; a dual UAW family making $130k a year is approaching the top 5% for income in the US! Not bad for watching TV or turning out cars that people do not want. What a massive rip-off of families making far less money.
a smart manager knows that his workers need to be incentivized to work and to produce at optimal levels
Exactly! Finally we have something to agree on. Uniform pay mandated by union work rules removes any and all incentive to work hard.
Rocky
Unfortunately, it has become a field of political rants about the alleged evils of organized labor, inspired by the constant PR-motivated recitations of this "legacy costs" argument, hence the need I see to discuss what the problems really are.
And ultimately, the numbers make it clear that it's largely a revenue problem. US automakers made money for decades with relatively costly labor, and their successful rivals don't exactly pay low wages.
So, how do higher UAW labor costs benefit GM?
At this stage of the game, this is the wrong business question, because the labor costs are what they are, and a change in costs will create certain results, good and bad. The question is what costs can be reduced without creating ill effects, and what costs, if any, might need to be increased in order to gain improvements.
The current plan of buying out workers, regardless of performance or potential, almost ensures that the quality of the workforce will deteriorate, because most of the best people will take the money and run. You won't achieve a turnaround by retaining the least beneficial workers, and losing the better ones.
It would be better to put labor to work, building products that consumers want and will buy at retail, while developing processes to make that production more efficient. Instead of speaking about labor as a problem, which only harms the productivity of those who remain, use that capacity to create desirable products that bring cash in the door.
The fact that the workers have devoted their energies building undesirable products is a decision that was made at the top, and you can fault the managers who ignored consumer needs for the outcome.
Rocky
Union Labor costs could be absorb making premium products like these and make the company money when autosales might be down.
Rocky
Neways I'm not sure what the gross salary has to do with the buy-out package the UAW negotiated with GM ?
Rocky
The fundamental problem is that GM can't sell its automaking business and become a different kind of company altogether like the next logic step to your suggestion would be because nobody wants the union liability . . . that's why it can only dabble in other industries and make as much money from them as it can, just to blow more wads down the sink hole that is unionized car making (SUV making is/was profitable).
The fact that all of these automakers aspire to create sales in the US market, and that many of them attempt to build capacity here, tells you that they think it is a lucrative market. The various Japanese, German and Korean makers are here because they see profit or profit potential, and the French and English who failed before them show us how tough it is. There is a lot of money to be made here, but you've got to earn it.
The US auto market has grown almost every year in the past few decades, yet GM hasn't participated in much of that growth. If you can't succeed in a growing market, you may very well be doing something wrong.
Then let's not respond to the 'political rants' as you see them. Instead, why not discuss the UAW and the Domestic Automakers?
"...constant PR-motivated recitations of this "legacy costs" argument..."
Regardless of the motivation behind the 'legacy costs' argument, either GM has 'legacy costs' due to the UAW contracts, or they don't. Let's boil it down and try to stay away from 'motivations' since that inevitably will lead us back to politics.
Does GM have 'legacy costs' due to UAW contracts which they would not have with non-Union labor? These 'legacy costs' should go down in the ledger as a 'debit'. What would be the corresponding asset which GM gained by dealing with Union labor?
"...hence the need I see to discuss what the problems really are."
Why? Either 'legacy costs' are a legitimate issue, or they are not. If they are NOT a legitimate issue, then why not show WHY they are not legitimate and we can move on. Instead, you've chosen to go off on a tangent regarding other problems GM has.
Fine. GM has many problems. Past management decisions and their current product lineup are problems. But I'm not here trying to SOLVE an overall 'What's wrong with GM' issue; I'm just trying to discuss the UAW.
"At this stage of the game, this is the wrong business question..."
I'm not trying to ask the RIGHT business question (as in "If I'm GM, how do I fix it"). I simply TRYING to determine how higher UAW labor costs benefit GM?
Yes or no? Is the UAW an asset or a liability?
"The current plan of buying out workers, regardless of performance or potential, almost ensures that the quality of the workforce will deteriorate...."
Yes. YES! Absolutely. So why would buying out workers regardless of performance or potential, be that different from setting wages/benefits under a collective contract regardless of performance or potential?
