Auto bailout, from within

[henk4]

That system sounds a lot more like what most US companies have. First we do have a government run pension plan called Social Security. However it is generally underfunded and even if it wasn't, it doesn't pay out much. Most companies now have 401K which are savings accounts that include investments and managed portfolios. They are for the most part fully funded up front but then they have a defined level of benefit. If you die early your family is paid out but if you die late, well you might run out of cash before your time.

Our system may look the same but it works in a clearly different way. An employee pays an annual insurance premium (a percentage of his gross salary and tax deductable) to which a similar or mostly somewhat larger amount is added by the employer. The combined amount goes into an independent fund, that will manage this as an investment portfolio. The system works in such a way that your maximum pension will be 70% of your average salary over your entire working life. So if you pay for 40 years, you pay a built-up of about 1.75 % per annum. (If you will work less you will not build up your full pension) Once reaching the pension age, (65 officially) the fund will start to pay out on a monthly basis, and AS LONG AS YOU LIVE, which I think is a decisive difference with your system.
You do not need to work all of your life with the same employer, because built-up pension rights are transferable from one pension fund to another without additional costs.

[john14]

I've heard a lot of bad things about the UAW. Is it really as bad as many people say it is? Does anyone here work for an American automaker in the USA? Have the UAW asked for too much over the years?

[CapnBoost]

They've negotiated a vast array of "benefits" that you and I simply do not have access to. Their healthcare program adds ~$1500 to the price of every car. Job banks kick in after your unemployment runs out and pays you to stay home. There's more that I don't care to remember. I don't have any inside information but everything I've read lead me to believe that the UAW became a wasting disease, being behind the times with regard to their product lines, and for GM specifically cannibalizing of sales from one brand to another were the major things that nailed the coffin door shut.

[culver]

Our system may look the same but it works in a clearly different way. An employee pays an annual insurance premium (a percentage of his gross salary and tax deductable) to which a similar or mostly somewhat larger amount is added by the employer. The combined amount goes into an independent fund, that will manage this as an investment portfolio. The system works in such a way that your maximum pension will be 70% of your average salary over your entire working life. So if you pay for 40 years, you pay a built-up of about 1.75 % per annum. (If you will work less you will not build up your full pension) Once reaching the pension age, (65 officially) the fund will start to pay out on a monthly basis, and AS LONG AS YOU LIVE, which I think is a decisive difference with your system.
You do not need to work all of your life with the same employer, because built-up pension rights are transferable from one pension fund to another without additional costs.

Believe me I don't mean to say they are the same at all. I get the feeling that in Europe the systems are more uniform across the population and that the public portion is better funded. Our public system (Soc Sec) pays for the rest of your life. We have a number of different private systems. Some like what the UAW gets pay for life. Others like what I have only have so much money so I better kick the bucket before it's too late
For companies the advantage to the later is they know how much it will cost and any more the systems are pay as you go. That's the critical thing. GM used to employ about 1/2 million workers, mostly from the days before automation. Now they are paying for retirement benefits for all these people and it's killing them financially... well it killed them anyway. No mater how much my last employer was contributing to my retirement, when I left/quit/was fired/joined the army/etc they no longer had to pay for me.

[culver]

I've heard a lot of bad things about the UAW. Is it really as bad as many people say it is? Does anyone here work for an American automaker in the USA? Have the UAW asked for too much over the years?

I worked for a company that used to be owned by GM. Yes it often was that bad. Check out the cover page article at Autoextremist.com. It's talking about the unions going after Ford. Ford might actually turn a profit this year so it's time for them to pay up!

In the past the unions used collective bargaining to make sure Ford GM and Chrysler all paid out the same wages and benefits. Of course now that GM and Chrysler got concessions Ford would like similar concessions. I guess that collective bargaining mantra only maters when it helps the UAW. One of the flaws in the UAW's thinking has been that when times are good, the company owes them more. Never mind share holder value or anything like that. However, when times were bad the UAW was not willing to take a hit.

[G35COUPE]

G35,
You should take a look at the news regarding Ford and the UAW. After years of making sure that all the members of the UAW got the same benefits regardless of the health of the company (something that helped kill Studebaker) the UAW now is not interested in giving Ford the same life saving concessions they gave GM and Chrysler. This is the same union that basically killed International Harvester with a strike.

