Hiding the UAW Behind a Giant Strawman Isn't a Help.

| December 22, 2008 | Reply

I don’t think it’s controversial to say that the UAW has been a major cause for the slow collapse of the Big Three automakers. Eric Peters, writing in the American Spectator, apparently does, and he attacks the subject with such vigor that he’s left a fact or two on the side of the road in his quest to mow down a strawman.

Here’s how he starts.

I am not a huge fan of the UAW.

It has been obtuse, even obstreperous. But the idea that the collapse of General Motors and Chrysler Corp. is the fault of the unions is swill of the worst sort. Because not only is it false, if accepted it will simply mean that taxpayers are made to shovel more money down the gullet of companies that won’t make the necessary changes to their business model because they haven’t been forced to confront the fact that their problems have not been caused by “the unions” — the braying mantra they’ve been falling back on for years now.

I’m not sure where Peters gets his information, but I don’t know anyone that’s blaming the UAW for the entire automaker bailout mess and I don’t think that Peters can find anyone making that argument either (else he would likely have quoted someone). It has been a major cause, as Mark Steyn ably details, but it’s far from the only cause. This, however, is Peters’ strawman and he’s going to pummel the bejeezus out of it.

Unfortunately, his first point nearly caused me to ruin my keyboard with spewed iced tea.

While almost everyone in the media and elsewhere is talking about the failure of the industry, note that Ford is not in trouble like GM and Chrysler are in trouble. It is GM and Chrysler that are on the verge of bankruptcy. Ford itself is healthy — and only in danger of being dragged along with GM and Chrysler because the collapse of those two would have a catastrophic ripple effect across the entire industry. Toyota, Honda and all the others would be gut-shot, too.

And yet, Ford uses UAW labor just like GM and Chrysler. But Ford somehow makes money — or at any rate, loses less than GM and Chrysler have.

I don’t know what Peters’ definition of “healthy” is, but it’s certainly not one in common use among businessmen. Ford just posted a third quarter operating loss of almost $3 billion, watched its stock drop six percent, and burned through $7.7 billion of its cash reserves. Its second quarter loss of $8.7 billion was its worst loss ever, and experts are estimating that it’s spending about a billion dollars more a month than it’s making. Last year about this time, Ford stock dropped 19 percent. That’s healthy?

The only reason Ford isn’t begging for a bailout as hard as GM or Chrysler is because it spent the end of this year scrambling to keep enough liquidity to make it through 2009. When a company has to drop workers like leaves from a tree in autumn just to keep enough cash on hand to forestall bankruptcy, it is the exact opposite of healthy.

It’s certainly true that Ford is in better financial shape than GM or Chrysler, but “less sick” does not equal “healthy”.

As for his contention that Ford loses less than GM, he should probably check our those article I posted. According to the Reuters article, GM only burned through $6.9 billion, which is 800 million dollars less than what Ford spent. Though in fairness, GM’s operating loss was larger than Ford’s and that’s what he could have meant, but we should take into account that GM’s sales were way off last month in comparison to Ford’s so you’d expect GM’s losses to be worse.

I mentioned Mark Steyn earlier, and it’s time now to bring his column of this past Friday to the front. Here’s how he describes the financial obligations the Big Three have thanks to the UAW.

The UAW is the AARP in an Edsel: It has three times as many retirees and widows as “workers” (I use the term loosely). GM has 96,000 employees but provides health benefits to a million people.

Peters needs to explain just how paying pretty expansive health benefits to ten times more people than are on your payroll isn’t a major cause of GM’s financial problems. Does he really think that if GM couldn’t cut their UAW-imposed expenses by, say, half, they wouldn’t be in nearly as precarious a position? They might even be as “healthy” as Ford!

The rest of Peter’s article does make sense. None of the Big Three has managed to adapt their business plans to the demands of today’s auto consumer. They all make cars that fewer and fewer of us want to drive, and they’ve spent a lot of years frittering away the strong brand loyalty that they’ve enjoyed for decades.

That doesn’t let the UAW off the hook and it doesn’t excuse Peters’ strawman. So long as those legacy costs remain in place, the Big Three can never be competitive. The UAW stubbornly refuses to acknowledge that fact even as the Big Three admit that they need to make serious and fundamental structural changes. Until the UAW faces reality, it will continue to be a primary cause of the Big Three’s continuing failure. Peters isn’t doing anyone any good by accusing whoever he’s accusing of argument they haven’t made.

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Category: The Economy and Your Money

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