I do not know where you are talking about but in the 70's and 80's here in Michigan they were the best place for anyone who wanted to make big money(w/o any kind of skills or education) worked. Once you were in you were set for life-whoops, not true anymore.
Max out 401's? I think they will still have the pension money that they have earned when they retire . Only it stops getting bigger now and any additional money comes from the 401k. this is what happended to the salaried. Nobody lost anything.
http://www.amgeneral.com/corporate_history.php/amSid/eecc685b73d9c266c8e3aaaa953- - 1641a
Toyota, and especially Honda, Mitsubishi, BMW, Suzuki, have very well diversified portfolio's beyond cars. GM used to and I bet they are regretting selling Hughes for example. The bottom line is I am one who believes that GM could use union labor to make military, planes, to diversify it's portfolio and add value to shareholders and provide even more jobs to americans.
But hey what do I know ?
Rocky
Rocky
In order for GM to make that offer of $140k, it has to be the case that GM has greater benefits liability on the account, no? In other words, the worker has accrued additional income during his tenure that is greater than the $140k buy-out offer.
GM already diversified, like many other posters mentioned. It's just that GM has a chronicly sick and uninsurable kid in the house; every time the cash burn accelearates, it has to hock more and more valuables to keep the kid alive. That is the death grip UAW has on GM's finances.
Rocky
To gain later? To gain later?
You mean 'later' as in when GM turns the ship away from the iceberg and becomes profitable? Why should the UAW gain later? Assuming that appropriate changes in management are made and GM produces vehicles to meet consumer demand (since those really is the CORE reason for GM's problems according to socala4), why should the UAW deserve anything 'later'?
Rocky
Rocky
:confuse:
In the past the UAW kept the ship afloat? In other words, if not for the UAW, the GM ship would have sunk a long time ago?
Okay, so that would be listed as a 'benefit' of having the UAW.
So.....how did having Union labor vs. non-Union labor keep GM's ship afloat?
And it happened in 1994.
What I mean is the UAW so far is being punished because managements refusal to build quality cars across the board. They have and are going to absorb real cuts in pay and benefits. It's not the same as making $10 million one year and then making $6 million another yr. When your that wealthy what else can one buy ?
I do feel that finally they are "getting the message" from consumers, but have still canceled or delayed good product that would give a solid image for the healths of the brands.
In the past the UAW kept the ship afloat? In other words, if not for the UAW, the GM ship would have sunk a long time ago?
That's not exactly what I was saying. However GM with it's good pay and benefits could pick and choose who it wanted to hire both in management and labor. The UAW workers only can build the best products with the materials and machinery given to them. That is common sense. They have procedures to follow like most everyone else.
Okay, so that would be listed as a 'benefit' of having the UAW.
Longevity and experience of a UAW member is a benefit. He/She acquires enough experience and loyalty to offer money saving suggestions which include efficiency, safety, quality, in the process.
So.....how did having Union labor vs. non-Union labor keep GM's ship afloat?
I'm not saying that having union labor has kept GM afloat. OTOH- they aren't the primary reason why GM has failing grades on it's report card. I think any industry willing to pay it's workforce enough money will get very good help. Sure both union and non-union you have slackers. GM has paid it's upper management very well in the past and they have failed to leave the company better off then when they came in. Some are going to put 100% of the blame on the unions and for some reason in this society we give management excuses like blaming others for there decision makings.
Whether I'm right or wrong this is the way I see it.
Rocky
"They have and are going to absorb real cuts in pay and benefits."
Yes. No argument there.
"However GM with it's good pay and benefits could pick and choose who it wanted to hire both in management and labor."
Yes. But doesn't ANY company (using Union labor or not) have the capacity to pick and choose, for both management and labor, if they have good pay and benefit? Umm, wouldn't that be a trait of a free labor market? Offer better pay, get your pick of applicants. Offer lower pay, get your pick of the dregs. Seems fair to me.
"The UAW workers only can build the best products with the materials and machinery given to them."
Yep. Same with non-union labor. I'd like to see the differences in the final product for otherwise IDENTICAL products built using both Union and non-union labor. If one could categorically prove that Union labor led to a better product, using the SAME materials and machinery, that would be a huge check in the 'Union as asset' column....
