Smart Ways to a Bailout -- Step 1: Stop Demonizing the UAW

If you've been following mainstream news stories or conservative Republicans, you've probably heard claims about those inefficient UAW members supposedly making $70 an hour, including benefits, making unions the prime culprit in the failures of the Big 3 automakers.

But it's all a big lie, swallowed whole by union-bashing pundits even in The New York Times. One example of the lie: the $70 figure comes in part from measuring all health benefits and pensions paid to 450,000 UAW retirees and their families. In truth, as economist Mark Brenner, the co-director of Labor Notes, points out in an insightful op-ed and in an interview with me:

The only place where pundits, politicians and Big Three executives seem to agree is that autoworkers will have to make do with less or kiss their jobs goodbye. But imposing more pain on rank-and-file autoworkers can't solve Detroit's problems. Automakers have already wrung billions in concessions out of the United Autoworkers over the last three years, and even if union workers agreed to work for free it would only shave 5 percent off the cost of their cars.

Let's repeat that point: if the autoworkers worked for no salary at all, it would cut just 5 percent off the cost of their cars. That's a stastical nugget Brenner found by burrowing into the latest economic census data and matching it with manufacters' costs. Before the UAW made billions of dollars in concessions that lowered UAW's labor costs in 2007, the union cited similar data in answering this question:

How much are labor costs in relation to the total price of a new vehicle?

The total labor cost of a new vehicle produced in the United States is about $2,400, which includes direct, indirect and salaried labor for engines, stamping and assembly at the automakers' plants.

This represents 8.4 percent of the typical $28,451 price of a new vehicle in 2006. The vast majority of the costs of producing a vehicle and transporting it to a dealership and preparing it for sale - including design, engineering, marketing, raw materials, executive compensation and other costs - are not related to direct or indirect manufacturing labor.

Now, for UAW workers at the Big Three companies, the percentage of total car costs accounted for by wages is down to as little as five percent.

Armed with facts like those, last week, Jonathan Cohn of the New Republic and Brenner offered a clear-eyed assessment of what's gone wrong in the auto industry and what needs to be done on the radio show I co-host, the "D'Antoni and Levine Show," in part by challenging the myths and lies aimed at the UAW.

The smears and distortions continued this past Sunday. On Meet the Press, Chuck Todd falsely claimed (at the 4:40 minute mark) that the UAW should have been on Capitol Hill this past week, too. In fact, UAW's president Ron Gettlefinger testified at both panels with the auto executives. That's a small example of the distortions and outright lies that have spread about the union this past week, paving the way for undermining worker's rights by blocking the proposed Employee Free Choice Act that promotes a fair playing field for union organizing. (One key myth: workers aren't allowed to cast a secret ballot under the "card-check" proposal. But they are free to choose to having a secret-ballot election, rather than a majority vote card-check, if they want. But the current system is rigged against workers.)

Of course, most of the Big Three leadership, especially at GM, deserves to be fired. Paul Ingrasia of The Wall Street Journal, a Pulitzer Prize-winner for covering the auto industry, is skeptical about a bailout, but he points out:

Let's assume that the powers in Washington -- the Bush team now, the Obama team soon -- deem GM too big to let fail. If so, it's also too big to be entrusted to the same people who have led it to its current, perilous state, and who are too tied to the past to create a different future.

In return for any direct government aid, the board and the management should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver -- someone hard-nosed and nonpolitical -- should have broad power to revamp GM with a viable business plan and return it to a private operation as soon as possible.

If we let the industry fail, as many as three million workers with direct and indirect ties to the auto industry could lose their jobs.

