The Biggest Problem with the Big Three can be Summed Up in Three Little Letters
Reason abound for the current sad state of the American auto industry, but the biggest is the one no one is willing to talk about: The United Auto Workers Union. According the US Department of Labor, it costs the American auto industry $73.20 per hour to employ a UAW union member. Toyota, a non-union manufacturer, shells out $48.00 per hour. And the kicker, the average American worker overall costs $28.48.
Now don’t get me wrong, I have nothing against the average UAW worker. Who can blame them for taking a very high paying job. And no, they aren’t actually taking home $73.20 per hour. That cost includes benefits, pensions and costs associated with their employment that the average employee never sees, but they are costs to the manufacturer none the less.
Beyond shear costs, there are the structural problems too. When market forces dictate to a non-union manufacturer that it needs to make a change, that manufacturer makes the change as quickly as possible to stay competitive. But when a US auto manufacturer needs to close plants, retool or introduce further automation, it is hampered by UAW contracts that make it impossible to do so quickly and cost-efficiently, putting it at further competitive disadvantage.
But it gets worse. Similar to the warehousing of lousy teachers in NYC, auto manufacturers strait-jacketed by insane contracts warehouse unnecessary employees in “rubber rooms.” In 2006, there were 15,000 able-bodied UAW employees in this “Job Bank.” Auto manufacturers are forced to pay up to $2 billion per year for workers doing absolutely NOTHING! Add to that all the perfectly healthy workers who manufacturers are forced to provide early buyouts and retirements, and it’s no wonder the industry is dying.
Now congress has put the chief architects of the Fannie and Freddie meltdown on the case. Barney Frank and Chris Dodd, who have voiced their concern about further weakening union strength, are going to dictate to the Big 3 how to fix their business.
Heaven help us, and call your congressmen.
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