"Longevity and experience of a UAW member is a benefit. He/She acquires enough experience and loyalty to offer money saving suggestions which include efficiency, safety, quality, in the process."
Why do you think that only Union shops have loyal employees? I wonder what the turnover rates are in Toyota/Honda shops vs. UAW shops? (Although this is probably more of a style of management issue than a Union vs. non-Union issue). My point here is that loyalty to a company ISN'T due to the Union - it should be due to the style of management. Unless you define loyalty as "gee, I've got this cush Union job where I'm guaranteed a job for life; I'm NEVER leaving.....". But is that loyalty to the company or loyalty to the source of the cush job (the Union)?
"GM has paid it's upper management very well in the past..."
Yes, GM has paid upper management very well. Would things have been better if they paid upper management only twice what the average line worker made? Who knows - my point is that what they paid upper management is completely immaterial to this discussion. GM could produce as many as 5 million vehicles this year. A $10M benefits package equates to $2/vehicle. That kinda pales in comparison to some of the Union 'legacy costs' I've heard kicked around.
"...and they have failed to leave the company better off then when they came in."
How many changes in management has GM seen over the last 2+ decades? And yet things always seem to remain the same. How many changes in Union leadership has the UAW seen over the same period? Perhaps (just perhaps) this is one reason (ONE reason) why things always seem to remain the same...
"Some are going to put 100% of the blame on the unions..."
Yes, some will. Some folks will NEVER buy a car made in America (or Mexico for that matter) because their favorite 'whipping boy' is responsible for 100% of the problem.
I don't put all the blame on the UAW. GM management has made MANY boneheaded moves over the last few decades. Personally, I think Ford management has done a bit better job and DCX a MUCH better job despite all three using the UAW.
My point however has NOT been what is wrong with the Domestics. I'm simply trying to determine the benefit the UAW provides to the domestics in general. Earlier there was a discussion of the 'level playing field' regarding the transplants. Even if one assumed hypothetically that GM management was JUST AS GOOD AS the management of Toyota or Honda, they would still be at a competitive disadvantage due to higher labor costs.
Rocky
If one of my worker gives me a suggestion that saves $30k for me, never mind $3mil, I'd give him/her a bonus and I'd promote him/her to position where he/she can save me more money. That simply would not be allowed under UAW rules. Over time, productive workers leave UAW shops or cease to be on the look-out to be productive.
My beef is with UAW as an institution, not with individual workers. In fact, if your father and grandfather's contribution can indeed be verified, they'd be far better off without UAW.
I appreciate your candor and honesty. Yes, I'm sure it WOULD lead to a bunch of off-topic discussion.
I'm not sure just how that ends up benefiting the consumer thought since ultimately, it is the consumer who pays the UAW wages.
Grandfather, got checks ranging from $20-40K in the 70's and 80's for his suggestions. Dad's last million dollar suggestion was about 7 or 8 years ago and was a China made plastic flashlight that said "Delphi" on it.
brightness, it was the company not the UAW that cut the "suggestion program" payouts. You make it like the UAW like all unions prohibits one from promoting. Where do you think GM gets alot of there supervisors from ???? They still get a fair share from ex-UAW workers
BTW- I'm not sure where all this TV watching is going on at and not showing up to work talk is about ????? I think your living in the 70's and 80's during the recession years.
My father was in the jobs banks for a short-time in the 80's. That was back in the big recession. GM hired a few to many workers back then, but demand was pretty high when a reccession wasn't happening under Reagan and could see why they needed so many.
Nothing, nothing, and nothing at all. That's what happens under UAW work rules.
You get a flashlight or some other item from the Dollar Tree.
If one of my worker gives me a suggestion that saves $30k for me, never mind $3mil, I'd give him/her a bonus and I'd promote him/her to position where he/she can save me more money.
Your a small buiz that recognizes small achievements. GM is a huge corporation that Rick Wagoner doesn't know who his Division Managers names, let alone somebody like my father giving a million dollar savings. He doesn't have time for the small stuff.
You need to think outside your small buisness box.
That simply would not be allowed under UAW rules. Over time, productive workers leave UAW shops or cease to be on the look-out to be productive.
