United Auto Workers Tough Position

The UAW, once the bane of management and the superhero of the assembly line, is now in a fascinating position. An article this week in the Wall Street Journal, link at bottom of page, detailed the new pay pressures on the UAW. Below I summarize the article, share my feelings on unions, and then state my opinion of what strategy unions should take.

The big three auto workers would like to tie employee compensation to productivity, quality and the general well being of the company. UAW President, Bob King, (yes that is his real name) has declined to publicly state his opinion of the proposed pay structure, but the union has been historically been against accepting such deals usually pushing for higher base salaries.

I believe this makes sense for the Unions on a few fronts. Productivity and quality gains usually translates to fewer workers and layoffs. Also, I would assume that a variable income would be harder for factory workers to budget and such a payment system would encourage such workers to take on excessive debt.

The interesting twist with this round of contract talks is that now a union controlled trust owns significant stakes in both Chrysler and General Motors. Now, more than ever, what is good for the company will be good for the union. According to the Wall Street Journal, UAW has already compromised a little with the recession. They have allowed the auto makers to hire new employees at $14 an hour, which is half of what current employees were receiving. With Detroit's Big Three profitable, but still struggling, it will be interesting to see what further comprimises will be made. It will also be interesting to see if UAW gives more favorable contracts to Chrysler and GM, than to Ford, a company it does not own stake in.

My own feelings on unions are torn. I realize that they played a significant role in reducing poverty during the industrial revolution. I also realize that in Zion society, the workers would reap the full benefit of their labor as ownership of all companies will be shared in a Christlike manner. That being said, my experience at John Deere taught me that unions can make companies very inefficient. For example, the Waterloo, Iowa factory has a rule that employees can not be flexed. This means that if one factory line is under-producing, and the workers have nothing to do, they can not go help on a line that is running near capacity. It is my understanding that this inefficiency has made it difficult for unions to compete with non-unionized factories.

I believe that in a competitive free market world, unions need to realize that the personal success of their employees is inseparably tied to the success of the company, and that they should organize to help, not hinder, productivity gains.

http://online.wsj.com/article/SB10001424052748704803604576078224262665108.html?KEYWORDS=New+Pay+pressure+on+UAW