Posted by: mutantpoodle | September 22, 2010

It’s the Management…

Ezra Klein flagged this Jon Chait interview with Steven Rattner, who was the Obama Administration pojnt man on the auto industry bailout, and while there’s lots of good stuff there (i.e, you should click through) I fel the need, as a former member of the Teamsters and the International Brotherhood of Electrical Workers Local 1228, to flag this:

The unions were not the major reason why GM and Chrysler got into the position they got into. There are certainly issues around the labor situation, which I’ll discuss in a second, but to lay this all at the feet of the UAW, which I know some management teams have tried to do, is simply not fair. I’ll give you two data points. First, labor only accounts for only about 7 percent of the cost of a car. So, if you cut that to 6 percent, you’re going to make a bit more money, but this is not the biggest expense that an automaker has.

The second thing I would point out to you is that Ford was playing with exactly the same deck of cards. They had effectively the same UAW contract. They had effectively the same manufacturing footprint, up in the upper Midwest area. They had the same kind of dealer network issues that GM and Chrysler had. And yet while Ford certainly struggled for a while, they got through this and have been making good money for some time now.

So, what’s the difference between Ford and GM? I would argue the difference between Ford and GM is management. I don’t know what else to attribute it to. It’s one of the few cases where you actually have two examples that you can put side-by-side and it would be a very valid comparison.

Having said that, there’s no question that the UAW contract contained excesses that probably never made good sense for almost anybody but certainly didn’t make sense in the current environment. I mean, I am a strong believer in unions and in the role of unions in making sure that workers get their fair share of the pie. But what I don’t believe in are unions, union contracts, and union efforts to create inefficient work practices and feather-bedding. So the fact that at GM they had something like 300 job classifications for UAW workers, and nobody in one job classification could be asked to do even the most menial task of someone in another, is just inefficiencyand wasteful.

The fact that GM and Chrysler UAW workers got a whole series of holidays that the rest of us don’t getfor example, at GM, the entire Fourth of July weekis an example of inefficiency that I don’t think you can defend. The jobs bank, I don’t think you could defend.

So we did push hard on many of those things. And, as you suggested, my view was that the UAW and Ron Gettelfinger, in particular, were very professional people to deal with. They fought hard for their interests, they were not shy about their points of view, but they were straight shooters, it was professional, and they were good partners in a difficult bargain.

I would note that all of those ridiculous union work rules were agreed to by Big 3 management, and that they chose (in GM’s case) not to address the problem head on, but to underfund pension obligations to artificially inflate their profitability. Rattner again:

What was in worse shape was the management and the finances[GM] just had no handle over their finances or their financial needs. [So] they got themselves to a point where they just literally ran out of money. They had a very insular culture with no real accountability, no real consequences of failure. It was all very collegial, but a kind of ‘get-along-go-along’ culture. It was shocking beyond anything I would’ve guessed.

I, for one, am so glad that Richard Shelby, Bob Corker, and Mitch McConnel worked so hard to force wages down for the UAW – and have fought so hard for the rights of managers everywhere to pay themselves obscene salaries unrelated to performance.*

More on GM Management’s legacy here. Some thoughts on the importance of the labor movement – inspired by the 2007-8 writer’s strike – here.

*I know – government regulation of salaries is a genuinely bad idea.  But how about this: the lowest annualized salary at a company can’t be less than a fixed percentage (TBD)  of the highest paid employee’s salary and bonus averaged over the past three years? I like the idea that blatant self dealing would actually benefit more than a few people…

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