Sure some do leave but 90% of them stay because where else are they going to get good pay and benefits, especially today ?
Not everyone is blessed at having the perfect situation to make a small buisness succeed. It's not all about hard work, but also alot of luck and good fortune of having the desirable product or service. Many can't afford to risk the well being of there children on starting a buisness, unless they come from money.
My beef is with UAW as an institution, not with individual workers.
Well the UAW like all other unions are the only insitutions in this country that have faught for workers rights, and fair wages. You obviously disagree with that, and I won't go into it any further to start a political war.
In fact, if your father and grandfather's contribution can indeed be verified, they'd be far better off without UAW.
If it wasn't for the UAW, or some other unions raising the standard of living in the automobile sectors they would probably be making atleast $15 an hour less. Sure it's hard to judge what everyone would be making if Unions would be abolished.
My father and grandfathers along with all my other relatives would strongly disagree with you on them being better off without the UAW.
brightness, I am having a hard time understanding your logic that's all. "nothing personal pal."
Rocky
Too bad he didn't suggest a union made, American-built plastic flashlight......has he no shame? :P
That is very true. Sure I could spew that they are more qualified, more experienced, more mechanically inclined, rough and tough blue collar workers, but honestly I don't want to get into that.
I guess from the "outside looking in" the ordinary consumer will say they (UAW) offer no benefit to them as a consumer. I strongly disagree with that though, because I know better and know the individuals like my father, my family and friends.
I also will say other american workers are just as passionate at Toyota or Honda.
Rocky
LOL rorr.
I was at home the night he recieved it. He said he was working on a machine and his boss came up to him and shook his hand and told him good job Rusty on your sugestion. They handed him a small black box and dad went back to work. Dad said when he got done fixing the machine and opened it up and said wow I get a plastic flashlight that says Delphi on it for a $1.3 million dollar suggestion. How could they be so generous. he said wow it's made in China :surprise:
Dad laughed it off. I know his boss was embarrassed to give him it since he thought alot of my father. Dad said J.T. Battenburg III made $11 million this year and I get a bleeping flashlight.
So like yeah if you believe they would be better off without the UAW, your fooling yourself.
Rocky
Rocky
http://www.freep.com/apps/pbcs.dll/article?AID=/20060618/BUSINESS01/606180600/10- 14
Rocky
http://www.freep.com/apps/pbcs.dll/article?AID=/20060618/BUSINESS01/606180592/10- 14
Rocky
Back from the UAW's convention in Las Vegas, where he was re-elected to a second four-year term, UAW President Ron Gettelfinger said Monday he's fired up and ready to tackle the critical issues facing the union.
One of the biggest: finding new members. Last week, delegates approved a proposal authorizing the UAW to spend up to $60 million on organizing new members and promoting union causes.
Over a 6:30 a.m. breakfast of an omelet and a cup of coffee at the UAW's Solidarity House cafeteria, Gettelfinger talked to the Free Press about recruiting new members, Delphi Corp. Chief Executive Steve Miller and changing the union's name.
QUESTION: Coming out of the convention, what's your focus going forward?
ANSWER: I think it was energizing for all of us, for the delegates as well as the leadership. It shows you that people do have a much better understanding of what's going on.
Obviously times are tough, and everybody's not happy. But they understand also that solutions are hard to find.
Q: Doesn't that put you in a very difficult position as a union leader? Fighting the NLRB, courts, states ...
A: It's a different battleground today, there's no question.
Many companies would prefer to move from the bargaining table to the courtroom, as we are witnessing more and more.
But it doesn't always work their way, as you can see with the Delphi struggle. It's not nearly resolved yet. From Oct. 7 (the day before Delphi filed bankruptcy) to today, we're still hanging in there, fighting the good fight.
Q: Is there a risk that more will go the Delphi route in the future?
A: I wouldn't say there's a risk. I would say responsible employers won't take the same approach that Delphi did.
Q: Does the membership get it now, the difficult position the union is in?
A: I think the membership is a lot more informed today than the average person gives them credit for.
They see what happens in Greenville, Mich., with Electrolux. You've got productive workers, you've got a quality product, you've got a plant that's making a profit. And they watch the doors close, they see it go to Mexico.