But before the auto industry gets a bail-out, we have to clearly look at the realities underlying the current crisis, and, today, after billions of dollars in concessions, it's simply wrong to blame the UAW for the auto industry's ills. In the smartest new article on the auto industry, the savvy Jonathan Cohn points out:

But what's missing in the tsk-tsk editorials is any recognition that the culture of Detroit has been changing, however belatedly, starting with its labor relations. Ford led the way years ago by reaching site-specific "competitive operating agreements" with locals at different plants, rather than sticking to one national agreement, thereby enabling it loosen work rules and engage in the sort of collaborative quality management on which industry leader Toyota made its reputation. Then, last year, the UAW reached a breakthrough agreement in which it granted the companies similar flexibility, agreed to a two-tier wage structure for new hires, and set up a separate trust fund to finance future retiree health benefits. The companies would provide the initial money for this trust, but, henceforth, the unions would manage it--thereby taking off the companies' books a tremendous burden that had, on its own, accounted for about half the gap in compensation between unionized workers for the Big Three and non-unionized workers for foreign-owned automakers. "I think they've shown unprecedented ability to change and transform the union," says Kristin Dziczek, who directs CAR's Automotive Labor and Education program. "They understand what is at stake."

So far, the results are promising. According to the most recent Harbour Report, the benchmark guide for manufacturing prowess, Chrysler's factories now match Toyota's for the most productive, while both Ford's and GM's are improving. (A Toledo Jeep factory was actually named the nation's most efficient.) Consumer Reports now says Ford's reliability is approaching that of perennial leaders Honda and Toyota, whose ratings actually slipped last year. In late 2010, GM will introduce the Chevrolet Volt, a plug-in hybrid that can go 40 miles without gas, and the Chevrolet Cruze, a compact that relies solely on gas but that gets 45 miles to the gallon. The Volt would represent a rare leap ahead of the Japanese, who never embraced plug-in technology with the same enthusiasm. It's also typical of the better cars that observers say Detroit has in store. "There's a lot of accumulated negativity about these companies out there," says Wharton's John Paul MacDuffie, who directs the International Motor Vehicle Program. "U.S. consumers gave the Big Three the benefit of the doubt for a long time before turning away from them, and now their reputation is worse than their actual performance and progress toward needed reforms."

Brenner of Labor Notes believes the union has already given away too much in concessions, noting that all newly hired union auto workers can only be paid $14 an hour. "Can you have a middle-class life, pay for college and buy a house with a $14 an hour wage?" Brenner argues. "I don't think so."

In fact, it seems that American automakers are on their way to matching or beating labor costs of Japanese auto plants in Southern non-union states, such as Alabama.

Actually, as both Brenner and Cohn argue, this current crisis raises the stakes for moving forward on pursuing alternative enegry and ending the dependence on oil -- as well as providing national health insurance.

Cohn puts it all in a broader context:

But, if the government demands that the Big Three and its workers live up to more obligations, the government--which is to say, the taxpaying public--must live up to some obligations of its own. Companies like Honda operate out of countries that made health and retirement benefits a national responsibility. And the perennially high price of gasoline, a product of high gas taxes in virtually all other highly developed countries, has ensured a steady market for their smaller, more fuel-efficient vehicles. There's no reason not to treat U.S. car companies, and car owners, the same way.

For now, that would mean government would assume some health and pension obligations (which it would have to do in a bankruptcy anyway, though its Pension Benefit Guaranty Corporation) while subsidizing the purchase of fuel-efficient cars (something it is already planning to do, thanks to recent tax changes). But the debate over a Detroit bailout should begin a larger political conversation, one that sprawls beyond the Midwest and the intellectual confines of lean production techniques and workers' legacy costs. Whatever mistakes the Big Three and the UAW have made, their struggles are a pretty good indicator of why the government--not employers--should be responsible for providing health insurance and why, without broader action to fight climate change, improving fuel efficiency will be a struggle. Naturally, the Big Three should enthusiastically promote these reforms, something they haven't done in the past.

A good place to start on all this to stop blaming today's United Auto Workers for being a primary cause of the auto industry's crisis.

UPDATE:Media Matters columnist Eric Boehlert weighs in today with an excellent column citing countless examples of how this $70-an-hour myth is beling peddled -- and its implications. He writes:

But having the media echo conservative misinformation and bandy about urban-myth salary figures about allegedly high-on-the-hog GM workers does not constitute a careful review of the facts.

Question: Is the press just being sloppy on this issue of supposedly pampered autoworkers, or are there other elements in play? Because honestly, I've had trouble escaping the not-very-subtle elitist, get-a-load-of-this tone that has run through the media's misinformation on the topic; i.e., "These autoworkers get paid that?!"

