The Car Rants Continue

Since I am going with a car-related theme this week...

I've been following the dire situation with the Big 3 American automakers for a while. Given my roots in auto country, I find it sad what that industry has become today.

Yesterday, DaimlerChrysler announced (in kinder words) that the Chrysler group is a complete failure and that they are looking to get rid of it for whatever they can get. Furthermore, they will be eliminating around 13k North American jobs.

You want to know what's crippling Chrysler and the other big US automakers? Look no further than the comments from the United Auto Worker's (UAW) leadership in reaction to the latest news from Chrysler. I've included the key quote below:

"While Chrysler Group's recent losses are not the fault of UAW members, they will suffer because of the reductions announced today"

Classic. This quote is why either the UAW or the US automakers (or possibly both) will be irrelevant in 3 years. The UAW has no accountability. There is no connection or pride for the companies where UAW members work. Whenever life is good, the UAW takes all the credit and milks the automakers for as large a profit sharing check as possible. Never mind that past earnings could have been used to make investments to help a company innovate and remain competitive in a changing business environment or return wealth to the shareholders that are the owners with a financial stake in the company.

When times a hard, the UAW blames management. That's a pathetic excuse unless the UAW also takes a long hard look in the mirror. When cars are not selling, the UAW claims it is because management is supporting out of date models. Or because management is pricing too high in an attempt to make excessive profits. Or because management is out of touch and taking larger paychecks than they deserve.

According to the UAW, it's not because US cars cost too much to produce relative to the foreign competition that does not have to pay union-level wages. It's not because the UAW is forcing the auto companies to either overproduce and build up bloated inventories or pay workers to do nothing since the union is protecting unneeded jobs through their “job bank”. It's not because the UAW insists on protecting overly rich medical plans with $5 copays that lead to over-utilization of medical services and a higher cost of labor (and cars). Would you spend more on your car if your auto insurance included windshield wiper fluid and oil changes?

The demand for cars in this country does not support the need for as many employees as the unions force the big three automakers to hire and retain. By taking the hiring and firing decisions away from the corporations, the corporations lose control over their ability to make a sufficient profit for their shareholders. Publicly traded corporations are supposed to be cold and heartless and make decisions that might not always be best for their employees. That's why the best companies are so much more efficient than government. A company that is way too nice to parties that do not hold a financial stake will underperform over the long-term.

I hate to break it to the UAW, but the current state of the US auto industry is as much your fault as it is anyone else's fault. First, it's the UAW's fault because of their unrealistic demands on pay and staffing levels relative to the demands of the open market for cars. Second, it's the UAW's fault because they refuse to take a sense of ownership in the financial results of the US auto industry. Third, it's the UAW's fault that they refuse to consider alternative options and plan designs to help control their ridiculous cost of healthcare, and then blame the lack of government sponsored universal health coverage instead of their unwillingness to negotiate. Don't even get me started on the faults of government sponsored universal health care. That's a rant for another day. (Don't get me wrong, I think everyone should have access to basic catastrophic health care coverage, but the government cannot be trusted to provide this efficiently)

The UAW's short term strategy to maximize returns for union members has ruined a generation of unskilled labor that will be out of luck and out of a job when the automakers all go bankrupt or break the unions through a hard stance in the next round of negotiations.

The executives of these companies also deserve their share of the blame, but they are generally much more accountable for their own actions. Auto executives can be fired more easily and paid poorly relative to normal executive pay when their company underperforms, assuming that their board of directors has more integrity than has been demonstrated at some companies (Like Home Depot and UnitedHealthGroup) in recent years.

When the next round of labor negotiations is completed, the auto companies will force one of two results:
1) Be on a path to financial ruin by giving in to UAW demands
2) Break the union either by forcing them to give in or letting them strike and replacing them with cheaper labor


I do believe that labor unions can be great for professions and have a place in the world today. However, when a labor union promotes an 'us against the corporation' mentality, it will fail its members over the long-term.

Before you all go accusing me of becoming a conservative, let me assure you that I am just ranting against the sense of entitlement within the UAW today. I provide equal criticism to other entitlement problems in our country (like the complete elimination of the estate tax), so my moderate-to-left leaning political views have not been compromised today.