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Ron Gettelfinger, Preident, United Auto Workers Union
Unions destroyed the Michigan Auto Industry
The U.S. suffers from its worst recession since the Carter years, with unemployment rates hovering near 10%. Yet Michigan’s own battered economy makes the national rate look like an economic boom by comparison. Since taking office in 2003, Democratic Governor Jennifer Granholm, has mismanaged the healthy state economy that she inherited from her predecessor, Republican governor, John Engler. To understand this clearly, you need first to see the employment numbers during the three terms of Engler, starting in 1991 and ending in 2002, then compare those numbers to Granholm’s first term and her current and final term today.
When John Engler took office on January 1, 1991, he faced an unemployment rate of nearly 9.9%. Under his predecessor, Democratic Gov. James Blanchard, Michigan’s unemployment rates exceeded the national average by as much as 5.8% points. By the time Gov. Engler completed this third and final term in 2001, the Michigan economy was prospering at record levels. By November 2001, Michigan’s unemployment was only 0.4% above the national average. From 1992 to 2001, Michigan saw its greatest job growth in decades, with growing employment at 16.8% and a record 4,674,000 Michiganders employed by late 2000. This number is out of a total Michigan population of 9.5 million, with a record low unemployment level near 3.8% by November 2000. When Engler left office at the end of 2001, the economy had slowed slightly prior to the 9/11 attacks. Yet at the end of 2001, after the attacks had already impacted the national economy, Michigan still tracked to the national average of about 5.5% unemployment rather than above.
Since Governor Granholm first took office, the total number of jobs lost has grown to almost 800,000, meaning at least that many Michiganders are standing in the unemployment lines. The vast majority of those jobs are in the auto manufacturing sector , their suppliers, and all businesses that serviced the auto industry. This does not take into account those Michiganders who have simply given up on seeking employment nor does it take into account the several hundreds of thousands who have decided to move out of the state for better economic conditions in other states.
During Granholm’s first term, Michigan’s unemployment shot up to around 7% or higher. Obviously there were several outside factors that contributed to this dire statistic, including the impact of the 9/11 attacks, however, the auto industry has suffered more than all other business sectors by far. Auto makers and the unions should have seen the warning signs at least 10 years ago. Instead, the Big 3 chose to rest on their laurels by primarily focusing on proven “winners” such as minivans, pickup trucks and SUVs, while the unions continued to demand more and more of a shrinking economic pie for themselves while not considering the consequences.
In the 1980s and 1990s the automobile industry found itself struggling to compete in the global economy as Chrysler, Ford and GM lagged behind foreign competitors to manufacture higher fuel efficiency vehicles and investing in newer technologies to respond to shifting market demands. While Japanese and German autos were being built to get maximum fuel efficiency, developing and advancing “smart car” technologies, the Big 3 were building SUV’s and pickup trucks that used much more fuel than the foreign competitors. Even though the demand for such large vehicles was there during that time, the Big 3 could still get away with investing more into those types of vehicles and continue charging inflated prices at their dealerships. As long as there were buyers willing to pay more for an American-built vehicle and gasoline was cheap, it was not an issue. After all, it is a free market, and at that time, the formula was still working. However, trouble was brewing on the horizon, and no one seemed to be planning on how best to meet the coming challenges in Lansing or Detroit.
The first challenge was the 9/11 attacks and a shakeup of consumer confidence. There was a real fear that Americans would lock up their wallets out of a fear that further attacks would create an economic crisis. The second challenge that followed immediately was gasoline prices started to shoot into new highs. As the cost for a barrel of crude rose up to $70, doubled by the scarce number of refineries in America, gasoline has never really gone back down to pre-9/11 levels, making it very expensive to drive fuel-intense vehicles such as a Hummer or Ford F150 Pickup Truck. The auto industry made no effort to really plan on this market change until after they started getting hit with negative numbers. To get into competitive shape would require major changes in the US auto industry, as far as outsourcing non-core capacity items, eliminating waste and unnecessary processes on the manufacturing floor to drive down production costs would be required to make Detroit lean and effective competitors. Since unions do not thrive in efficient and effective environments, as such a workplace is not conducive to their funding, the UAW and Teamsters would become one of the biggest hurdles Detroit faced in upgrading to compete in the 21st century.
One major hurdle facing the Big 3 is the simple fact that they pay nearly 3 times as much in wages to their employees than the foreign automakers. Because all Big 3 autoworkers are members of the union rackets, the Big 3 had no choice but to continue paying off the collectors from the unions “for protection” from strikes and shutdowns. In addition to the $80 per hour wage of an average union auto employee, the unions also demanded that the Big 3 provide extremely generous benefits, such as full medical coverage and a requirement that the Big 3 must pay all laid-off union members up to 80% of their full employment wages while idle. Of course, once the huge pensions and benefits enjoyed by union members can be added to this mix, and you have a recipe for disaster. These unsustainable costs to the auto makers, when added to the overbearing benefits to the unions, have essentially priced Detroit’s vehicles out of the market. The high costs of paying the artificial wages and benefits “protection” demanded by the unions have almost destroyed the City of Detroit and, to a larger extent, the economy and image of Michigan.
In the past, the unions could count on American consumers to pay for US-built cars with nary a thought to the inflated dealer prices. In the 1980s, when the economy started booming under President Ronald Reagan, fuel was cheap and everyone seemed to have disposable cash, it was deemed as a patriotic duty to “buy American” such as the K-car from Chrysler as a means of communicating to the world, and especially, the Japanese, that foreign investment to locate manufacturing plants in the US would be a costly failure. The message was loud and clear, but it was not effective. For a short while, the Big 3 and the unions with whom they made a deal enjoyed a rebound of sorts, as Americans bought purchased US cars to show their loyalty to the American auto industry.
