I know this will invariably turn into a union-bashing thread, but I figured that this is still worth posting:

Siphoning G.M.’s Future

Gotta love shortsighted corporate leadership. Of course, it'd be interesting to know how much GM pulled out of its pension accounts during the late 90s and added to its operating income, but the company doesn't seem to be as eager to discuss this point

 

I'm no fan of the unions, and they have their share of the responsibility for this mess, but I want to bash the executives in charge of GM during the time when all of these pension commitments were made. What the hell were they thinking? They should have known this would come back to haunt the company. They probably didn't give a damn, just wanted to give the illusion of peace and well-being within the company so they could get back to giving themselves enormous paycheques, "performance" bonuses, and severance packages.

 

What's funny is 15 years ago GM built good/great trucks, OK family cars (but on the so so side of OK) and really crappy econo cars and were making money hand over fist. Now, GM builds incredible trucks/suvs, great and competitive family cars and are finally starting to build decent econoboxes and can't turn a profit to save their life...

...yeah, **** like that comes back to bite you in the ***...

 

GM probably had to make those crazy payouts, or else the union would've struck


and yup, I went there!

 

See below.

 

So, what was more costly - letting the union strike and maybe enforcing a lockout, or constantly giving into the union's demands for the sake of short-term stability?

Further reading on the relationship between Caterpillar and the UAW in the 1990s might provide some insight, and is left as an exercise for the student

 

I wonder what would happen to all the retired GM employees' benefits IF GM ever has to go bankrupt. Like some of you, I know people that this would impact...

I doubt that many companies in the 40's 50's 60's and 70s had the forsight to see that the cost (and services) of healthcare would grow at the rate that they did. Nor did they likely expect that with good healthcare, their retirees would live longer.

 

Yeah, I know.

Would have been nice for management to "make their stand" long ago, instead of in the more recent years when they are frighteningly close to the brink...



Still, the union leadership is part of the management, in a sense, and must share a good chunk of the responsibility for being greedy (?) and for lacking the same foresight that management was lacking. I just want to make sure everyone gets their due credit.

 

To those who were in management in the past, it wasn't costly at all. They were able to push off the problem onto the future generation(s) of management while they still had all the perks of "running" a large company. They will still be filthy rich when GM goes bankrupt.

 

Well besides some obvious mismanagement of the pension and healthcare programs I really don't see how this could have been avoided.
GM has that many people to support and they have been for almost a century now. Remember to that the pension and healthcare deals do apply to white collar workers and families also. This isn't just a GM-UAW problem.
This is from a way of doing business that has since passed. I don't blame GM for getting into these deals and agreements because for when they happened it was standard business practice and acceptable. Sure the Domestic brands were tying a noose around their necks and that could eventually come to strangle them but what other reasonable options were there at the time. Who could have predicted the strides in modern medicine that led to extended life expectancy. But it comes at a severe price. So now people live longer, extending their pension needs,and spend more on medical coverage to do so.
How bad would GM have looked if they had negotiated out of these deals in the late 80's when they needed to instead of the late 90's when everyone else started to stop pensions.
The UAW deserves some fault too but really they are predictable in that they will take everything they are given and always ask for more. The union isn't in the business of selling cars or forecasting pension obligations they only look out for those they represent from contract to contract. The deals that the Domestic brands gave them over the decades on the pension and healthcare front were by and large about the same.
This is a huge number and it's very crippling to GM and I'm sure the other brands too. But had the economy stayed better and gas prices stayed lower we might not have seen just how razor thin GM has been running. Or maybe it would have just prolonged the inevitable.

 

Lots of old companies figured out how to manage their way through this issue - GE, Caterpillar, and Boeing, just to name a few. One of those three even managed to take on the UAW.

 

Agreed but those are not car companies in Detroit and they didn't have quite the history the big 3 have had with labor. Caterpillar worked the UAW in a way that the big 3 never could. Timing was right as the US was in a recession and the location helped too. We are also talking about a lot smaller workforce. The UAW could afford to fight a much more specific battle against any one of the big 3 who stepped out of line. Direct competition and close location have always given the UAW major power in the Detroit area because even if you can get 5,000 people to cross the lines in Spring Hill, TN that won't help on the battlefront in Flint, Dearborn or Hamtramck. Not to mention the big 3 usually can't afford a long strike with certain Teamster help. The UAW will take a numerically small but large political defeat with Caterpillar but still look strong enough to win the war with automakers. There is a reason why the bargaining for all three makes occur very close in time to each other.

I can tell you first hand that there was always a worry at GM and Ford when a significant amount of white collar employees at Chrysler went union. They have always given what ever deal the UAW got in benefits to the white collar ranks to keep the peace.

Hindsight is always clear and there is no doubt that the Domestic automakers have dug themselves into a hole. The worst part is almost everyone could see it and almost nobody could stop it. Because when your choices are going bankrupt from an long ugly strike or take chances that concessions in future contracts will be made like, VEBA, that will allow the company to carry on and hope for a strong enough economy to pay for it. What looks better from the management side of the table during negotiations...

 

Never could... or never had the courage to try?

The Big 3's failure to manage the union has to go down as one of this country's largest business mistakes. And the union's failure to maintain competitive costs has to go down as one of this country's largest social failures.

 

Well I think they always had courage to try but they never had the unique opportunity that Caterpillar and the Detroit News/Free Press had.

I don't know if the management of the UAW and their failure to maintain a competitive cost structure was even possible. From the management standpoint the up and down swings in Domestic economical conditions were being managed to a point and by the time the lower cost foreign producers had arrived the UAW was already getting far higher wages and had more benefits. Nearsighted business practices certainly, but again this whole equation works if the economy and sales stay in predictable swings. But the kicker is the unexpected healthcare and pension cost escalation. We know how long and hard it's been to take jobs and benefits away from the UAW and that's after the proverbial wolf at the back door was already well known. How difficult would that task have been without the changing automotive environment and without a crippling strike..

 

Well...the biggest issue with these pension plans, is they don't work unless you keep growing and adding workers....kinda like social security. GM obviously did not plan to loose 50% market share in what 20 years?