I haven’t really commented much about the GM/UAW.
Mostly, because I don’t have much interest insight into either side of the debate.
And while I love older GM cars — especially 1950s and a few early 60s — I am not a fan of their present wares (‘Vette, Skyy and Solstice notwithstanding).
This perfectly sums up what just happened.
Why is it that GM and other big corporations aren’t on the universal healthcare bandwagon? It would seem to be in their best interest.
Curious in Canada.
It’s high time people came to the realization that nobody OWES them anything, and that pensions don’t exist on this plane of reality. They are nothing but interest free loans to corporations and government.
If you want to have anything left for retirement, put money aside in the highest paying money market deposit account you can find, and never more than the FDIC limit in any one account. Anything that is involved with the stock market is a gamble NOT a guarantee despite what anyone tells you.
KP- That is a silly comment. Time horizon and risk tolerance are everything. Life is a gamble.
KP — I am not sure I understand your point.
Remember, these were contracts both parties agreed to many years ago. We can discuss whether or not GM management and the unions made good or bad deals, but that is not what is on the table here.
Are you arguing that people are NOT owed what other parties contractually obligated themselves to pay? I assume you do believe in contract rights?
GM owes what it promised to pay all those many years ago. If we do not recognize that, the entire argument becomes rather untenable . . .
Ex Chrysler CEO Lee Iaccoca has been calling for universal health care recently.
GM nor any other “GMs” in any other industry are guaranteed not to fail. I highly doubt that your pension is high on the list of prioritized creditors. That is one hell of a risk, and it’s a tragedy that it never occurred to these folks.
Charles E. Wilson (former GM CEO and US SecDef under Eisenhower) at his Senate confirmation hearing: “… I thought what was good for the country was good for General Motors and vice versa.”
I thought so, too.
It’s curious that someone here who seems to almost celebrate the GM employee’s lack of retirement security would encourage the “safe” placement of their retirement funds in the hands of the FDIC instead.
If GM isn’t too big to fail, nothing’s too big to fail. Even the FDIC.
Speaking of Iacocca, “Where Have All the Leaders Gone?” I dunno. That’s also very curious.
Barringo,
Can you name anything that GM promised the union that it hasn’t honored?
You imply that GM has failed a contractual obligation… Can you name it?
If the UAW had always had the perfect knowledge that GM would never lack the capacity to deliver on its contractual agreements, do you think the UAW would’ve blinked like it did and let them out of their traditional relationship?
I contend the union let them out. Can you disprove it?
We all play the cards we’re dealt. All that happened is that the UAW wasn’t sure enough of its hand to raise the ante… and risk getting their hand called and losing what pot they had left. As it was, they won the hand, but in doing so they didn’t force GM to bet all its chips, because it would’ve folded, withdrawn from the game, eaten whatever political or financial grief it had to… and closed plants.
I tip my hat to the UAW leadership. They got every nickel they could’ve gotten from GM, and set up Ford and Chrysler for the same apple bobbing to be accomplished later.
However, it wasn’t all cake. I think we’ve just witnessed the death sentence of the UAW. Basically they cut the best deal they could for the benefit of the dying breed, but something the UAW held dear for all these years since their formation — Growth!– was just let go, tossed overboard for the benefit of temporary survival. Even the mere thought in the 1960s that the UAW might someday allow the automakers to hire non-UAW workers or UAW workers with differential rights and benefits would have itself caused the workers to rise up against their own union… because the workers knew it was a beachhead not to be lost at any cost. Once the line breaks, it’s all but over… eventually.
The UAW is like a business proprietor that realizes all hope is lost for his business. While the cap ex for replacing his plant and equipment is a long dead issue, he’ll continue to pay the utility bills and keep enough staff on hand to render what little EBITDA can be extracted… mainly because there no longer is any D and A… no more cap ex in the form of ‘worker growth investment’ to be made, and thus none to be depreciated or amortized… and no more to have to be charged against gross operating earnings (benefits for new union workers won’t dilute the remaining pot).
Once EBIT turns negative (my guess is that it’s still going to be negative for GM in their traditional haunts in the U.S., for overall earnings once I,T,D and A, in reasonable and rational terms, are charged off) the proprietor will a-b-a-n-d-o-n the building and terminate all remaining staff. In the case of the UAW, the workers (staff) will just retire and die out.
That deal just cut was deflationary for all remaining U.S. manufacturing workers, regardless of industry. It’s a signal that the unions are dead. It was destiny… and it’s the destiny for other manufacturing workers, for blue-collar and for middle-white-collar service industry workers as well.
kp
If you put you money in an American bank five years ago,your dollars would have gained “safe” interest. But the number of doughnuts you could get at Tim Hortons in Canada would have been reduced by sbout 40%.
Just shows you how safe your purchasing power was. Perhaps you should take a broader look at your investment options.
Check out this Bloomberg reporter’s tale about working for GM/UAT during the 1970s:
http://tinyurl.com/3ajdkx
I read somewhere that new hires will make half of existing workers wages and benefits. I have been a free market proponent all my life, but I now see the plan like turning over a cross point.