However, the foreign automakers continued to make advances in automobile quality by designing better vehicles, developing more efficient and effective manufacturing techniques. These companies began investing in US property and locating new plants in “union-free” Southern States. They were able to build vehicles as good, or better than Detroit, at a higher profit margin and lower cost due to the simple fact that they were not held hostage to the union’s artificial patronage racket. Eventually, as the economy soured and consumers started to see foreign cars with better technologies and fuel efficiencies that were lacking in contemporary American- built vehicles, they started to buy foreign. The lower prices for a new, sleek, well-built and technologically advanced Mercedes, BMW, Toyota, Lexus, etc, without sacrificing quality and performance began eating into the domestic market that the Big 3 and the unions had dominated for almost 75 years. It was the beginning of the end.
When the non-union wages for autoworkers are $30 per hour as opposed to union-made vehicles at $80 per wage hour, it does not take a rocket scientist to see how negative the impact was going to be on Detroit. By the 1990s, consumers found they no longer had to accept the skyrocketing costs of American-built cars. They could proudly buy foreign autos while no longer being shamed by the unions crying foul or making accusations of being “un-American.” Over time, this led to the fall of Detroit’s auto-makers, which, in turn, started to have negative domino effect on the thousands of suppliers who depended on a healthy automobile industry and all other businesses that provide service to this huge sector.
Yet, even today, in an era when the U.S. government is a majority holder in General Motors, when even the U.S. President has a say in what cars GM will be allowed to manufacture and who will be the corporate chairman, it becomes clear that the UAW and Teamsters continue to think, like parasites, only of themselves and not about the host upon which they feed. The unions have played a major role in destroying an auto industry that was once the envy of the world. Even today, when GM and Chrysler are literally struggling just to exist, when GM stocks are worth only pennies and consumers are flocking to other makes and models, the unions continue to bite the hand that feeds them, demanding still more of the Big 3 in terms of unrealistic wages, benefits and gifts.
It is ironic and sad that the unions continue pressuring the Big 3 with unsustainable demands that will all but destroy the shell of the once-great U.S. automobile industry. Like the parasite that eventually kills its host, in turn, killing the parasite, so too the unions kill the remnants of their livelihood, which will destroy the unions eventually lead to the end of the unions themselves.
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Comments
Anyone with an ounce of common sense knows the Unions destroyed the auomakers industry. Money grubbing greedy, blood sucking LOSERS literally sucked the companies dry!
Jess
www.anonymous.ua.tc
Yes, those bloodsucking losers don't desire good paying jobs and benefits. They are the bottom of the ladder so screw em. We need to realize in order to save the automakers we need to send the plants over to china. No unions, cheap labor. I mean come on America wake up. And yes I am being sarcastic...
workers do NOT make $80/hr!
They may not make that much but they do cost the company that much. You can not base the cost of an employee by the amount they take home. The blood sucking unions and the blood sucking government charge an employeer for creating jobs. That is the main problem in our country today and things like Obamacare make that cost go higher.
Think about it
Social security
Federal with holding
unemployement insurance
health care
workmans compensation
pensions
vacation pay
sick pay
The sad reality is an employee that is not worth $10 per hour because they have no skills costs almost $30
Unions and government regulations are destroying the economy and they will continue to bleed it dry as long as they can stay in power. What is happeing in Detroit will spread across this nation unless someone stands up to the unions and the government and start making it reasonable to employ Americans. The sad reality is that it is easier and cheaper for an American company to provide foreign jobs than local. As long as that is true expect life to get worse.
- Japanese automobile companies are unionized.
- European Automobile companies are unionized.
- US cars are (on average) cheaper than foreign cars.
- Union workers didin't decide to focus on building gas guzzling SUV's when the consumers wanted gas efficient cars.
UAW has it's issues, but management certainly shares some of the blame.
What is your point? As a 20 year member of the UAW I can tell you that we deserve the pay that we get. It's irrelevant what other auto makers pay there employees. My fellow union members and I don't care what happens to "stock holders". We don't care if the company is viable in 30 years. We will all be retired long before then and the Federal Government insures our pensions so who cares if GM or Chrysler are still around. We got the most we could and you would too.
Yeh and your an IDIOT
You are pathetic, who cares if GM is not around as long as you get yours. The big 3 used to be something this nation could be proud of. Places like Detroit used to thrive and know it is decaying. You so deserve the unemployment line. If there is true justice I hope that it finds it's way to you.
.... and if you want to blame management. Blame them for taking a job at a company where the Union had them by their short hairs. We strike. We get what we want. Everyone else can sucks eggs. If you were stupid enough to invest in GM (or still are that stupid); sucks being you.
You love the Union cause they will keep your lazy ass around no matter what you do....you lazy bum
not really a union member are you ? just a red herring.
In reality this article is useless. It starts our by bashing a democratic Governor with no evidence or reasoning only numbers that he stats have outside influence.
Also the pay/hr for union workers has already been ousted as a misrepresentation/falsehood. Also the Big 3 had the ability to build better cars instead they invested in the hummer. Americans didn't just go for a cheaper car by buying foreign, and many cases it wasn't cheaper, they went with a higher caliber car.
The author of this article is a moron and is trying to simplify a complicated issue into pointing fingers. Why not look at the paychecks of the top execs of the Big 3 then at the monthly income of a union worker. Political crap is all this is. No true analysis but it had one intended goal rather than analyzing the facts.
The unions played a big role in the downfall of the US auto industry, but the big 3 also failed to change with the markets. I own a Ford, but I will never again buy American made car, they are crap in quality. I truly want the big 3 to fail, take the workers and go to different companies like Tesla.
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