Thoughts from the Highway of Life

For the past thirty years of my life I have been an industrial union worker, and for all that time and longer, I have been a gearhead. The last job I held before I started where I am now was with a Chrysler/Plymouth dealership nearby. While that dealer and the Plymouth marque are now both defunct, that year of my life was a rich learning experience.

To work at a place where your ongoing education of the changes in the new cars was a priority was a true gift. We were visited several times a year by the Chrysler factory representative, who would school us on procedures and special tools to be used on new models. The time before and after the formal class was more casual chatting, but it was a grand insight on the inner workings of the automotive world. These sessions sparked a thirst for car knowledge I have never quenched to this day.

When the opportunity came my way to be hired on to my present job, it was one of those things you cannot walk away from. At the young age of 20, the chance to sign on for a job that doubled my salary was a no-brainer, and even though I was laid off several times and recalled over the next four years, it still paid off in the long haul. Through all of those up and down times, I never stopped reading books and magazines dedicated to the automotive world.

Upon my being hired on my present job, I was offered admittance to the Teamsters Union, and I have been a member ever since. There have been many accusations levied against the union over the course of my career, not the least of which was association with organized crime. Anytime there are big dollars involved, corruption can take hold of people and carry them astray. This is true in many businesses as well as politics, which is why organized crime has never put all of its eggs into one basket. You can find many records of arrest and convictions of union officials over the years, but also in many other places as well.

On the whole, I do not believe that all unions are corrupt any more than I believe every police officer I see is on the take. What I do know is that through negotiations, the union has held the company in check and protected the jobs of many people. There have still been sacrifices made over the years,and we have assumed more of our benefit costs to keep business viable and competitive. In the end, we have seen how companies will treat their own without compassion, and replace older,more experienced workers with younger butt-kissers,so it isn’t just unions who shield less than stellar employees.

All told, after 30 plus years of union exposure and automotive immersion, I think these are topics I have a bit of knowledge about and can speak of with a level of conviction.

Back to the subject at hand, which would be the ongoing battle between the United Auto Workers (UAW) and the domestic auto giants. Glenn Beck made the statement that if unions were so great, why wasn’t Detroit like Disneyworld? The truth of the matter is that at one time it was exactly that, but one only has to take a ride along Lakeshore Drive to see that the money still hasn’t left town.
The five villages of Grosse Pointe are the most wealthy and highly valued real estate anywhere in the area. We recently visited Detroit on vacation and chatting with local residents proved very enlightening. The entire stretch of Lake St Clair in Grosse Pointe is bordered with gated parks and yacht clubs with no public access. Four of the villages of Grosse Pointe have ownership of these places, and even they don’t want members of the land locked portion of Grosse Pointe to intrude. The homes in this area would have to be called estates since “houses” would be far too much of an understatement. So “Disneyland” would depend mostly on your point of view.

I have traveled over much of the northeast and northern parts of the Midwest, and the number of abandoned industrial sites is shocking. There have been many types of businesses that owned them and I doubt they were all shut down by unions. Some were replaced in other areas, while others outlived their usefulness. Industrial plants have a lifespan like any other facility,perhaps more so since their equipment will become antiquated over time. This is compounded in the auto industry since model and platform changes can sometimes require retooling so immense that constructing a new location is more cost-effective,especially if the old plant is already over twenty years old.

Ford, General Motors and Chrysler all still have their headquarters here in Detroit, or at least one of its suburbs, and all three still operate multiple plants in the area. Ford has weathered the recent financial downturn without the benefit of bailout funds. Chrysler suffered at the hands of its breakup with Daimler-Benz, who had retooled several of its plants to build V8 powered,rear wheel drive vehicles as well as trucks and sport utilities. When Daimler-Benz pulled out of their partnership, they were suddenly saddled with massive debt and few new products in the pipeline. Cerberus Management then took over, and they were by their own admission,”not car people”. Cerberus set forward on a plan to liquidate as many asset funds as possible in an effort to buy out GMAC, or General Motors financial arm. Their first order of business was to dump any new products, which weren’t numerous to begin with, and basically wait for the company to fail. When the price of gas spiked and then the economy collapsed, it looked as though they might get their wish, but General Motors went south as well, a victim of its own poor planning.

GM has long claimed that high union wages were the bane of their business, but there is a deeper story. On the one hand,GM was incredibly top-heavy with layers of management,mostly as a result of the many divisions they encompassed. Over time the various divisions were competing against themselves instead of having distinct identities. They also made the same short-sighted mistake of pouring too many of their resources into trucks and SUVs,even going so far as to idle car plants and retool them for trucks. The major example of this was when they killed off the Caprice sedan, which they made large fleet sales to police and municipal facilities, and replaced it with Tahoe SUVs. GM’s effort to try and get police departments to buy Tahoes instead was ill-fated and most all of that business was lost to Ford.

I was given an industrial business mini-course on improved efficiency called Six-Sigma, in this course we identified things that could be eliminated or reduced to make our operation “leaner”. This course repeated over and over the benefits of a self-directed workforce, because while management was considered essential, it was also deemed “non-value added work”.
In the realm of automotive business, this equates to the fact that artists,designers, engineers and builders actually make the cars, while management decides what flies and what doesn’t. Time has proven their decisions are not always the right ones. In their defense, the same is true of any business, right down to the Mom and Pop operation where one bad decision can determine if they flourish or lock the doors.