Have you seen the video showing Ford's very modern plant in Brazil. The video claims that many of the things that make the plant so class leading are not possible in the US thanks to labor work rules.

Finally, when you consider that GM has paid out around $100 BILLION dollars to the unions for pensions and health care it becomes more apparent just how much the unions are a financial drain on the company. That extreme cost ends up taking away funds that could be used to create more products. It took away funds that could be used to put better interiors in GM cars. It took away funds that could be used to improve quality or modernize components. It took away funds that could have been used for fundimental R&D.

That cost was like a high tax on doing business. Ultimately you can't compete when your fundamental operating costs are substantially higher than your competitors especially when you no longer have the premium brand. Hyundai certainly couldn't have turned it's self around in the US market if it had the labor issues and cost that GM was facing. I would suggest you read "While America Aged" for more info on just how insidious the effects of the unions were on GM's financial health.

First of all, unions do not/ cannot force GM, chrysler and Ford to hire anyone. If these auto companies chose to hire excessive numbers of staff who potentially could end up as union workers, then it means that management is clearly inept at organizing itself in a very efficient and/or effective manner, in order to stay profitable.

Blaming unions for the woes of these corporations assumes that mangement of these corporations are largely absent, weak, and ineffective to the effects of unions, which is something i disagree with. A simple act of a realistic re-organization within these corporations, has the potential to bring the unions to their knees, failry quickly and in short order. Instead, GM management decidedly went to make love with the unions, allowing themselves several helpings of the unions love handles, when they should have been thinking of the consequences of that sinful love for the future.

Can you then tell us how the financial sector of the US economy, which had no unions to complain about, showed immense levels of strategic and operational failures that led to the current economic quaqmire we find ourselves in the USA? What I am trying to say here is that the impact of unions on the overall state of these corporations is very limited, and frankly, it can be narrowed to just a few operational goals of the auto companies. The vast strategic goals of these corporations, including their short-sighted views of profitability and survivability, which caused their failures, is largely out of bounds of the unions.

I agree with you that union-related expenses of the auto companies did lead to some reallocation of funds to their least efficient use. However, these are simply accounting costs. In macro-economics, the greatest cost a business will ever face is opportunity cost. The opportunity cost of GM management being innovative and nimble was their sad attempt at blaming all their woes on unions. GM simply failed to be creative, strategic, and realistic about the new world they now live in. The consequence of thier poor decisions on opportunity cost, was the eventually saddling of GM with unnecessary accounting costs associated with legacy benefits of the unions.

Ineffective management is always one that points to everything else but itself for the cause of its demise.

[culver]

G35Coupe,

I never said the unions can force the company to hire someone.

The unions have forced the automakers to prefer union suppliers (not sure if they still do). They can hurt productivity by having work rules which force the companies to operate in a suboptimal way such as not allowing suppliers to work inside an area of the plant.

If you don't understand the macro-economic cost of the unions I would suggest you read "While America Aged". It goes into great depth and illustrates the long term negative impact of the unions on the US auto industry.

You can say the management was ineffective and in many ways it was. However, one of the reasons WHY it was ineffective was because of the power of the unions to stifle management actions that they didn't like as well as the financial drains that resulted from union demands. This does not excuse management but the unions and their leaders are every bit as responsible for the fall of the auto industry.

Before you say the unions are reasonable please look up the history of International Harvester and how the UAW's strike ended up resulting in the collapse of the company. Also look no further than the current UAW trouble at Ford.

The autoextremist.com has a good cover story on Ford and the UAW.

[G35COUPE]

G35Coupe,

I never said the unions can force the company to hire someone.

The unions have forced the automakers to prefer union suppliers (not sure if they still do). They can hurt productivity by having work rules which force the companies to operate in a suboptimal way such as not allowing suppliers to work inside an area of the plant.

If you don't understand the macro-economic cost of the unions I would suggest you read "While America Aged". It goes into great depth and illustrates the long term negative impact of the unions on the US auto industry.

You can say the management was ineffective and in many ways it was. However, one of the reasons WHY it was ineffective was because of the power of the unions to stifle management actions that they didn't like as well as the financial drains that resulted from union demands. This does not excuse management but the unions and their leaders are every bit as responsible for the fall of the auto industry.