Q: So the message from the convention is you have to fight at the ballot box?
A: Unions have always come out of struggle. It was a struggle forming the union.
People ... painted Walter Reuther a communist. That was their method to try to hold down organizing efforts.
But now, a lot of the businesses today are doing business with a communist regime in China.
Q: With approval of the $60 million, are you placing a big emphasis on organizing?
A: Absolutely, we're placing a big emphasis on it.
That's a pretty good chunk of change.
I think our union understands ... that we need to be successful in organizing if they're going to be able to hold on and maintain the lifestyle that they've become accustomed to.
Q: Is there a great opportunity to organize more in the service industry?
A: We've got a lot of organizing efforts going on. And I do think it's important that we continue to work in all areas, but also continue to work in our own backyard.
There's literally hundreds of thousands of parts suppliers that haven't been organized. I don't know how many workers we've got in foreign nameplate operations that haven't been organized, but it's well over 60,000.
Q: It sounds like there's going to be a big organizing drive in the next four years.
A: There's been a big drive in the past four years.
The thing is, people want to join a union, but they should be free to do so without coercion against them.
Let's be honest. If a company's out here and they want to kill a drive, what can they do? They can fire you for no reason. And it sends a signal to everybody else.
Q: Quite a few of the locals have depleted membership. Are we going to see more of the locals close?
A: No, I don't think so. Obviously we can't control a company like Electrolux closing down, then you're going to see that local close.
Q: Delphi CEO Steve Miller wasn't the most popular figure at the convention. Is he someone you can work with?
A: I don't know. Only time will tell.
Q: With the attrition package, you could have only a few thousand workers at Delphi. Will that make it easier to work out a compromise?
A: I wouldn't dare speculate on the outcome or whether it will be easier or harder.
I would have thought when we put the first attrition agreement in place that that would be a progressive move, that would have helped us to try to find a compromise. But then the company saw fit to go into court to file an 1113/1114 (trying to void labor contracts and some retiree benefits).
Q: There were some rumors before the convention that the UAW could change its name.
A: We are the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW.
The last thing on people's mind at that convention was changing the name.
People are proud to be able to say 'I'm UAW.' Does that say that we will never change the name? No it doesn't. But by the same token, there was certainly no need for it at this convention.
Q: Is the UAW bogged down by the name, seen as a Midwest organization, or hurt by its association with the auto industry?
A: I don't think so. I think we've worked hard on our public image.
We recognize that there are those who want to hold workers down. They don't want them to join unions and they can go out and paint us with a pretty wide brush if they want.
But we're still proud of who we are.
http://www.freep.com/apps/pbcs.dll/article?AID=/20060620/BUSINESS01/606200410/10- 14
Rocky
I'd say that they're, on the whole, fairly irrelevant in that eliminating them would still not accomplish what GM actually needs to accomplish: increasing revenues per vehicle and increasing retail market share.
The price of GM products is not affected by legacy costs, they are determined by the market, so the consumer isn't really impacted by these. And the marketplace is actually paying less for GM products than it does for comparable products from rivals, because the products and branding are inferior to the alternatives.
GM would still be in serious trouble without the legacy costs, and if it was properly managed, the legacy costs would be covered by the extra revenues. You could get rid of the legacy costs tomorrow, yet GM would be in the same position that it is in now, except the negative number would be just a bit smaller.
Either 'legacy costs' are a legitimate issue, or they are not. If they are NOT a legitimate issue, then why not show WHY they are not legitimate and we can move on.
It's not a legitimate issue, because this implies that if it weren't for the legacy costs that GM would be allocating the assets more effectively and earning a profit. But GM management has proven to be such efficient abusers of resources that any cost savings would likely be misallocated somewhere else instead.
Let's consider what would ikely happen if GM wasn't paying the workers with that money, what else would it do with it?
Based upon past performance, I'd say that they'd probably blow it. They may have well used it to prop up losing operations that should have been cut long ago (for example, they may have kept Oldsmobile, which had deserved to get axed or consolidated long ago). They would have likely thrown even more good money after bad at losing deals such as FIAT. Perhaps they would pay more to lobbyists to protect them from CAFE, while letting a more competitive company such as Toyota take advantage of a push for fuel economy by building cars that could profit from them. They might have released a badge-engineered Pontiac G5 (Cobalt) even sooner than they have.
