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Paul A. London

Paul A. London

Posted: March 21, 2011 12:39 PM

Talking Cars and Unions


In January 1958, I flew to Washington for the first time to see Walter Reuther, then president of the United Auto Workers (UAW) and a hero of mine, testify before the Senate Antitrust and Monopoly Subcommittee.

Reuther wanted the Big Three U.S. automakers to build small cars to compete with Volkswagen. He said he would take the companies' need to be competitive into consideration in future contract talks if they would build small cars. The top U.S. auto executives told Reuther in no uncertain terms that his suggestions were not worth considering.

The Big Three executives were as blind to what would happen a decade later in the U.S. auto market as the Wall Street bankers were to the risks of securities based on sub-prime mortgages during the 2000s. The auto executives, believing they were masters of the universe, made their companies vulnerable to higher gasoline prices and foreign competition by not building quality small cars in the US as Reuther had suggested: The price of their fecklessness -- thousands of lost jobs and bankrupt companies.

Bob King, the new president of the UAW is in a better position than Reuther was to find leaders in the car companies willing to work with him to prepare the U.S. industry for the future. Managements have been chastised and are far less obdurate than in the 1950s and 60s. Yet instead of trying to work with auto industry leaders who might want to do so, King is threatening to adopt an aggressive and old-fashioned "us vs. them" approach that could further weaken the industry. Put bluntly, his tough talk about organizing transplant automakers misses the point.

U.S. car sales in 2010 were still 30 percent lower than a few years ago, but King seems to ignore this depressing reality. Instead he wants to mount a push to unionize one or more of the dozen foreign automakers who now have plants in the United States. It's more than just a "push;" King has threatened to "pound on" these employers if he doesn't get his way. This would not create a single job in the industry.

King also surely knows that the foreign-owned plants he wants to unionize already have a reputation for treating their workers with respect. Most also are located in southern or border states where unions are especially weak and most local people would be against them.

Pounding on foreign car makers who provide well paying jobs in the US also would hurt the union's standing with the public just as unions have regained a measure of public support because of events in Madison and other Midwestern capitals. It would be much better for the UAW's reputation to be seen working with rather than against the companies to develop a joint strategy to rebuild the U.S. market.

I understand King's predicament. His union has lost hundreds of thousands of members and a lot of clout, and it has been blamed unfairly for the problems of the U.S. auto industry. I am sure that he would agree with me that it was the lack of vision of the American auto executives, not the union, that let transplant car makers like Mercedes, BMW, Volkswagen, Toyota, Honda and Nissan take half of the American market. After all auto makers in Germany and Japan are not taking market share here because they pay low wages.

King, however, should look past old management failures and the unjust laying of blame and think about how the union and the companies could cooperate to create a more competitive industry for the long term. Their biggest shared competitive problem is wildly fluctuating US gasoline prices - high one year, low the next. These fluctuations lead customers to demand small cars when prices are high and gas-guzzlers when they are low. Car makers in Europe and Japan don't face this problem as severely because government tax policies dampen fuel price fluctuations and unambiguously favor fuel-sipping cars.

If Walter Reuther were heading the UAW today, I believe he would be trying to work with all the companies to stabilize fuel prices rather than mounting a divisive attack on foreign automakers building cars in the US.

King cannot go back to the UAW's heyday when almost the entire industry was unionized, but he could work with the companies as Reuther wanted to in 1958 to make auto manufacturing in this country more competitive. That would help American workers more than a quixotic effort to unionize a few foreign-owned US auto plants.