Answer: No, they don't, so please stop reporting it. (And why has the press been so reticent to note that Big Three autoworkers recently made significant concessions to management?)

And it's funny, because I don't remember hearing much coverage in the press about AIG workers' six- and seven-figure salaries when the U.S. government announced it was bailing out the insurance giant. And I haven't seen or heard a single press reference to the annual salaries pocketed by Citigroup employees, even though the government has moved in quickly to bail the banking giant out of a hole its executives dug.

As Rep. Barney Frank (D-MA) pointed out during congressional hearings last week, "There is apparently a cultural condition that's more ready to accept aid to a white-collar industry than the blue-collar industry, and that has to be confronted."

That cultural condition seems to extend to, and be embraced by, today's white-collar press corps.

Make no mistake: The $70-an-hour claim represents a classic case of conservative misinformation. It's also a very dangerous one. The falsehood about autoworkers is being spread at a crucial time, when a make-or-break public debate is taking place, a debate that could affect millions of American workers.

Read More:
Should the Government Bail Out the Big Three U.S. Automakers? HuffPost Bloggers Weigh In

Comments

[arvay]

One suggestion for increasing auto industry efficiency: an executive order that nullifies all the state laws that prevent the automakers from owning dealerships. The result? An integrated industry that provides uniform standards and takes advantage of economies of scale to drive down costs.

[LeftRight]

So you would create an auto industry vertically integrated like the oil industry? How's THAT one working out for ya?

[arvay]

Collapses cost, makes the industry much more cost efficient. Works for the oil guys, check their profits. Common supplier conditions, software, ability to negotiate big discounts with suppliers etc.

This is not for the already-dead auto industry. This is for our partially government-owned business. If we have a correctly-managed, fuel-efficient auto industry, that will be a taxpayer asset. We'll be paying for the revitalization, jobs, etc. -- all in that vertically integrated industry.

[Articulator]

In 1979 Chrysler got a bailout and paid it back in 5 years with interest. Probably a lot of taxable income since then too.

[MagisterLudi]

Good point, and they didn't destroy the union in the process. In today's anti-labor climate people who delude themselves to be American progressives would be considered hidebound right wingers only some thirty years ago.

[arvay]

Ha, we agree on something!

The excesses of some unions have never caused the kind of catastrophe we are now enduring. That's the work of unfettered YuppieMonster, psychopathic "geniuses" given carte blanche by the most incompetent administration in our history.

"Labor" --- whatever that means in the Internet age -- needs to have some real economic clout to oppose the cowboys now in charge. And you are correct that anyone who looks at "labor" as some excessive cost needs to sign up for the Republican party, certainly to be nailed by real progressives. First step would be new law making it easy to organize a union and severely penalizing anti-union retaliation and other repressive actions.

[MagisterLudi]

The struggle does exist, whatever the apologists of capital may say to the contrary. It will exist so long as a reduction of wages remains the safest and readiest means of raising profits...

The very existence of Trades Unions is proof sufficient of the fact; if they are not made to fight against the encroachments of capital what are they made for?

No milksop words can hide the ugly fact that present society is mainly divided into two great antagonistic classes: capitalists, the owners of all the means for the employment and working men.

Each class tries to get as large a share as possible; and it is the most curious aspect of this struggle that the working class, while fighting to obtain a share only of its own produce, is often enough accused of actually robbing the capitalist!

K. Marx, June 4, 1881

[MagisterLudi]

"During the phases of sinking market prices and the phases of crisis and stagnation, the working man, if not thrown out of employment altogether, is sure to have his wages lowered. Not to be defrauded, he must, even with such a fall of market prices, debate with the capitalist in what proportional degree a fall of wages has become necessary. If, during the phases of prosperity, when extra profits are made, he did not battle for a rise of wages, he would, taking the average of one industrial cycle, not even receive his average wages, or the value of his labour."
K> Marx.

[MagisterLudi]

German car industry found a way to work their auto workers union, part of IG Metall and is relatively is strong and healthy.
Maybe Perhpaps Americans can stop bashing the Unions and start encouraging unionization.