In other words, they'd have more cash to spew away on yet even more mistakes. Giving them that extra cash would have been akin to giving money to a junkie -- you know that the addict is just going to use it to get another fix, and not use the cash to clean up and change his ways. There's no need to debate the virtues of giving cash to someone like that, it's doomed to be wasted, regardless.
So the legacy costs argument is just a coverup for what really ails the company, and disguises the core issues that must be addressed to return the company to profitability. The amounts of the losses might be somewhat smaller, but the same fundamental problems that created losses would still be there.
Unfortunately, the downside of the legacy costs discussion is that the GM spin machine can use it to buy a bit of time by pretending that outsourcing is going to be its next great salvation. I'll submit to you that the Daewoo Chevys will fail soon enough against its rivals from Japan and Korea, and it will become increasingly obvious that the lower labor costs will not have changed a single thing.
Even if GM could get people to work for free, the cars and branding would still be inferior, and the company would still be hitting the wall. The best thing for GM would be for this year's losses to be even worse, which would allow the company to hit bottom, causing a shareholder revolt and a shakeout, and force in a new management team that could reinvent the business.
I'm not even going to get fired up. Your words speak for themselves if ya know what I mean.
Rocky
Socala, What ever happen to take a little less upfront, but gain alot more not just in respect, but also in sales ???? Honyota seems to understand. You and I understand, maybe we should run the company.
Rocky
Legacy costs are irrelevant? So, I suppose GM might as well just double the wages/benefits they currently shower UAW employees with, since these costs are irrelevant?
"The price of GM products is not affected by legacy costs, they are determined by the market, so the consumer isn't really impacted by these."
Final cost is not affected? ALL costs are ultimately borne by the consumer. Who pays corporate taxes? The consumer, in the guise of higher cost of goods and services. Who pays for increased manufacturering/transportation costs due to higher energy prices? The consumer, in the guise of higher cost of goods and services. Who pays for increased business insurance or lawsuit abuse? The consumer, in the guise of higher cost of goods and services.
ALL business costs are ultimately borne by the consumer. GM MUST get the money from SOMEWHERE to pay legacy costs. Where do YOU think they get that money from?
"And the marketplace is actually paying less for GM products than it does for comparable products from rivals, because the products and branding are inferior to the alternatives."
Yes! They DO pay less for GM products! Absolutely, 100% correct. But let's play a little game:
A new Camry LE V6 with minimal options has an invoice cost of a bit over $21k. A comparable Malibu LT V6 has an invoice of a bit over $20k. Now, I have no idea how much profit for the manufacturer is built into those invoice prices but let's assume that both Toyota and GM want to make 10% profit to cover R&D, plant improvements/expansion, etc. So the cost to Toyota to build that Camry (in my example) is about $19k and the cost for GM to build that Malibu is about $18.2k.
So, Toyota has $19k to devote to materials, parts, and labor. GM has $18.2k to devote to the same, BUT their labor/legacy costs are $1500 per unit more. So they REALLY have only $16.7k to devote to materials, parts and labor.
How do they make up the difference? Design? Management? They'd better be burning some SERIOUS midnight oil to get competitive with the Camry when Toyota (no slouch in the design/management department) has $19k to throw at the car while GM has less than $17k. And you WONDER that the cars are inferior?
Please don't try to tell me that legacy cost are irrelevant; it insults my intelligence. Designers are constantly looking for ways to save nickels and dimes out of each of the thousands of parts that go into a car; and you're telling me that legacy costs are irrelevant.
"Let's consider what would ikely happen if GM wasn't paying the workers with that money, what else would it do with it?"
You want a what-if game? What if GM management was EXACTLY as efficient, wise, and intelligent as Toyota? What if they designed cars that the consumers REALLY wanted to buy (like a Camry or Corolla). In short, what would Toyota have to charge for the Camry/Corolla IF THEY HAD GM'S LEGACY COST?
Does GM have other problems besides the UAW? YES.
Does GM have BIGGER problems than the UAW? YES. Absolutely.
