Mickey Kaus has a very long piece about unions and the Davis Bacon Act, a piece of legislation that demands government hire union labor. He touches on the UAW's stranglehold on the remaining U.S. carmakers. I was at a management comference about fifteen years ago, and a woman named MaryAnn Keller (an insider advisor to business then) asked, "Can any car company make money if they have a UAW contract?" She went on to predict the stock prices for the industry we have now, and the eventual collapse of the entire business if they couldn't get out from under the UAW. Well here we are and Business Week pretty well lays it out, (link to a very old article).
Logic says that when your cash holdings exceed your entire valuation in the stock market, some Wall Street shark is going to swoop in, snap up the good parts, and toss the rest. Companies with bloated factories and workforces got religion the hard way 20 years ago, in the days of "Neutron Jack" Welch. And with today's more active boards, CEOs who consistently lose ground to the competition usually don't need Donald Trump to tell them they're fired.Junk Bond status? We're UAW, we don't care about stuff like that. UAW contracts will not allow GM to cut back because the contract demands that GM run at 80% capacity, no matter what. Bye bye GM.
But GM, of course, is no ordinary company. With sales of $193 billion, it stands as an icon of fading American industrial might. Size and symbolism dictate that its fate has sweeping implications. After all, GM's payroll pumps $8.7 billion a year into its assembly workers' pockets. Directly or indirectly, it supports nearly 900,000 jobs -- everyone from auto-parts workers to advertising writers, car salespeople, and office-supply vendors. When GM shut down for 54 days during a 1998 labor action, it knocked a full percentage point off the U.S. economic growth rate that quarter. So what's bad for General Motors is still, undeniably, bad for America.
And make no mistake, GM is in a horrible bind. That $1.1 billion loss in the first quarter doesn't begin to tell the whole story. The carmaker is saddled with a $1,600-per-vehicle handicap in so-called legacy costs, mostly retiree health and pension benefits.I
2 comments:
Gee, I thougt mamagement was supposed to, you know, manage a company. "Manage" being defined as day to day operation, and planning for the future.
This is completlely a management failure. How any employee, or group of employees, is responsible for this is beyond me.
By the way, if GM simply made cars people wanted to buy, this problem would dissapear. This is one turkey that needs to be sliced.
Xiaoding
A little history for all of you. The Roosevelt Administration literally enshrined labor unions in the 1930s. The government sided with "the workers" and backed up any strike. By the 50s no employer was allowed to hire replacement workers and the unions were so big and powerful that when management tried to hire "scabs" the workers invaded the plants and held "sit down strikes" thus locking management out. There were riots in every city as union goons simply destroyed small businesses that wouldn't go along and their criminal activities were backed up by the courts. Unions ruled, absolutely. Car companies like Packard, Studebaker, and a few others were forced out of business. Add to that the fact that America was the only country on the planet not destroyed by WWII. Nobody else had any factories. That meant that all companies could "pass costs through" to the consumer. Labor boards simply endorsed any and all wage demands that went to arbitration. They backed up the "featherbedding" labor contracts whereby guys working for the union got paid by the companies, guys got paid for doing next to nothing, and management ate sand. Until. The mid-seventies and the Japanese car invasion coupled with sudden high gasoline prices meant that all the American car companies had products nobody could use because gas mileage was as low as six miles per gallon on the big American cars. This gave the auto companies some leverage, but not much. Factories have closed, production lines have been closed, but the union work rules established in the 50s by the union-industrial complex remained in place. The unions can wreck any company they choose to wreck and they have no problem with mutual suicide.
These contracts were made in a different age to suit an environment that no longer exists. Unions will never budge and all you have to do is look at the shrunken newspaper business, the bankrupt large airline business, and the clothing business to name but a few.
Management had to sign, the law and the government mandated it.
Post a Comment