26 June 2005

For an article about the troubles of General Motors (GM) two weeks ago, The Economist ran a picture that showed the GM logo and the UAW (United Auto Workers) logo on each side of the the car company’s Lansing Grand River plant’s sign. The article itself was the usual work – a good analysis of the challenges faced by GM, its productivity issues, and its efforts to renegotiate union contracts, etc. – but that single photo caught my eye, and in many ways seems to sum up one part of GM’s problems, as well as those of Ford and Chrysler. Put simply: the United Auto Workers union does not co-own GM’s manufacturing plant. So why on earth is their name and logo on the sign?

Much has been written of GM’s problems, from the rising costs of their health care and pension programs to the day-to-day inability to tweak their labor force for maximum efficiency and competitiveness. Most of these problems are the result of agreements with the UAW, which set pay scales, determine benefits for current and retired workers, and even baseline employment agreements. Partly as a result of these hard-to-shake financial obligations, GM’s very existence may be threatened, as its bond rating dips to “junk” status, sales decline, profits on those cars that are sold decrease, and the more flexible competition grows stronger.

That one photo, with the two logos on GM’s plant, seems indicative of the over-reaching of the UAW and of the long-term impact of this out-sized union strength on American manufacturing. No wonder unions in the United States are in such a state of decline: by locking GM (and, for the most part, the other two American car companies) into such expensive contracts, the UAW no doubt believes it is doing what is best for its member-workers – and perhaps this is true. Yet if the company (or any other of its size) collapses as a result of having its hands tied by the unions, the benefits of these agreements disappear, as do the jobs and the long-term stability of the company and the community on which it depends. It may be an unpleasant reality for an already depressed, blue-collar area of Michigan, to think that what was wrought at the bargaining table – hard-won jobs for hard-working Americans – has helped put GM at a competitive disadvantage, but this is most certainly true. The idea that the Lansing Grand River plant should be co-branded with the union’s logo is just a small, external indicator of how far GM is from operational independence.

Of course, the UAW is not entirely to blame for GM’s troubles. This is a company that has worked aggressively for nearly 40 years to disprove every truth about the automobile industry – and it shows. GM has held together, producing cars under more than six different marques (Chevy, Buick, Pontiac, Oldsmobile, Cadillac, and GMC, plus Saturn more recently) yet the difference in quality and style between these cars was, overall, negligible; only recently did GM decide to phase out one and perhaps two of these non-revenue-producing, copy-cat brands. Meanwhile, the competition worked harder to make its various marques more distinct. When smaller, fuel-efficient foreign cars were gaining ground, in part because of a global oil crisis, GM waited until the last possible moment to bring out a somewhat smaller, more fuel-efficient cars – and then did so with the underwhelming Chevette (1976) and Citation (1980).

Over and over again, throughout the decades, as the reliability of foreign cars improved while low prices helped create demand, GM held out, apparently believing that for the average guy, buying American would trump quality any day. One wonders what value all those tough union contracts offered, if the well-paid American workers couldn’t produce qualitatively-competitive cars. And in the realm of the entirely-subjective, GM’s designs have also been weak since the 1970s, with bland cars offering few true automotive innovations or new styles, cars that drive – with great consistency – quite badly.[1] This is to say nothing of the history of rancor between the union and GM, which surely flavors any current dialogue with a distinct odor of distrust. No wonder Toyota is close to overtaking GM as the world’s largest car maker.

Still, The Economist’s photo remains emblematic of much of what is wrong with American manufacturing (and other industries) beyond GM, expressing a sense of co-ownership that is untrue in both literal and figurative senses. The UAW does not literally own the plant; it may even take more dollars away than the plant actually generates. Figuratively, the union’s actions are also not those of a co-owner, but rather of an exclusively self-interested party: expensive wages and benefits driven in part by powerful unions hamstring the companies whose employees are unionized, forcing ineffective business compromises elsewhere. The workers benefit, of course, and that’s good; the cost of living in the U.S. can be high, so strong wages help; and one could argue that, therefore, the broader economy also benefits, since well-paid workers have more money to spend in other parts of the economic chain. However, it is this sense of over-reaching that is problematic and most troublesome: the inflexibility that GM must deal with in its union contracts, even in the face of massive corporate damage – damage that changes to those same contracts might mitigate or alleviate. It is no wonder that Wal-Mart is so aggressively fighting attempts to unionize its workers: when it looks back at how the American car and steel industries have been battered over the years by the organizations created to protect the American worker.

Of course, one might also expect Wal-Mart to fend off unions by unilaterally responding, by improving pay and benefits and undercutting the motivation of union organizers and sympathizers. Perhaps that will happen. Undoubtedly, unions are valuable tools for workers: they can help protect against labor abuse, hazardous work conditions, and ensure that employees receive a more deserving share of corporate profits. To function effectively, the union and the companies should be mutually dependent, acting as though they have as much common interest as opposing aims – something that seems entirely lacking in the GM situation. Maybe the over-reaching of unions is normal, a typical by-product of a human drive for power that is the mirror image of the corporations with which the unions must negotiate. Similarly, the decline of American manufacturing may be just an inevitable by-product of globalization, of the desire for cheaper wages and labor available elsewhere, with few(er) of the problems of international production and distribution than existed 10 or 20 years ago – and not simply about escaping from under the hammer of an American union.

The situation is sad, for the companies and the workers alike. While many people will probably not shed tears if GM collapses, those blue-collar Americans in Michigan will suffer the most. In the meantime, maybe GM should think about changing its signage to reflect a more honest sense of ownership.  But they probably can’t – that UAW logo is surely in the union contract.