Friday, May 8, 2009

How the Unions Screwed the Auto Companies (And Will Continue To)

 In our brave new global manufacturing world, those who travel the globe have an interesting perspective to manufacturing and the costs associated. For instance, warehouses in Mexico, China, India, Hungary and the USA all look remarkably alike. They all use the same yellow forklifts, made by the same company. They all have some form of green and orange painted steel pallet racking, where pallets of automotive parts are stacked all the way to the ceiling. The concrete floors are nearly identical, as are the steel roll up dock doors, and the trucks that are parked as they are unloaded. The folks that are driving the forklifts, and doing the work may look different, but they are much the same, and they do much the same job.

The massive disparity is only seen when you go outside the factory, and you see the houses in which the workers live.

For instance, in Mexico, the government builds housing outside of the maquiladoras (factories) for the workers. In an effort to draw companies to Mexico, modern looking concrete tenements are in place outside of many of the factories, and many folks have cars and some of the trappings of the Western world.  

 Not so in China where few own cars, and most take public transportation to the ghettos of corrugated aluminum housing where they live. Some are lucky enough to have dormitory like housing in the factory where they work.  

In India, many ride bicycles to the huts constructed of mud that they call home.  

In Hungary, the wood from the discarded pallets thrown out of the back of the factory as trash, can be seen in the construction of the houses where the workers live. 

In South Carolina where I live, the average forklift driver wage is in the $9-$12 an hour range. Folks may have older cars, and often live in single wide trailers out in the country.

All these folks do the same job as the union autoworkers. So how do the autoworkers live?

Let's take Randy for an example. He's been with the union 14 years. His aggregate salary is $76 an hour, when all benefits and perks are included. In some cases he's paid overtime after working only five hours in a single day. He lives in a 2500 ft.² brick house, has a summer cottage up north, a nice 23 foot boat, a nice motorcycle and drives an Escalade. In another 16 years, at the age of 48, he will be able to retire with nearly a full income, and full medical and dental benefits at little or no cost to him. Like most of his coworkers who have retired, he is likely to take a job to "supplement" his income. If he is caught being late repeatedly, showing up drunk or high at work, has low production, makes a lot of mistakes, his company cannot fire him. He gets raises regardless of his production or performance,  and if his company goes through hard times  and needs to lay him off, he will likely draw full benefits and wages.  Hard for an automaker to save costs in tough times that way. 

When it comes time for his company to negotiate new wages, he will vociferously fight to retain or even gain more compensation than he already has. He will likely cite Henry Ford as saying that the workers should be able to afford the vehicles they make. No matter if Henry was referring to an Escort rather than an Escalade.

All this, when Randy has a high school diploma, and no more education or ability than the workers doing the same job in other parts of the USA or the world.

Non-US auto companies, and manufacturers of all kinds across the USA, are paying fair wages (aggregate $20-$30 an hour) to folks who are doing the same work as Randy is for $76 an hour. In Mexico the same kind of worker makes four dollars an hour. In China, four dollars a day. And Randy is campaigning and complaining about his $76 an hour.   

In other companies competent managers push for higher productivity and increased pay to incentivize good workers. But the unions do not allow such "nonsense", instead pushing for less production for the same pay, setting limits for production during an full workday and forcing promotions for even low producing workers. In other companies employees buy into productivity, quality products and competition, in the union making it to retirement with as little work as possible is the motive, and your job pays the same if you make a quality product or not, and whether you make a lot of it during your eight hours or not. 

Which brings up the issue of productivity.  Truck drivers to deliver to union auto plants become frustrated by the obtuse regulations that govern how slowly the UAW can do its job.  At most non-union facilities, you pull your truck with him into a loading dock, and a forklift driver will look at your paperwork, quickly and efficiently unload your truck and sign the paperwork. The process should take no longer than an hour, by one person.  

But in the union plant there are hoops to be jumped through to ensure that all sorts of people who don't have anything to do are given a piece of the pie. A truck driver will first have to find the office where the paperwork should be turned in. Usually this paperwork person is on break, so the truck driver has to wait 15 minutes to an hour just to find out what dock they should pull into. When the truck is finally in the dock, a forklift driver may not unload the truck. You see, the dock plate is hydraulic, and is operated by pushing a button. This complex task can only be accomplished by an "engineer" from the electricians union. And guess what, the "engineer" is on break. Another 15 minute to an hour wait while the "engineer" is located, and comes cruising up slowly on his three wheeled bicycle. His work is easily accomplished in 30 seconds, he pushes and holds the green button that lowers the hydraulic dock plate into place. This complex job being done he wheels away to sit in an office and do nothing until someone else needs him.  

Now finally after all this time a forklift driver is allowed to enter the truck. But does this forklift driver move quickly? No, there is no incentive for him to move quickly. The slower he goes the better off for him. I have quite literally seen forklift drivers creep at a slow crawl that enables them to stretch a one hour load into four hours. When asked why, they will honestly answer that they are paid by the hour and there is no point in going faster. Now comes the charade of the "engineer" being summoned to make the 15 minute trip from across the plant to do his thirty second job again. And of course the paperwork person who is required to sign off what the forklift driver unloaded is on break for lunch again. Four to eight hour waits are not unusual for truck drivers delivering to union auto facilities, an infuriating fact for those who are paid by the load, not by the hour, and know that an hour at most is needed.

Extrapolate this small picture of UAW inefficiency on one truckload of materials being delivered, into hundreds of trucks per day.  Or into thousands of vehicles made on assembly lines using this slow unproductive approach by frankly lazy union workers desperate to keep and protect their job rather than to keep their company productive and profitable.  How can I stretch the four hours of work I have, into the eight hours it needs to be so I can keep my job? 

Look, the unions had a good effect on the system 75 years ago when low wages and worker abuse were the norm. No one disputes they were necessary then. There was nothing wrong with Americans leading the way to a prosperous and happy middle class.

So its high time now that they take a look at the reality felt across the rest of the world now.  The UAW workers should understand the incredulity and anger toward the UAW that all the other Americans have across the USA who do the same damn thing for a living. They should understand that there are many Americans who have little or no sympathy for this whining of the union workers who are now being forced to give "concessions" that "lower" them to a new level of employment still far above most American workers. Really, who do these uneducated folks holding $76 an hour day labor jobs that should pay $12 an hour thing they are?

Other companies are slashing workforce, cutting salaries and benefits, and asking workers for more production in an effort to be profitable. But the UAW provides a foolish charade that they are making "concessions". What deep cuts are they taking? That overtime be paid after 40 hours a week on site, like all other Americans. Oh, wow, like, that was really a big one, good job guys. Lets see some serious cuts brought to the table, wage reductions bringing them into line with  what Americans in the rest of the country make, lets see some serious effort at incentivized pay for quality and production. Instead its more complaining about how bad they have it. Well go to India dude, and let me know how that makes you feel to see the same job done, with far better quality control than you have done, for so much less. If you want to make $76 an hour, go to college and make something of yourself. Be real.

In the Obama administrations view, the right thing to do is continue and empower this disastrous UAW model by turning 50% of Chrysler and GM over to the very entity that strangles it. Over the last 15 years, GM and Chrysler have been loaned over $36 Billion of cash by average Americans, and this has subsidized the losses caused by the UAW. Now the Obama administrations view is that all these people should walk away from the cash they put into Chrysler and GM, and just give it to the union workers. What insanity.

Until the UAW brings itself and its pay structure into line with reality, the companies it strangles will continue a slow choking death. Lets hope there is some change....