Will It Be Government Motors 2.0?
As the UAW strikes once again, it's a reminder of cronyist bailouts in the past.
In business, companies fashion their model of operations to meet the demands of customers, whether providing a service or product. Well, that’s the case unless you’re unionized. Then the company has to meet the demands of its employees rather than prioritize said good or service.
Too broad a statement, you say?
Let’s look at the General Motors strike of 49,000 workers that commenced last week and continues into this one. It’s costing the auto manufacturer up to $100 million daily in the first national GM strike since 2007. Interesting, that strike 12 years ago was just before the American taxpayers had not only bailed out failing banks that packaged risky debt and collapsed (due to Democrat policies) but also got to fulfill the request of the auto industry by providing over $80 billion to rescue both General Motors and Chrysler. Let’s hope we’re not in for another taxpayer-funded stunt.
First, the renegotiations of a four-year contract with the United Auto Workers (UAW) are not just limited to GM. Fiat Chrysler and Ford are also in the same type of talks, but, as The Wall Street Journal notes, the strike was most profitable to begin with GM to set the bar for the others to follow as a model. Union workers are striking for higher pay (the average hourly employee makes $90,000), better healthcare benefits (workers currently pay only 3% of insurance costs), and greater job security with a demand to halt use of any temporary workers whose pay and benefits are substantially less expensive.
Not only have these union workers been making good money with very little burden of paying their own health-insurance premiums, but just last year GM made $11 billion in profit and gave every worker a bonus of over $10,000.
But, clearly, according to the union bosses, the reason GM exists is to employ individuals, not offer a quality product or service in demand by the masses.
Another point to note in the GM strike is that it’s already in its eighth day, as of this writing. The 2007 strike was just a day and a half in duration. In the words of workers who actually walked the picket line years ago, “the other one was a political move.” One worker with a 19-year tenure who is among the striking workers is losing pay with the hope of getting only $250 per week — paid from UAW strike coffers reportedly loaded with about $750 million.
But a key fact not readily available during the reporting of the strike is the ongoing investigations of UAW corruption as it hemorrhages members. For four years, federal investigators, including the FBI, have been seizing records, conducting raids, and charging union bosses with crimes involving embezzlement, money laundering, illegal kickbacks, and tax fraud. Prosecutions and sentencing involving felony convictions have already impacted union officials tied to GM, Fiat Chrysler, and Ford. One raid even yielded $30,000 in cash found in the home of a union leader who, among others, used union money — worker dues — to purchase luxury items for personal use.
So, is the purpose of the union strike at GM to actually improve the lives of workers, or is it a show of force after a year where UAW membership plunged by 35,000 members despite an increase in employment by 20,000 in the auto industry? Is this strike a diversion away from the other headlines of federal convictions of Big Labor bosses who are supposed to be fighting for the line worker but are being sent to federal prison for essentially stealing workers’ dues?
Don’t be fooled. This strike will continue to create an impact on the lives of hard-working Americans who want to provide for their families.
One lesson, among many, of this GM strike is to see that companies must adapt to the changing needs and desires of their customers. Companies that fail to do so struggle and even fail. Currently, the U.S. market for autos is changing. The demand for SUVs and crossovers is making the manufacturing of sedans minimal. The move to greater technology in vehicles is increasing costs of production and infrastructure investments to remain current. These financial pressures on GM and all auto companies are creating disruption in the overall market.
GM is proposing an 18% reduction in its workforce to deal with the changing market and costs. This involves both blue-collar and executive employees with about 25% of the current leadership team. Yet unions demand that workers be employed and compensated at a fixed, contracted rate with very robust benefits, regardless of any need for a company to address changing consumer demands.
Once upon a time, unions were necessary. The working conditions and compensation were equally brutal at the turn of the 19th century. Today, unions largely serve their bosses and tie the hands of companies to the point of harming their ability to compete.
Workers deserve good pay and benefits. But if a company cannot respond to its changing customer needs, regulatory burden, and advancement of technology, it will close. Think Blockbuster, Toys R Us, Kodak, Polaroid, and others.
Oh, let’s not forget, even after the massive bailout, GM filed bankruptcy in 2009. It was the largest industrial bankruptcy in history. But, according to the UAW, there’s no need to adapt a business model in a time when car sales are declining with consumer tastes changing.
Will it be Government Motors 2.0?