The PTB continue to deflate wages while assets are allowed to bubble away. Everyone feels great about things until the asset bubble blows up, and then what is left is debt. You then have joe blow who makes less than a man in his 30’s during the 1970’s with no prospect of ever paying off all the debt he has accumulated.
At the same time, you have the elites continually dumping dollars and credit into the system to devalue the dollar and screw the little guy with less purchasing power.
We are screwed folks. The America we love has been transformed into a banana republic.
Barringo, I have to dig on you a bit… friendly of course.
I find your attitude regarding supposed life-time contractual promises GM gave UAW members a little at odds with your vocal and repeated objection on this blog to the enforcement of intellectual property rights in digital music and other media.
I would think that protecting intellectual property rights would be far more important to a person so strident for a dying industry to keep unrealistic promises it made in thriving times… to a union no longer capable of enforcing the promises.
Aren’t we really talking about two identical situations? In both cases parties with actual or supposed rights have simply -in the case of the union because of a lack of leverage, and in digital media because of technological change and irresponsible legislation – lost their ability to enforce them.
You asked KP: “I assume you do believe in contract rights?”
…Do you?
The UAW and GM are adversaries, with both sides arguing about something that might already be a moot point. If a turnip promises blood, it’s still not possible to extract it regardless of the promise offered. If it were beet red when it made the promises, but turnip pale when the promises were demanded… makes no difference to the turnip-ee… the turnip-er still has no blood to give.
I think the loss of intellectual property rights protections will create a far more untenable environment than that occuring between two entities wrestling over rusting iron.
GM should have been funding these plans. Somewhere along the line the system broke down.
America is just broken, in so many ways.
FDIC IS to big to fail. GM et al is NOT. The government realizes that if the FDIC fails, it’s game over. I honestly can’t imagine that being allowed to happen.
To the point of inflation overtaking depository institution rates, yes, in recent history that has definitely been the case. However, in my view the biggest risk in the longer view ahead of us now is deflation.
Fact is that if your principal is not guaranteed then…well it’s not guaranteed. Those black swans are rare but also incredibly painful. I’d rather have two savings buckets, one with guaranteed principal and one to chase higher risk.
It is my opinion that by and large a lot of people are losing sight of how much risk actually exists in their retirement strategies, and I don’t want to have to bail them out later. The few savers that remain are already penalized enough.
D is correct.
If we believe kp “and it’s a tragedy that it never occurred to these folks.” you assume your boss is a liar.
Back then, when Watson said you make less money now because when you retire you will have company paid health care and a good retirement, who the fuck would be smart enough tho think he was lying?
There is no warning now, its just gone and it is way too late for anyone to make it up.
Did Sam Palmisanno lose his health care? Hell no, and he doesn’t even have to pay copays. If the company can[t afford it he should cut his first, not never.
Today when you read IBM and Microsoft can’t get anyone to work there, its not that we work up and forgot how to do our jobs, its that nobody WANTS to work there. They know somebody that works there and loses a little more health care each year, has lost their pension or has lost their job.
D is right and the day of reckoning is upon us. When the government can’t fund health care for children and yet has another $193 BILLION for Iraq…. Well its coming and it won’t be pretty.
KP-“Guaranteed Principal”.Guaranteed by whom? The feds? An insurance company? There are no guarantees, only various levels of default possibilities. Insured municipals? Legislative risk and inflation risk are as important as market risk. What the government gives the governmnet can take away. Diversifying risk is the only way aside from gold and guns. Whose fault is it that some folks, through ignorance and greed, take inappropriate risks?
Barry- Labor contracts within the context of the 1935 Wagner Act are coercive in nature. Labor monopolies, protected by law, are contrary to what should be freely agreed upon arrangements. The current condition of old-line American manufacturing can be directly tied to legislation favoring ‘labor’ as if the labor theory of value was gospel and property rights are theoretically subserviant to abstract ‘labor’ (Says who?). Protected unions can sign all the contracts they want but economic reality always wins.
>> GM should have been funding these plans. Somewhere along the line the system broke down.
There is a recurring pattern here. The concepts of “externalities” and “private profits, public risks” comes to mind.
The GM execs turned “future debilitating pension and healthcare costs” into externalities — costs not to be borne at the time by any party to the current contract.
Company executives intentionally lowered expenses (funding the plans) to *temporarily* boost company stock and bonuses. (“Temporary” could mean 10-20 years. But, even 2-5 years is often “enough” to make the shenanigans worthwhile.) Eventually, they’re gone and they leave the empty bag to workers, shareholders, and the government (taxpayers).
This is the “rot” inside capitalism. If we could stamp it out, we’d be much better off. It’s more difficult to “allocate capital efficiently” and serve the consumer when the captains of industry purposely distort the accounting.
Nothing brings out the hysterics like workers trying to stand up for themselves.
The only reason why the US didn’t go down the Libertarian/Capitalism crapper was because Unions were able to counter the power of employers. Say what you want about both parties being equal, but a employer can get along quite fine without an individual for a longer time, than the individual can get along without the employer.
