There are lots and lots of obvious things to overcome before Michigan
regains prosperity and informed hope for the future.
An automobile industry struggling through the greatest transformation of
modern times. A 7.7 percent unemployment rate, highest in the nation.
Thousands of homes under repossession, the consequence of the subprime
mortgage crisis. Reductions in the absolute value of real property,
even in wealthy Oakland County. And a political and policy system that
is – charitably – broken.
Less obvious but perhaps more pervasive and important are long-standing,
deeply-embedded cultural attitudes that hinder progress. Scorn for
education; according to a Detroit News poll, only 27 percent of Michigan
families consider post high school education critical in their kids’
success. Reluctance to accept risk and its corollary, willingness to
tolerate failure, which stalls development of an entrepreneurial
economy.
The problem with cultural issues, of course, is that they are
intangible, hard to get at and even harder to change.
But Here is very good news. The recently concluded labor agreements
between the domestic automobile manufacturers and the United Auto
Workers represent the single most important cultural change in Michigan
in half a century.
Ever since the 1930’s, confrontation between labor and management has
been the hallmark of the auto industry. The record of shop floor anger,
out of touch management, repeated strikes and complexly restrictive
contracts has been an intrinsic part of our most important industry.
Now we have a series of labor contracts that reduce the labor costs to
the car companies by something like $30 an hour, putting them nearly on
a par with the foreign transplant plants. They also offer a two-tier
wage structure, that significantly reduces the wages paid to non-core
job classifications. In return, the companies are committed to make
investments in existing and new plants and to manufacture new product in
UAW-represented facilities.
David Cole, president of the Center for Automotive Research, told me
this is an historic shift in culture, from confrontation to
collaboration. Cole thinks this change has been developing for around a
decade, but the threat of disaster facing the domestic manufacturers and
their union partners has been so terrifying as to drive in the new
contracts a completely different way of working together. “Instead of
framing the choice as between gold and silver,” Cole told me, “both the
union and the companies realize the real choice is between silver and
lead.”
After all, the word “collaboration” comes from “co” (“together”) and the
Latin verb, “laborare” (“to work”). A collaborative relationship, like
a marriage, doesn’t mean the partners never argue or disagree. But it
does mean they recognize that it is in each party’s basic interest to
work together.
Many people have remarked about the east side of Michigan’s preference
for conflict, argument, confrontation. And many have suggested that
this long-standing cultural attitude stems at heart from the labor
relations pattern in the automobile industry. Perhaps the new auto
contracts represent a change that will seep much farther than the
industry. Imagine what a culture of collaboration might do so
relationships between Detroit and the suburbs!
Another deeply ingrained cultural attitude hindering Michigan is
entitlement thinking, the attitude that suggests that gold plated health
care coverage or generous pensions are automatically to be expected from
any job, that workers are entitled to such benefits regardless of what
they do or how successful their employer might happen to be.
Consider, now, the VEBAs (Voluntary Employers’ Benefit Associations) in
the new contracts. Setting up these trusts inside the UAW to pay for
health care not only takes that liability off the balance sheets of the
auto companies. Because the trusts are funded by complex financial
instruments called convertible debentures which can be converted into
company stock, the UAW and its members have become major equity owners
of the auto companies. Preliminary calculations suggest the UAW’s stake
in General Motors is around 16 percent, nearly 15 percent at Ford.
In effect, what the VEBAs have done is converted a defined benefit
health care plan (i.e. one in which the benefits are set regardless of
the contribution of the employee) into a defined contribution program
(in which the contributions of the employees are fixed and, therefore,
can only buy as much health care as they can pay for). This
conversation strikes to the core of entitlement attitudes that are so
damagingly pervasive in Southeastern Michigan.
Both cultural changes – from confrontation to collaboration and from
entitlement to shared responsibility – are enormous in their
implications for the future health of our state. And both are driven by
the most powerful objective facts in Michigan – the workings of the auto
industry.
Sure, the new contracts are important – maybe revolutionary – in their
economic impact. But what they might do to overcome and reverse
long-held cultural patterns in our state might in the long run be far
more important.
2 Comments
It was important new contracts were negotiated to enable the car manufactures to come in line with foreign manufactures wages. The one thing I see as a problem is the auto company’s desire to shuttle all there existing workers for lower wage workers. I think they are going to experience a considerable decline in quality products which in turn will be counter productive to what they are trying to accomplish. It is like pulling up all the plants in a garden to get rid of some weeds that are not producing like you would like them to, Only time will tell.
David Cole is clueless.
http://futureoftheunion.com/?p=6734
Auto Workers & The Auto Industry: The Coming Clash
February 22, 2008
by Rob Rooke/Carpenter Local 713 Hayward, CA
Ten years ago I noticed that here in California, as a well-paid union carpenter who lived in working class neighborhoods, that my truck was the cheapest looking vehicle parked outside a home. Even in poorer neighborhoods new sedans and SUVs lined the streets.