Before you say the unions are reasonable please look up the history of International Harvester and how the UAW's strike ended up resulting in the collapse of the company. Also look no further than the current UAW trouble at Ford.

The autoextremist.com has a good cover story on Ford and the UAW.

"While America Aged" is not gospel and it is certainly one person's view of what they beleive about unions. All decisions have the tendency to have unintended long-term negative consequences. So, limiting the negative impacts to unions, is sprious. Lack of manangement creativity, is as dangerous or worse to the existence of any corporation as any benefits being payed to unions. In fact, its hard to quantify the true cost of poor, lacakadiasical, and inept management and their corrresponding decisions. For this reason, the obvious and natural option of humans, is to point to that which we can see and quantify---unions and their corresponding direct and indirect compensation.

I will also refer you to the pre-industrial state of the United States and Great Britian, when unionization was not the norm, children were routinely asked to work 13 hour days, in factories, and were routinely beat and abused by the same industrialists and capitalists who now point the finger at unions as the reason for their demise. So, unions have their purposes. Whether or not they have outlived their usefullness in the 21st century, is up for debate.

Globalization forces, in the last 20 years, has severely crimped whatever powers unions think they have. To this end, any effort to blame the demise of the auto companies on unions, taking into account the last 20 years, is very spurious. For example, in Germany, VW is constantly threatening to send its major manufacturing operations to China if its auto union does not play ball. The German govt knows that this is not an idle threat. They know it can happen---VW is one of the top foreign auto companies in China. Why did GM not use the same threats and strategy against the UAW when they had the chance to do so?? Poor GM management.

And, unions cannot force an organization to function in a sub-optimal way. I earlier told you that sub-optimal productivity can be negated by executives and top managment who have the power and will to reallocate resources or re-organize their organizational operations to counter any negative impact of unionized behavior. Unions have no right to tell any organization how it should organize and/or how it should re-organize itself. At best, unions can strike. Thats it.

GM fell as a result of management ineptitude and lack of creativity.

And as for International Harvester, more companies have failed as a result of poor management and their decisions than have failed as a result of unionization. Without even bothering to know the details, I can say with confidence that International Harvester was fraught with poor management. Why should any organization stand idly by and watch itself decimated by a disease? It was either a weak organization to begin with or it was infested by an army of inept managers and executives.

[culver]

While America Aged is a well researched book on the dangers of pensions. The UAW and GM are one example of a pension system that was killing (GM hadn't gone under at the time) a company.

Sorry, if you can't understand how a few billion a year taken away from the bottom line might negatively affect a company there really is little point in this conversation.

IH specifically died because of an extended strike that cost the company more than it could afford. That doesn't mean IH was in great shape or run perfectly before hand but it does make it clear that the UAW was willing to strike them selves out of a job.

You seem very defensive of labor. Is there a reason you want to place blame only on white collar shoulders?

[G35COUPE]

While America Aged is a well researched book on the dangers of pensions. The UAW and GM are one example of a pension system that was killing (GM hadn't gone under at the time) a company.

Sorry, if you can't understand how a few billion a year taken away from the bottom line might negatively affect a company there really is little point in this conversation.

IH specifically died because of an extended strike that cost the company more than it could afford. That doesn't mean IH was in great shape or run perfectly before hand but it does make it clear that the UAW was willing to strike them selves out of a job.

You seem very defensive of labor. Is there a reason you want to place blame only on white collar shoulders?

I love your question. I actually anticipated you asking it. First of all, i am no friend of labor. In fact, I detest labor unions with every fibre of my person. I just have a hard time agreeing with organizations that pin their problems on one insignificant factor or the other. I call them loser organizations.

Now, why would I then prefer to blame managment and not labour (labor)? Well, it all starts with making a distinct difference between owner's of labour (labor) and owner's of capital. When this distinction is placed in the context of a political system that is largely democratic (naturally responsive to political and economic stimuli), merged against business creativity, ingenuity, and strategy, it then becomes fairly obvious how inept any organization would appear, when they blame all their woes on the fairly chaotic organization of owner's of labor (unions).