Bottom line: unions help its members maintain the line on wages against blood sucking management.

I support my union, and so should you!
Hell, I even support my Musicians Union Local 47, and that's sayin' somethin'

[Catarry]

In fact, German auto workers have a presence on the corporate boards of their industry...and wouldn't that be a progressive development here in the USA? It's one thing to organize and be able to confront employers across a bargaining table during contract negotiations and in union/management meetings. It's another thing entirely to be part of the group which sets policy for the corporation, and it's long past time that American workers woke up to the importance of claiming a seat on the board.

[BuckeyeGal]

Dumore's and Intrepid's comments are very interesting:
http://www.topix.com/forum/com/f/TB2BSIGN2KDEDH43J

Still think $14 - $28 an hour is too much?

[Rule Of Law]

Detroit makes cars no one wants to buy. Those who do buy them use them as anchors or doorstops within 5 years. The top management has gotten rich off sweetheart tax and support deals the average American worker has funded. The Big 3 have made no real effort to become competitive with the world's best and now are paying for it. Period.

Workers, union or not, don't design cars, make corporate policy or account for the lion's share of the cost of a new car. Those things all come down from the very TOP! Anything else is just fascistic, corporatist, new world order, K-rap.

[BuckeyeGal]

Sez you.
I own -- and drive a 99 Ford.
Hubby drives a 97 Ford.
Son drives a 96 Mercury.

Plus, I see lots of American made cars on the roads I drive.

Ekewu.

[therealredstateblues]

From a recent article by Robert Reich

"So why save Citi and not GM? It's not at all clear. In fact, there may be more reason to do the reverse. GM has a far greater impact on jobs and communities. Add parts suppliers and their employees, and the number of middle-class and blue-collar jobs dependent on GM is many multiples that of Citi. And the potential social costs of GM's demise, or even major shrinkage, is much larger than Citi's -- including everything from unemployment insurance to lost tax revenues to families suddenly without health insurance to entire communities whose infrastructure and housing may become nearly worthless. .......

Nonetheless, Citi is about to be bailed out while GM is allowed to languish. That's because Wall Street's self-serving view of the unique role of financial institutions is mirrored in the two agencies that run the American economy -- the Treasury and the Fed. Their job, as they see it, is to keep the financial economy "sound," by which they mean keeping Wall Street's own investors and creditors reasonably happy.

....... Wall Street and another $500 to $600 billion of subsidized loans to the Street from the Fed -- bailing out the investors and creditors of every major bank, including , any moment, Citi -- only to discover, at the end of this frantic and unbelievably expensive exercise, that American jobs and communities are more endangered than they were at the start.

[Rule Of Law]

Hey Red, when Goldman-Sachs owns GM then we'll see the mother of all bailouts. LOL

[therealredstateblues]

Indeed, indeed

[Michale32086]

Another interesting piece of information, this directly from the UAW

"According to UAW, average straight-time pay for assembly workers is $27.81 per hour and $32.32 per hour for skilled trades in 2006."

That seems a FAR cry from the $14 an hour that people claim here..

Michale.....

[therealredstateblues]

But a heckuva lot less than the $70 number you throw around

[Michale32086]

That's just wages..

The benefits package adds on another 30+ dollars an hour, which does approach the $70 per hour that was posted earlier by legalclubs

Michale......

[BuckeyeGal]

It is the TWO-TIER wage system that the UAW agreed to last contract.


$14 for NEW hires.


The workers hired in BEFORE the last contract keep their same wages, $28.


OF COURSE, skilled tradesmen get higher pay.



If you ever worked in an auto plant, you would know this.



But as you just spout R talking points, you are revealing your ignorance AND your anti-union BIAS.

[Michale32086]

Interesting article

http://www.freep.com/apps/pbcs.dll/article?AID=/20070926/BUSINESS01/70926007/1019/BUSINESS06&theme=AUTOTALKS072007

One part really stood out..

" is a plan to shift oversight of retiree health-care benefits to an independent health-care trust – known as a voluntary employee beneficiary association, or VEBA.