Maybe if workers got together and called themselves corporations instead of unions they’d have a lot more power.
me: It’s a bit more subtle — a lot of people they want don’t want to work there, and they effectively don’t want a lot of the qualified and sufficiently motivated who have come to the realization that most jobs are just that, jobs. The same is true for most “mature” companies. At the end of the day, they are looking to hire somebody because some work or other needs to be done.
Eclectic,
“However, it wasn’t all cake. I think we’ve just witnessed the death sentence of the UAW. Basically they cut the best deal they could for the benefit of the dying breed, but something the UAW held dear for all these years since their formation — Growth!– was just let go, tossed overboard for the benefit of temporary survival.”
I’d venture just the opposite.
Because of this new contract, GM will be building several cars inside the U.S. that are or would have been built outside the country, which should result in increased membership. Just two examples:
* The new FWD Gamma platform, which will compete with the likes of the Honda Fit and Toyota Yaris, will be a replacement for the current Aveo, which is currently built in South Korea.
* The RWD Alpha platform, which will be a replacement for the Pontiac G6, was scheduled to be built in Mexico, but will now be built in Ohio instead.
.
VJ,
I actually hope you are correct, for the sake of the U.S. economy. However, I find it hard to believe the UAW can net new members consistently from now.
We’ll see.
Dervin- Anti-trust doesn’t apply to organized labor.Closed shop rules would be a no-no. Only labor markets can be monopolized.If they operated under similar rules and regs they’d be out of business. 400,000 UAW members at GM in 1970 vs 75,000 today. Way to go!
GM’s “promises” are the expected response to union extortion (threat of strike). Because of unfair labor law, GM’s hands are tied. In a truly free market, GM could (and should) fire everyone the second they walk off the job, hiring replacements at a free market-determined compensation (currently about 1/10th the current UAW labor cost.)
No binding “contract” for pensions and retirement benefits (or anything else for that matter) can possibly exist when made under such circumstances.
“… hiring replacements at a free market-determined compensation (currently about 1/10th the current UAW labor cost.)”
Even if you use the total compensation labor rate of $75/hr that’s frequently used to make the average UAW fellow appear quite wealthy, 1/10 of that is only $7.50/hr.
$7.50/hr is the figure GM advertises as the total wage/benefit cost for their Mexican plants.
So, USA = Mexico? What a lovely future you’re trying to create for America, Mr. Potter. My choice is Bedford Falls and I’ll fight for the ol’ “Building and Loan”, thank you.
engineer- Fight all you want. I’ll even fight with you (not sure who we’re fighting) but 75,000 UAW GM clients vs 400,000 30 years ago means we’re fighting a losing battle.
Bedford Falls has been renamed Plaza de Potter, and the old savings and loan is now a pawnshop.
If there was any more evidence needed that class warfare (the top attacking the bottom) was in full swing in the US, see if you can find Jim Cramer’s appearance on Hardball (MSNBC) just after the GM strike started. In essence, Cramer stated that GM needed to “break the union,” just like Caterpillar did in the 1990s, and that if it succeeded, GM stock would go to $150. And in Cramer’s opinion, Wagoner was just the manly man to do it.
Uncle Jeffy- Are you on the bottom? Would you like to always be at the bottom? Keep up the class warfare gibberish and those poor souls on ‘the bottom’ will stay there.
At a competitor company of CAT several years ago, the older UAW employees made $25/hr while the new hires made $8.
Piece work pay for the senior people was arranged traditionally to reward them for the more they produced. The new hires worked under piece work rules that functioned in the opposite. Past a certain minimum, the $8/hr gents saw their piece rate pay reduced as their “reward” for producing more.
The result was co-worker fist fights and “keyed” personal vehicles. Now that was real “class warfare”.
The company solution was obvious: no more “new permanent hires”, only temps.
“You sit around here and you spin your little webs and you think the whole world revolves around you and your money. Well, it doesn’t, Mr. Potter. In the whole vast configuration of things, I’d say you were nothing but a scurvy little spider.”
Fist fights among co-workers is class warfare? What color’s the sky where you live? You hire temps w/o benny’s when the contract for the ‘senior’ guys needs to be subsidized, if you’d like to keep the doors open. Even George Bailey would understand that. He ran a business.
Tom C – sorry to be so late getting back to you, but I work for a living. And in point of fact, I’m not on the bottom. (Are you a bottom?) According to the Census Bureau’s report, “Income, Poverty, and Health Insurance in the United States: 2006 (available at http://www.census.gov/prod/2007pubs/p60-233.pdf), Table A-3, p. 38, I’m in the 95th percentile – oops – probably higher, inasmuch as my 2006 income (just finished my tax return – love those extensions!) was actually above that. So I’m not worried about myself – I’m worried about a lot of people who are well below me on the income distribution ladder.
By the way, calling my point “class warfare gibberish” is name-calling, possibly the most despicable – and ineffective – rhetorical trick of all. But having seen your other posts here, I admit I’m not surprised.