People’s pay hadn’t gone up, but their home equity had. Tens of millions of Americans had cashed in on the future-worth of their homes and bought the latest model out there. How much money did the average family borrow against their homes during this past decade’s credit boom? A Financial Times estimate points towards a figure upwards of $50,000 per household. This cash is not only no longer available, but families are now under increased pressure to use up what cash they do have to pay back their debts. In this context, Bush’s tax rebate of $1500 per family will do little to stimulate anything.
All aspects of American life will be affected by the upcoming recession, however deep it is. The proliferation of new vehicles in neighborhoods points to the auto industry as the probable biggest winner of the past home-equity boom. That same industry may now be the most devastated by the collapse of disposable family income.
Even during the past credit boom, the unionized Big Three: GM, Ford and Chrysler, have faired very badly. For the first seven decades of the last century the American vehicle producers controlled 90% of the auto market. By 1996 that figure dropped to 75% of the auto market. This year the Big Three’s share of the US auto market is expected to slip to less than 50%. GM has also been recently relegated to number two Auto producer as Toyota steals its crown.
A disastrous perfect storm is brewing in Auto. Rising gas prices, falling incomes, shrinking credit, and rising auto prices connected to the pressure of increased fuel economy standards, will likely lead to a dramatic decline in Auto sales. In the past five years gas guzzling and high profit-margin SUVs have seen their sales collapse from 18% to a 12% share of the US light vehicle market. Detroit, in preparing for a shallow recession, is cutting its projected production from 9.5 million vehicles last year to 8.8 million this year. Carmakers currently employ about one million workers, one in thirteen of all US manufacturing jobs. If during the past boom years, since 2000, some 292,000 US automobile industry jobs were lost, what can we expect in the coming period?
From the US auto bosses’ perspective a major clash with the UAW on the scale not seen since the 1930s is likely in the period ahead. Such a clash has been sidestepped in recent years by the auto companies increasingly going into debt and by the compliance of the United Auto Workers leadership. Both of these factors may be reaching their limits. The Big Three’s reliance on outsourcing parts and assembly is one process that will be stepped up.
The political power of Detroit has shrunk in proportion to the publics green pressure on Capital Hill. The Big Three’s war against increased fuel economy standards has now been lost. GM estimates that the December 19th regulations, which increases average fuel economy requirement by 40% to 35 miles per gallon, will cost it $6,000 per vehicle. Its victory over the UAW and introduction of tier-2 workers at below union pay will not make up for that cost. Increasing production of compact cars is also a bad option from a capitalist perspective as profit-margins on such models has traditionally been very low.
The September 2007 two-day strike at GM was mocked in the capitalist Financial Times as the “41-hour wonder that was the GM national strike.” The rank and file proved their willingness to fight as equally as the UAW leaders proved their unwillingness to fight. When the generals are not sure which side they support, then that battle has already been decided. The recent UAW contracts sold away the futures of new employees. Second tier workers will now be paid less than many non-union Auto workers. Perhaps the worst consequence of this is that the UAW leaders have given the Toyota and Honda bosses the strongest economic card to argue against joining the union.
The reliability of the UAW leaders to constantly provide givebacks to the bosses may be strained by the size and scale of upcoming industry demands. The production cutbacks and plant closures of the upcoming decade will devastate communities across a region already hammered by high levels of foreclosure. The choice facing the union will be to either take up the old methods of the UAW that built the country’s once strongest and most militant union or for the UAW to be ghost-towned itself, going the way that so many mid-western communities have gone after the Big Three rolled out.
What is not in dispute is that the storm is coming. If the weather is worse than the auto bosses expect, as is most likely, they will possibly tear up the existing bad contracts and demand far more concessions. They will likely argue that if further cuts aren’t made then whole companies will go belly up. The UAW through its recently contract-acquired convertible bond now has a 16% stake in GM.
The leaders are increasingly indistinguishable from the bosses they are supposed to challenge. These leaders will echo whatever the bosses want in arguing for cuts. It is not overly cynical to recognize that from the UAW leaders’ perspective, dues can always increased to make up for workers who are thrown on the scrapheap.
In-house organizing around a program that puts the interests of workers and their communities first is a first step to preparing the ground for the dam-burst that is around the corner. The harder the axe comes down the more militant the response will need to be. Even those older workers who have stood by and watched concession after concession over the years will see that that policy has not worked.
Older workers, the younger 2-tier workers and those that are currently non-union will have their backs against the wall. Struggles to defend the right to strike such as the Freightliner 5 battle could open up scattered skirmishes that, once united, could represent an active plant-based rank and file opposition movement. Groups like Soldiers of Solidarity could fill out with shop floor workers. The entrenched leaders of the UAW will not be able to control the flood of anger that the bosses’ severe cuts will unleash.
When workers had no weekends, a 10-hour day and no benefits, they occupied their plants in the tens of thousands and won the union. Similar tactics will be necessary to save jobs and communities. A huge, powerful movement of solidarity is not only the only hope for the working class, but increasingly for the whole human race. The alternative to putting up a fight, is not just a continuation of the current policy of retreat, but an accelerated retreat so great that no-one will be able to recognize the difference between union and non-union.