The trust is expected to remove more than $50 billion in long-term obligations from GM's books. "

Iddn't it interesting?

$50 BILLION Dollars saved back in 2007...

And guess what?? It didn't help GM...

So, who's to say that ANOTHER 50 billion is going to help??

Michale.....

[Michale32086]

@LiberalBuzz

}}}}
I see no bonuses from the BAILOUT, just what they contract for as part of the union agreement. DO try to stop lying.
{{{{

Well, no duh...

Because they haven't GOT the handout yet...

I say again....

DUH....

Michale......

[LeftRight]

That's a DELIBERATE misinterpretation Michale! You KNOW that he meant that there WOULD BE NO bonuses from the bailout for the UAW workers!

[Michale32086]

@therealre­dstateblue­s

}}}}}
And the democrats OWE labor for their recent gains presidentially and congressionally, labor contributed big $$$ in order for democrats to redeem themselves for selling labor out with nafta. it would be disastrous to their careers if they are too seen to be favoring wall street over mainstreet and turning their backs once again on labor
{{{{{

Now THIS is probably the most factual statement you have made in all of this..

THAT is why you feel that the bailout should go thru..

Labor is ENTITLED to this bailout because they help elect Democrats.

Who cares if it's good for the country or not.

Labor is OWED and that's reason enough..

Hopefully, Obama won't give in to such extortion...

It's assured that Bush won't...

How long can the auto industry hold it's breath?? 2 months??

Michale....

[therealredstateblues]

It is a political reality

Labor helped Obama big time

Obama is a smart guy, and knows his fortunes will not be good if turns his back on labor like Clinton did

And in todays speech he pretty much promised to help big auto

[Michale32086]

@LiberalBuzz

}}}}}
PURE speculation on your part and part of the ANTI union effort in full swing.

Your figures are easily destroyed.
{{{{{{

And yet... No one has...

Why is that???

Michale......

[LiberalBuzz]

It amazes me at all the Anti Union rhetoric from the usual talking points tro lls.

They use the typical rightwing anti union talking points of how America would have been so much better had there never been unions because we ALL know just how honest and equality minded CEO's and managment are.

They use typical logical fallacies, mis-information and the usual lies.

Unions created the Middle Class of America and are responsible almost single handedly making America what it was at it's peak.

The anti union republicans are the ones who gave tax breaks to corporations to take jobs OUT of America all in the continued efforts to get rid of all unions in America.

The anti union people have long lied about not just the UAW but all unions. The GOP and corporate America long for the days of yore when they controlled the company with an iron fist along with control of the police to back their anti worker policies.

They long for the days when there were NO health benefits, NO safety regs to get in the way of profits, NO labor laws, NO age laws so you could practically buy children to work for pennies a day. THEY LONG FOR THOSE DAYS with an ache that even a broken heart can't imagine.

They long for the days when there was the Ultra Rich Ruling Class, a small management class The working poor and the poor. To the anti union people THAT is Utopia.

[Michale32086]

No, I long for the day when a company can stand on it's own two feet without whining and begging for handouts from the American people..

But, I guess with your precious auto industry, that is just too much to ask for..

Michale.....

[therealredstateblues]

Auto industry asking for a LOAN of 3.5% of the amount that Wall Street got

And less than 10% of the handout Citbank got over the weekend

[Michale32086]

@therealre­dstateblue­s

}}}}
No one will buy a car from nor will any suppliers make parts for a bankrupt company
{{{{

Then I guess it behooves the CEOs, the Management and the Union Leaders to make some very real and very drastic changes in their mindset, now doesn't it??

Because, if they don't, then bankruptcy will be their only option..

Michale......

[therealredstateblues]

And that is what they are trying to borrow the working capital to do


Look your circular arguments are tiresome going no where

the fact is no politician wants to go down as the one that killed the US auto industry (excpet maybe Bush and Paulson). And the democrats OWE labor for their recent gains presidentially and congressionally, labor contributed big $$$ in order for democrats to redeem themselves for selling labor out with nafta. it would be disastrous to their careers if they are too seen to be favoring wall street over mainstreet and turning their backs once again on labor