Monday, December 8, 2008

It's the Unions, Stupid!

Democratic strategist James Carville once said "it's the economy, stupid," when describing the primary factor in people voting the way they do. Well, when thinking of why GM, Ford, and Chrysler are all failing miserably and are begging for a bailout, it might be safe to say "it's the unions, stupid." The United Autoworkers (UAW) have essentially held the three auto companies hostage for years and now it's come time to pay the piper. The UAW, according to their own website, place enormous costs for auto companies on CEO salaries. Well, the fact is, the UAW employees do earn a higher wage than their competitors in companies such as Honda and Toyota. Ever notice why Japanese car companies build plants outside of Detroit or even the state of Michigan? It's to keep out the UAW. That cuts costs and ensures that Japanese cars are built with better quality than American cars. The UAW asserts that their wages and costs are not the reason for financial troubles at the "Big Three," but the truth is, their costs impact the company overall. That forces the companies to build cars at a lower standard than the Japanese. Thus, Americans buy more Japanese cars, sending less revenue to the American companies. This forces the companies to cuts raises, or benefits, etc. The UAW then negotiates a tougher contract for wages, benefits, etc. that aren't even there and therefore places the car companies in an even tighter position financially.
This is simple economics and anyone who's taken an economics course will tell you that unions drive up company costs, plain and simple. Add into the mix the UAW's horrendous "JOBS Bank" and you've got a recipe for bankruptcy. The JOBS Bank is simply a benefit for those UAW workers who have been laid off of work. They get paid their salaries for being laid off. Not one time.....not just two. They get paid regularly......and they get paid to not have a job. This costs the company dearly needed revenue. Ron Gettelfinger, UAW representative, may put on a sad face to the public, and continually lay blame to the CEOs and costs of the parts for vehicles, but he needs to take some responsibility for the union's actions. Look at what he says (or fails to address about) the JOBS Bank:
“The jobs bank has become a sound bite that people use to beat us up,” Mr. Gettelfinger said, who will join the auto executives at Congressional hearings starting Thursday. “It’s become a lightning rod that takes away the focus from what the real issue is, and the real issue is the backbone of America.”

As you see, he never addresses then issue. He deflects and places the problem on Washington's doorstep. The unions are to blame for a large piece of the financial struggles. The sooner they accept that and work within a REALISTIC framework, the better the Big Three will be. They will be able to cut some costs for labor and re-invest that money into research and development, or manufacturing costs, or parts, to ensure a better vehicle, reasonably priced that Americans would like to buy. Otherwise the unions will ironically drive their members out of employment and ensure that Japan dominates the auto industry. And that's something that even James Carville would have to marvel at.

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