Why GM Must hold the Line

The United Auto Workers are on strike and seem to be dug in for the long haul. I personally believe they are hurting their own workers. The auto makers have moved many plants offshore and it is my belief a bad settlement will make them move even more. More and more auto workers will be out of work, and even more bitterness will ensue. The union wants guarentees of job security. Those of us who work in the real world know this is not possible. If my company loses customers and cannot pay me, I have no job security. This is a given in the work world. It needs to be accepted by union workers as well.

Unions in our present world exist for the purpose of forcing companies to pay above market wages and benefits at the end of a rhetorical gun. I have stated this before and believe it to be true. The argument from the union leaders is always the same, "The company has not bargained fairly". Bargaining fairly is always equivalent to giving the union everything they want. I ask a simple question, if all the workers were replaced, would qualified people be able to be hired and trained in a short time for less compensation? I believe this to be true. What that tells me is that they are paid above market wages and benefits currently, and are demanding more.

Union workers are this is all about fairness. The fact is this cannot be used as a measure because fairness is a relative term and measure. Is it fair that they make much more than other factory workers that are not in a union? I personally choose not to get into that because I for one believe it to be irrelevant. Every worker should get as much he or she can, but should be determined by the free market and not how well your negotiator can convince the other party that they will suffer.

The auto companies also have no point of sympathy with me. They have put themselves in a horrible competitive situation. They need to address this and now. The longer they put it off the more likely they will be to have horrible financial consequences. They have expensive long term commitments to present retirees. They must pay these and they must not try to avoid them. They must however make changes to future retirees. Morally they need to honor the people close to retirement. The younger workers are another matter. They must make changes and require them to contribute more to their own retirement and benefits. If that is not acceptable, they can make other employment decisions. The rest of the labor market contributes much more to their own retirement and health insurance. Auto workers should not be privileged beyond other workers. The sooner this happens the sooner we will begin to slow the loss of manufacturing jobs. (A corporate tax cut would also help, but that is a different piece).

The foreign auto companies do not face nearly the fixed expenses the American companies do. This is not just salaries, it is due to retirement, health benefits, resolution of grievances and litigation to name just a few. These costs prevent the companies from truly improving quality and making a competitive product.

The workers feel that they are singled out to give back with nothing from management. I agree with them. Unfortunately cutting executive compensation will not help significantly due to the vast size of the companies and probably hurt their ability to draw good executives. What can and should be done though, is to tie executive compensation closely to results. Companies have tried to do that in the past with some good results. The metrics have to be closely and carefully defined though. Just tying it to stock price or bottom line profit can result in short term gains that can produce long term disasters. It is a difficult thing they need to do, but essential.

This strike may be a long drawn out expensive endeavor. It may also save the American auto industry. It could also break it.