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Apples and Oranges

September 28, 2019 (1,559 words)

There are some 50,000 employees of General Motors who are currently out on strike. They are all members of the United Auto Workers, the same union that represents similar employees at Ford and Chrysler.

The contracts between each of the Big Three automakers and the UAW do not run concurrently. They have different term limits and so expire in different years. The idea is that negotiations with one automaker will sort of set the tone and raise the bar for the next round of negotiations with one of the other two companies.

In the case of GM their factory workers made substantial concessions ten years ago, in the wake of the financial crisis of 2008, in order to help the company remain afloat during perilous times. Now that the auto industry has turned a corner, and General Motors is once again recording healthy pre-tax profits – $10.8 billion in 2018 on $38.4 billion in revenue – union members are looking for their fair share of those profits.

Yes, the profit-sharing check of $10,750 that was announced in February for every one of GM’s UAW members was certainly a step in the right direction. But if my math is correct those bonus checks total up to a mere $54 million, which hardly makes a dent in that $10.8 billion of pre-tax profit.

Of course, even those of us who have no head for big business realize a company can’t distribute all its profits every year to its employees. Reserves must be held for various contingencies such as maintenance and replacement costs, not to mention the all-important category of research and development.

And GM is making that very point in these negotiations – the need to allocate a portion of their latest $10.8 billion windfall to the development of new, electric car technology.

looking for promises of job security…

In addition to higher wages and a cap on their healthcare deductible, union members are looking for promises of job security, along with asking that the legion of “temporary” GM workers be given full-time status, and the same top-line compensation package.

In response, General Motors says it’s counting on those temporary workers and their lower wages and benefits to help keep labor costs in line. The challenge of remaining competitive is a familiar rallying cry, especially in light of the many foreign automakers now operating non-union manufacturing facilities here in the States.

For a behind-the-scenes look into this dynamic, please consult the new Netflix documentary American Factory. It illustrates the financial pressures being applied to both management and the common workforce in a most even-handed manner. A simple Google search turns up the following synopsis:

In post-Industrial Ohio, a Chinese billionaire opens a new factory in the husk of an abandoned General Motors plant. Early days of hope and optimism give way to setbacks as high-tech China clashes with working class America.

In the hands of these observant filmmakers, the story is much more nuanced than a simple tale of a greedy overseas billionaire setting up shop here and exploiting the locals.

We see a bevy of Chinese managers and supervisors – experts in the manufacturer of auto glass for windshields – attempt to train and oversee the down-on-their-luck, recently laid-off GM workers. The visitors have their work cut out for them, trying to get middle-aged men and women to learn the nuances of a complicated process they are completely unfamiliar with.

almost coming across as lazy…

Compared to the super-motivated and (for the most part) younger Chinese, the older Americans don’t look particularly engaged. At times they almost come across as lazy. The viewer should keep in mind, though, how difficult and frustrating it must be to cope with a hyper-demanding production line, while being paid less than half what you were earning at your previous job.

When the plant is still not profitable after the first year, changes are implemented. The Ohio native and auto industry veteran, initially installed to lead the new endeavor as its president, is replaced with a Chinese National. Staffing on the shop floor is cut, in a desperate attempt to bring labor costs in line with projections.

We see a middle-aged woman, who stared as part of a two-person team, now left alone to inspect finished windshields coming off the line. This involves picking up a heavy windshield from the conveyor belt, and placing it on a stand with a number of other windshields. One windshield after another, all day long, all by herself.

What American Factory quietly dramatizes is a classic clash of cultures. The Chinese seem to eat-sleep-and-breathe their job. They bunk six to an apartment to keep living expenses to a bare minimum. We see one such group share a simple evening meal around a stark table. Then the camera cuts to one of those diners, smoking the odd cigarette out on a tiny balcony, before going to bed.

They don’t understand why it is taking the Americans so long to pick up on their procedures. And they resent the Americans’ unwillingness to work late and come in on Saturdays (with no offer of overtime pay) to get things back on track.

expecting a high return on investment…

It goes without saying the billionaire owner who made this huge investment in the old Ohio factory is expecting the same high return he’d likely get from a comparable investment in China. And who can blame him, right? One’s first instinct, after all, is to commend the gentleman for wanting to move the operation closer to the market he intends to serve.

But the gap in expectations is just too great. These laid-off GM workers were making $29.00 an hour, with full medical benefits, vacation and holiday pay, and a pension. Now they are earning a fraction of that – $12.00 an hour with all but non-existent benefits – at the new Chinese owned-and-operated windshield manufacturing plant that blew into town as a savior just a few short years ago.

This is what the UAW members on strike at General Motors right now are up against. And let’s face it folks, things do not look good for these union workers. How can GM continue to offer a life-sustaining compensation package when the entire auto industry is headed in the opposite direction?

Instead of pointing fingers and assigning blame, American Factory leaves the viewer to contemplate a larger question: How and why did all this happen?

Domestic auto-makers were once able to operate profitably and still provide a good living to their line workers. But now we are told the demands of the market make that impossible to maintain.

Even those of us who lack a head for big business can figure out one of the culprits is the amped-up return the wealthy now look to take from any investment. This may have always been the case, down through history. But it sure seems to have ratcheted up again in the last fifty or sixty years, and especially since the personal computer-fueled boom that started in the 1980s.

It’s no longer enough to be profitable. The percentage of our population with discretionary income at their disposal now expects the highest profit possible, for the pile of spare cash being “tied up” in any given investment.

The other obvious culprit is the dramatic increase in executive compensation, which siphons more of the pre-tax profit away from the bottom, where assembly line people live their lives, to the top of the employment pyramid.

clever maneuvers that elude controls…

This second problem has unfortunately gotten much worse just since the early 1990s, when the Clinton Administration’s attempt to rein in the alarming discrepancy between executive and median pay backfired. Clever companies found a creative way around the new directives, and started awarding unlimited stock options to their top people.

It’s hard to see how things will ever improve in this regard. Those not part of the investor class are having an increasingly rough time of it these days. It would appear the establishment of a reasonably secure middle class was, in hindsight, a brief shining moment in the history of our country. For those who must work for a living, it seems the 21st century is starting off pretty much the way the 19th century ended.

That General Motors is starting to invest in electric car technology is a good thing. But this transition will put all the people now assembling transmissions and combustible engines out of work. While I understand the UAW’s demand for “job security,” I don’t agree with it.

The way we work and the jobs we hold have undergone a series of transitions and transformations over the years. There is no stopping innovation. Those transitions are frequently painful for the majority of people forced into making them.

All this creative disruption would be easier for the little people to swallow, when they have to switch gears in mid-life, if only they would be treated fairly by the industries they helped make king-of-the-hill, while those industries enjoyed their time at the top.

Which is to say, when General Motors issues a meager $10,750 bonus to their UAW workers, that amounts to an approximate $54 million outlay against a 2018 pre-tax profit of $10.8 billion, it hardly qualifies as “fair treatment.”

Robert J. Cavanaugh, Jr.
September 28, 2019

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