BUT, don't try to pretend that the UAW is simply NOT a problem in any shape, form, or fashion.
An analogy: over in the Ethanol forum, you've apparently taken the tact that solving our energy dependency on foreign oil can't rely on JUST ethanol or biodiesel or additional drilling in the US. Any overall solution will be a conglomerate of several different approaches. I think you've even said there's no single 'silver bullet'. If I've misread your thrust in that thread, I apologize.
But why wouldn't the same apply to the problems with GM? Not ALL of the problems can be laid at the feet of management. There is no 'silver bullet' to solving GM's problems. Yes, there've been some boneheaded moves on their part. Yes, multiple divisions with little brand differentiation is a problem. But why should you simply IGNORE the UAW and pretend that it is not PART of the problem?
Is it the whole problem? No. But, once again, we shouldn't be in here trying to solve ALL of GM's problems. Just discussing the UAW. Afterall, the UAW is the topic of this thread.
They irrelevant in explaining what is wrong with the company. Legacy costs are a symptom of the problem (poor management that didn't have the foresight to find cost effective ways to deliver benefits that would be sufficient to secure a workforce), not a problem in and of itself.
If GM was paying too much to get steel delivered to its factories, you wouldn't blame the steel, you'd blame the dumb manager who poorly negotiated the contract. Same rule of logic should apply here -- you blame the leadership for failing to lead.
Final cost is not affected?
For the consumer, it isn't. GM simply could not tack on $1,500 on the price of every car, there's no way for them to get away with that because of the free market.
And you know that they aren't because of the prices of the cars. GM cars are actually cheaper than those of the competition, because consumers won't pay as much for them. GM's problem isn't that the cars are too expensive, it's that they deliver poor value for money within the price range that consumers are willing to pay for these cars.
It's a common misunderstanding of economics that companies simply pass on costs to their customers. In reality, the market picks the price, and manufacturers end up with a certain amount of revenue that they get to keep. If that amount isn't sufficient for them to keep making products at Price X for whatever reason, they eventually go out of business after they've run out of money. Costs that are unique to one particular company cannot be passed onto the consumer, competition ensures that such costs must be absorbed by the seller.
But why wouldn't the same apply to the problems with GM? Not ALL of the problems can be laid at the feet of management.
Because managers make the decisions that create the results. Every company faces competition and constraints of some sort, and its up to managers to deal with both.
You want a what-if game? What if GM management was EXACTLY as efficient, wise, and intelligent as Toyota?
To me, it's pretty obvious -- GM would be the largest, most successful automaker on the planet. The cars would be better, the branding would be better, there would be fewer nameplates, the relationship with workers would be more harmonious, and nobody would care less about this "legacy costs" distraction because GM would be making too much money to care. An insightful manager with an eye for long-term planning would find ways to satisfy the needs of its workforce with a cost structure that could be managed over time.
Notice that I'm not saying that legacy costs aren't expensive and that GM shouldn't try to reduce those costs. If I was in GM management, I would absolutely look to do something about them (although I wouldn't be using the rhetoric that they are now using while doing it -- another example of bad management to attack the workers who they need to build the products that will turn the company.)
But when trying to determine the underlying question of the thread -- the role played by the UAW play in all of these headlines we see today about the near-bankrupt GM and troubled FoMoCo -- the answer is that the union is a symptom of the management problem, not the problem itself, per se.
The nature of the union relationship vis-a-vis comes from decades of poor management, and was alluded to earlier by GRBeck, myself and others, Ford and DCX have obtained flexible work rules, Saturn got them (not that much of GM management actually supported them), etc. when they were wanted.
At this point, it's just the latest in a long line of excuses. If it wasn't this, it would be something else.
Excellent analogy. But I'm not blaming the steel (labor); I'm blaming the steel SUPPLIER (UAW). I'm telling the steel SUPPLIER (UAW), "either get competitive with other suppliers (non-Union labor) or I'll get my steel (labor) elsewhere".
