The Recession

Don't Blame the UAW for the Auto Industry's Problems

| by Economic Policy Institute

The problems of the Big Three are not the result of the United Auto Workers (UAW) union, which has cut labor costs by billions of dollars.

The problems are the result of the credit crisis, which has wrecked the market for auto loans and made it hard to borrow enough money to buy a car; the spike in gas prices earlier this year which wrecked sales for SUVs; and, the overall economic crisis, which has wrecked consumer confidence, shrunk payrolls by more than a million dollars and left more than 10 million Americans unemployed. All car sales are down, including Toyota’s and Honda’s.

Labor costs are only 10% of the sales price of an average vehicle. But the UAW has done its part to ensure competitiveness. UAW contracts allow the Big Three to hire new workers at about half of Toyota’s $25-$30 an hour wage rate. The biggest competitive drag on the auto companies is the cost of a million retirees -– the result of being in business in the U.S. for the last 75 years.

The Japanese manufacturers in the U.S. haven’t been here long enough to have more than a handful of retirees and don’t take responsibility for their health care. But even that cost was cut in half by the last two UAW contracts. Don’t blame the UAW for failure to pass national health care reform.

If you think UAW workers have unproductive work rules, get this: 9 out of the 10 most efficient auto assembly plants in the U.S. are UAW plants. And, by the way, Toyota has a “job bank,” too. When good, experienced workers are temporarily laid off, smart companies don’t want to lose them to another employer.

Whatever you think of the Big Three’s products, remember that the UAW has absolutely no say in design choices or whether GM will build trucks or sub-compacts, let alone what their mileage will be. Where they do have a say, they’ve fought to keep the Big Three’s factories in the U.S., to make factory work safer, and to earn fair compensation for a life of physical labor.

And when you hear people complain that UAW members make $55,000 a year, remember that that’s one-third what the average financial services worker earns, yet no one suggested forcing bank and brokerage employees to take pay cuts when their companies were bailed out.

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