In recent years GM claimed that rising medical costs for their union employees actually cost them more per car than sheet metal required for production. Negotiations followed and the UAW made concessions and ultimately took over responsibility for the workers pension fund. I have no doubt this was a huge issue since workers who have retired from my job have complained mightily about the rising cost of health insurance eating their pension checks.

Over ten years ago the UAW and the domestic auto makers lobbied Congress for tariffs on import cars that were flooding the marketplace. This seemed only fair since our cars were heavily taxed when shipped overseas, the resulting law made provision that if a foreign automaker wanted to sell cars here without tariff, then the cars must be at least assembled in the United States.
Today, Honda,Toyota,Subaru,Hyundai,BMW and Mercedes-Benz all have at least one plant operating in the United States, with Kia and VW in process to build.

The North American Free Trade Agreement (NAFTA) allowed goods to cross both the Canadian and Mexican borders without import tariff,and the domestic automakers jumped on this with both feet. Today there are almost as many “domestic” cars built in Canada and Mexico than in the US, while fully half of the foreign fleets are built here.

While its true that plants in either Canada or Mexico don’t have to deal with large health care costs for employees, how is it the foreign automakers are flourishing under domestic conditions? Some will instantly say it is because they are non-union; but why have they stayed that way? It certainly isn’t because the UAW hasn’t approached them, its more about the reasons the workers have rejected them.

UAW employees contracted to GM can earn a top pay of $73 an hour, which includes the cost of benefits, while the Honda USA workers have top pay of $65 an hour. This may seem like a sizable amount when you consider the number of employees involved, but then Honda pays its employees on average $6-8k bonuses each year, which puts their pay higher than the GM workers. Is it any wonder they don’t want the UAW on board?

Now in fairness, none of the foreign plants have been up and running long enough to have employee turnover to retirement like GM is experiencing, but now that the UAW has assumed control of that it should be on off the table issue. There is another issue of larger proportion to be addressed.

General Motors average Executive pay is 17 million dollars, NOT just the CEO, while by contrast Honda’s entire Executive board made almost 22 million dollars COMBINED. This is also part of the reason their plant workers get bonuses,everyone gets bonus money for making goals. These scale up per level, but the entire company benefits from a job well done. In turn, everyone makes sacrifices when things get tight. Toyota had to idle its Tundra plant for 14 weeks for inventory control,and it was done so without revolt,especially since they laid no one off. Instead they are using the time for training and skills improvement. So is it any wonder their workers feel no need for union support? This is a far cry from shuttering entire facilities and laying off thousands. At least the foreign automakers are making the effort to live and die as a team by putting the company first, and doing so by example. To compound this disparity, domestic builders break their exec salaries out of their cost equation while the foreign companies include their in. Shouldn’t this be giving the domestic auto companies an edge? Not really, since the compensation payout to execs still takes funds away from development of future technologies and products.

The actions of Honda and Toyota not only invoke a sense of unity and company loyalty, but provides more liquid cash flow for developing new products and not being at the mercy of the quarterly report. GM scoffed at Toyota when they put the Prius into production, saying they would wind up eating the car and it would sink like a rock. Lo and behold ten years later, not only has Prius production more than doubled, but it has become the household name for “hybrid/high mileage car”. Despite an 11 day shutdown in Japan, Toyota still has plans to move forward with construction of a plant to build Prius hybrids here in the United States. Toyota looked farther forward than what profited big in the short-term and never lost their world vision for the sake of the American market.

In retrospect is it any surprise the UAW would fight with GM over wages and benefits when their business practice is so far removed from their competition? The domestic automakers have been the recipient of numerous breaks from the Government, NAFTA, the stalling of CAFE standards, the exemption of trucks from CAFE, and yet they still cannot compete with domestic facilities who are making cars at higher standards. Foreign automakers who are actually paying their workers more overall.

I submit that “Disneyworld” is still in Detroit, and it resides in the boardrooms of those who made the decisions to run the ship aground for short-term profit. I personally think it takes a special kind of arrogance to knock off a 17 million dollar paycheck and then tell the workers who build your products they get too much. Your competitors are proving the flaws in your thinking right in your own backyard. Where did this whole twisted mentality come from that makes an executive believe they are worth that kind of money? While it might be true it took many years to rise to those positions, your counterparts at Honda and Toyota have as well. If your demands to your workers are to compete with them they why can’t you? If your company made big profits from huge sales, did you think you did that all on your own? Evidently someone must think so since CEO pay in the United States has risen 400% in the past ten years,far outstretching virtually any other country in the world.

In my opinion, this is the classic case of the American abuse of capitalism, which is pretty sad when the foreign car makers are playing the same game and showing the domestics how its done. I realize there are many details to this argument which vary from plant to plant per company. There are also disparities in multi-craft work between UAW and non-union, but I believe that people will bind together for a common cause if the terms are fair…and that has to come from both sides of the table.

This isn’t “Disneyworld” or “Fantasy Island”, this is the U.S.A. and we should be doing it better, we should be leading and setting the example, not getting our butts kicked at our own game.