Oh, I forgot; I've got a contract to buy that steel (labor) at an inflated price. Then I guess the steel (labor) is simply NOT A PROBLEM anymore (since it's really the fault of the bonehead who negotiated the contract in the first place) so I'll just SOMEHOW 'absorb' those costs. How? I dunno, magic I guess. SOMEHOW, I'll just make my cars just as good as the competition in extremely price-conscious segments despite the higher cost of steel (labor).
"Costs that are unique to one particular company cannot be passed onto the consumer, competition ensures that such costs must be absorbed by the seller."
That's naive. The costs are in there and they are reflected by a myriad of cost cutting measures; hence the slightly cheaper materials; hence the brow-beating of suppliers; hence the lack of profit necessary for future R&D or plant improvements. Yes, there is no 'line-item' on the factory invoice for labor. But to state that the consumer DOESN'T ultimately pay for those costs, in some fashion, is wrong.
What you are asking is for GM to design and build cars with the same desireability as Honda/Toyota, but which can't COST the consumer any more money, yet do it with higher steel (labor costs)......and still increase their revenues.
Why would you do that? If the buyer negotiates a poor deal, that's the buyer's fault.
GM management negotiated contracts that created "legacy costs." Obviously, they didn't possess the foresight to see where this would lead, or else just didn't care. Either way, they screwed up.
But to state that the consumer DOESN'T ultimately pay for those costs, in some fashion, is wrong.
No, it's absolutely right. That's how the free market works -- only a monopoly can pass unique costs onto the customer.
A company that competes can't get away with it, that company will generate lower profits because the price that it can earn has to service higher expenses.
What you are asking is for GM to design and build cars with the same desireability as Honda/Toyota, but which can't COST the consumer any more money, yet do it with higher steel (labor costs)......and still increase their revenues.
I've already shown you the numbers on this. Per unit, GM spends a few hundred dollars less than Toyota to build a car, and sells them for about $5,000 less. Think about that: GM already has lower costs, the problem is in the revenue gap.
Let's suppose that GM needed to put another $1,500 worth of materials, marketing, etc. into a car in order to command similar prices to those of TMC. Based upon numbers in the last annual report, that would result in GMNA's costs in being about $1,200 per unit above those of Toyota (rough estimate from memory, but close enough), while revenues would increase by well over $4,000 per unit. It would be a profitable company, albeit less profitable than Toyota.
It would be good business to spend the $1,500 if you could get the $4,000+ in revenues as a result. But GM would seemingly prefer to repeat the saga of the Vega -- create an notoriously unreliable motor with a design inspired by the goal of saving $8 per car. (Yes, that's $8 per car.) Another pennywise, pound foolish example of GM's lack of forward thinking.
To me, it's pretty obvious -- GM would be the largest, most successful automaker on the planet. The cars would be better, the branding would be better, there would be fewer nameplates, the relationship with workers would be more harmonious, and nobody would care less about this "legacy costs" distraction because GM would be making too much money to care. An insightful manager with an eye for long-term planning would find ways to satisfy the needs of its workforce with a cost structure that could be managed over time.
Nice try, Socala.
If GM was as smart as Toyota, there wouldn't be any legacy costs. They wouldn't have cornered themselves with the union contracts the way they did 30 years ago.
Actually, I agree with that. A better working relationship with the employees and better planning would have avoided that mistake.
But even if they had the legacy costs, GM led by a better management team would still be making money. The revenue gap per unit between GM and Toyota dwarfs these "legacy costs" by a long shot, and would easily cover those expenses, and a good management team would have created cars capable of delivering those revenues.
Now that fund has grown over the years to nearly $30 Billion dollars in it and generates it's own revenue, costing GE Zilch in pensions liability's today
Now that is foresight !!!
Socala, What is the "legacy costs" of those union workers in Japan and Germany ???? A good number of the Japanese vehicles are still assembled in Japan and Europe and was wondering how much those vehicles labor cost's stack up against UAW labor.
Is GM, Ford, Chrysler, really at a labor cost disadvantage, since it does build a fair number of vehicles in foreign county's and import them back here in the states ?????? The Japanese seem to be building there cars in high labor market places both in Japan or U.S. and I'm not sold that the union costs are putting the domestics at such a disadvantage IMO when you factor the cheap labor it's recieving from foreign plants. Is there enough of them to eat up that $1500 per car number ?
Rocky