UAW vs non-UAW

George Orwell · 2007-05-23T12:00:12+00:00

Wall Street Journal - May 23, 2007..With the collapse of the DaimlerChrysler experiment, it might be useful to stop referring to "domestic" and "foreign" auto makers. The important distinction is between auto makers bound by UAW contracts and those that aren't.Chrysler's labor costs are $30 an hour higher than Toyota's, headed for a gap of $45 by 2009. Chrysler pays the same wage to UAW janitors and skilled craftsmen. It carries idle workers on its books when no jobs are available. Most of all, it's on the hook for the untrammeled health-care spending of 134,000 unionized workers, retirees and dependents -- an $18 billion liability that Toyota, Honda and Nissan don't face. This alone adds a cost of $1,500 per car.How it got this way is no longer interesting -- the tired debate over which stick figure, "labor" or "management," is responsible for Detroit's uncompetitive labor deals. Both operated under the incentives of the Wagner Act, the 1935 labor law that entrenched the UAW as the monopoly labor supplier to the Big Three.Detroit draws on the same talent pool as the rest of global industry, and must pay a competitive wage. Its executives are no more overpaid or incompetent than anybody else's. Nor is it necessary to rub its face in the superiority of the Toyota Camry and Honda Accord. No car company could humanly hope to compete in the basic sedan segment with a deadweight cost disadvantage of thousands of dollars per car. Detroit would be foolish to try...

May 23, 2007 21 Replies

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Joe 19 years ago

You need to remember here that the reason legacy costs hurt is that there's shrinkage instead of growth. If the company grows today, then the amount of retiree cost per car is smaller today. If the company shrinks, then the cost goes up, and the company has more and more difficulty competing. In Ford's case, the shrinkage is getting to be pretty painful. Even if the Big

3 stayed the same size, Toyota's growth still helps Toyota work at an advantage.

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Edwin Pawlowski 19 years ago

So what if they were crap, they were selling. Many of the sales were to foreign governments that put a bid out and the low price got the sale.

My point is that we are competing on a global scale. While the company and union was arguing about wages here, the government of Burma or Sudan or wherever bought the backhoe from Kubota.

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