So, what happened to the drive, hunger, and creativity, and organization of owner's of capital in a free market operated under a democratic system? Has it been sucked away by the invisible demons of the owner's of labor, when considering the positives of globalization as it relates to the owner's of capital?

Unions or owner's of labor are only as strong and/or as viable as the owner's of capital will allow them. It is a never ending tug of war that shifts in one direction or the other depending on the prevailing political and economic condition. American auto manufacturers (owner's of capital) bent over and allowed themselves to be used, rapped, and abused by unions (owner's of labor) because of short term gains. When the auto manufacturer's (owner's of capital) saw how much they were going to make in the short-run, they quickly allowed unions (owner's of labor) to have their way so that owner's of capital could go about their business of getting rich quickly. In so doing, union creep began to find its way operationally into these corporations. It got worse when it became very obvious that SUVs were extremely profitable---30% of an SUVs price was pure profits.

So, owner's of labor bent over even more and allowed themselves to be desecrated by the unions as the SUV hype and profits grew without seizing. When the party was over, the scales on the eyes of the owner's of capital fell off rather quickly, and they began to complain and make police statements (govt and their bail outs) that they were drugged and abused by owner's of labor (unions). All the while, the sinful act between the owner's of capital (auto manufacturers) and the owner's of labor (union), was consensual and agreed upon.

As you can see, it becomes clear that the owner's of capital deserve all the humiliation they are now receiving from the police (government). The report clearly shows that the owner's of capital agreed to the incestous relation with the owner's of labor, when times were good.

So, unions, as much as i detest them, do not have an iota of blame here. They took advantage of a situation that was handed to them by the owner's of capital, who allowed their greed to seize their ability to see well into the future. Japanese auto manufacturer's have avoided this same situation fairly well. They understand that to give a step to unions, will be the beginning of their downfall. The middle to late 70s was the first chance the owner's of capital had in the post industrial era to get rid of unions. Guess what? They didn't. Why did they fail to do this? Greed and short-sightedness.

[culver]

I'm not even sure what you are talking about now. This seems to be turning political rather than analytical. I'm going to avoid any sort of overly broad political discussions like this.

[henk4]

I'm not even sure what you are talking about now. This seems to be turning political rather than analytical. I'm going to avoid any sort of overly broad political discussions like this.

he is just describing the ins and outs of the classic economic theory production function....but you stimulated him by asking whether he favoured "labour"....
In the mean time we have deviated along way from the original article.

[culver]

he is just describing the ins and outs of the classic economic theory production function....but you stimulated him by asking whether he favoured "labour"....
In the mean time we have deviated along way from the original article.

Yes, but it was easier to say that the to say that G35 simply ignores the power and influence that labor unions have both politically and via the ability to strike and other tools. It is simply willful ignorance to claim the UAW's had no part in the downfall of Detroit.

[henk4]

Yes, but it was easier to say that the to say that G35 simply ignores the power and influence that labor unions have both politically and via the ability to strike and other tools. It is simply willful ignorance to claim the UAW's had no part in the downfall of Detroit.

from what I understand from it, it is just so that the UAW played the role that they were supposed to play under the present (and past) US social circumstances, but maybe that is too simply put.

[culver]

The UAW is almost perfectly doing what they are supposed to do. They are supposed to look out for the interest of their members. However, they have done it in a short sighted fashion. Even as far back as the 1950s some in the UAW leadership understood the dangers to both the employer and to the employee of unfunded pension promises. The UAW leadership was just as short sighted as anyone at GM. G35 asserted that SUV profits allowed GM to be blind to the risks associated with their promises to the UAW. That's completely wrong as the fundamental benefits promises were all made before SUVs became an important product in the market. The guaranteed retirement benefit was originally agreed to in 1955. I believe health care was added in the late 1960s. As I've said before, these issues date far back.

G35 was also wrong in claiming that the UAW doesn't share any blame. The UAW demonstrated with IH that they would strike to the point that the company collapsed. That was stupid on their part because in the end they got far less than what the company was offering and the company also suffered irrevocably. In modern times even the UAW rank and file realized that GM couldn't afford the burden of the UAW. However, rather than agree to better terms the UAW insisted on keeping things like the Job Banks and other terms. The moment they used their considerable power against the company to demand things that simple analysis said the company couldn't afford, the UAW because part of the problem.