Autoblog

Robert @ Jan 31st 2007 7:36PM

There are actually a couple layers to union costs and structure that this article completely misses.

Unions, in and of themselves, are not dangerous entities if they are willing to work with the company management during ebbs and flows. Further, there must be ways to flexibly hire good workers and fire bad ones. Then, facilities need to be able to reallocate workforces to particular areas if demands on a plant change (flexible manufacturing of products). Finally, facilities need to be able to reorganize themselves in response to product launches, upgrades, etc and ask for things like overtime and adaptability of individual functions and jobs. All of this has to be available without the threat of strike or perpetuated worker resentment (mob mentality).

So, just based on those limited requirements, tell me if Toyota has a total cost advantage, even if they paid in salary 10-20% more per worker than Ford or GM? The answer is yes.

Then, take into account health care, pensions and other benefits that have been promised to UAW workers of the Big Three and are guaranteed through contracts.

Tell me if you think Toyota, without anywhere near the same pension obligations even when their workforce ages and more balanced sharing of health care costs in the long term, has a lower total cost structure even if they paid 30-40% more than UAW workers, and the answer is probably still yes.

Now, this fact doesn't exempt product managers and executives at GM and Ford who have completely screwed up the product lines, but now that both companies seem to have decent leadership teams in place, they need these flexibilities from the UAW. Most importantly, if Ford and GM are to survive, they need certainty, not uncertainty (future pension costs, future health care costs, future strikes and shut downs). Japanese companies have that certainty with 401ks, shared health care costs and no unions to strike.

But, going into the 2007 negotiations, I would argue that the mistakes of the past are past. We are in the present now and the management teams, at least at Ford, are significantly different. Although not all plants have what I would consider completely competitive products yet, if I were the workers in Ford's Oakville or Louisville plants or GM's Kansas City plant where the Malibu will be produced, I would be pleased with good products on my line and working with the management going forward to ensure quality, flexibility and certainty. That means working some overtime if needed, being flexible with my work station, retraining and not striking. In return I would demand relatively good wages.

I would argue that the fair market value for UAW workers is MUCH lower than Toyota workers under current contracts because of the loopholes and uncertainty that exist in them. Eliminate uncertainty (this is both a company and UAW effort - one can't eliminate confrontational attitudes alone) and you can see increasing salaries. Eliminate the inflexible roles and relatively inflexible hiring, firing, retraining and reassigning practices, and you can expect even more increases (this again is a joint effort) over time.

From what I understand, at least from Ford's side, Mullaly has already begun his outreach. Given his past success in labor relations, I would venture to guess that if the unions work with him, providing certainty and flexibility, he can guarantee wages and return some level of certainty to them. If the union is inflexible, there is nothing that can save Ford, if not the other domestics as well.